Higher Rock Education - Economics Blog

Wednesday, January 26, 2022

Real Gross Domestic Product Fourth Quarter 2021
The Bureau of Economic Analysis (BEA) Releases its Advance Estimate for Fourth Quarter 

The US economy recovered nicely from a dismal 2020 where containment measures drove the economy into a recession. Overall, 2021 was a good year, with the economy growing by 5.7%. Early in the year, record increases in consumer spending fueled the economy. In many cases, suppliers could not keep pace with demand. So they stepped up production and increased inventory in the second half of the year. Gross private investment contributed the most to the fourth quarter's jump in RGDP. Unfortunately, the increase in demand and supply shortages pushed the inflation rate to be more than three times higher than all of 2020. But what is most alarming was how much the annual rate increased at the end of the year. The surge in prices more than offset the increase in disposable personal income. Real disposable income decreased in both the third and fourth quarters.

Economists expect the Omicron variant to cool the economy in the first quarter of 2022. A record number of COVID cases create staffing problems, and many businesses have again had to cut back. Demand for many services has fallen as consumers once again curtail their activities. Readers can access the full report at Gross Domestic Product, Advance Estimate Fourth Quarter 2021

  • The US economy grew at an annual rate of 6.9% in the fourth quarter, up from 2.3% in the third quarter.  
  • The US economy grew 5.7% in 2021, the most since 1984. 2021’s growth followed a 3.4% contraction in 2020.
  • Gross private investment increased 32% in the fourth quarter, up from 12.4% in the second. Growth in inventories contributed 4.9% to the fourth-quarter GDP.
  • Inflation, as measured by the PCE price index, increased at an annual rate of 6.5%, up from 5.6% in the third quarter. Prices rose 3.9% over the prior 12 months.
  • The core rate, which excludes food and energy prices, rose 4.9% after increasing 4.6% in the third quarter. 
  • Real disposable income decreased 5.8% in the fourth quarter after falling 4.3% in the third quarter.

The BEA will release Personal Income and Outlays, December2021 on Friday, January 28. Check back to HigherRockEducation.org Friday afternoon or Saturday for our summary and analysis.

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