Home > News Release: Gross Domestic Product (GDP) and Corporate Profits
EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, THURSDAY, MARCH 26, 2009
BEA 09-11


* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.


Lisa Mataloni : (202) 606-5304 (GDP)
Andrew Hodge: (202) 606-5564 (Profits)
Recorded message: (202) 606-5306  
GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (Final)
Corporate Profits, Fourth quarter 2008
	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 6.3 percent in the fourth quarter of 2008,
(that is, from the third quarter to the fourth quarter), according to final estimates released by the Bureau
of Economic Analysis.  In the third quarter, real GDP decreased 0.5 percent.

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

	The decrease in real GDP in the fourth quarter primarily reflected negative contributions from
exports, personal consumption expenditures, equipment and software, and residential fixed investment
that were partly offset by a positive contribution from federal government spending.  Imports, which are
a subtraction in the calculation of GDP, decreased.

	Most of the major components contributed to the much larger decrease in real GDP in the fourth
quarter than in the third.  The largest contributors were a downturn in exports and a much larger
decrease in equipment and software.  The most notable offset was a much larger decrease in imports.

 ________________________________________________________________

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.
 ________________________________________________________________

	Final sales of computers subtracted 0.02 percentage point from the fourth-quarter change in real
GDP after subtracting 0.01 percentage point from the third-quarter change.  Motor vehicle output
subtracted 2.01 percentage points from the fourth-quarter change in real GDP after adding 0.16
percentage point to the third-quarter change.

	The price index for gross domestic purchases, which measures prices paid by U.S. residents,
decreased 3.9 percent in the fourth quarter, 0.2 percentage point less of a decrease than the preliminary
estimate; this index increased 4.5 percent in the third quarter.  Excluding food and energy prices, the
price index for gross domestic purchases increased 1.2 percent in the fourth quarter, compared with an
increase of 2.8 percent in the third.

	Real personal consumption expenditures decreased 4.3 percent in the fourth quarter, compared
with a decrease of 3.8 percent in the third.  Real nonresidential fixed investment decreased 21.7 percent,
compared with a decrease of 1.7 percent.  Nonresidential structures decreased 9.4 percent, in contrast to
an increase of 9.7 percent.  Equipment and software decreased 28.1 percent, compared with a decrease
of 7.5 percent.  Real residential fixed investment decreased 22.8 percent, compared with a decrease of
16.0 percent.

	Real exports of goods and services decreased 23.6 percent in the fourth quarter, in contrast to an
increase of 3.0 percent in the third.  Real imports of goods and services decreased 17.5 percent,
compared with a decrease of 3.5 percent.

	Real federal government consumption expenditures and gross investment increased 7.0 percent in
the fourth quarter, compared with an increase of 13.8 percent in the third.  National defense increased
3.4 percent, compared with an increase of 18.0 percent.  Nondefense increased 15.3 percent, compared
with an increase of 5.1 percent.  Real state and local government consumption expenditures and gross
investment decreased 2.0 percent, in contrast to an increase of 1.3 percent.

	The real change in private inventories subtracted 0.11 percentage point from the fourth-quarter
change in real GDP, after adding 0.84 percentage point to the third-quarter change.  Private businesses
decreased inventories $25.8 billion in the fourth quarter, following a decrease of $29.6 billion in the
third quarter and a decrease of $50.6 billion in the second.

	Real final sales of domestic product -- GDP less change in private inventories -- decreased 6.2
percent in the fourth quarter, compared with a decrease of 1.3 percent in the third.


Gross domestic purchases

	Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- decreased 5.9 percent in the fourth quarter, compared with a decrease of 1.5 percent in the
third.


Gross national product

	Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- decreased 5.6 percent in the fourth quarter, compared with a decrease of 0.2 percent
in the third.  GNP includes, and GDP excludes, net receipts of income from the rest of the world, which
increased $21.3 billion in the fourth quarter after increasing $9.9 billion in the third; in the fourth
quarter, receipts decreased $77.2 billion, and payments decreased $98.5 billion.


Current-dollar GDP

	Current-dollar GDP -- the market value of the nation's output of goods and services -- decreased
5.8 percent, or $212.5 billion, in the fourth quarter to a level of $14,200.3 billion.  In the third quarter,
current-dollar GDP increased 3.4 percent, or $118.3 billion.


Revisions

	The final estimate of the fourth-quarter change in real GDP is 0.1 percentage point, or $2.9 billion,
lower than the preliminary estimate issued last month.  The downward revision to the percent change in
real GDP primarily reflected downward revisions to private inventory investment, to exports of services,
and to nonresidential structures that were partly offset by a downward revision to imports of services
and an upward revision to exports of goods.

                                            Advance         Preliminary       Final
                                             (Percent change from preceding quarter)

Real GDP................................      -3.8            -6.2            -6.3
Current-dollar GDP......................      -4.1            -5.8            -5.8
Gross domestic purchases price index....      -4.6            -4.1            -3.9


2008 GDP

	Real GDP increased 1.1 percent in 2008 (that is, from the 2007 annual level to the 2008 annual
level), compared with an increase of 2.0 percent in 2007.

	The major contributors to the increase in real GDP in 2008 were exports, personal consumption
expenditures (PCE) for services, federal government spending, nonresidential structures, and state and
local government spending.  These were partly offset by negative contributions from residential fixed
investment, PCE for goods, private inventory investment, and equipment and software.  Imports, which
are a subtraction in the calculation of GDP, decreased.

	The slowdown in real GDP in 2008 primarily reflected a sharp deceleration in PCE, a downturn in
equipment and software, and decelerations in exports and in state and local government spending that
were partly offset by a sharp downturn in imports, an acceleration in federal government spending, and a
smaller decrease in private inventory investment.

	The price index for gross domestic purchases increased 3.2 percent in 2008, compared with an
increase of 2.8 percent in 2007.

	Current-dollar GDP increased 3.3 percent, or $457.1 billion, in 2008.  Current-dollar GDP
increased 4.8 percent, or $629.1 billion, in 2007.

	During 2008 (that is, measured from the fourth quarter of 2007 to the fourth quarter 2008), real
GDP decreased 0.8 percent.  Real GDP increased 2.3 percent during 2007.  The price index for gross
domestic purchases increased 2.0 percent during 2008, compared with an increase of 3.3 percent during
2007.


Corporate Profits

	Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $250.3 billion in the fourth quarter, compared with a decrease of
$18.5 billion in the third quarter.  Current-production cash flow (net cash flow with inventory valuation
and capital consumption adjustments) -- the internal funds available to corporations for investment --
decreased $97.0 billion in the fourth quarter, in contrast to an increase of $43.1 billion in the third.

	 Taxes on corporate income decreased $130.3 billion in the fourth quarter, compared with a
decrease of $13.3 billion in the third.  Profits after tax with inventory valuation and capital consumption
adjustments decreased $120.1 billion, compared with a decrease of $5.2 billion.  Dividends decreased
$32.8 billion, compared with a decrease of $5.3 billion; current-production undistributed profits
decreased $87.4 billion, in contrast to an increase of $0.3 billion.

	Domestic profits of financial corporations decreased $178.7 billion in the fourth quarter,
compared with a decrease of $75.5 billion in the third.  Domestic profits of nonfinancial corporations
decreased $89.1 billion in the fourth quarter, in contrast to an increase of $52.1 billion in the third.  In
the fourth quarter, real gross value added of nonfinancial corporations decreased, and profits per unit of
real product decreased.  The decrease in unit profits reflected an increase in unit prices that was more
than offset by increases in both the unit labor and nonlabor costs corporations incurred.

	The rest-of-the-world component of profits increased $17.5 billion in the fourth quarter, compared
with an increase of $4.9 billion in the third.  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 fourth-quarter increase was
accounted for by a larger decrease in payments than in receipts.

	Profits before tax with inventory valuation adjustment is the best available measure of industry
profits because estimates of the capital consumption adjustment by industry do not exist.  This measure
reflects depreciation-accounting practices used for federal income tax returns.  According to this
measure, domestic profits of financial and nonfinancial corporations decreased.  The decrease in
nonfinancial corporations reflected decreases in all the aggregate industries shown except wholesale
trade; the largest decrease was in manufacturing.  Within manufacturing, the largest decreases were in
petroleum and coal products, “other” durable goods, and chemical products.

	Profits before tax decreased $499.2 billion in the fourth quarter, compared with a decrease of
$56.3 billion in the third.  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 $0.1 billion in the fourth quarter (from -$88.0 billion to -$88.1 billion), compared
with a decrease of $25.3 billion in the third.  The inventory valuation adjustment increased $249.0
billion (from -$90.9 billion to $158.1 billion), compared with an increase of $63.1 billion.


Corporate profits in 2008

          Profits from current production decreased 10.1 percent in 2008, compared with a decrease of 1.6
percent in 2007.  Domestic profits decreased 16.0 percent, compared with a decrease of 7.4 percent.  The
rest-of-the-world component of profits increased 12.2 percent, compared with an increase of 28.9
percent.

         Taxes on corporate income decreased 18.6 percent in 2008, compared with a decrease of 4.0
percent in 2007.  Profits after tax with inventory valuation and capital consumption adjustments
decreased 6.9 percent, compared with a decrease of 0.6 percent.  Dividends increased 5.5 percent,
compared with an increase of 12.3 percent; current-production undistributed profits decreased 31.1
percent, compared with a decrease of 18.9 percent.

      According to the measure of profits before tax with inventory valuation adjustment, domestic profits
of financial and nonfinancial corporations decreased in 2008.  The decrease in nonfinancial corporations
reflected decreases in all industries shown.  The largest decrease was in manufacturing, and within
manufacturing, the largest decreases were in “other” durable goods and in motor vehicles.

                                        *          *          *

	BEA’s national, international, regional, and industry estimates; the Survey of Current Business;
and BEA news releases are available without charge on BEA’s Web site at www.bea.gov.  By visiting
the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

                                        *          *          *

                          Next release – April 29, 2009, at 8:30 A.M. EDT for:
                         Gross Domestic Product:  First Quarter 2009 (Advance)