Real gross domestic product (GDP) in the United States rose at an annual rate of 6.5 per cent for the second quarter of 2021, according to the advance estimate released by the country’s Bureau of Economic Analysis (BEA).

This follows an increase of 6.3 per cent in the first quarter. The second-quarter GDP increase reflected continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.

The upward movement in real GDP for the second quarter was mainly attributed to increases in personal consumption expenditures (PCE), non-residential fixed investment, exports and state and local government spending. However, this was partly offset by declines in private inventory investment, residential fixed investment and federal government spending.

This is, in addition, an increase in imports. The increase in PCE was due to increases in services led by food services and accommodations and goods, which was led by “other” non-durable goods, notably pharmaceutical products.

Non-residential fixed investment went up

There was also an increase in nonresidential fixed investment, which revealed increases in equipment led by transportation equipment and intellectual property products led by research and development. The rise in exports reflected an increase in goods, which was led by non-automotive capital goods and services, which was led by travel.

Moreover, the decrease in private inventory investment primarily reflected a decrease in retail trade inventories. The BEA reports that, “the decrease in federal government spending primarily reflected a decrease in nondefense spending on intermediate goods and services.”

In the second quarter, non-defense services decreased as the processing and administration of Paycheck Protection Program (PPP),  loan applications by banks on behalf of the federal government both declined. Current dollar GDP rose 13.0 per cent at an annual rate, or $684.4 billion, in the second quarter to a level of $22.72 trillion.

In the second quarter of 2021, the price index for gross domestic purchases went up 5.7 per cent when compared to an increase of 3.9 per cent in the first quarter of 2021. In addition, the PCE price index rose 6.4 per cent relative to a rise of 3.8 per cent the previous quarter.

With the exception of the food and energy prices, the PCE price index climbed 6.1 per cent versus a rise of 2.7 per cent.