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U.S. First Quarter Third Gross Domestic Product (Text)

June 28, 2012

Following is the text of the Gross Domestic Product from the Commerce Department.

GROSS DOMESTIC PRODUCT: FIRST QUARTER 2012 (THIRD ESTIMATE)

CORPORATE PROFITS: FIRST QUARTER 2012 (REVISED ESTIMATE)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was also 1.9 percent.

The increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, nonresidential fixed investment, and private inventory investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in nonresidential fixed investment that were partly offset by accelerations in PCE, in exports, and in residential fixed investment and a deceleration in imports.

Annual Revision of the National Income and Product Accounts

The annual revision of the national income and product accounts (NIPAs), covering the first quarter of 2009 through the first quarter of 2012, will be released along with the “advance” estimate of GDP for the second quarter of 2012 on July 27, 2012. The August Survey of Current Business will contain an article that describes the annual revision in detail.

______________

FOOTNOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to- quarter dollar changes are differences between these published estimates. Percent changes are calculated from unrounded data and are annualized. “Real” estimates are in chained (2005) dollars. Price indexes are chain-type measures.

This news release is available on BEA’s Web site along with the Technical Note and Highlights related to this release. For information on revisions, see “Revisions to GDP, GDI, and Their Major Components.” ______________

Motor vehicle output added 1.16 percentage points to the first-quarter change in real GDP after adding 0.47 percentage point to the fourth-quarter change. Final sales of computers subtracted 0.05 percentage point from the first-quarter change in real GDP after adding 0.12 percentage point to the fourth- quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 2.6 percent in the first quarter; this index increased 1.1 percent in the fourth quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 2.4 percent in the first quarter, compared with an increase of 1.2 percent in the fourth.

Real personal consumption expenditures increased 2.5 percent in the first quarter, compared with an increase of 2.1 percent in the fourth. Durable goods increased 13.7 percent, compared with an increase of 16.1 percent. Nondurable goods increased 2.1 percent, compared with an increase of 0.8 percent. Services increased 0.8 percent, compared with an increase of 0.4 percent.

Real nonresidential fixed investment increased 3.1 percent, compared with an increase of 5.2 percent in the fourth. Nonresidential structures increased 1.9 percent, in contrast to a decrease of 0.9 percent. Equipment and software increased 3.5 percent, compared with an increase of 7.5 percent. Real residential fixed investment increased 20.0 percent, compared with an increase of 11.6 percent.

Real exports of goods and services increased 4.2 percent in the first quarter, compared with an increase of 2.7 percent in the fourth. Real imports of goods and services increased 2.7 percent, compared with an increase of 3.7 percent.

Real federal government consumption expenditures and gross investment decreased 5.9 percent in the first quarter, compared with a decrease of 6.9 percent in the fourth. National defense decreased 8.3 percent, compared with a decrease of 12.1 percent. Nondefense decreased 0.8 percent, in contrast to an increase of 4.5 percent. Real state and local government consumption expenditures and gross investment decreased 2.7 percent, compared with a decrease of 2.2 percent.

The change in real private inventories added 0.10 percentage point to the first-quarter change in real GDP, after adding 1.81 percentage points to the fourth-quarter change. Private businesses increased inventories $54.4 billion in the first quarter, following an increase of $52.2 billion in the fourth quarter and a decrease of $2.0 billion in the third.

Real final sales of domestic product -- GDP less change in private inventories -- increased 1.8 percent in the first quarter, compared with an increase of 1.1 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 1.7 percent in the first quarter, compared with an increase of 3.1 percent in the fourth.

Gross national product

Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- increased 0.5 percent in the first quarter, compared with an increase of 1.8 percent in the fourth. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $44.3 billion in the first quarter after decreasing $36.7 billion in the fourth; in the first quarter, receipts decreased $19.6 billion, and payments increased $24.6 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation’s output of goods and services -- increased 3.9 percent, or $148.4 billion, in the first quarter to a level of $15,467.8 billion. In the fourth quarter, current-dollar GDP increased 3.8 percent, or $143.3 billion.

Gross domestic income

Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 3.1 percent in the first quarter, compared with an increase of 2.6 percent in the fourth. For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data. However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.

Revisions

The “third” estimate of the first-quarter increase in real GDP is the same as in the “second” estimate issued last month, reflecting a downward revision to imports and an upward revision to nonresidential fixed investment that were offset by downward revisions to exports, to personal consumption expenditures, and to private inventory investment.

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $6.4 billion in the first quarter, in contrast to an increase of $16.8 billion in the fourth quarter. Current- production cash flow (net cash flow with inventory valuation adjustment) -- the internal funds available to corporations for investment -- decreased $123.9 billion in the first quarter, in contrast to an increase of $44.8 billion in the fourth.

Taxes on corporate income increased $83.3 billion in the first quarter, in contrast to a decrease of $0.7 billion in the fourth. Profits after tax with inventory valuation and capital consumption adjustments decreased $89.7 billion in the first quarter, in contrast to an increase of $17.5 billion in the fourth. Dividends increased $10.1 billion compared with an increase of $10.3 billion; current-production undistributed profits decreased $99.8 billion in contrast to an increase of $7.2 billion.

Domestic profits of financial corporations increased $26.3 billion in the first quarter, compared with an increase of $29.9 billion in the fourth. Domestic profits of nonfinancial corporations increased $15.4 billion in the first quarter, compared with an increase of $28.4 billion in the fourth. In the first quarter, real gross value added of nonfinancial corporations increased 3.8 percent. Profits per unit of real product increased, reflecting an increase in unit prices and a decrease in unit labor costs; unit nonlabor costs were unchanged.

The rest-of-the-world component of profits decreased $48.1 billion in the first quarter, compared with a decrease of $41.5 billion in the fourth. This measure is calculated as (1) receipts by U.S. residents of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. The first-quarter decrease was accounted for by an increase in payments and a decrease in receipts.

Profits before tax with inventory valuation adjustment is the best available measure of industry profits because estimates of the capital consumption adjustment by industry do not exist. This measure reflects depreciation-accounting practices used for federal income tax returns. According to this measure, domestic profits of both financial and nonfinancial corporations increased. The increase in nonfinancial industry profits reflected increases in all major industries; the largest increases were in manufacturing and in “other” nonfinancial. Within manufacturing the increase was widespread; the largest increases were in petroleum and coal products and in “other” durable goods.

Profits before tax increased $234.3 billion in the first quarter, in contrast to a decrease of $8.3 billion in the fourth. The before-tax measure of profits does not reflect, as does profits from current production, the capital consumption and inventory valuation adjustments. These adjustments convert depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to the current-cost measures used in the national income and product accounts. The capital consumption adjustment decreased $230.4 billion in the first quarter (from $100.9 billion to -$129.5 billion), compared with a decrease of $1.8 billion in the fourth. The inventory valuation adjustment decreased $10.4 billion (from -$18.6 billion to -$29.0 billion), in contrast to an increase of $26.9 billion.

The large increase in first-quarter taxes on corporate income and the large decrease in the first-quarter capital consumption adjustment mainly reflected the expiration of bonus depreciation claimed under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. For detailed data, see the table “Net Effects of the Tax Acts of 2002, 2003, 2008, 2009, and 2010 on Selected Measures of Corporate Profits” at www.bea.gov/national/xls/technote_tax_acts.xls. Profits from current production are not affected because they do not depend on the depreciation-accounting practices used for federal income tax returns; rather they are based on depreciation of fixed assets valued at current cost and using consistent depreciation profiles based on used-asset prices. For more detail on the effect of the changes in the tax act provisions on the capital consumption adjustment, see FAQ #999 on the BEA Web site, “Why does the capital consumption adjustment for domestic business decline so much in the first quarters of 2011 and 2012?”

Next release -- July 27, 2012, at 8:30 A.M. EDT for: Gross Domestic Product: Second Quarter 2012 (Advance Estimate)

Annual Revision of the National Income and Product Accounts

(First Quarter 2009 through First Quarter 2012)

SOURCE: U.S. Commerce Department, http://www.bea.gov.

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net


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