Technical Note
Gross Domestic Product and Corporate Profits
Third Quarter of 2007 (Preliminary)
November 29, 2007

*See the navigation bar at the right side of the technical note text for supplementary materials.

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; 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 

Sources of Revision to Real GDP
The real GDP growth rate in the third quarter was revised from 3.9 percent to 4.9 
percent (annual rate).
   .    Inventory investment was revised up, reflecting newly available Census Bureau
        inventory data for September.
   .    Exports were revised up and imports were revised down, reflecting newly
        available Census goods data for September.

Corporate Profits

Profits from current production decreased $19.3 billion, or 1.2 percent (quarterly rate), in 
the third quarter, after increasing $94.7 billion, or 6.1 percent, in the second.

During the third quarter, several large financial corporations announced bad-debt 
expenses or asset write-downs related to sub-prime mortgages.  Therefore, it may be 
useful to note these expenses are treated differently in corporate financial accounting 
than in estimating profits from current production in the national income and product 
accounts (NIPAs).  In the national accounts, bad-debt expenses and asset write-downs 
are treated as capital losses that reduce the value of corporate assets on the balance 
sheet rather than as current-period expenses that lower profits.  As a result of this 
treatment, profit estimates based on corporate financial accounting can differ markedly 
from estimates of NIPA corporate profits, and tend to be lower than NIPA corporate 
profits during periods when corporations report unusually large bad-debt expenses or 
asset write-downs.  Additional information is available in an FAQ ("How are bad-debt
expenses, asset write-downs, and loan-loss provisions treated in estimating NIPA 
corporate profits?") available on BEA's Web site at

Revisions to Wages and Salaries and Disposable Personal Income

In addition to presenting preliminary estimates for the third quarter, today's news release 
also presents revised estimates of second-quarter wages and salaries, personal taxes, 
and contributions for government social insurance.  Wage and salary disbursements are 
now estimated to have increased $24.5 billion in the second quarter, a downward 
revision of $44.8 billion.  These estimates reflect newly available wage and salary 
tabulations for the second quarter from the Bureau of Labor Statistics quarterly census 
of employment and wages.  These data are more comprehensive than the monthly 
employment and earnings data that were used for the earlier estimates--they include the 
pay of supervisors and irregular pay, such as bonuses and gains from the exercise of 
stock options. 

Real disposable personal income is now estimated to have decreased 0.8 percent in the 
second quarter and to have increased 4.4 percent in the third.  (By comparison, the 
estimates that were available last month showed an increase of 0.6 percent in the 
second quarter and an increase of 4.4 percent in the third.)

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