What's driving the second quarter's 4.1% gain?
On July 27, the Bureau of Economic Analysis released its “advance” estimate of GDP growth, which was 4.1%, the strongest since 2014. So, what contributes to GDP growth? We answer this question with a FRED pie chart, which shows the components of GDP that contributed to that 4.1% growth rate and how much they each contributed. (By the way, this 4.1% number is valid at the time of this writing, but is subject to revision; see this blog post on GDP revisions.) As a simple exercise, consider this scenario: If the investment component made up 41% of GDP and it had grown 10%, then investment’s contribution would account for all of the second quarter’s 4.1% GDP growth. But this is imaginary, and economic data are rarely that simple anyway. In fact, for this quarter, investment didn’t grow at all; it was actually slightly less than zero. As was imports. (Both values were –0.06%.) Luckily, no component had a significant negative impact, which a pie chart can’t represent.
So what did drive GDP growth last quarter? Consumption of services (34.8%), consumption of goods (29.6%), and exports (26.7%) each contributed about a third to the increase. Government expenditures (8.8%) complete the circle. More details can be found in this release. As it turns out, the only significant drag came from the reduction in non-farm inventories, while the biggest drivers were housing and utilities, health care, food services and accommodation, investment in structures and intellectual property, and (the biggest of all) exports of goods, which exactly matches the reduction in inventories.
How this graph was created: Search for “GDP contributions” and click on a relevant series. Scroll to the bottom of the page to find the release, then check the relevant series and click “Add to Graph.” From the “Edit Graph” panel, open the “Format” tab and choose graph type “Pie.”
Suggested by Christian Zimmermann.