August 26, 2021

The first revision to second quarter GDP growth was 6.6% compared to the preliminary estimate of 6.5%.  First quarter growth was 6.3%.  In the second quarter GDP growth was bolstered by a continuing rebound from the GDP slump in the second quarter of last year as more and more businesses re-opened.  In fact, demand was so strong that firms had to dip sharply into inventory levels to satisfy demand.  Those inventories will eventually have to be replenished as labor constraints ease and supply chain interruptions are reduced.  That implies faster growth in the last couple of quarters of the year.

Final sales, which is GDP excluding the change in business inventories, rose 7.9% in the second quarter after having umped by 9.1% in the first quarter.  Given GDP growth of 6.6% and growth in final sales of 7.9%, inventory accumulation subtracted 1.3% from GDP growth in that quarter.

Final sales to domestic purchasers excludes both the change in inventories and trade rose 7.8% in the second quarter after having jumped 10.4% in the first quarter.  Given that final sales rose 7.9%, then trade subtracted 0.1% from GDP growth in the second the deficit for net exports widened slightly..

Consumption spending jumped by 11.9% in the second quarter after having climbed 11.4% in the first quarter as the government distributed two fiscal stimulus checks early in the year.


Nonresidential investment rose 9.3% in the second quarter after having climbed 12.9% in the first quarter. The increase was partly attributable to equipment spending which surged by 11.6%.  Spending on intellectual property rose 14.6%.  Spending on structures fell 5.4% in the first quarter.    Firms need to invest in technology that will allow them to survive difficult times, and/or help them expand their production and delivery functions to meet surging demand.

Residential investment fell 11.5% in the second quarter after having climbed at a 13.3% pace in the first quarter.  It appears that the dramatic increase in home prices is curtailing sales of homes prices at $300,000 or below.  At the same time builders are experiencing a shortage of workers, higher commodity prices, and difficulty in getting necessary materials in a timely matter.  But as more labor becomes available after Labor Day and supply constraints disappear, residential investment should resume its climb.

The foreign sector as measured by the deficit for real net exports In the second  quarter widened by $21 billion to $1,247.1 billion.   Exports rose 6.7% in the second quarter while imports rose 7.8%.  These results suggest that the rebound in the U.S. economy is continuing to outpace the pickup in growth overseas.

.Federal government spending declined 5.2% in the second quarter after having jumped 11.3% in the first quarter as transfer payments to consumers began to shrink in Q2 after having surged early in the year.  Defense spending fell 0.89, but non-defense spending plunged by 10.6% in the second quarter.

We expect  GDP to rise by 8.9% in the third quarter.  We anticipate GDP growth of 8.1% for 2021 and we look for 5.1% GDP growth in 2022..

Stephen Slifer


Charleston, SC