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1Q21 GDP: Solid Gains To Start Year

April 29, 2021
Bottom Line:  The US economy grew at a 6.4% annualized pace in the 1st Quarter, a touch below elevated expectations. Consumption was notably strong, more than offsetting weakness in net exports and a sharp drop in inventories.   Business fixed investment and residential investment also added notably to the quarter's gains.  While seasonal calculations provided an artificial boost to the consumption figures, this advanced reading showed the year started on a strong footing amid continued reopenings and vaccine progress.
Gross Domestic Product ROSE by 6.4% in the 1st Quarter, higher than market expectations for an increase of 2.6%.    Economic activity was 0.4% ABOVE its year-ago level.

Inventory Investment
FELL by $147.5 billion, subtracting 2.64 percentage points from overall economic activity. Consequently, Real Final Sales ROSE by 9.2% and was 0.4% ABOVE its year-ago level.
Imports ROSE by 5.7% and Exports FELL by 1.1% so Net Exports FELL by $53.5 billion. This implies that Real Final Domestic Demand ROSE by 9.8% and was 2.0% ABOVE its year-ago level.
Consumer Spending ROSE by 10.7%, contributing 7.02 percentage points to economic growth.

Business Investment
ROSE by 9.9%, adding 1.29 percentage points to GDP.  Intellectual property products increased by 10.1% while non-residential structures declined by 4.8%.

Residential Investment
ROSE by 10.8%, adding 0.49 percentage points to economic growth.
Finally, Government Purchases ROSE by 6.3%, adding 1.12 percentage points to GDP. This was its 8th positive contribution in the last 12 quarters.
The GDP Price Index ROSE by 4.2%, compared with market expectations of 2.6%. This is also 2.0% ABOVE its year-ago level.