The U.S. economy grew at an annual rate of 2.1 percent in the second quarter of 2023, according to the latest data from the Bureau of Economic Analysis (BEA) This was a downward revision from the previous estimate of 2.4 percent and a slowdown from the first quarter’s growth of 2.7 percent.
Key Takeaways from the Latest GDP Report
Contributing Factors: The main factors that contributed to the weaker growth were lower private inventory investment and nonresidential fixed investment, which include spending on structures, equipment, and intellectual property products by businesses. These components were negatively affected by supply chain disruptions, higher input costs, and labor shortages that hampered production and delivery of goods and services.
Consumer Spending Slows, but Still Leading Growth The report finds consumer spending, which accounts for about 70 percent of GDP, also grew slower than previously estimated, increasing 2.5 percent instead of 2.6 percent. However, consumer spending was still the main driver of GDP growth in the second quarter, supported by the reopening of the economy, vaccination progress, and fiscal stimulus.
Government Spending Increases Government spending also contributed positively to GDP growth, mainly due to higher state and local government spending. Federal government spending decreased slightly, reflecting a decline in nondefense spending.
Exports Ease Net exports subtracted 1.1 percentage points from GDP growth, as imports grew faster than exports. Imports reflect domestic demand for foreign goods and services, while exports reflect foreign demand for U.S. goods and services.
Prices Rise The price index for gross domestic purchases, which measures the prices paid by U.S. residents for goods and services, increased 1.7 percent in the second quarter, lower than the previous estimate of 1.9 percent. The personal consumption expenditure (PCE) price index, which is the preferred measure of inflation by the Federal Reserve, increased 2.5 percent, also lower than the previous estimate of 2.6 percent.
Corporate Profits Decreased Corporate profits from current production decreased $10.6 billion in the second quarter, compared with a decrease of $121.5 billion in the first quarter. Profits of domestic nonfinancial corporations increased $17.1 billion in the second quarter, in contrast to a decrease of $102.9 billion in the first quarter.
Current-dollar GDP, which measures the market value of goods and services produced by the nation’s economy, increased 4.1 percent at an annual rate, or $268.6 billion, in the second quarter to a level of $26.80 trillion
Gross domestic income (GDI), which measures the income earned by the nation’s producers, increased 0.5 percent in the second quarter, after decreasing 1.8 percent in the first quarter.
Executive Summary for Manufacturers
For manufacturing companies, the GDP report shows that:
• The demand for goods remained strong in the second quarter, as consumer spending on both durable and nondurable goods increased.
• The supply of goods was constrained by various challenges such as shortages of materials, components, labor, and transportation capacity.
• The prices of goods increased due to higher input costs and strong demand.
• The profits of nonfinancial corporations improved slightly from the first quarter but were still below their pre-pandemic levels.
• The outlook for manufacturing depends on how quickly and effectively these challenges can be resolved and how resilient consumer demand can be amid rising inflation and uncertainty.
