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1Q21 GDP: Consumer Ended Quarter Even Stronger

May 27, 2021
Bottom Line:  The second estimate of 1st Quarter US GDP growth was unchanged at 6.4%, in line with expectations.  Consumption was revised higher, now 11,3% versus 10.7% previously. Residential investment remained positive, while most other categories were a larger drag on growth than previously reported.  Inventory investment and net exports contracted more than previously reported, as government spending growth was slower.  Overall, the consumer drove growth in the 1st Quarter even more than previously estimated, with spending ending the quarter on a strong note.  The late strength in consumption in the 1st Quarter likely carried into the 2nd Quarter, supporting elevated expectations of 9.4% quarter-over-quarter annualized GDP growth in 2Q.
GDP was unchanged at 6.4% in this second estimate of economic activity for  Q1-21.  This was in line with market expectations for an upward revision to 6.5%.  Economic activity was 0.4% ABOVE its year-ago level and 27.3% ABOVE its 2007 Q4 cyclical peak.
Consumer Spending
was revised higher by 0.61% to 11.3%, contributing 7.40% to economic growth.
Business Fixed Investment was revised higher by 0.85% to 10.8%, contributing 1.39% to economic growth.
Residential Investment
was revised higher by 1.92% to 12.7%, contributing 0.57% to economic growth.
Inventory Investment was revised modestly lower, contributing -2.78% to economic growth.                                 
Net Exports
were revised sharply lower with a moderate decline in Exports and modest growth in Imports, contributing -1.20% to economic growth.
Government Purchases were revised slightly lower but grew solidly for the 9th time in the past 12 quarters, contributing 1.02% to economic growth.
As a result of all of these changes, Real Final Sales was revised modestly higher while Real Domestic Demand was revised higher.
The GDP Price Index was REVISED UP by 0.18 points to 4.4%, compared with market expectations of 4.1%. Economy-wide prices are now 2.0% ABOVE its year-ago level.