Home > News Release: Gross Domestic Product (GDP) > Technical Note


*See the navigation bar at the right side of the technical note text for supplementary materials.
Technical Note
Gross Domestic Product
Second Quarter of 2010 (Advance)
July 30, 2010
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 second
quarter is available on BEA's Web site at www.bea.gov; 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 Economy").

Real GDP

Real GDP increased 2.4 percent (annual rate) in the second quarter of 2010, following an increase of 3.7
percent (revised) in the first quarter.  The deceleration in real GDP in the second quarter reflected an
acceleration in imports and a deceleration in inventory investment that were partly offset by an upturn
in residential fixed investment, an acceleration in nonresidential fixed investment, an upturn in state
and local government spending, and an acceleration in federal government spending.

Source data for the advance estimate

The advance GDP estimate for the second quarter of 2010 is based on source data that are incomplete and
subject to revision.  Three months of source data were available for consumer spending on goods; shipments
of capital equipment other than aircraft; motor vehicle sales and inventories; manufacturing durables
inventories; federal government outlays; and consumer, producer, and international prices.  Only two months
of data were available for most other key data sources; BEA’s assumptions for the third month are shown in
table A.  Among those assumptions are the following:

*	an increase in nondurable manufacturing inventories,
*	an increase in non-motor-vehicle merchant wholesale and retail inventories,
*	a decrease in exports of goods, excluding gold, and
*	an increase in imports of goods, excluding gold.

Prices

The price index for gross domestic purchases increased 0.1 percent in the second quarter, following an increase
of 2.1 percent in the first.  Excluding food and energy, the price index for gross domestic purchases increased
0.9 percent in the second quarter, following an increase of 1.6 percent in the first.

American Recovery and Reinvestment Act of 2009

BEA's national accounts include the effects of the federal outlays and tax cuts included in the American Recovery
and Reinvestment Act of 2009.  Most of the effects of ARRA on GDP show up indirectly through the effects on GDP
components such as consumer spending, residential investment, and state and local government spending.  Thus, BEA’s
accounts do not directly identify the portion of GDP expenditures that is funded by ARRA.  It is possible, however,
to identify the effects of ARRA on selected federal government transactions, which are shown on table B.

During the second quarter of 2010, ARRA provisions lowered personal taxes about $120 billion (annual rate) and
raised government social benefits to persons about $61˝ billion, thus raising disposable personal income
(income after taxes) about $181˝ billion.  In addition, ARRA funded about $102˝ billion in current grants to
state and local governments (such as Medicaid and education grants), about $47˝ billion in capital transfers
to state and local governments, to home buyers, and to businesses, about $22˝ billion in federal consumption
expenditures and gross investment, and about $2 billion in subsidies for housing and energy.  Further information,
including estimates of the effects of ARRA for 2009, is available at /recovery/index.htm.

Annual revision

Today’s GDP news release presents results from the regular annual revision of the national income and product
accounts.  This year’s revision covers the estimates for the most recent three years—from 2007 to 2009—and
the first quarter of 2010.  The revision incorporates source data that are more complete and reliable than
those previously available.  Shortly after the GDP release, BEA will post a table on its Web site, www.bea.gov,
showing selected component detail and major source data for the revisions.  A detailed discussion of the
results will be published in the August issue of the Survey.

For 2006–2009, real GDP decreased at an average annual rate of 0.2 percent, which was 0.2 percentage point less
than in the previously published estimates.  This revision reflected a downward revision to personal consumption
expenditures, an upward revision to imports, and downward revisions to state and local government spending and
to residential fixed investment that more than offset an upward revision to exports.  The GDP revisions reflected
the incorporation of regular annual source data, such as the 2009 Services Annual Survey and the 2008 Annual
Retail Trade Survey from the Census Bureau.

The revised estimates show a sharper cyclical contraction in GDP during 2008 and the first half of 2009 than in
the previously published estimates.  From the fourth quarter of 2007 to the second quarter of 2009, real GDP
decreased at an average annual rate of 2.8 percent; in the previously published estimates, it had decreased at
an average annual rate of 2.5 percent.  The cumulative decrease in real GDP over the six quarters of contraction
was 4.1 percent.  From the second quarter of 2009 through the second quarter of 2010, real GDP increased 3.2 percent.

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