GDP Up 6.9% Is Mostly An Artificially Boosted Illusion – Mish Talk

The BEA’s advance estimate of Gross Domestic Product for the Fourth Quarter of 2021 is 6.9% at a Seasonally-Adjusted Annualized Rate (SAAR). 

The advance estimate is preliminary and will be revised at least twice. 

BEA Comments 

The increase in real GDP primarily reflected increases in private inventory investment, exports, personal consumption expenditures (PCE), and nonresidential fixed investment that were partly offset by decreases in both federal and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The price index for gross domestic purchases increased 6.9 percent in the fourth quarter, compared with an increase of 5.6 percent in the third quarter (table 4). The PCE price index increased6.5 percent, compared with an increase of 5.3 percent. Excluding food and energy prices, the PCE price index increased 4.9 percent, compared with an increase of 4.6 percent.

Real GDP for the year increased 5.7 percent in 2021 (from the 2020 annual level to the 2021 annual level), in contrast to a decrease of 3.4 percent in 2020. The increase in real GDP in 2021 reflected increases in all major subcomponents, led by PCE, nonresidential fixed investment, exports, residential fixed investment, and private inventory investment. Imports increased  

The price index for gross domestic purchases increased 3.9 percent in 2021, compared with an increase of 1.2 percent in 2020 (table 4). Similarly, the PCE price index increased 3.9 percent, compared with an increase of 1.2 percent. Excluding food and energy prices, the PCE price index increased 3.3 percent, compared with an increase of 1.4 percent.