Real gross domestic product – the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 2.7 percent in the first quarter of 2010 (that is, from the fourth quarter to the first quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2009, real GDP increased 5.6 percent.
The GDP estimate released June 25 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 3.0 percent.
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports and non-residential fixed investment that were partly offset by negative contributions from state and local government spending and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, a deceleration in non-residential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in PCE.
Motor vehicle output added 0.40 percentage point to the first-quarter change in real GDP after adding 0.45 percentage point to the fourth-quarter change. Final sales of computers added 0.09 percentage point to the first-quarter change in real GDP after adding 0.01 percentage point to the fourth-quarter change.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.7 percent in the first quarter, unrevised from the second estimate; this index increased 2.0 percent in the fourth quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.2 percent in the first quarter, compared with an increase of 1.5 percent in the fourth. The federal pay raise for civilian and military personnel added 0.1 percentage point to the first-quarter increase in the gross domestic purchases price index.
Real personal consumption expenditures increased 3.0 percent in the first quarter, compared with an increase of 1.6 percent in the fourth. Real non-residential fixed investment increased 2.2 percent, compared with an increase of 5.3 percent. Non-residential structures decreased 15.5 percent, compared with a decrease of 18.0 percent. Equipment and software increased 11.4 percent, compared with an increase of 19.0 percent. Real residential fixed investment decreased 10.3 percent, in contrast to an increase of 3.8 percent.
Real exports of goods and services increased 11.3 percent in the first quarter, compared with an increase of 22.8 percent in the fourth. Real imports of goods and services increased 14.8 percent, compared with an increase of 15.8 percent.
Real federal government consumption expenditures and gross investment increased 1.2 percent in the first quarter, compared with no change in the fourth. National defense increased 1.0 percent, in contrast to a decrease of 3.6 percent. Non-defense increased 1.5 percent, compared with an increase of 8.3 percent. Real state and local government consumption expenditures and gross investment decreased 3.8 percent, compared with a decrease of 2.2 percent.
The change in real private inventories added 1.88 percentage points to the first-quarter change in real GDP, after adding 3.79 percentage points to the fourth-quarter change. Private businesses increased inventories $41.2 billion in the first quarter, following decreases of $19.7 billion in the fourth quarter and $139.2 billion in the third.
Real final sales of domestic product – GDP less change in private inventories – increased 0.8 percent in the first quarter, compared with an increase of 1.7 percent in the fourth.
Gross domestic purchases
Real gross domestic purchases – purchases by U.S. residents of goods and services wherever produced – increased 3.5 percent in the first quarter, compared with an increase of 5.2 percent in the fourth.
Gross national product
Real gross national product – the goods and services produced by the labor and property supplied by U.S. residents – increased 3.5 percent in the first quarter, compared with an increase of 5.0 percent in the fourth. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased $23.6 billion in the first quarter after decreasing $14.5 billion in the fourth; in the first quarter, receipts increased $24.5 billion, and payments increased $800,000.
Current-dollar GDP
Current-dollar GDP – the market value of the nation's output of goods and services – increased 3.9 percent, or $138.6 billion, in the first quarter to a level of $14,592.4 billion. In the fourth quarter, current-dollar GDP increased 6.1 percent, or $211.7 billion.
Corporate Profits
Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $116.9 billion in the first quarter, compared with an increase of $108.7 billion in the fourth quarter. Current-production cash flow (net cash flow with inventory evaluation adjustment) – the internal funds available to corporations for investment – increased $63.7 billion in the first quarter, compared with an increase of $69.1 billion in the fourth.
Taxes on corporate income increased $61.3 billion in the first quarter, compared with an increase of $40.9 billion in the fourth. Profits after tax with inventory valuation and capital consumption adjustments increased $55.6 billion in the first quarter, compared with an increase of $67.8 billion in the fourth. Dividends decreased $27.3 billion, in contrast to an increase of $29.1 billion; current-production undistributed profits increased $82.9 billion, compared with an increase of $38.7 billion.
Domestic profits of financial corporations increased $11.2 billion in the first quarter, compared with an increase of $65.0 billion in the fourth. Domestic profits of non-financial corporations increased $79.6 billion in the first quarter, compared with an increase of $59.8 billion in the fourth. In the first quarter, real gross value added of non-financial corporations increased. Profits per unit of real value added increased, reflecting decreases in both the unit labor and non-labor costs corporations incurred that more than offset a decrease in unit prices.
The rest-of-the-world component of profits increased $26.1 billion in the first quarter, in contrast to a decrease of $16.1 billion in the fourth quarter. 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 first-quarter increase was accounted for by a larger increase 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 both financial and non-financial corporations increased. The increase in non-financial corporations reflected increases in all the major industry categories shown except information. Within manufacturing, all the subcategories increased except chemical products and "other" non-durable goods.
Profits before tax increased $215.1 billion in the first quarter, compared with an increase of $137.0 billion in the fourth quarter. Te 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 $107.4 billion in the first quarter (from -$118.8 billion to -$226.2 billion), in contrast to an increase of $100 million in the fourth. The inventory valuation adjustment increased $9.2 billion (from -$45.6 billion to -$36.4 billion), in contrast to a decrease of $28.5 billion.
The large decrease in the first-quarter capital consumption adjustment reflects the expiration of bonus depreciation. Profits from current production are not affected because they do not depend on the depreciation-accounting practices used for federal income tax returns; rather they are based on depreciation of fixed assets valued at current cost and using consistent depreciation profiles based on used-asset prices.
