The BEA of the U.S. Department of Commerce Releases Advanced Estimate of Third Quarter 2020 Gross Domestic Product ("GDP") (Oct. 2020)
Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020 (reflecting the July through September time frame) according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter real GDP decreased 31.4 percent. The quarterly increase was +7.4%--reflecting a record increase following the previous quarter’s record decline. The annualized rate of GDP increase assumes that the pace of the economy’s recovery in the most recent quarter is maintained over the course of the year. With these initial GDP results for the July through September quarter the U.S. economy’s output remained roughly 3.5% smaller at the end of the September quarter than it was at the end of calendar year 2019.
The Commerce Department reported that the increase in real GDP during the July through September period reflected increases in personal consumption expenditures (PCE) private inventory investment exports nonresidential fixed investment and residential fixed investment that were partly offset by decreases in federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans) and state and local government spending. Imports which are a subtraction in the calculation of GDP increased.
The Commerce Department reported that the increase in PCE reflected increases in services (led by health care as well as food services and accommodations) and goods (led by motor vehicles and parts as well as clothing and footwear). The increase in private inventory investment primarily reflected an increase in retail trade (led by motor vehicle dealers). The increase in exports primarily reflected an increase in goods (led by automotive vehicles engines and parts as well as capital goods). The increase in nonresidential fixed investment primarily reflected an increase in equipment (led by transportation equipment). The increase in residential fixed investment primarily reflected an increase in brokers’ commissions and other ownership transfer costs.
The price index for gross domestic purchases increased 3.4 percent in the third quarter in contrast to a decline of 1.4 percent in the hard-hit April to June quarter. The PCE price index increased 3.7 percent in contrast to a decrease of 1.6 percent last quarter. Excluding food and energy prices the PCE price index increased 3.5 percent in contrast to a decrease of 0.8 percent.
Current-dollar personal income declined by $540.6 billion in the third quarter in contrast to an increase of $1.45 trillion in the second quarter. The decrease in personal income was more than accounted for by a decrease in personal current transfer receipts (notably government social benefits related to pandemic relief programs) that was partly offset by increases in compensation and proprietors’ income. The Commerce Department noted that additional information on several factors impacting personal income can be found in “Effects of Selected Federal Pandemic Response Programs on Personal Income.” Personal saving was $2.78 trillion in the third quarter compared with $4.71 trillion in the second quarter. The personal saving rate—personal saving as a percentage of disposable personal income— was 15.8 percent in the third quarter compared with 25.7 percent in the second quarter.
The full Commerce Department press release on the second estimate of second quarter GDP can be accessed in the link below.
The next release - for the second estimate of third quarter 2020 GDP - will be released on November 25 2020.
