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National Income and Product Accounts
Gross Domestic Product: Fourth Quarter and Annual 2016 (Third Estimate)
Corporate Profits: Fourth Quarter and Annual 2016
Gross Domestic Product: Fourth Quarter and Annual 2016 (Third Estimate)
Corporate Profits: Fourth Quarter and Annual 2016
Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2016 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter of 2016, real GDP increased 3.5 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.9 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains largely the same; personal consumption expenditures (PCE) increased more than previously estimated (see "Updates to GDP" on page 2).
Real gross domestic income (GDI) increased 1.0 percent in the fourth quarter, compared with an increase of 5.0 percent in the third. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.5 percent in the fourth quarter, compared with an increase of 4.3 percent in the third quarter (table 1). The increase in real GDP in the fourth quarter reflected positive contributions from PCE, private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2). The deceleration in real GDP in the fourth quarter reflected downturns in exports and in federal government spending, an acceleration in imports, and a deceleration in nonresidential fixed investment that were partly offset by accelerations in private inventory investment and in PCE, and upturns in residential fixed investment and in state and local government spending. Current-dollar GDP increased 4.2 percent, or $194.1 billion, in the fourth quarter to a level of $18,869.4 billion. In the third quarter, current-dollar GDP increased 5.0 percent, or $225.2 billion (table 1 and table 3). The price index for gross domestic purchases increased 2.0 percent in the fourth quarter, compared with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 2.0 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 1.7 percent (appendix table A). Updates to GDP The upward revision to the percent change in real GDP primarily reflected upward revisions to PCE and to private inventory investment that were partly offset by downward revisions to nonresidential fixed investment and to exports. Imports, which are a subtraction in the calculation of GDP, were revised upward. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section that follows. Advance Estimate Second Estimate Third Estimate (Percent change from preceding quarter) Real GDP 1.9 1.9 2.1 Current-dollar GDP 4.0 3.9 4.2 Real GDI --- --- 1.0 Average of Real GDP and Real GDI --- --- 1.5 Gross domestic purchases price index 2.0 1.9 2.0 PCE price index 2.2 1.9 2.0 2016 GDP Real GDP increased 1.6 percent in 2016 (that is, from the 2015 annual level to the 2016 annual level), compared with an increase of 2.6 percent in 2015 (table 1). The increase in real GDP in 2016 reflected positive contributions from PCE, residential fixed investment, state and local government spending, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2). The deceleration in real GDP from 2015 to 2016 reflected downturns in private inventory investment and in nonresidential fixed investment and decelerations in PCE, in residential fixed investment, and in state and local government spending that were partly offset by a deceleration in imports and accelerations in federal government spending and in exports. Current-dollar GDP increased 3.0 percent, or $532.5 billion, in 2016 to a level of $18,569.1 billion, compared with an increase of 3.7 percent, or $643.5 billion, in 2015 (table 1 and table 3). Real GDI increased 1.6 percent in 2016, compared with an increase of 2.5 percent in 2015 (table 1). The price index for gross domestic purchases increased 1.0 percent in 2016, compared with an increase of 0.4 percent in 2015 (table 4). During 2016 (that is, measured from the fourth quarter of 2015 to the fourth quarter of 2016), real GDP increased 2.0 percent, compared with an increase of 1.9 percent during 2015. The price index for gross domestic purchases increased 1.5 percent during 2016, compared with an increase of 0.4 percent during 2015. Real GDI increased 1.9 percent during 2016, compared with an increase of 1.5 percent during 2015 (table 7). Corporate Profits (table 12) Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $11.2 billion in the fourth quarter of 2016, compared with an increase of $117.8 billion in the third quarter. Profits of domestic financial corporations increased $26.5 billion in the fourth quarter, compared with an increase of $50.1 billion in the third. Profits of domestic nonfinancial corporations decreased $60.4 billion, in contrast to an increase of $66.4 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. For more information, see the FAQ, "What are the effects of the Volkswagen buyback deal on GDP and the national accounts?”. The rest-of-the-world component of profits increased $45.1 billion, compared with an increase of $1.3 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the fourth quarter, receipts increased $9.1 billion, and payments decreased $36.0 billion. In 2016, profits from current production decreased $2.3 billion, compared with a decrease of $64.0 billion in 2015. Profits of domestic financial corporations increased $20.5 billion, compared with an increase of $8.5 billion. Profits of domestic nonfinancial corporations decreased $47.0 billion, compared with a decrease of $47.3 billion. The rest-of-the-world component of profits increased $24.3 billion, in contrast to a decrease of $25.2 billion. * * * Next release: April 28, 2017 at 8:30 A.M. EDT Gross Domestic Product: First Quarter 2017 (Advance Estimate) Additional Information Resources Additional Resources available at www.bea.gov: • Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email subscription service, or following BEA on Twitter @BEA_News. • Historical time series for these estimates can be accessed in BEA’s Interactive Data Application. • Access BEA data by registering for BEA’s Data Application Programming Interface (API). • For more on BEA’s statistics, see our monthly online journal, the Survey of Current Business. • BEA's news release schedule • NIPA Handbook: Concepts and Methods of the U.S. National Income and Product Accounts Definitions Gross domestic product (GDP) is the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production. GDP is also equal to the sum of personal consumption expenditures, gross private domestic investment, net exports of goods and services, and government consumption expenditures and gross investment. Gross domestic income (GDI) is the sum of incomes earned and costs incurred in the production of GDP. In national economic accounting, GDP and GDI are conceptually equal. In practice, GDP and GDI differ because they are constructed using largely independent source data. Real GDI is calculated by deflating gross domestic income using the GDP price index as the deflator, and is therefore conceptually equivalent to real GDP. Current-dollar estimates are valued in the prices of the period when the transactions occurred—that is, at “market value.” Also referred to as “nominal estimates” or as “current-price estimates.” Real values are inflation-adjusted estimates—that is, estimates that exclude the effects of price changes. The gross domestic purchases price index measures the prices of final goods and services purchased by U.S. residents. The personal consumption expenditure price index measures the prices paid for the goods and services purchased by, or on the behalf of, “persons.” Profits from current production, referred to as corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj) in the NIPAs, is a measure of the net income of corporations before deducting income taxes that is consistent with the value of goods and services measured in GDP. The IVA and CCAdj are adjustments that convert inventory withdrawals and depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic measures used in the national income and product accounts. For more definitions, see the Glossary: National Income and Product Accounts. Statistical conventions Annual rates. Quarterly values are expressed at seasonally-adjusted annual rates (SAAR), unless otherwise specified. Dollar changes are calculated as the difference between these SAAR values. For detail, see the FAQ “Why does BEA publish estimates at annual rates?” Percent changes in quarterly series are calculated from unrounded data and are displayed at annual rates, unless otherwise specified. For details, see the FAQ “How is average annual growth calculated?” Quantities and prices. Quantities, or “real” volume measures, and prices are expressed as index numbers with a specified reference year equal to 100 (currently 2009). Quantity and price indexes are calculated using a Fisher-chained weighted formula that incorporates weights from two adjacent periods (quarters for quarterly data and annuals for annual data). “Real” dollar series are calculated by multiplying the published quantity index by the current dollar value in the reference year (2009) and then dividing by 100. Percent changes calculated from real quantity indexes and chained-dollar levels are conceptually the same; any differences are due to rounding. Chained-dollar values are not additive because the relative weights for a given period differ from those of the reference year. In tables that display chained-dollar values, a “residual” line shows the difference between the sum of detailed chained-dollar series and its corresponding aggregate. Updates to GDP BEA releases three vintages of the current quarterly estimate for GDP: "Advance" estimates are released near the end of the first month following the end of the quarter and are based on source data that are incomplete or subject to further revision by the source agency; “second” and “third” estimates are released near the end of the second and third months, respectively, and are based on more detailed and more comprehensive data as they become available. Annual and comprehensive updates are typically released in late July. Annual updates generally cover at least the 3 most recent calendar years (and their associated quarters) and incorporate newly available major annual source data as well as some changes in methods and definitions to improve the accounts. Comprehensive (or benchmark) updates are carried out at about 5-year intervals and incorporate major periodic source data, as well as major conceptual improvements. The table below shows the average revisions to the quarterly percent changes in real GDP between different estimate vintages, without regard to sign. Vintage Average Revision Without Regard to Sign (percentage points, annual rates) Advance to second 0.5 Advance to third 0.6 Second to third 0.2 Advance to latest 1.1 Note - Based on estimates from 1993 through 2015. For more information on GDP updates, see Revision Information on the BEA Web site. The larger average revision from the advance to the latest estimate reflects the fact that periodic comprehensive updates include major statistical and methodological improvements. Unlike GDP, an advance current quarterly estimate of GDI is not released because data on domestic profits and on net interest of domestic industries are not available. For fourth quarter estimates, these data are not available until the third estimate.