Technical Note

                                     Gross Domestic Product
                            Third Quarter of 2016 (Third Estimate)
                                       December 22, 2016

This technical note provides background information about the source data and estimating methods
used to produce the estimates presented in the GDP news release. The complete set of estimates for
the third quarter is available on BEA's Web site at www.bea.gov; a brief summary of "highlights" is also
posted on the Web site. In a few weeks, the Survey of Current Business, BEA’s online monthly journal,
will publish a more detailed analysis of the estimates ("GDP and the Economy").

Sources of Revision to Real GDP

Real GDP increased 3.5 percent (annual rate) in the third quarter of 2016, an upward revision of 0.3
percentage point from the second estimate. The revision reflected upward revisions to nonresidential
fixed investment, consumer spending, and state and local government spending.

*       The largest contributor to the upward revision to nonresidential fixed investment was an
        upward revision to intellectual property products, which reflected updated R&D expense data
        from company financial reports and newly available data from the Census quarterly services
        survey (QSS).
*       The upward revision to consumer spending was primarily to services and reflected upward
        revisions to spending by nonprofit institutions and to financial services. The revisions
        were mostly the result of incorporating newly available Census QSS data.
*       The upward revision to state and local government spending was primarily to investment in
        structures and was based on revised Census construction data for August and September.

Gross Domestic Income and Corporate Profits

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 4.8 percent in the third quarter, a
downward revision of 0.4 percentage point from the previous estimate. The revision reflected a
downward revision to corporate profits of domestic industries.

Profits from current production increased $117.8 billion, or 5.8 percent (quarterly rate), in the third
quarter, a downward revision of $16.0 billion. Domestic profits of financial corporations increased $50.1
billion, domestic profits of nonfinancial corporations increased $66.4 billion, and rest-of-the-world
profits increased $1.3 billion.

Effective with today’s release, the estimates of real gross value added of nonfinancial corporate business
were revised historically (see NIPA Table 1.14 in BEA's online interactive data application and news
release Table 13). The revision reflects the use of a revised deflator for nonfinancial industries from
BEA’s industry accounts.

Brent R. Moulton
Associate Director for National Economic Accounts
Bureau of Economic Analysis
(301) 278-9606