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Gross Domestic Product and Corporate Profits, 1st Quarter 2009 (Preliminary)

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 5.7 percent in the first quarter of 2009, (that is, from the fourth quarter to the first quarter), according to preliminary estimates released by the Bureau of Economic Analysis.  In the fourth quarter, real GDP decreased 6.3 percent.

The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month.  In the advance estimates, the decrease in real GDP was 6.1 percent (see “Revisions” on page 3).

The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, equipment and software, private inventory investment, nonresidential structures, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures (PCE).  Imports, which are a subtraction in the calculation of GDP, decreased.

The smaller decrease in real GDP in the first quarter than in the fourth reflected a larger decrease in imports, an upturn in PCE for durable goods, and a smaller decrease in PCE for nondurable goods that were partly offset by larger decreases in private inventory investment and in nonresidential structures and a downturn in federal government spending.

Motor vehicle output subtracted 1.36 percentage points from the first-quarter change in real GDP after subtracting 2.01 percentage points from the fourth-quarter change.  Final sales of computers added 0.06 percentage point to the first-quarter change in real GDP after subtracting 0.02 percentage point from the fourth-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 1.0 percent in the first quarter, the same as in the advance estimate; this index decreased 3.9 percent in the fourth quarter.  Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent in the first quarter, compared with an increase of 1.2 percent in the fourth.  The federal pay raise for civilian and military personnel added 0.3 percentage point to the change in the first quarter gross domestic purchases price index.

Real personal consumption expenditures increased 1.5 percent in the first quarter, in contrast to a decrease of 4.3 percent in the fourth.  Real nonresidential fixed investment decreased 36.9 percent, compared with a decrease of 21.7 percent.  Nonresidential structures decreased 42.3 percent, compared with a decrease of 9.4 percent.  Equipment and software decreased 33.5 percent, compared with a decrease of 28.1 percent.  Real residential fixed investment decreased 38.7 percent, compared with a decrease of 22.8 percent.

Real exports of goods and services decreased 28.7 percent in the first quarter, compared with a decrease of 23.6 percent in the fourth.  Real imports of goods and services decreased 34.1 percent, compared with a decrease of 17.5 percent.

Real federal government consumption expenditures and gross investment decreased 4.3 percent in the first quarter, in contrast to an increase of 7.0 percent in the fourth.  National defense decreased 6.8 percent, in contrast to an increase of 3.4 percent.  Nondefense increased 1.0 percent, compared with an increase of 15.3 percent.  Real state and local government consumption expenditures and gross investment decreased 2.9 percent, compared with a decrease of 2.0 percent.

The real change in private inventories subtracted 2.34 percentage points from the first-quarter change in real GDP, after subtracting 0.11 percentage point from the fourth-quarter change.  Private businesses decreased inventories $91.4 billion in the first quarter, following decreases of $25.8 billion in the fourth quarter and $29.6 billion in the third.

Real final sales of domestic product — GDP less change in private inventories — decreased 3.4 percent in the first quarter, compared with a decrease of 6.2 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — decreased 7.5 percent in the first quarter, compared with a decrease of 5.9 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 — decreased 5.8 percent in the first quarter, compared with a decrease of 5.6 percent in the fourth.  GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $4.1 billion in the first quarter after increasing $21.3 billion in the fourth; in the first quarter, receipts decreased $99.7 billion, and payments decreased $95.5 billion.

Current-dollar GDP

Current-dollar GDP — the market value of the nation’s output of goods and services — decreased 3.1 percent, or $110.6 billion, in the first quarter to a level of $14,089.7 billion.  In the fourth quarter, current-dollar GDP decreased 5.8 percent, or $212.5 billion.

Revisions

The preliminary estimate of the first-quarter change in real GDP is 0.4 percentage point, or $12.8 billion, higher than the advance estimate issued last month.  The upward revision to the percent change in real GDP primarily reflected upward revisions to private nonfarm inventory investment and to exportsthat were partly offset by a downward revision to PCE for nondurable goods.

AdvancePreliminary
(Percent change from preceding quarter)
Real GDP-6.1-5.7
Current-dollar GDP-3.5-3.1
Gross domestic purchases price index-1.0-1.0

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $42.6 billion in the first quarter, in contrast to a decrease of $250.3 billion in the fourth quarter.  Current-production cash flow (net cash flow with inventory valuation and capital consumption adjustments) — the internal funds available to corporations for investment — increased $59.0 billion in the first quarter, in contrast to a decrease of $97.0 billion in the fourth.

Taxes on corporate income increased $31.6 billion in the first quarter, in contrast to a decrease of $130.3 billion in the fourth.  Profits after tax with inventory valuation and capital consumption adjustments increased $11.1 billion in the first quarter, in contrast to a decrease of $120.1 billion in the fourth.  Dividends decreased $42.2 billion compared with a decrease of $32.8 billion; current-production undistributed profits increased $53.3 billion, in contrast to a decrease of $87.4 billion.

Domestic profits of financial corporations increased $116.1 billion in the first quarter, in contrast to a decrease of $178.7 billion in the fourth.  Domestic profits of nonfinancial corporations decreased $64.2 billion in the first quarter, compared with a decrease of $89.1 billion in the fourth.  In the first quarter, real gross value added of nonfinancial corporate business decreased, and profits per unit of real value added decreased.  The decrease in unit profits reflected increases in both the unit labor and nonlabor costs corporations incurred.

The rest-of-the-world component of profits decreased $9.3 billion in the first quarter, in contrast to an increase of $17.5 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 a larger decrease in receipts than in payments.

Profits before tax increased $152.1 billion in the first quarter, in contrast to a decrease of $499.2 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 $56.8 billion in the first quarter (from -$88.1 billion to -$144.9 billion), compared with a decrease of $0.1 billion in the fourth.  The inventory valuation adjustment decreased $52.8 billion (from $158.1 billion to $105.3 billion), in contrast to an increase of $249.0 billion. 

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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.


The press release above was published by the Bureau of Economic Analysis on 29 May 2009.


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