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Technical Note
Gross Domestic Product
Fourth Quarter of 2016 (Third Estimate)
March 30, 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 fourth quarter is available on BEA's Web site at www.bea.gov; a brief summary of "highlights" is also
posted on the Web site. The April issue of the Survey of Current Business, BEA’s online monthly journal,
will include a more detailed analysis of the estimates ("GDP and the Economy").

Sources of Revision to Real GDP

Real GDP was revised up 0.2 percentage point from the second estimate, increasing 2.1 percent (annual
rate) in the fourth quarter after increasing 3.5 percent in the third quarter. Upward revisions to
consumer spending and to inventory investment were partly offset by downward revisions to
nonresidential fixed investment and to exports of goods and services. Imports, which are a subtraction
in the calculation of GDP, were revised upward.

*	The upward revision to consumer spending reflected upward revisions to both goods and
        services. The upward revision to goods was more than accounted for by gasoline and other
        energy goods and primarily reflected the incorporation of newly available data for the month of
        December from the Energy Administration Association’s Petroleum Supply Monthly Report.
        The revision to services reflected upward revisions to “other” services and to recreation
        services. Within “other” services, net foreign travel was the leading contributor to the revision,
        reflecting the incorporation of revised statistics from BEA’s International Transactions Accounts.
        Revisions to recreation services primarily reflected the incorporation of newly available and
        revised information from the Census Bureau’s Quarterly Services Report.

*	The upward revision to inventory investment primarily reflected an upward revision to
        manufacturing, based on revised inventory data for December from the Census Bureau’s
        Manufacturers’ Shipments, Inventories, and Orders (M3) survey.

*	The downward revision to nonresidential fixed investment was more than accounted for by a
        downward revision to intellectual property products. All three categories (software; research
        and development; and entertainment, literary, and artistic originals) were revised down and
        reflected the incorporation of newly available and revised data from the Census Bureau’s
        Quarterly Services Report as well as newly available R&D expense data from publicly traded
        company financial reports.

*	Revisions to both exports and imports primarily reflected the incorporation of revised statistics
        from BEA’s International Transactions Accounts.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI), which measures the value of the production of goods and services in
the United States as the costs incurred and the incomes earned in production, increased 1.0 percent in
the fourth quarter, following a 5.0 percent increase in the third quarter.

Profits from current production increased $11.2 billion, or 0.5 percent (quarterly rate), in the fourth
quarter, compared with an increase of $117.8 billion, or 5.8 percent, in the third. In the fourth quarter,
profits of domestic financial corporations increased $26.5 billion, profits of domestic nonfinancial
corporations decreased $60.4 billion, and rest-of-the-world profits increased $45.1 billion.

The estimate of nonfinancial corporate profits in the fourth quarter was reduced by a $4.95 billion ($19.8
billion at an annual rate) settlement between a U.S. subsidiary of Volkswagen and the federal and state
governments. This settlement was recorded in the national income and product accounts (NIPAs) as a
business current transfer payment to government; the estimate of GDI was not affected by the
settlement. The NIPAs record these types of settlements on an accrual basis in the quarter when the
settlement is finalized, which is not necessarily the same quarter when the charges are recorded on a
company's own financial statements. For more information, see the FAQ, "What are the effects of the
Volkswagen buyback deal on GDP and the national accounts?”.

David B. Wasshausen
Chief, National Income and Wealth Division
Bureau of Economic Analysis