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Technical Note
Gross Domestic Product
First Quarter of 2017 (Second Estimate)
May 26, 2017
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 first 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 Survey of Current Business, BEA’s online monthly journal,
will publish a more detailed analysis of the estimates ("GDP and the Economy").

Sources of Revision to Real GDP

Real GDP increased 1.2 percent (annual rate) in the first quarter of 2017, an upward revision of 0.5
percentage point from the advance estimate. The revision primarily reflected upward revisions to
nonresidential fixed investment, consumer spending on services, and state and local government
consumption expenditures and investment.  Partly offsetting these upward revisions was a downward
revision to private inventory investment.

*	The upward revision to nonresidential fixed investment primarily reflected an upward revision
        to intellectual property products, which in turn reflected the incorporation of newly available
        information from the Census Bureau’s Advance Quarterly Services Report as well as newly
        available R&D expense data from company financial reports. Fixed investment in nonresidential
        structures also contributed to the upward revision, reflecting revised and newly available
        (March) construction spending statistics from the Census Bureau’s Value of Construction Put in
        Place Survey.

*	The upward revision to consumer spending on services reflected upward revisions to final
        consumption expenditures of nonprofit institutions serving households (NPISH) and to
        household utilities and food services that were partly offset by a downward revision to health
        care services. Revisions to final consumption expenditures for NIPISHs and to health care
        services reflect the incorporation of newly available information from the Census Bureau’s
        Advance Quarterly Services Report. The revision to household utilities is based on newly
        available electricity usage data for the month of February published by the Energy Information
        Administration. The revision to food services is based on revised data from the Census Bureau’s
        Monthly Retail Trade Sales survey.

*	The upward revision to state and local government consumption expenditures and gross
        investment was accounted for by an upward revision to investment in structures, reflecting
        revised and newly available (March) construction spending statistics from the Census Bureau’s
        Value of Construction Put in Place.

*	The downward revision to private inventory investment was more than accounted for by a
        downward revision to nondurable goods manufacturing, reflecting the incorporation of revised
        and newly available (March) information from the Census Bureau’s Monthly Report on
        Manufacturers’ Shipments, Inventories and Orders. Benchmarked Census inventories data for
        manufacturing and retail trade industries were incorporated on a best-change basis.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI), which measures output of the economy as the costs incurred and the
incomes earned in the production of GDP, increased 0.9 percent in the first quarter. The average of real
GDP and real GDI increased 1.0 percent.

Profits from current production decreased $40.3 billion, or 1.9 percent (quarterly rate), in the first
quarter.  Domestic profits of financial corporations decreased $28.4 billion; domestic profits of
nonfinancial corporations decreased $18.4 billion; and rest-of-the-world profits increased $6.5 billion.

Estimates of corporate profits were affected by legal settlements in the first quarter. The national
income and product accounts (NIPA) record these settlements on an accrual basis in the quarter when
the settlement is finalized, regardless of when recorded on a company's own financial statements.

The estimate of financial corporate profits was reduced by $5.6 billion ($22.3 billion at an annual rate)
reflecting two separate legal settlements related to the sale of residential mortgage-backed securities.
The federal government imposed a $3.1 billion penalty on a U.S. subsidiary of Deutsche Bank and a
$2.48 billion penalty on a U.S. subsidiary of Credit Suisse.

The estimate of nonfinancial corporate profits were reduced by $4.3 billion ($17.2 billion at an annual
rate), reflecting legal settlements with a U.S. subsidiary of Volkswagen related to violations of U.S.
environmental regulations.

None of these legal settlements affected the estimate of GDI. The settlements were recorded in the
NIPAs as business current transfer payments to the federal government, which offset the reduction in
corporate profits.

Revisions to Wages and Salaries, Disposable Personal Income, and GDI

In addition to presenting revised estimates for the first quarter, today's release presents revised
estimates of fourth-quarter wages and salaries, personal taxes, and contributions for government social
insurance. Wages and salaries are now estimated to have decreased $28.3 billion in the fourth quarter
of 2016, a downward revision of $106.2 billion. These estimates reflect the most recently available wage
and salary tabulations for the fourth quarter from the BLS Quarterly Census of Employment and Wages.

Real disposable personal income decreased 0.3 percent (annual rate) in the fourth quarter and
increased 1.7 percent in the first. The estimates presented in the advance release last month showed
increases of 2.0 percent in the fourth quarter and 1.0 percent in the first.

The revision to fourth-quarter wages and salaries also resulted in a revision to gross domestic income.
Real GDI decreased 1.4 percent in the fourth quarter, a downward revision of 2.4 percentage points.

Annual Update Scheduled for July 28

The annual update of the national income and product accounts will be released along with the
“advance” estimate of GDP for the second quarter of 2017 on July 28. GDP will be revised for the most
recent 3 years (2014 through 2016) and for the first quarter of 2017. For more information, see
“Preview of the 2017 NIPA Annual Update” included in the May Survey of Current Business article on
“GDP and the Economy”. The August Survey will contain an article that describes the results.



David B. Wasshausen
Chief, National Income and Wealth Division
Bureau of Economic Analysis
(301) 278-9715