March 30, 2022
According to the Bureau of Economic Analysis, bea) “Third” estimate, real gross domestic product (GDP) increased at an annual rate of 6.9% in the Fourth quarter of 2021. Real GDP increased by 2.3% in the third quarter. The GDP estimate released today is based on more complete source data than were available for the “second” estimate in February. In the second estimate, the increase in real GDP was 7.0%. Notably, “The downward revision primarily reflected downward revisions to personal consumption expenditures (PCE) and exports that were partly offset by an upward revision to private inventory investment,” as per bea.
The ongoing economic impact of the COVID-19 pandemic was evident in the increase in fourth-quarter GDP. In some sections of the country, a revival of COVID-19 cases has resulted in increased restrictions and disruptions in the 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 increase in GDP was led by an increase in private inventory investment, PCE, exports and non-residential fixed investment during the fourth quarter, this was partially offset by a decline in both federal and state and local government spending. Imports increased, which is a factor in calculating GDP.
Private inventory investment increase was due wholesale trade and retail trade industries (led by motor vehicles dealers). The increase in PCE was due to an increase in services, led by health care, financial services, and insurance, and recreation. The increase in exports reflected increases in both goods and services. Notably, “the increase in exports of goods was widespread, and the leading contributors were consumer goods, foods, feeds, as well as beverages industrial supplies and materials. The increase in exports of services was led by travel,” according to bea. The increase in non-residential fixed investment was mainly due to a rise in intellectual property products that was partly offset by reductions in structures.
The decrease in federal government spending was mostly due to a decrease in defense spending on intermediate goods and services. Also, the decrease in state and local government spending is as a result of a drop in gross investment (led by new educational structures). The increase in imports was mostly due to an increase in goods (led by non-food and non-automotive consumer goods, as well as capital goods).
In the fourth quarter, current dollar GDP increased 14.5% on an annual basis, or $800.5 billion, to $24.00 trillion. GDP increased by 8.4%, or $461.3 billion, in the third quarter. Furthermore, the price index for gross domestic purchases increased 7% for the fourth quarter, in contrast to a 5.6% increase in the third quarter. The PCE price index increased 6.4%, compared with an increase of 5.3%. Excluding food and energy prices, the PCE price index increased 5.0%, compared with an increase of 4.6%.
Real GDP increased 5.7%, unrevised from the second estimate, in 2021 (from the 2020 annual level to the 2021 annual level), in contrast to a decrease of 3.4% in 2020. The increase in real GDP for 2021 primarily reflected increases in PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports increased.
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