Business situation - United States economy, second quarter 2001 - Statistical Data Included

Survey of Current Business, Oct, 2001 by Ralph W. Morris, Daniel Larkins

THE general picture of the U.S. economy in the second quarter of 2001 that is indicated by the "final" estimates of the national income and product accounts (NIPA's) is changed little from that shown by the "preliminary" estimates. The final estimates reflect the incorporation of revised and newly available source data (see the section "Revisions").

According to the final estimates,

* The pace of economic growth continued to slow in the second quarter. Real gross domestic product (GDP) increased 0.3 percent, the weakest showing since the first quarter of 1993, when GDP decreased 0.1 percent (table 1 and chart 1). (1) Over the past four quarters, real GDP has increased only 1.2 percent. In contrast, the average rate of growth from the second quarter of 1991 (the beginning of the current expansion) through the second quarter of 2000 was 3.6 percent.

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* The major contributors to the second-quarter increase in real GDP were consumer spending and government spending (table 2). (2)

* GDP growth was dampened by decreases in business investment in equipment and software and in exports of goods.

* Real private inventory stocks were liquidated at a faster pace in the second quarter than in the first; the back-to-declines in inventory stocks are the first since 1991.

* Exports and imports decreased for the third consecutive quarter, and both decreased more in second quarter than in the first.

* Real final sales of domestic product--GDP less inventory investment--increased 0.7 percent after increasing 4.0 percent.

* Real gross domestic purchases--a measure of domestic demand for goods and services regardless of where they were produced--increased 0.4 percent after increasing 0.7 percent.

* The price index for gross domestic purchases--a measure of prices paid by U.S. residents--increased 1.3 percent, about half as much as in the first quarter.

* Real disposable personal income (DPI) increased 2.4 percent, a little slower than in the first quarter, and the personal saving rate--personal saving as a percentage of current-dollar DPI--was 1.1 percent, the same as in the first quarter.

Revisions

The revisions to the second-quarter estimates were small. The final estimate of a 0.3-percent increase in real GDP is 0.1 percentage point more than the preliminary estimate (table 3); for 1981-2000, the average revision (without regard to the sign) from the preliminary estimate to the final estimate was 0.3 percentage point.

The largest contributor to the slight upward revision to real GDP was imports of services (0.12 percentage point). Imports are a subtraction in the calculation of GDP. The revision to imports of services reflected the incorporation on a "best-change" basis of new and revised data from BEA's international transactions accounts. (3)

The final estimate of a 1.3-percent increase in the prices of gross domestic purchases is 0.1 percentage point less than the preliminary estimate. The small downward revision primarily reflected downward revisions to the prices of personal consumption expenditures for services: The implicit price of imputed financial charges was revised down based on newly available data from the Federal Deposit Insurance Corporation, and the implicit price of brokerage and investment counseling was revised down based on newly available data from the Securities and Exchange Commission.

Gross National Product

The growth of real gross national product (GNP) in the second quarter was the slowest since the first quarter of 1993. Real GNP--goods and services produced by labor and property supplied by U.S. residents--increased 0.3 percent, the same as real GDP (table 4). (4) Income receipts from the rest of the world and income payments to the rest of the world decreased about the same amount, reflecting decreases in interest income and in corporate profits.

Real GNP on a command basis--which measures the purchasing power of goods and services produced by the U.S. economy--increased 0.9 percent, 0.6 percentage point more than real GNP. The larger increase in command-basis GNP reflected an improvement in the terms of trade (chart 2). (5) In the first quarter, real GNP on a command basis also increased more than real GNP.

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The national saving rate--gross saving as a percentage of GNP--decreased to 17.2 percent from 17.3 percent, the fourth consecutive decrease. The second-quarter rate was the lowest since the second quarter of 1996.

Corporate Profits

Profits decreased again in the second quarter. Profits from current production decreased $30.0 billion (or 3.8 percent at a quarterly rate), about half as much as in the first quarter and also less than the $47.4 billion drop in the fourth quarter of 2000 (table 5). (6)

The revised estimate for the second quarter is $1.5 billion less than the preliminary estimate. Profits of domestic financial corporations were revised down $14.9 billion, mainly reflecting newly available source data from an insurance industry trade association (on the amount of storm damage and the extent of insurance coverage) and revised and newly available source data from the Federal Deposit Insurance Corporation (on bank earnings). This revision was largely offset by upward revisions to profits of domestic non financial corporations and to profits from the rest of the world.