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FOR WIRE TRANSMISSION: 8:30 A.M. EDT, THURSDAY, MAY 27, 1999

BEA 99-14

Gross Domestic Product, 1st quarter 1999 (preliminary); Corporate Profits, 1st quarter 1999 (preliminary)

This release is also available in Adobe Acrobat (PDF) format.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.1 percent in the first quarter of 1999, according to preliminary estimates released by the Commerce Department's Bureau of Economic Analysis. In the fourth quarter, real GDP increased 6.0 percent. Real GDP increased $77.0 billion in the first quarter, following an increase of $111.2 billion in the fourth.

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 increase in real GDP was 4.5 percent (see "Revisions" on page 3).

As announced in the February issue of the Survey of Current Business, the Bureau of Economic Analysis plans to release the results of its 11th comprehensive, or benchmark, revision of the national income and product accounts (NIPA's) beginning on October 28, 1999, along with the release of the advance estimates for the third quarter of 1999. The annual revision of the NIPA's that would normally take place this summer will instead be combined with the upcoming comprehensive revision. An article previewing the definitional and statistical changes that will be introduced in the comprehensive revision is scheduled for the August issue of the Survey.

The major contributors to the increase in real GDP in the first quarter were personal consumption expenditures and fixed investment. The contributions of these components were partially offset by the effects of a decrease in exports and an increase in imports. The deceleration in real GDP in the first quarter reflected a downturn in exports.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.1 percent in the first quarter, 0.1 percentage point more than the advance estimate; this index increased 0.9 percent in the fourth.

Real personal consumption expenditures increased 6.8 percent in the first quarter, compared with an increase of 5.0 percent in the fourth. Real nonresidential fixed investment increased 7.9 percent, compared with an increase of 14.6 percent. Nonresidential structures increased 2.9 percent, compared with an increase of 6.0 percent. Producers' durable equipment increased 9.7 percent, compared with an increase of 17.8 percent. Real residential fixed investment increased 15.4 percent, compared with an increase of 10.0 percent.

Real exports of goods and services decreased 6.8 percent in the first quarter, in contrast to an increase of 19.7 percent in the fourth. Real imports of goods and services increased 14.2 percent, compared with an increase of 12.0 percent.

Real federal government consumption expenditures and gross investment decreased 1.7 percent in the first quarter, in contrast to an increase of 7.3 percent in the fourth. National defense decreased 6.6 percent, in contrast to an increase of 1.3 percent. Nondefense increased 8.1 percent, compared with an increase of 19.8 percent. Real state and local government consumption expenditures and gross investment increased 7.7 percent, compared with an increase of 1.3 percent.

The real change in business inventories subtracted 0.23 percentage point from the first-quarter change in real GDP, after subtracting 0.53 percentage point from the fourth-quarter change. Businesses increased inventories $39.0 billion in the first quarter, following increases of $44.2 billion in the fourth quarter and $55.7 billion in the third.

Real final sales of domestic product -- GDP less change in business inventories -- increased 4.3 percent in the first quarter, compared with an increase of 6.6 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 6.6 percent in the first quarter, compared with an increase of 5.4 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 -- increased 4.0 percent in the first quarter, compared with an increase of 6.3 percent in the fourth. GNP includes, and GDP excludes, net receipts of factor income from the rest of the world.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 5.6 percent, or $118.5 billion, in the first quarter. In the fourth quarter, current-dollar GDP increased 6.9 percent, or $143.3 billion.

Revisions

The preliminary estimate of the first-quarter increase in real GDP is 0.4 percentage point, or $7.8 billion, lower than the advance estimate issued last month. The downward revision to the percent change in real GDP reflected a downward revision to the change in business inventories ($6.2 billion) and an upward revision to imports ($7.1 billion) that more than offset an upward revision to exports ($2.5 billion).

                                       Advance                  Preliminary
                                    (Percent change from preceding quarter)
Real GDP.......................            4.5                      4.1
Current-dollar GDP.............            6.0                      5.6
Gross domestic purchases price index..     1.0                      1.1

Corporate Profits

Profits from current production (profits before tax with inventory valuation and capital consumption adjustments) increased $31.8 billion in the first quarter, according to the preliminary estimates. In the fourth quarter, profits decreased $5.3 billion. The first-quarter turnaround partly reflects the effects of payments by tobacco companies related to out-of-court settlements. Third-quarter profits had been reduced by $1.7 billion, fourth-quarter profits by $13.5 billion, and first-quarter profits by $0.9 billion. Current-production cash flow (net cash flow with inventory valuation and capital consumption adjustments) -- the internal funds available to corporations for investment -- increased $24.2 billion in the first quarter, compared with an increase of $4.9 billion in the fourth.

Domestic profits of financial corporations increased $9.1 billion in the first quarter, compared with an increase of $0.6 billion in the fourth.

Domestic profits of nonfinancial corporations increased $19.7 billion in the first quarter, in contrast to a decrease of $12.7 billion in the fourth. In the first quarter, both real gross corporate product and profits per unit of real product increased. The increase in unit profits reflected a small increase in the prices corporations received and a decrease in the unit nonlabor costs they incurred. The decrease in unit nonlabor costs primarily reflected much smaller tobacco settlement payments in the first quarter than in the fourth.

The foreign component of profits increased $3.0 billion in the first quarter, compared with an increase of $6.9 billion in the fourth. Profits from the rest of the world 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 increase was accounted for by a larger increase in receipts than in payments.

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. According to this measure, domestic profits of both financial corporations and nonfinancial corporations increased. Profit increases for nonfinancial corporations were widespread among major industry groups. The largest increases occurred in nondurable goods manufacturing and in the transportation and public utilities group. Profits decreased in durable goods manufacturing and in "other" nonmanufacturing.

Profits before tax increased $30.3 billion in the first quarter, in contrast to a decrease of $12.4 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 and inventories reported by business to the measures used in the national income and product accounts. The capital consumption adjustment increased $4.5 billion in the first quarter (from $100.2 billion to $104.7 billion), compared with an increase of $5.4 billion in the fourth. The inventory valuation adjustment decreased $3.0 billion (from $13.4 billion to $10.4 billion), in contrast to an increase of $1.7 billion.

Profits tax liability increased $10.2 billion in the first quarter, in contrast to a decrease of $7.6 billion in the fourth. Profits after tax increased $20.1 billion, in contrast to a decrease of $4.8 billion. Dividends increased $3.3 billion, the same increase as in the fourth; undistributed profits increased $16.9 billion in the first quarter, in contrast to a decrease of $8.1 billion in the fourth.

BEA's major national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available on BEA's web site: http://www.bea.gov

STAT-USA maintains an electronic bulletin board (EBB) and an Internet site, which contain BEA estimates, BEA news releases, and the Survey of Current Business. The information available through STAT-USA is often more detailed and more timely than that available from other sources. To subscribe to STAT-USA's World Wide Web system, go to: http://www.stat-usa.gov. Subscriptions for single-user unlimited access to STAT-USA's Internet information are $50.00 for 3 months or $150.00 for 1 year. For further information, call (202) 482-1986.

Summary BEA estimates are available on recorded messages at the time of public release at the following telephone numbers:

(202) 606-5306 Gross domestic product
(202) 606-5303 Personal income and outlays
(202) 606-5362 Summary of international transactions

Most of BEA's estimates and analyses appear in the Survey of Current Business, BEA's monthly journal. The printed Survey of Current Business is available from the Superintendent of Documents, U.S. Government Printing Office, Washington D.C. 20402. First class mail: Annual subscription $88.00 domestic. Second class mail: Annual subscription $39.00 domestic, $48.75 foreign; single issue $14.00 domestic, $17.50 foreign.

Next release -- June 25, 1999, at 8:30 A.M. EDT for:
Gross Domestic Product: First Quarter 1999 (Final)
Corporate Profits: First Quarter 1999 (Revised)

Full Release & Tables (PDF) (PDF)

Technical Note

Gross Domestic Product, First Quarter 1999 (Preliminary)

This technical note provides background information about the source data and estimating methods used to produce the estimates presented in the GDP news releases; the note also provides some perspective on the estimates. Additional material will become available in the next several days; much of it will be posted to BEA's web site <http: www.bea.doc.gov>. In a few weeks, the estimates will be published in BEA's monthly journal, the Survey of Current Business. The Survey also will provide a more detailed analysis of the estimates ("The Business Situation").

Real GDP (revised) : Real GDP is now estimated to have increased 4.1 percent in the first quarter of 1999, 0.4 percentage point less than the advance estimate of 4.5 percent. Real GDP increased 6.0 percent in the fourth quarter of 1998. The revision to first-quarter real GDP growth is smaller than the 0.5-percentage point average revision--without regard to sign-- between the advance and preliminary estimates over the past 20 years.

As in the advance estimate, GDP growth in the first quarter was more than accounted for by increases in consumer spending and in fixed investment; these increases were partially offset by a drop in exports and an increase in imports. Also, as in the advance estimate, the slowdown in GDP growth was more than accounted for by a downturn in exports that more than offset larger first-quarter increases in consumer spending for nondurable goods and for services and in spending by State and local governments.

GDP excluding motor vehicle output increased 5.0 percent in the first quarter after increasing 3.8 percent in the fourth, as motor vehicle output decreased in the first quarter after increasing sharply in the fourth. GDP less final sales of computers increased 3.9 percent in the first quarter after increasing 5.6 percent in the fourth quarter. (See appendix table A of the news release.)

Prices (revised) : The price index for gross domestic purchases increased 1.1 percent in the first quarter, 0.1 percentage point more than the advance estimate, after increasing 0.9 percent in the fourth. Excluding food and energy prices, which are normally more volatile than many other prices, the price index increased 1.1 percent, the same as the increase in the fourth quarter.

The price index for GDP increased 1.5 percent in the first quarter, 0.1 percentage point more than in the advance estimate; this index increased 0.8 percent in the fourth quarter. The larger first quarter increase in the GDP price index than in the gross domestic purchasers price index primarily reflects import prices. Import prices decreased more in the first quarter than in the fourth. Export prices decreased at about the same in the first quarter as in the fourth quarter. (About 0.3 percentage point of the first-quarter increases in both the gross domestic purchases and GDP price indexes was accounted for by the Federal pay raise for Civilian and military personnel.)

Real GNP : Real GNP increased 4.0 percent in the first quarter, about the same as the increase in GDP. In the fourth quarter, real GNP increased 6.3 percent, 0.3 percentage point more than real GDP. GNP equals GDP plus incomes, mainly on investments, earned abroad by U.S. residents less similar incomes earned in the United States by foreign residents.

Corporate Profits : Profits from current production increased 3.9 percent (at a quarterly rate) in the first quarter, after decreasing 0.6 percent in the fourth. The fourth-quarter decrease had been more than accounted for by payments by tobacco companies related to out-of-court settlements with state governments; in the first quarter, these payments were relatively small.

Domestic profits of financial corporations increased $9.1 billion in the first quarter, following an increase of $0.6 billion in the fourth. Profits of domestic nonfinancial corporations increased $19.7 billion, following a decrease of $12.7 billion in the fourth. Rest-of-the-world profits increased $3.0 billion, following an increase of $6.9 billion in the fourth; receipts decelerated in the first quarter, and payments increased slightly more than in the fourth quarter. The small acceleration in payments was mainly attributable to the acquisition of two very large U.S. corporations by foreigners.

Real gross corporate product of nonfinancial corporations increased 5.7 percent, and their profits per unit of real product increased. The increase in unit profits reflected a decrease in nonlabor costs that more than offset a small increase in labor costs; the prices corporations received increased slightly.

Statistical discrepancy : The current-dollar statistical discrepancy -- the product-side less income-side measure of GDP -- increased $26.8 billion (absolute value) in the first quarter from a negative $64.2 billion in the fourth quarter to a negative $91.0 billion (1 percent of GDP) in the first. In the fourth quarter, the discrepancy had decreased $37.8 billion (absolute value).

Disposition of personal income (revised) : Disposable personal income (DPI) in current dollars increased 4.3 percent in the first quarter, after increasing 5.4 percent in the fourth. Personal saving measures saving out of current income and is defined in the national income and product accounts as DPI less personal outlays. The personal saving rate--saving as a percentage of disposable personal income--was negative 0.6 percent in the first quarter; in the fourth quarter; it was zero percent.

Sources of revision (table A) : The first-quarter revision to GDP primarily reflected revised estimates of imports and of inventory investment. (Table A shows both the BEA assumptions used for the advance estimate and the newly available and revised source data for the preliminary estimate for selected key series.)

The revisions to imports and to exports mainly reflected the incorporation of newly available March Census Bureau data for international trade in goods.

The revision to inventory investment reflected the incorporation of revised February and newly available March Census Bureau data for change in inventories.

Robert P. Parker
Chief Statistician
Bureau of Economic Analysis
202-606-9607

Table A.--SOURCE DATA FOR THE ADVANCE AND PRELIMINARY
          ESTIMATES OF GDP FOR THE FIRST QUARTER OF 1999

This table shows the actual data used for the preliminary estimate of GDP for the first quarter of
1999.  For these key series, actual data for March were not available in time for inclusion in the
advance GDP estimate released on April 30, 1999, and BEA made assumptions for these source
data.  The numbers in brackets show the March values that had been assumed for the advance
estimate.  For most series, the data incorporated for February and, in some cases, for January
were preliminary and the numbers shown in brackets are the values used last month.

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.  
                                                           

                                                                    1998                             1999
                                                         Oct.       Nov.       Dec.        Jan.       Feb.      Mar.
 Private fixed investment:

   Nonresidential structures:
     Buildings: 
1         Value of new nonresidential 
          construction put in place........             174.2      176.7      179.0       177.6      184.7     180.8
                                                                                         {176.5}    {183.3}   {178.4}
     
  Producers' durable equipment:
2  Manufacturers' shipments of
     complete aircraft.....................              67.2       55.5       44.9        58.3       37.4      34.3
                                                                                                     {37.6}    {36.5}
  Residential structures:
    Value of new residential
      construction put in place:
3      1-unit structures......................          193.8      198.5      203.2       206.0      208.8     212.6
                                                                                         {206.1}    {209.2}   {212.2}
  
  
4     2-or-more-unit structures..........                25.4       25.0       25.0        26.1       26.8      27.4
                                                                                          {26.3}     {26.7}    {27.0}
  Change in business inventories, 
    nonfarm:

5  Change in inventories for
      manufacturing and trade (except
       nonmerchant wholesalers) for
      industries other than motor 
     vehicles and equipment in trade..                   12.2       37.7      -31.1        -8.0       27.2      16.0
                                                                                                     {31.5}    {24.8}
 Net exports:

  Exports of goods:
6   U.S. exports of goods, 
      balance-of-payments basis........                 699.0      685.3      673.6       662.0      652.3     658.6
                                                                                                    {652.1}   {656.6}
6a        Excluding gold.......................         689.1      677.4      670.6       659.3      649.3     655.7
                                                                                                    {649.1}   {653.0}
                                                                                                              
   Imports of goods:
7  U.S. imports of goods,
          balance-of-payments basis.......              942.3      945.3      919.6       941.1      963.5     976.0
                                                                                                    {965.9}   {955.1}
7a        Excluding gold......................          934.2      938.1      915.2       937.6      960.8     972.7
                                                                                                    {963.2}   {952.1}

8   Net exports of goods....................           -243.3     -260.0     -246.0      -279.1     -311.2    -317.5
                                                                                                   {-313.8}  {-298.5}
8a        Excluding gold.......................        -245.1     -260.7     -244.6      -278.2     -311.5    -317.0
                                                                                                   {-314.1}  {-299.1}
 Government:

  State and local:
   Structures:
9      Value of new construction put
               in place..........................       131.0      130.6      133.5       139.7      142.7     144.7
                                                                               {141.0}          {146.4}        {140.1}