Table 2 Contributions to Percent Change in Real Gross Domestic Product (Seasonally Adjusted at Annual Rates) Line Percent Change at an Annual Rate 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q3 1 Gross Domestic Product Percentage Points at Annual Rates 1.5 2.6 2.4 -5 -31.4 33.1 2 Personal Consumption Expenditures 2.47 1.83 1.07 -4.75 -24.01 25.27 3 Goods 1.57 0.87 0.12 0.03 -2.06 9.24 4 Durable Goods 0.85 0.44 0.22 -0.93 0 5.18 5 Nondurable Goods 0.71 0.43 -0.1 0.97 -2.05 4.06 6 Services 0.9 0.96 0.96 -4.78 -21.95 16.04 7 Gross Private Domestic Investments -1.04 0.34 -0.64 -1.56 -8.77 11.58 8 Fixed Investment -0.07 0.42 0.17 -0.23 -5.27 4.96 9 Nonresidential 0.01 0.25 -0.04 -0.91 -3.67 2.88 10 Structures 0.05 0.11 -0.16 -0.11 -1.11 -0.43 11 Equipment -0.23 -0.1 -0.1 -0.91 -2.03 3.34 12 Intellectual Property Products 0.19 0.24 0.21 0.11 -0.53 -0.03 13 Residential -0.08 0.17 0.22 0.68 -1.6 2.09 14 Change in Private Inventories -0.97 -0.09 -0.82 -1.34 -3.5 6.62 15 Net Exports of Goods and Services -0.79 0.04 1.52 1.13 0.62 -3.09 16 Exports -0.54 0.1 0.39 -1.12 -9.51 4.9 17 Goods -0.74 0.23 0.19 -0.2 6.56 4.88 18 Services 0.2 -0.13 0.2 -0.92 -2.95 0.02 19 Imports -0.25 -0.06 1.13 2.25 10.13 -7.99 20 Goods -0.01 -0.08 1.15 1.36 7.32 -7.55 21 Services -0.24 0.02 -0.03 0.9 2.8 -0.43 22 Government Consumption Expenditures and Gross Investments 0.86 0.37 0.42 0.22 0.77 -0.68 23 Federal 0.58 0.31 0.26 0.1 1.17 -0.39 24 National Defense 0.17 0.22 0.26 -0.01 0.18 0.17 25 Nondefense 0.41 0.09 0 0.11 0.98 -0.55 26 State and Local 0.28 0.06 0.16 0.12 -0.4 -0.3 Bureau of Economic Analysis Description: • The above table decomposes percent changes in Real GDP into its components (consumption, investment, government, and net exports) and more specific subcomponents. Analysis: • It is important to recognize that the above table annualizes quarterly percent changes. Annualizing converts quarterly data to the approxi- mate annual equivalent. Doing so makes it easier to compare data sets with different reporting frequencies (i.e. quarterly vs annual data). • Annualizing data, however, can be a source of confusion. Note that for 2020 Q2, Gross Domestic Product fell by 31.4%! Despite the dra- matic impact of the pandemic on the economy, economic activity did not decrease by almost a third between the first and second quarters. Actually, total economic activity fell by about 9%, which is still a huge drop. Annualizing effectively projects how the economy would increase or decrease if that quarterly change continued to occur over the course of a year. • In addition, the 33.1% increase in GDP in 2020 Q3 might give one the impression that the economy had fully recovered and then some. Economic activity actually fell by 2.3% compared to 2020 Q1 numbers. It is important to consider the base when calculating percentage changes. For 2020 Q2, percent changes were calculated using the 2020 Q1 Real GDP of 19,010.8 (in billions) as the base. For 2020 Q3, the base was 17,302.5. • A 24.1 % fall in consumption expenditures accounted for most of the 31.4% decline in GDP for the second quarter. A 22% decline in the consumption of services was responsible for most of the fall in consumption. In most recessions, decreases in consumption of durable and nondurable goods typically account for most of the decline in consumption, with services often minimally impacted. This shows the unique effect of the pandemic on consumer behavior. • With the help of the CARES Act and elimination of lockdown restrictions, the economy sharply bounced back in Q3 2020. It will be important to see how surging COVID-19 cases and the expiration of federal relief measures affect growth in upcoming quarters.
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Center for Business and Economic Insight
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