Real gross domestic product (GDP) is comprised of four major subcomponents: personal consumption expenditures, gross private domestic investment, net exports, and government consumption expenditures. In the latest Q4 2024 second estimate update it was reported that real GDP increased at an annual rate of 2.3%. Three of the four components made positive contributions.
Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the fourth quarter of 2024, according to the second estimate. In the third quarter, real GDP increased 3.1 percent. The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased. (Link)
- Personal consumption expenditures (PCE) contributed 2.79
- Down from Q4 advance estimate
- Up from Q3 final estimate
- Gross private domestic investment (GPDI) contributed -1.05
- Down from Q4 advance estimate
- Down from Q3 final estimate
- Net exports of goods and services (NEGS) contributed 0.12
- Up from Q4 advance estimate
- Up from Q3 final estimate
- Government consumption expenditures (GCE) contributed 0.49
- Up from Q4 advance estimate
- Down from Q3 final estimate
Over time, the personal consumption expenditures (PCE) component has demonstrated the strongest and most consistent correlation with real GDP. When PCE is positive, GDP tends to be positive as well, and when PCE declines, GDP often follows—though there have been exceptions, such as in Q2 2022.
Visualizing Gross Domestic Product
The accompanying chart is a way to visualize real gross domestic product (GDP) change since 2007. The chart uses stacked columns to segment the four major components of GDP with a solid line overlay to show the sum of the four, which is real GDP itself. The data source for this chart is the Excel file accompanying the BEA's latest GDP news release (see the links in the right column). Specifically, it uses Table 2: Contributions to Percent Change in Real Gross Domestic Product.
Here is the same chart but only showing the latest two years to get a clearer picture of each components' most recent contributions.
Components as a Percent of Real GDP
Here is the latest break down of the components as a percent of real GDP:
As noted earlier, the personal consumption expenditures (PCE) component has demonstrated the strongest and most consistent correlation with real GDP. When PCE is positive, GDP is typically positive as well, and vice versa. Over time, PCE's share of GDP has grown, reflecting its increasing role in the economy. The chart below provides a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP data in 1947. As of the latest data, the ratio stands at 69.16%, the highest level since Q1 2023 and just shy of its Q2 2022 peak of 69.44%.
GDP Components and Recessions
Let's conclude with a look at how the four GDP components behave inversely during recessions. PCE and GPDI typically rise as a share of GDP, while GCE and NEGS tend to decline during recessions. The chart below uses different vertical axes—PCE on the left and GPDI, GCE, and NEGS on the right—to emphasize these frequent inverse correlations.
Other GDP updates: Latest GDP Update and Real GDP Per Capita.
Read more updates by Jen Nash
