Q4 GDP growth estimate raised a hair to 4.1%

Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the fourth quarter of 2020, according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 4.0 percent. With the second estimate, upward revisions to residential fixed investment, private inventory investment, and state and local government spending were partly offset by a downward revision to personal consumption expenditures (PCE).

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

The increase in exports primarily reflected an increase in goods (led by industrial supplies and materials). The increase in nonresidential fixed investment reflected increases in all components, led by equipment (mainly transportation equipment). The increase in PCE was more than accounted for by spending on services (led by health care); spending on goods decreased (led by food and beverages). The increase in residential fixed investment primarily reflected investment in new single-family housing. The increase in private inventory investment was more than accounted for by an increase in manufacturing that was partly offset by a decrease in retail trade.

Current dollar GDP increased 6.1 percent at an annual rate, or $317.6 billion, in the fourth quarter to a level of $21.49 trillion. In the third quarter, GDP increased 38.3 percent, or $1.65 trillion.

The price index for gross domestic purchases increased 1.8 percent in the fourth quarter, compared with an increase of 3.3 percent in the third quarter. The PCE price index increased 1.6 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 3.4 percent.