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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 4.3 percent in the first quarter of 1999, according to revised estimates released by the Commerce Department's Bureau of Economic Analysis. In the fourth quarter, real GDP increased 6.0 percent. Real GDP increased $81.9 billion in the first quarter, following an increase of $111.2 billion in the fourth.

The GDP estimates released today are based on more complete source data than were available for the preliminary estimates issued last month. In the preliminary estimates, the increase in real GDP was 4.1 percent (see "Revisions" on page 3).

The major contributors to the increase in real GDP in the first quarter were personal consumption expenditures and private fixed investment. The contributions of these components were partially offset by the effects of a decrease in exports and an increase in imports. The deceleration in real GDP in the first quarter reflected a downturn in exports.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.2 percent in the first quarter, 0.1 percentage point more than the preliminary estimate; this index increased 0.9 percent in the fourth quarter.

Real personal consumption expenditures increased 6.7 percent in the first quarter, compared with an increase of 5.0 percent in the fourth. Real nonresidential fixed investment increased 8.5 percent, compared with an increase of 14.6 percent. Nonresidential structures increased 5.7 percent, compared with an increase of 6.0 percent. Producers' durable equipment increased 9.5 percent, compared with an increase of 17.8 percent. Real residential fixed investment increased 15.4 percent, compared with an increase of 10.0 percent.

Real exports of goods and services decreased 5.1 percent in the first quarter, in contrast to an increase of 19.7 percent in the fourth. Real imports of goods and services increased 13.5 percent, compared with an increase of 12.0 percent.

Real federal government consumption expenditures and gross investment decreased 1.9 percent in the first quarter, in contrast to an increase of 7.3 percent in the fourth. National defense decreased 6.6 percent, in contrast to an increase of 1.3 percent. Nondefense increased 7.4 percent, compared with an increase of 19.8 percent. Real state and local government consumption expenditures and gross investment increased 7.7 percent, compared with an increase of 1.3 percent.

The real change in business inventories subtracted 0.27 percentage point from the first-quarter change in real GDP, after subtracting 0.53 percentage point from the fourth-quarter change. Businesses increased inventories $38.7 billion in the first quarter, following increases of $44.2 billion in the fourth quarter and $55.7 billion in the third.

Real final sales of domestic product -- GDP less change in business inventories -- increased 4.6 percent in the first quarter, compared with an increase of 6.6 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 6.6 percent in the first quarter, compared with an increase of 5.4 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 4.4 percent in the first quarter, compared with an increase of 6.3 percent in the fourth. GNP includes, and GDP excludes, net receipts of factor income from the rest of the world.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 6.0 percent, or $127.5 billion, in the first quarter. In the fourth quarter, current-dollar GDP increased 6.9 percent, or $143.3 billion.

Revisions

The final estimate of the first-quarter increase in real GDP is 0.2 percentage point, or $4.9 billion, higher than the preliminary estimate issued last month. The upward revision to the percentage change in real GDP was more than accounted for by an upward revision to exports ($4.5 billion) and a downward revision to imports ($2.0 billion).

                                         Advance    Preliminary       Final
                                       (Percent change from preceding quarter)
Real GDP..............................     4.5          4.1            4.3   
Current-dollar GDP....................     6.0          5.6            6.0
Gross domestic purchases price index..     1.0          1.1            1.2

Corporate Profits

Profits from current production (profits before tax with inventory valuation and capital consumption adjustments) increased $47.1 billion in the first quarter, according to revised estimates. In the fourth quarter, profits decreased $5.3 billion. The first-quarter turnaround partly reflects the effects of large fourth-quarter payments by tobacco companies related to out-of-court settlements, which reduced fourth-quarter profits by $13.5 billion and first-quarter profits by $0.9 billion. Current- production cash flow (net cash flow with inventory valuation and capital consumption adjustments) -- the internal funds available to corporations for investment -- increased $34.7 billion in the first quarter, compared with an increase of $4.9 billion in the fourth.

The revised estimate of first-quarter corporate profits from current production is $15.3 billion higher than the preliminary estimate issued last month. The foreign component of profits (rest-of-the- world profits) was revised up $1.6 billion. Domestic profits of nonfinancial and financial corporations were revised up $9.3 billion and up $4.3 billion, respectively.

Domestic profits of financial corporations increased $13.4 billion in the first quarter, compared with an increase of $0.6 billion in the fourth.

Domestic profits of nonfinancial corporations increased $29.0 billion in the first quarter, in contrast to a decrease of $12.7 billion in the fourth. In the first quarter, both real gross corporate product and profits per unit of real product increased. The increase in unit profits reflected a small increase in the prices corporations received and a decrease in the unit nonlabor costs they incurred; unit labor costs were unchanged. The decrease in unit nonlabor costs primarily reflected much smaller tobacco settlement payments in the first quarter than in the fourth.

The foreign component of profits increased $4.6 billion in the first quarter, compared with an increase of $6.9 billion in the fourth. Profits from the rest of the world 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 increase was accounted for by a larger increase in receipts than in payments.

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. According to this measure, domestic profits of both financial corporations and nonfinancial corporations increased. Profit increases for nonfinancial corporations were widespread among major industry groups. The largest increases occurred in nondurable goods manufacturing and in the transportation and public utilities group. Profits decreased in durable goods manufacturing and in "other" nonmanufacturing.

Profits before tax increased $44.5 billion in the first quarter, in contrast to a decrease of $12.4 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 and inventory withdrawals reported on an historical-cost basis to the replacement-cost measures used in the national income and product accounts. The capital consumption adjustment increased $4.4 billion in the first quarter (from $100.2 billion to $104.6 billion), compared with an increase of $5.4 billion in the fourth. The inventory valuation adjustment decreased $1.8 billion (from $13.4 billion to $11.6 billion), in contrast to an increase of $1.7 billion.

Profits tax liability increased $15.1 billion in the first quarter, in contrast to a decrease of $7.6 billion in the fourth. Profits after tax increased $29.4 billion, in contrast to a decrease of $4.8 billion. Dividends increased $3.3 billion, the same increase as in the fourth; undistributed profits increased $26.2 billion, in contrast to a decrease of $8.1 billion.

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Most of BEA's estimates and analyses appear in the Survey of Current Business, BEA's monthly journal. The printed Survey of Current Business is available from the Superintendent of Documents, U.S. Government Printing Office, Washington D.C. 20402. First class mail: Annual subscription $104.00 domestic. Second class mail: Annual subscription $42.00 domestic, $52.50 foreign; single issue $15.00 domestic, $18.75 foreign.

Next release -- July 29, 1999, at 8:30 A.M. EDT for:
Gross Domestic Product: Second Quarter 1999 (Advance)