Home > News Release: Gross Domestic Product (GDP) and Corporate Profits
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BEA 08-51


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Lisa Mataloni : (202) 606-5304 (GDP)
Andrew Hodge: (202) 606-5564 (Profits)
Recorded message: (202) 606-5306  
GROSS DOMESTIC PRODUCT: THIRD QUARTER 2008 (PRELIMINARY)
CORPORATE PROFITS: THIRD QUARTER 2008 (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 0.5 percent in the third quarter of 2008,
(that is, from the second quarter to the third quarter), according to preliminary estimates released by the
Bureau of Economic Analysis.  In the second quarter, real GDP increased 2.8 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 0.3
percent (see "Revisions" on page 3).

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

	Most of the major components contributed to the downturn in real GDP growth in the third
quarter.  The largest contributors were a sharp downturn in PCE, a deceleration in exports, a smaller
decrease in imports, and decelerations in nonresidential structures and in state and local government
spending.  Notable offsets were an upturn in inventory investment and an acceleration in federal
government spending.

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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.

	This news release is available on BEA’s Web site along with the Technical Note and Highlights
related to this release.
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        Final sales of computers added 0.03 percentage point to the third-quarter change in real GDP after
adding 0.17 percentage point to the second-quarter change.  Motor vehicle output added 0.20 percentage
point to the third-quarter change in real GDP after subtracting 1.01 percentage points from the second-
quarter change.

	The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 4.7 percent in the third quarter, 0.1 percentage point less than in the advance estimate; this
index increased 4.2 percent in the second quarter.  Excluding food and energy prices, the price index for
gross domestic purchases increased 3.0 percent in the third quarter, compared with an increase of 2.2
percent in the second.

	Real personal consumption expenditures decreased 3.7 percent in the third quarter, in contrast to
an increase of 1.2 percent in the second.  Real nonresidential fixed investment decreased 1.5 percent, in
contrast to an increase of 2.5 percent.  Nonresidential structures increased 6.6 percent, compared with an
increase of 18.5 percent.  Equipment and software decreased 5.7 percent, compared with a decrease of
5.0 percent.  Real residential fixed investment decreased 17.6 percent, compared with a decrease of 13.3
percent.

	Real exports of goods and services increased 3.4 percent in the third quarter, compared with an
increase of 12.3 percent in the second.  Real imports of goods and services decreased 3.2 percent,
compared with a decrease of 7.3 percent.

	Real federal government consumption expenditures and gross investment increased 13.6 percent
in the third quarter, compared with an increase of 6.6 percent in the second.  National defense increased
18.0 percent, compared with an increase of 7.3 percent.  Nondefense increased 4.5 percent, compared
with an increase of 5.0 percent.  Real state and local government consumption expenditures and gross
investment increased 0.8 percent, compared with an increase of 2.5 percent.

	The real change in private inventories added 0.89 percentage point to the third-quarter change in
real GDP, after subtracting 1.50 percentage points from the second-quarter change.  Private businesses
decreased inventories $29.1 billion in the third quarter, following a decrease of $50.6 billion in the
second quarter and a decrease of $10.2 billion in the first.

	Real final sales of domestic product -- GDP less change in private inventories -- decreased 1.4
percent in the third quarter, in contrast to an increase of 4.4 percent in the second.


Gross domestic purchases

	Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- decreased 1.5 percent in the third quarter, compared with a decrease of 0.1 percent in the
second.

Gross national product

	Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- decreased 0.4 percent in the third quarter, in contrast to an increase of 2.1 percent in
the second.  GNP includes, and GDP excludes, net receipts of income from the rest of the world, which
increased $2.4 billion in the third quarter after decreasing $20.2 billion in the second; in the third
quarter, receipts decreased $21.3 billion, and payments decreased $23.6 billion.

Current-dollar GDP

	Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
3.6 percent, or $126.0 billion, in the third quarter to a level of $14,420.5 billion.  In the second quarter,
current-dollar GDP increased 4.1 percent, or $143.7 billion.


Revisions

	The preliminary estimate of the third-quarter decrease in real GDP is 0.2 percentage point, or $7.7
billion, lower than the advance estimate issued last month.  The downward revision to the percent
change in real GDP primarily reflected downward revisions to personal consumption expenditures and
to exports that were partly offset by an upward revision to private nonfarm inventory investment and a
downward revision to imports.

							Advance		Preliminary
						(Percent change from preceding quarter)

Real GDP..........................................        -0.3              -0.5
Current-dollar GDP................................         3.8               3.6
Gross domestic purchases price index..............         4.8               4.7


Corporate Profits

	Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $14.6 billion in the third quarter, compared with a decrease of
$60.2 billion in the second quarter.  Current-production cash flow (net cash flow with inventory
valuation and capital consumption adjustments) -- the internal funds available to corporations for
investment -- increased $43.5 billion in the third quarter, in contrast to a decrease of $60.5 billion in the
second.

        Third quarter profits from current production were reduced by $46.2 billion because of Hurricane
Ike, reflecting the net benefits paid by domestic insurance companies and uninsured losses of corporate
property.

	Taxes on corporate income decreased $9.9 billion in the third quarter, in contrast to an increase of
$3.9 billion in the second.  Profits after tax with inventory valuation and capital consumption
adjustments decreased $4.7 billion in the third quarter, compared with a decrease of $64.1 billion in the
second.  Dividends decreased $5.0 billion in contrast to an increase of $13.9 billion; current-production
undistributed profits increased $0.4 billion, in contrast to a decrease of $78.1 billion.

	Domestic profits of financial corporations decreased $61.6 billion in the third quarter, compared
with a decrease of $31.0 billion in the second.  Domestic profits of nonfinancial corporations increased
$47.9 billion in the third quarter, in contrast to a decrease of $4.2 billion in the second.  In the third
quarter, real gross value added of nonfinancial corporations increased, and profits per unit of real value
added increased.  The increase in unit profits reflected an increase in unit prices that was partly offset by
an increase in unit nonlabor costs; unit labor costs were unchanged.

	The rest-of-the-world component of profits decreased $0.9 billion in the third quarter, compared
with a decrease of $25.0 billion in the second.  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 third-quarter
decrease was accounted for by a larger decrease in receipts than in payments.

	Profits before tax decreased $50.7 billion in the third quarter, compared with a decrease of $0.9
billion in the second.  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 $25.5 billion in the third quarter (from -$62.7 billion to -$88.2 billion), compared
with a decrease of $14.7 billion in the second.  The inventory valuation adjustment increased $61.6
billion (from -$154.0 billion to -$92.4 billion), in contrast to a decrease of $44.6 billion.


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                         Next release -- December 23, 2008, at 8:30 A.M. EST for:
                            Gross Domestic Product:  Third Quarter 2008 (Final)
                               Corporate Profits:  Third Quarter 2008 (Final)