News Release
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Gross Domestic Product, Fourth Quarter 2008 (final) and Corporate Profits
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.3 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to final estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent. 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 decrease in real GDP was 6.2 percent (see "Revisions" on page 3). The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by a positive contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased. Most of the major components contributed to the much larger decrease in real GDP in the fourth quarter than in the third. The largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports. ________________________________________________________________ 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 (2000) dollars. Price indexes are chain-type measures. This news release is available on BEAs Web site along with the Technical Note and Highlights related to this release. ________________________________________________________________ Final sales of computers subtracted 0.02 percentage point from the fourth-quarter change in real GDP after subtracting 0.01 percentage point from the third-quarter change. Motor vehicle output subtracted 2.01 percentage points from the fourth-quarter change in real GDP after adding 0.16 percentage point to the third-quarter change. The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 3.9 percent in the fourth quarter, 0.2 percentage point less of a decrease than the preliminary estimate; this index increased 4.5 percent in the third quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.2 percent in the fourth quarter, compared with an increase of 2.8 percent in the third. Real personal consumption expenditures decreased 4.3 percent in the fourth quarter, compared with a decrease of 3.8 percent in the third. Real nonresidential fixed investment decreased 21.7 percent, compared with a decrease of 1.7 percent. Nonresidential structures decreased 9.4 percent, in contrast to an increase of 9.7 percent. Equipment and software decreased 28.1 percent, compared with a decrease of 7.5 percent. Real residential fixed investment decreased 22.8 percent, compared with a decrease of 16.0 percent. Real exports of goods and services decreased 23.6 percent in the fourth quarter, in contrast to an increase of 3.0 percent in the third. Real imports of goods and services decreased 17.5 percent, compared with a decrease of 3.5 percent. Real federal government consumption expenditures and gross investment increased 7.0 percent in the fourth quarter, compared with an increase of 13.8 percent in the third. National defense increased 3.4 percent, compared with an increase of 18.0 percent. Nondefense increased 15.3 percent, compared with an increase of 5.1 percent. Real state and local government consumption expenditures and gross investment decreased 2.0 percent, in contrast to an increase of 1.3 percent. The real change in private inventories subtracted 0.11 percentage point from the fourth-quarter change in real GDP, after adding 0.84 percentage point to the third-quarter change. Private businesses decreased inventories $25.8 billion in the fourth quarter, following a decrease of $29.6 billion in the third quarter and a decrease of $50.6 billion in the second. Real final sales of domestic product -- GDP less change in private inventories -- decreased 6.2 percent in the fourth quarter, compared with a decrease of 1.3 percent in the third. Gross domestic purchases Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- decreased 5.9 percent in the fourth quarter, compared with a decrease of 1.5 percent in the third. Gross national product Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- decreased 5.6 percent in the fourth quarter, compared with a decrease of 0.2 percent in the third. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased $21.3 billion in the fourth quarter after increasing $9.9 billion in the third; in the fourth quarter, receipts decreased $77.2 billion, and payments decreased $98.5 billion. Current-dollar GDP Current-dollar GDP -- the market value of the nation's output of goods and services -- decreased 5.8 percent, or $212.5 billion, in the fourth quarter to a level of $14,200.3 billion. In the third quarter, current-dollar GDP increased 3.4 percent, or $118.3 billion. Revisions The final estimate of the fourth-quarter change in real GDP is 0.1 percentage point, or $2.9 billion, lower than the preliminary estimate issued last month. The downward revision to the percent change in real GDP primarily reflected downward revisions to private inventory investment, to exports of services, and to nonresidential structures that were partly offset by a downward revision to imports of services and an upward revision to exports of goods. Advance Preliminary Final (Percent change from preceding quarter) Real GDP................................ -3.8 -6.2 -6.3 Current-dollar GDP...................... -4.1 -5.8 -5.8 Gross domestic purchases price index.... -4.6 -4.1 -3.9 2008 GDP Real GDP increased 1.1 percent in 2008 (that is, from the 2007 annual level to the 2008 annual level), compared with an increase of 2.0 percent in 2007. The major contributors to the increase in real GDP in 2008 were exports, personal consumption expenditures (PCE) for services, federal government spending, nonresidential structures, and state and local government spending. These were partly offset by negative contributions from residential fixed investment, PCE for goods, private inventory investment, and equipment and software. Imports, which are a subtraction in the calculation of GDP, decreased. The slowdown in real GDP in 2008 primarily reflected a sharp deceleration in PCE, a downturn in equipment and software, and decelerations in exports and in state and local government spending that were partly offset by a sharp downturn in imports, an acceleration in federal government spending, and a smaller decrease in private inventory investment. The price index for gross domestic purchases increased 3.2 percent in 2008, compared with an increase of 2.8 percent in 2007. Current-dollar GDP increased 3.3 percent, or $457.1 billion, in 2008. Current-dollar GDP increased 4.8 percent, or $629.1 billion, in 2007. During 2008 (that is, measured from the fourth quarter of 2007 to the fourth quarter 2008), real GDP decreased 0.8 percent. Real GDP increased 2.3 percent during 2007. The price index for gross domestic purchases increased 2.0 percent during 2008, compared with an increase of 3.3 percent during 2007. Corporate Profits Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $250.3 billion in the fourth quarter, compared with a decrease of $18.5 billion in the third quarter. Current-production cash flow (net cash flow with inventory valuation and capital consumption adjustments) -- the internal funds available to corporations for investment -- decreased $97.0 billion in the fourth quarter, in contrast to an increase of $43.1 billion in the third. Taxes on corporate income decreased $130.3 billion in the fourth quarter, compared with a decrease of $13.3 billion in the third. Profits after tax with inventory valuation and capital consumption adjustments decreased $120.1 billion, compared with a decrease of $5.2 billion. Dividends decreased $32.8 billion, compared with a decrease of $5.3 billion; current-production undistributed profits decreased $87.4 billion, in contrast to an increase of $0.3 billion. Domestic profits of financial corporations decreased $178.7 billion in the fourth quarter, compared with a decrease of $75.5 billion in the third. Domestic profits of nonfinancial corporations decreased $89.1 billion in the fourth quarter, in contrast to an increase of $52.1 billion in the third. In the fourth quarter, real gross value added of nonfinancial corporations decreased, and profits per unit of real product decreased. The decrease in unit profits reflected an increase in unit prices that was more than offset by increases in both the unit labor and nonlabor costs corporations incurred. The rest-of-the-world component of profits increased $17.5 billion in the fourth quarter, compared with an increase of $4.9 billion in the third. 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 fourth-quarter increase was accounted for by a larger decrease in payments than 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 financial and nonfinancial corporations decreased. The decrease in nonfinancial corporations reflected decreases in all the aggregate industries shown except wholesale trade; the largest decrease was in manufacturing. Within manufacturing, the largest decreases were in petroleum and coal products, other durable goods, and chemical products. Profits before tax decreased $499.2 billion in the fourth quarter, compared with a decrease of $56.3 billion in the third. 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 $0.1 billion in the fourth quarter (from -$88.0 billion to -$88.1 billion), compared with a decrease of $25.3 billion in the third. The inventory valuation adjustment increased $249.0 billion (from -$90.9 billion to $158.1 billion), compared with an increase of $63.1 billion. Corporate profits in 2008 Profits from current production decreased 10.1 percent in 2008, compared with a decrease of 1.6 percent in 2007. Domestic profits decreased 16.0 percent, compared with a decrease of 7.4 percent. The rest-of-the-world component of profits increased 12.2 percent, compared with an increase of 28.9 percent. Taxes on corporate income decreased 18.6 percent in 2008, compared with a decrease of 4.0 percent in 2007. Profits after tax with inventory valuation and capital consumption adjustments decreased 6.9 percent, compared with a decrease of 0.6 percent. Dividends increased 5.5 percent, compared with an increase of 12.3 percent; current-production undistributed profits decreased 31.1 percent, compared with a decrease of 18.9 percent. According to the measure of profits before tax with inventory valuation adjustment, domestic profits of financial and nonfinancial corporations decreased in 2008. The decrease in nonfinancial corporations reflected decreases in all industries shown. The largest decrease was in manufacturing, and within manufacturing, the largest decreases were in other durable goods and in motor vehicles. * * * BEAs national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEAs Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements. * * * Next release April 29, 2009, at 8:30 A.M. EDT for: Gross Domestic Product: First Quarter 2009 (Advance)