First Quarter GDP Grew 6.4 Percent

Real GDP increased at a seasonally adjusted annual rate of 6.4% during the first quarter of 2021, according to the Bureau of Economic Analysis’s “advance” estimate. Real GDP increased 4.3% in the fourth quarter of 2020.

The increase in first quarter GDP reflected the continued economic recovery, reopening of businesses, and continued government response related to the pandemic. In the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans, were distributed to households and businesses. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2021 because of data limitations.

Real GDP increase in the first quarter was a result of increases in personal consumption expenditures (PCE), nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports.

Consumption added 7.0 percentage points (pp) to growth, this follows a 1.5 pp addition during the fourth quarter of 2020. The increase in PCE was driven by durable goods (led by motor vehicles and parts), nondurable goods (led by food and beverages) and services (led by food services and accommodations).  Inventories fell, subtracting 2.64 pp from GDP. Residential investment added a total of 0.49 pp to GDP.

Business investment added 1.29 pp to GDP growth. Investment in intellectual property and equipment saw slight improvements, while investment in structures subtracted 0.12 pp.

Government spending increased, adding 1.12 pp to GDP. The federal government added 0.93 pp while state and local governments added 0.19 pp.

Read the BEA release.