In their second estimate of the US GDP for the third quarter of 2021, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.11% annual rate, up 0.11 percentage points (pp) from their previous estimate and down 4.61pp from the prior quarter.
The upward revision to the headline number came entirely from a more optimistic new estimate of the still contracting consumer spending on goods, which was somewhat offset by a downward revision to consumer spending on services. None of the other changes were material.
In an earlier release, annualized household disposable income was revised $393 higher than in the previous report, and the household savings rate was reported to be 9.6%, up 0.7pp from the previous report.
For this estimate the BEA assumed an effective annualized deflator of 5.85%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was lower at 4.74%. Over estimating inflation results in pessimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been 3.34%.
Among the notable items in the report :
-- Consumer spending for goods was reported to be contracting at a 2.11% rate, up 0.21pp from the previous estimate and down 5.10pp from the prior quarter.
-- The contribution to the headline from consumer spending on services was reported to be 3.29%, down 0.11pp from the previous report and down 1.64pp from the prior quarter. The combined consumer contribution to the headline number was 1.18%, up 0.10pp from the previous report.
-- The headline contribution for commercial/private fixed investments was revised to -0.20%, down 0.06pp from the previous report and down 0.81pp from the prior quarter.
-- Inventories added 2.13% to the headline number, up 0.06pp from the previous report and up 3.39pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.
-- The contribution to the headline from governmental spending was revised to 0.16%, up 0.02pp from the previous report and up 0.52pp from the prior quarter.
-- The contribution from exports was revised to -0.33%, down 0.05pp from the previous report and down 1.13pp from the prior quarter.
-- Imports subtracted 0.83% annualized 'growth' from the headline number, up 0.04pp from the previous report and up 0.16pp from the prior quarter. Foreign trade contributed a net -1.16pp to the headline number.
-- The annualized growth in the 'real final sales of domestic product' was revised to -0.02%, up 0.05pp from the previous report and down 8.00pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).
-- As mentioned above, real per-capita annualized disposable income was revised $393 higher than in the previous estimate. The annualized household savings rate was 9.6% (up 0.7pp from the previous report). In the 53 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.51%.
The Numbers, As Revised
As a quick reminder, the classic definition of the GDP can be summarized with the following equation :
GDP = private consumption + gross private investment + government spending + (exports - imports)
or, as it is commonly expressed in algebraic shorthand :
GDP = C + I + G + (X-M)
In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows :
GDP Components Table
Annual $ (trillions)
% of GDP
Contribution to GDP Growth %
The quarter-to-quarter changes in the contributions that various components make to the overall GDP can be best understood from the table below, which breaks out the component contributions in more detail and over time. In the table below we have split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, added a line for the BEA's "Real Final Sales of Domestic Product" and listed the quarters in columns with the most current to the left :
Quarterly Changes in % Contributions to GDP
Total GDP Growth
Real Final Sales
Summary and Commentary
Once again the BEA's antiquated monthly reporting of quarterly data tells us nothing about the economy's most recent full month. In the third decade of the 21st Century the BEA's reporting should be more timely. The current regimen is simply failing to provide guidance for critical fiscal and monetary policies during a time of ongoing economic stress.