Technical Note

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Technical Note
National Income and Product Accounts
Second Quarter 2006 GDP (Advance)
2003 through First Quarter 2006 (Revised)
July 28, 2006

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 second 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 estimates will be published in BEA's monthly journal, the Survey of Current
Business, along with a more detailed analysis of the estimates ("GDP and the
Economy").

Source Data for the Advance Estimate

The advance GDP estimate for the second quarter of 2006 is based on source data that
are incomplete and subject to revision. Three months of source data were available for
consumer spending on goods; shipments of capital equipment other than aircraft; motor
vehicle sales and inventories; manufacturing durables inventories; federal government
outlays; and consumer, producer, and international prices. Only two months of data
were available for most other key data sources; BEA's assumptions for the third month
are shown in table A. Among those assumptions are the following:

* an increase in nondurable manufacturing inventories,
* an increase in non-motor-vehicle merchant wholesale and retail inventories,
* an increase in exports of goods, excluding gold, and
* an increase in imports of goods, excluding gold.

Annual Revision

Today's GDP news release presents results from the regular annual revision of the
national income and product accounts. This year's revision, as usual, covers the
estimates for the most recent three years. The revision incorporates source data that
are more complete, more detailed, and otherwise more reliable than those previously
available. A detailed discussion of the results will be published in the August issue of
the Survey.

GDP growth rates were revised down for all three years. In general, the revisions to
year-to-year GDP growth rates were small: none exceeded 0.3 percentage point. For
2002-2005, real GDP grew at an average annual rate of 3.2 percent, compared with the
previously published estimate of 3.5 percent. For 2002-2005:

* real personal consumption expenditures grew at an average annual rate of 3.4
percent, the same as the previously published estimate; spending for nondurable
goods was revised down and spending for durable goods was revised up,
reflecting data from the Census Bureau?s Annual Retail Trade Survey for 2004;
* real nonresidential fixed investment increased at an average annual rate of 4.5
percent, compared with the previously published estimate of 6.4 percent; the
downward revisions were mainly to information processing equipment and
software (especially computers), to transportation equipment, and to other
equipment, reflecting data from the Census Bureau's Annual Survey of
Manufactures for 2004;

* real residential investment increased at an average annual rate of 9.0 percent,
compared with the previously published estimate of 8.6 percent; the upward
revision was primarily to single-family structures, reflecting revised Census
Bureau value-of-construction-put-in-place data.

* real inventory investment increased $7.1 billion, compared with the previously
published estimate of $7.8 billion;

* real exports increased at an average annual rate of 5.7 percent, the same as the
previously published estimate; real imports increased at an average annual rate
of 6.9 percent, compared with the previously published estimate of 7.2 percent;
the revisions to imports were primarily to services, reflecting the annual revision
of BEA's international transactions accounts that was released in June;

* real government consumption expenditures and gross investment increased at
an average annual rate of 1.7 percent, compared with the previously published
estimate of 2.2 percent; both federal spending and state and local spending were
revised down; the revisions reflected Census Bureau Government Finances data
for FY 2003 and FY 2004, Federal budget data for FY 2005, and BLS wage data
for 2005.

From the cyclical trough of GDP in the third quarter of 2001 to the first quarter of 2006,
the revised estimates show that real GDP increased at an average annual rate of 3.1
percent; the previously published estimates showed an average increase of 3.3 percent.
The revisions to the quarterly growth rates of GDP also were small.

For 2002-2005, the average annual rate of increase in the price index for gross domestic
purchases was revised up, from 2.8 percent to 2.9 percent.

Brent R. Moulton
Associate Director for National Economic Accounts
Bureau of Economic Analysis
(202) 606-9606

Table A. KEY ASSUMPTIONS FOR THE ADVANCE ESTIMATE OF GDP
FOR THE SECOND QUARTER OF 2006

For many of the key series used to prepare the advance estimate of GDP, including retail sales,
unit automobile and truck sales and inventories, manufacturers' shipments of nondefense
capital goods (other than aircraft), manufacturers' inventories of durable goods, federal defense
spending, and consumer, producer, and international price indexes, actual data are available for all
months of the quarter.

For the key series shown in this table, actual data for the third month of the quarter usually are not
available in time for inclusion in the advance GDP estimate. BEA makes assumptions for the source
data that are not yet available; assumptions for June 2006 are shown in the last column of the
table. For most series shown, the data for May are preliminary and subject to further revision.
Occasionally, the data for earlier months are also subject to revision.

All series shown in the table are in billions of dollars, seasonally adjusted at annual rates, and are
published by the Bureau of the Census.

2006
Jan. Feb. Mar. Apr. May Jun.*

Private fixed investment:
Nonresidential structures:
1 Value of new total private
construction put in place less
residential (inc. improvements) 277.9 277.8 284.5 289.0 288.2 288.6

Equipment and software:
2 Manufacturers' shipments of
complete aircraft............. 33.2 47.6 37.5 27.0 34.0 38.7

Residential structures:
Value of new residential
construction put in place:
3 Single family................... 455.8 457.5 457.3 449.4 441.8 435.1

4 Multifamily..................... 54.7 55.6 56.4 57.0 56.7 55.9

Change in private inventories:
5 Change in inventories for nondurable
manufacturing................... 35.1 -10.1 14.7 14.3 -12.1 8.5

5a Change in inventories for merchant
wholesale and retail industries other
than motor vehicles and equipment 22.0 32.4 35.2 48.2 74.0 72.2

Net exports:
Exports of goods:
6 U.S. exports of goods,
international-transactions-
accounts basis................ 976.9 969.0 988.3 982.0 1010.5 1011.8

6a Excluding gold................... 969.3 962.3 979.8 975.1 1001.2 1003.2

Imports of goods:
7 U.S. imports of goods,
international-transactions-
accounts basis............... 1843.5 1785.4 1800.8 1816.8 1851.6 1873.7

7a Excluding gold................. 1837.5 1780.1 1795.0 1811.4 1844.6 1867.6

8 Net exports of goods............... -866.7 -816.3 -812.6 -834.8 -841.0 -861.9

8a Excluding gold................. -868.3 -817.8 -815.1 -836.4 -843.4 -864.4

Government:
State and local:
Structures:
9 Value of new construction put
in place................... 235.8 240.0 243.8 245.1 247.1 246.1
____________
*Assumption.