Technical Notes
                                
These technical notes provide background information about the data sources and estimating
methods used to produce the estimates presented in the GDP news release of August 27; these notes
also provide some perspective on the estimates.  Additional material will become available in the
days and weeks ahead; much of it will be posted to BEA's web site <http://www.bea.gov>.  In mid-September, the
estimates will be published in BEA's journal, the Survey of Current Business, along with a more
detailed analysis of the estimates ("The Business Situation").


GDP, GNP, and Corporate Profits

Real GDP (revised):  Real GDP is now estimated to have increased 1.6 percent in the second quarter
of 1998, 0.2 percentage point more than the advance estimate of 1.4 percent.  Real GDP increased
5.5 percent in the first quarter.

As in the advance estimate, the preliminary estimate of the second-quarter increase in real GDP
reflects increases in consumer spending and in business expenditures for equipment and an increase in
imports.  The sharp slowdown in GDP growth from the first quarter to the second primarily reflects
a sharp downturn in inventory investment, a deceleration in expenditure for equipment, and a larger
second-quarter decrease in exports.

The price index for gross domestic purchases is estimated to have increased 0.4 percent in the
second quarter, the same as in the advance estimate.  The price index decreased 0.2 percent in the
first quarter.  Excluding food and energy prices, which are more volatile than many other prices,
prices increased 0.6 percent in the second quarter after increasing 0.7 percent. 
  
Real GNP:  Real GNP increased 1.6 percent in the second quarter, the same increase as in real GDP,
GNP increased 5.8 percent in the first quarter.  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 decreased 1.1 percent (at a quarterly rate) in the
second quarter, after increasing 1.0 percent  in the first.   Compared with current-production profits
in the second quarter of 1997,  profits in the second quarter of 1998 increased 0.5 percent.  The
current-production measure differs profits as they are usually reported in corporate financial
statements.  First, the current-production measure excludes non-operating items, such as special
charges and capital gains net of losses.  Second, the current-production measure is based on
replacement-cost estimates of  inventory withdrawals and depreciation rather than on historical-cost
values.
 

Sources of Revision

The 0.2-percentage point upward revision to second-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.  (See the summary of revisions to real GDP
estimates below.)  The less-than-average second-quarter revision primarily reflects a downward
revision to imports and an upward revision to exports that were largely offset by a downward
revision to nonfarm inventory investment.

The revisions to imports and to exports mainly reflected the replacement of BEA assumptions for
June with newly available Bureau of the Census data on international trade in goods; the revision
to nonfarm inventories mainly reflected the replacement of BEA assumptions for June with newly
available Bureau of the Census data on inventories.  The attached table shows both the BEA
assumptions used for the advance estimate and newly available and revised source data for
selected key series.

Summary of revisions to real GDP estimates, 1978-97 (percent changes at annual rate)
___________________________________________________________________________________________
                                                                   Range
                                    Average         _______________________________________
Quarterly estimates                 without         Two-thirds                Nine-tenths
      compared                      regard              of                        of
                                    to sign         revisions                  revisions
___________________________________________________________________________________________
                                             
                                 Current-dollar GDP
                                 __________________________________________________________

   Advance to preliminary.......       0.6         -0.5 to 0.8               -1.1 to 1.4            
Advance to final................        .7         - .6 to 1.0               -1.0 to 1.6
Preliminary to final............        .3         - .3 to  .4              -  .6 to  .7 

                                 Real GDP
                                 __________________________________________________________

   Advance to preliminary........       0.5        -0.5 to 0.7               -0.9 to 1.4
Advance to final.................        .6        - .6 to  .9               -1.0 to 1.3
Preliminary to final.............        .3        - .4 to  .4               - .5 to  .7
___________________________________________________________________________________________
                                
                                
                                                 Robert P. Parker
                                               Chief Statistician
                                      Bureau of Economic Analysis
                                                     202-606-9607


                                                          August 27, 1998
                                
Attachment

          Table A.--SOURCE DATA FOR THE ADVANCE AND PRELIMINARY
         ESTIMATES OF GDP FOR THE SECOND QUARTER OF 1998

This table shows the actual data used for the preliminary estimate of GDP for the second quarter of
1998.  For these key series, actual data for June were not available in time for inclusion in the
advance GDP estimate released on July 31, 1998, and BEA made assumptions for these source
data.  The numbers in brackets show the June values that had been assumed for the advance
estimate.  For most series, the data incorporated for May and, in some cases, for April 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
                                                        Jan.       Feb.       Mar.        Apr.      May.       Jun.
 Private fixed investment:

   Nonresidential structures:
     Buildings: 
1         Value of new nonresidential 
          construction put in place........            167.6      167.0      165.4       169.4      164.8      168.4
                                                                                        {168.1}    {165.3}    {167.8}
     
  Producers' durable equipment:
2  Manufacturers' shipments of
     complete aircraft.....................             59.2       50.3       34.8        38.7       48.2       43.1
                                                                                                    {43.8}     {43.6}
  Residential structures:
    Value of new residential
      construction put in place:
3      1-unit structures......................         172.1      175.2      178.8       182.3      181.3      184.2
                                                                                        {181.3}    {180.5}    {181.8}
 
  
4     2-or-more-unit structures..........               25.1       25.4       24.8        24.8       23.2       22.9
                                                                                         {24.9}     {23.2}     {24.0}
  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.....               98.3       86.1      47.5         36.6       23.9       45.7
                                                                                                    {17.7}     {54.3}
 Net exports:

  Exports of goods:
6   U.S. exports of goods, 
      balance-of-payments basis........                694.8      676.2     686.6        664.0      656.6      655.3
                                                                                                   {652.3}    {655.7}
6a        Excluding gold.......................        687.6      672.4     681.7        660.5      652.2      650.6
                                                                                                   {647.9}    {650.6}
                                                                                                              
   Imports of goods:
7  U.S. imports of goods,
          balance-of-payments basis.......             899.7      893.6     932.7       920.0       927.6      906.3
                                                                                                   {925.9}    {922.4}
7a        Excluding gold.......................        892.0      889.2     924.8       914.8       922.0      900.7
                                                                                                   {920.2}    {917.1}

8   Net exports of goods....................          -204.9     -217.4    -246.1      -256.0       -271.0    -251.0
                                                                                                   {-273.6}  {-266.7}
8a        Excluding gold.......................       -204.4     -216.8    -243.1      -254.3       -269.8    -250.1
                                                                                                   {-272.3}  {-266.5}
 Government:

  State and local:
   Structures:
9      Value of new construction put
               in place.........................      132.7      132.2     130.9       131.9        126.2      129.4
                                                                                      {131.9}      {126.9}    {133.7}