Advances in consumer and government spending and higher exports

Durrant Pate/ Contributor

The American economy continues its rebound with the latest economic data showing the economy growing by 1.1 per cent during the first quarter of 2023.

Advance estimates released today by the US Bureau of Economic Analysis (BEA) confirmed that the economy grew by 2.6 per cent during the last quarter of 2022. The 1.1 per cent increase in real Gross Domestic Product (GDP) in the first quarter of 2023 reflected increases in consumer spending, exports, federal government spending, state and local government spending and nonresidential fixed investment.

These were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributor was motor vehicles and parts. 

With services, the increase was led by health care and food services and accommodations. Within exports, an increase in goods (led by consumer goods, except food and automotive) was partly offset by a decrease in services (led by transport). 

Federal government spending

Within federal government spending, the increase was led by nondefense spending. The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees. 

Turning attention to non-residential fixed investment, increases in structures and intellectual property products were partly offset by a decrease in equipment. The decrease in private inventory investment was led by wholesale trade (notably, machinery, equipment and supplies) and manufacturing (led by other transportation equipment as well as petroleum and coal products). 

As far as  residential fixed investment was concerned, the leading contributor to the decrease was new single-family construction. Within imports, the increase reflected an increase in goods (mainly durable consumer goods and automotive vehicles, engines, and parts).

Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment. These movements were partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports turned up.

More GDP data

Current‑dollar GDP increased 5.1 percent at an annual rate, or $327.9 billion, in the first quarter, to a level of $26.47 trillion. In the fourth quarter, GDP increased 6.6 percent, or $414.1 billion (tables 1 and 3).

The price index for gross domestic purchases increased 3.8 per cent in the first quarter, compared with an increase of 3.6 per cent in the fourth quarter (table 4). The PCE price index increased 4.2 per cent, compared with an increase of 3.7 per cent. Excluding food and energy prices, the PCE price index increased 4.9 per cent, compared with an increase of 4.4 per cent.

Personal Income

Current-dollar personal income increased $278.9 billion in the first quarter, compared with an increase of $398.8 billion in the fourth quarter (table 8). The increase in the first quarter primarily reflected increases in compensation (led by private wages and salaries) and government social benefits.

Disposable personal income increased $571.2 billion, or 12.5 per cent, in the first quarter, compared with an increase of $403.0 billion, or 8.9 per cent, in the fourth quarter. The increase in the first quarter reflected an increase in personal income and a decrease in personal current taxes.

Real disposable personal income increased 8.0 percent in the first quarter, compared with an increase of 5.0 percent in the fourth.

Personal saving was $946.2 billion in the first quarter, compared with $758.8 billion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 4.8 per cent in the first quarter, compared with 4.0 per cent in the fourth.