May 27, 2022

According to the Bureau of Economic Analysis, B.E.A.)“second” estimate, real gross domestic product (GDP) decreased at an annual rate of 1.5% in the first quarter of 2022. Real GDP increased by 6.9% in the fourth quarter of 2021.

The GDP estimate released on May 26, 2022 is based on a more complete source data than were available relate to the “advance” estimate issued last month, reporting a 1.4% decrease. However, the update primarily reflects downward revisions to private inventory investment and residential investment that were partly offset by an upward revision to consumer spending. The drop in real GDP reflected decreases in “private inventory investment, exports, federal government spending, and state and local government spending, while imports, which are a subtraction in the calculation of GDP, increased.” Additionally, personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment increased.

According to the Bureau of Economic Analysis, the ongoing economic impact of the COVID-19 pandemic was evident in the increase in first-quarter GDP. In some part of the country the increase in the Omicron variant result in continued disruption in operations of establishments. Payments to businesses in the form of forgivable loans, grants to state and local governments, and social benefits to households also decreased, as provisions of several federal programs expired or tapered off.

The decline in private inventory investment was due to a decrease in wholesale trade (mainly motor vehicles) as well as mining, utilities, and construction (notably, utilities). The decrease in exports reflected decreases in nondurable goods, however; offset by a rise in “other” business services (mainly financial services). While the decrease in federal government spending was mainly due to a decline in defense spending on intermediate goods and services.

The increase in PCE was due to an increase in services, led by health care and offset by a decline in goods. Notably, the decline in goods is due to a decrease in gasoline and other energy goods, this decline was offset by an increase in nondurable goods (mainly motor vehicles and parts).  The increase in imports “was led by increases in durable goods (notably, nonfood and nonautomotive consumer goods),” according to BEA. The increase in non-residential fixed investment was mainly due to a rise in intellectual property products and equipment.

In the first quarter, current-dollar GDP increased 6.5% on an annual basis, or $381.5 billion, to $24.38 trillion. GDP increased by 14.5%, or $800.5 billion, in the first quarter. Furthermore, the price index for gross domestic purchases revised up to 8% for the first quarter, in contrast to a 7.0% increase in the fourth quarter. The PCE price index increased 7%, compared with an increase of 6.4%. Excluding food and energy prices, the PCE price index increased 5.1%, compared with an increase of 5%.

Personal Income

Current-dollar personal income climbed $248.3 billion (revised) in the first quarter, compared with an increase of $186.3 billion (revised) in the fourth quarter. While, disposable personal income increase revised down to $7.5 billion, or 0.2%, in the first quarter, compared with an increase of $72.4 billion (revised), or 1.6%, in the fourth quarter. Real disposable personal income decreased 6.7%, compared with a decrease of 4.5% (revised). While, personal savings was $1.03 trillion (revised) in the first quarter, compared with $1.45 trillion (revised) in the fourth quarter.

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