EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, TUESDAY, DECEMBER 23, 2008
BEA 08-59
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GROSS DOMESTIC PRODUCT: THIRD QUARTER 2008 (FINAL)
CORPORATE PROFITS: THIRD QUARTER 2008 (FINAL)
CORPORATE PROFITS: THIRD QUARTER 2008 (FINAL)
Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- decreased at an annual rate of 0.5 percent in the third quarter of 2008,
(that is, from the second quarter to the third quarter), according to final estimates released by the Bureau
of Economic Analysis. In the second quarter, real GDP increased 2.8 percent.
The GDP estimates released today are based on more complete source data than were available for
the preliminary estimates issued last month. In the preliminary estimates, the decrease in real GDP was
also 0.5 percent (see "Revisions" on page 3).
The decrease in real GDP in the third quarter primarily reflected negative contributions from
personal consumption expenditures (PCE), residential fixed investment, and equipment and software
that were partly offset by positive contributions from federal government spending, private inventory
investment, exports, nonresidential structures, and state and local government spending. Imports, which
are a subtraction in the calculation of GDP, decreased.
Most of the major components contributed to the downturn in real GDP growth in the third
quarter. The largest contributors were a sharp downturn in PCE, a deceleration in exports, a smaller
decrease in imports, a deceleration in nonresidential structures, a larger decrease in equipment and
software, and a deceleration in state and local government spending. Notable offsets were an upturn in
inventory investment and an acceleration in federal government spending.
_______________________________
FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual
rates, unless otherwise specified. Quarter-to-quarter dollar changes are
differences between these published estimates. Percent changes are calculated
from unrounded data and are annualized. “Real” estimates are in chained
(2000) dollars. Price indexes are chain-type measures.
This news release is available on BEA’s Web site along with the Technical Note and Highlights
related to this release.
Final sales of computers subtracted 0.01 percentage point from the third-quarter change in real
GDP after adding 0.17 percentage point to the second-quarter change. Motor vehicle output added 0.16
percentage point to the third-quarter change in real GDP after subtracting 1.01 percentage points from
the second-quarter change.
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 4.5 percent in the third quarter, 0.2 percentage point less than the preliminary estimate; this
index increased 4.2 percent in the second quarter. Excluding food and energy prices, the price index for
gross domestic purchases increased 2.8 percent in the third quarter, compared with an increase of 2.2
percent in the second.
Real personal consumption expenditures decreased 3.8 percent in the third quarter, in contrast to
an increase of 1.2 percent in the second. Real nonresidential fixed investment decreased 1.7 percent, in
contrast to an increase of 2.5 percent. Nonresidential structures increased 9.7 percent, compared with an
increase of 18.5 percent. Equipment and software decreased 7.5 percent, compared with a decrease of
5.0 percent. Real residential fixed investment decreased 16.0 percent, compared with a decrease of 13.3
percent.
Real exports of goods and services increased 3.0 percent in the third quarter, compared with an
increase of 12.3 percent in the second. Real imports of goods and services decreased 3.5 percent,
compared with a decrease of 7.3 percent.
Real federal government consumption expenditures and gross investment increased 13.8 percent
in the third quarter, compared with an increase of 6.6 percent in the second. National defense increased
18.0 percent, compared with an increase of 7.3 percent. Nondefense increased 5.1 percent, compared
with an increase of 5.0 percent. Real state and local government consumption expenditures and gross
investment increased 1.3 percent, compared with an increase of 2.5 percent.
The real change in private inventories added 0.84 percentage point to the third-quarter change in
real GDP, after subtracting 1.50 percentage points from the second-quarter change. Private businesses
decreased inventories $29.6 billion in the third quarter, following a decrease of $50.6 billion in the
second quarter and a decrease of $10.2 billion in the first.
Real final sales of domestic product -- GDP less change in private inventories -- decreased 1.3
percent in the third quarter, in contrast to an increase of 4.4 percent in the second.
Gross domestic purchases
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- decreased 1.5 percent in the third quarter, compared with a decrease of 0.1 percent in the
second.
Gross national product
Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- decreased 0.2 percent in the third quarter, in contrast to an increase of 2.1 percent in
the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which
increased $9.9 billion in the third quarter after decreasing $20.2 billion in the second; in the third
quarter, receipts decreased $13.3 billion, and payments decreased $23.1 billion.
Current-dollar GDP
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
3.4 percent, or $118.3 billion, in the third quarter to a level of $14,412.8 billion. In the second quarter,
current-dollar GDP increased 4.1 percent, or $143.7 billion.
Revisions
The final estimate of the third-quarter decrease in real GDP is the same as the preliminary
estimate, primarily reflecting upward revisions to nonresidential structures and to farm inventory
investment that were offset by downward revisions to private nonfarm inventory investment and to
equipment and software.
Advance Preliminary Final
(Percent change from preceding quarter)
Real GDP.......................................... -0.3 -0.5 -0.5
Current-dollar GDP................................ 3.8 3.6 3.4
Gross domestic purchases price index.............. 4.8 4.7 4.5
Corporate Profits
Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $18.5 billion in the third quarter, compared with a decrease of
$60.2 billion in the second quarter. Current-production cash flow (net cash flow with inventory
valuation and capital consumption adjustments) -- the internal funds available to corporations for
investment -- increased $43.1 billion in the third quarter, in contrast to a decrease of $60.5 billion in the
second.
Taxes on corporate income decreased $13.3 billion in the third quarter, in contrast to an increase
of $3.9 billion in the second. Profits after tax with inventory valuation and capital consumption
adjustments decreased $5.2 billion in the third quarter, compared with a decrease of $64.1 billion in the
second. Dividends decreased $5.3 billion, in contrast to an increase of $13.9 billion; current-production
undistributed profits increased $0.3 billion, in contrast to a decrease of $78.1 billion.
Domestic profits of financial corporations decreased $75.5 billion in the third quarter, compared
with a decrease of $31.0 billion in the second. Domestic profits of nonfinancial corporations increased
$52.1 billion in the third quarter, in contrast to a decrease of $4.2 billion in the second. In the third
quarter, real gross value added of nonfinancial corporations increased, and profits per unit of real value
added increased. The increase in unit profits reflected an increase in unit prices that was partly offset by
an increase in unit nonlabor costs; unit labor costs were unchanged.
The rest-of-the-world component of profits increased $4.9 billion in the third quarter, in contrast
to a decrease of $25.0 billion in the second. This measure is calculated as (1) receipts by U.S. residents
of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated
foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus
dividends paid by U.S. corporations to unaffiliated foreign residents. The third-quarter increase was
accounted for by a smaller decrease in receipts than in payments.
Profits before tax with inventory valuation adjustment is the best available measure of industry
profits because estimates of the capital consumption adjustment by industry do not exist. This measure
reflects depreciation-accounting practices used for federal income tax returns. According to this
measure, domestic profits of financial corporations decreased, while domestic profits of nonfinancial
corporations increased. The increase in nonfinancial corporations reflected increases in manufacturing
and in wholesale trade that were partly offset by decreases in information and in retail trade. Within
manufacturing, the largest increase was in petroleum and coal products.
Profits before tax decreased $56.3 billion in the third quarter, compared with a decrease of $0.9
billion in the second. The before-tax measure of profits does not reflect, as does profits from current
production, the capital consumption and inventory valuation adjustments. These adjustments convert
depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to
the current-cost measures used in the national income and product accounts. The capital consumption
adjustment decreased $25.3 billion in the third quarter (from -$62.7 billion to -$88.0 billion), compared
with a decrease of $14.7 billion in the second. The inventory valuation adjustment increased $63.1
billion (from -$154.0 billion to -$90.9 billion), in contrast to a decrease of $44.6 billion.
Effective with this release, chained-dollar gross value added of nonfinancial corporate business
was revised beginning with 2005. The current-dollar gross value added is deflated by a revised chain-
type price index for nonfinancial industries from the annual revision of the GDP-by-industry accounts
that were released in December 2008.
* * *
BEA’s national, international, regional, and industry estimates; the Survey of Current Business;
and BEA news releases are available without charge on BEA’s Web site at www.bea.gov. By visiting
the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.
* * *
Next release -- January 30, 2009, at 8:30 A.M. EST for:
Gross Domestic Product: Fourth Quarter 2008 (Advance)
Release dates in 2009
Gross Domestic Product
2008: IV and 2008 annual 2009: I 2009: II 2009: III
Advance......... January 30 April 29 July 31 October 29
Preliminary..... February 27 May 29 August 27 November 24
Final........... March 26 June 25 September 30 December 22
Corporate Profits
Preliminary........... ....... May 29 August 27 November 24
Final................. March 26 June 25 September 30 December 22
