International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, June 5, 2018

National Income and Product Accounts Gross Domestic Product: First Quarter 2018 (Second Estimate) Corporate Profits: First Quarter 2018 (Preliminary Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the first quarter of 2018
(table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth
quarter of 2017, real GDP increased 2.9 percent.

The GDP estimate released today is based on more complete source data than were available for the
"advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.3
percent. With this second estimate for the first quarter, the general picture of economic growth remains
the same; downward revisions to private inventory investment, residential fixed investment, and
exports were partly offset by an upward revision to nonresidential fixed investment (see "Updates to
GDP" on page 2).

Real GDP: Percent Change from Preceding Quarter
Real gross domestic income (GDI) increased 2.8 percent in the first quarter, compared with an increase
of 1.0 percent (revised) in the fourth quarter. The average of real GDP and real GDI, a supplemental
measure of U.S. economic activity that equally weights GDP and GDI, increased 2.5 percent in the first
quarter, compared with an increase of 2.0 percent in the fourth quarter (table 1).

The increase in real GDP in the first quarter reflected positive contributions from nonresidential fixed
investment, personal consumption expenditures (PCE), exports, private inventory investment, federal
government spending, and state and local government spending that were partly offset by a negative
contribution from residential fixed investment. Imports, which are a subtraction in the calculation of
GDP, increased (table 2).

The deceleration in real GDP growth in the first quarter reflected decelerations in PCE, exports, state
and local government spending, and federal government spending and a downturn in residential fixed
investment. These movements were partly offset by an upturn in private inventory investment and a
larger increase in nonresidential fixed investment. Imports, which are a subtraction in the calculation of
GDP, decelerated.

Current-dollar GDP increased 4.2 percent, or $202.7 billion, in the first quarter to a level of $19.96
trillion. In the fourth quarter, current-dollar GDP increased 5.3 percent, or $253.5 billion (table 1 and
table 3).

The price index for gross domestic purchases increased 2.7 percent in the first quarter, compared with
an increase of 2.5 percent in the fourth quarter (table 4). The PCE price index increased 2.6 percent,
compared with an increase of 2.7 percent. Excluding food and energy prices, the PCE price index
increased 2.3 percent, compared with an increase of 1.9 percent (appendix table A).


Updates to GDP

The percent change in real GDP was revised down 0.1 percentage point from the advance estimate,
primarily reflecting downward revisions to private inventory investment, residential fixed investment,
and exports that were partly offset by an upward revision to nonresidential fixed investment.  For more
information, see the Technical Note. A detailed "Key Source Data and Assumptions" file is also posted
for each release. For information on updates to GDP, see the "Additional Information" section that
follows.


                                           Advance Estimate   Second Estimate

                                         (Percent change from preceding quarter)
Real GDP                                          2.3               2.2
Current-dollar GDP                                4.3               4.2
Real GDI                                           …                2.8
Average of Real GDP and Real GDI                   …                2.5
Gross domestic purchases price index              2.8               2.7
PCE price index                                   2.7               2.6


For the fourth quarter of 2017, the percent change in real GDI was revised from 0.9  percent to 1.0
percent based on newly available fourth-quarter wages and salaries data from the BLS Quarterly Census
of Employment and Wages program.

Corporate Profits (table 12)

Profits from current production (corporate profits with inventory valuation adjustment and capital
consumption adjustment) decreased $12.4 billion in the first quarter, compared with a decrease of $1.1
billion in the fourth quarter.

Profits of domestic financial corporations increased $2.2 billion in the first quarter, in contrast to a
decrease of $14.6 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased
$19.0 billion, in contrast to an increase of $19.4 billion. Rest-of-the-world profits increased $4.4 billion,
in contrast to a decrease of $5.9 billion. In the first quarter, receipts increased $20.0 billion, and
payments increased $15.7 billion.

The 2017 Tax Cuts and Jobs Act includes several provisions that impact the business income statistics in
the national income and product accounts (NIPAs). The provisions do not directly impact corporate
profits from current production or GDI but do impact taxes on corporate income and net dividends in
the first quarter of 2018. For more information, see the Technical Note.

http://lawprofessors.typepad.com/intfinlaw/2018/06/national-income-and-product-accounts-gross-domestic-product-first-quarter-2018-second-estimate-corporate-profits-first-qu.html

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