Gross Domestic Profit, 1st quarter 2012 (second estimate); Corporate Profits, 1st quarter 2012

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, THURSDAY, MAY 31, 2012BEA 12-20

* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.

Lisa S. Mataloni: (202) 606-5304 (GDP) gdpniwd@bea.gov
Andrew Hodge: (202) 606-5564 (Profits) cpniwd@bea.gov
Recorded message: (202) 606-5306
Ralph Stewart: (202) 606-2649 (News Media)
Jeannine Aversa: (202) 606-2649 (News Media)

National Income and Product Accounts
Gross Domestic Product, 1st quarter 2012 (second estimate);
Corporate Profits, 1st quarter 2012 (preliminary estimate)
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 1.9 percent in the first quarter of 2012 (that
is, from the fourth quarter to the first quarter), according to the “second” estimate released by the Bureau
of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for
the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.2
percent (see “Revisions” on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from
personal consumption expenditures (PCE), exports, residential fixed investment, private inventory
investment, and nonresidential fixed investment that were partly offset by negative contributions from
federal government spending and state and local government spending. Imports, which are a subtraction
in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private
inventory investment, an acceleration in imports, and a deceleration in nonresidential fixed investment
that were partly offset by accelerations in exports and in PCE.
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BOX.
Annual Revision of the National Income and Product Accounts

The annual revision of the national income and product accounts (NIPAs), covering the first
quarter of 2009 through the first quarter of 2012, will be released along with the “advance” estimate of
GDP for the second quarter of 2012 on July 27, 2012. The August Survey of Current Business will
contain an article that describes the annual revision in detail.
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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 (2005) 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. For information on revisions, see “Revisions to GDP, GDI, and Their Major
Components.”
___________________

Motor vehicle output added 1.12 percentage points to the first-quarter change in real GDP after
adding 0.47 percentage point to the fourth-quarter change. Final sales of computers subtracted 0.03
percentage point from the first-quarter change in real GDP after adding 0.12 percentage point to the
fourth-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 2.4 percent in the first quarter, this index increased 1.1 percent in the fourth quarter.
Excluding food and energy prices, the price index for gross domestic purchases increased 2.3 percent in
the first quarter, compared with an increase of 1.2 percent in the fourth.

Real personal consumption expenditures increased 2.7 percent in the first quarter, compared with
an increase of 2.1 percent in the fourth. Durable goods increased 14.3 percent, compared with an
increase of 16.1 percent. Nondurable goods increased 2.3 percent, compared with an increase of 0.8
percent. Services increased 1.0 percent, compared with an increase of 0.4 percent.

Real nonresidential fixed investment increased 1.9 percent in the first quarter, compared with an
increase of 5.2 percent in the fourth. Nonresidential structures decreased 3.3 percent, compared with a
decrease of 0.9 percent. Equipment and software increased 3.9 percent, compared with an increase of
7.5 percent. Real residential fixed investment increased 19.4 percent, compared with an increase of 11.6
percent.

Real exports of goods and services increased 7.2 percent in the first quarter, compared with an
increase of 2.7 percent in the fourth. Real imports of goods and services increased 6.1 percent,
compared with an increase of 3.7 percent.

Real federal government consumption expenditures and gross investment decreased 5.9 percent
in the first quarter, compared with a decrease of 6.9 percent in the fourth. National defense decreased
8.3 percent, compared with a decrease of 12.1 percent. Nondefense decreased 0.8 percent, in contrast to
an increase of 4.5 percent. Real state and local government consumption expenditures and gross
investment decreased 2.5 percent, compared with a decrease of 2.2 percent.

The change in real private inventories added 0.21 percentage point to the first-quarter change in
real GDP, after adding 1.81 percentage points to the fourth-quarter change. Private businesses increased
inventories $57.7 billion in the first quarter, following an increase of $52.2 billion in the fourth quarter
and a decrease of $2.0 billion in the third.

Real final sales of domestic product — GDP less change in private inventories — increased 1.7
percent in the first quarter, compared with an increase of 1.1 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever
produced — increased 1.9 percent in the first quarter, compared with an increase of 3.1 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 1.3 percent in the first quarter, compared with an increase of 1.8
percent in the fourth. GNP includes, and GDP excludes, net receipts of income from the rest of the
world, which decreased $16.4 billion in the first quarter after decreasing $36.7 billion in the fourth; in
the first quarter, receipts decreased $4.2 billion, and payments increased $12.1 billion.

Current-dollar GDP

Current-dollar GDP — the market value of the nation’s output of goods and services — increased
3.6 percent, or $134.6 billion, in the first quarter to a level of $15,454.0 billion. In the fourth quarter,
current-dollar GDP increased 3.8 percent, or $143.3 billion.

Gross domestic income

Real gross domestic income (GDI), which measures the output of the economy as the costs
incurred and the incomes earned in the production of GDP, increased 2.7 percent in the first quarter,
compared with an increase of 2.6 percent in the fourth. For a given quarter, the estimates of GDP and
GDI may differ for a variety of reasons, including the incorporation of largely independent source data.
However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of
change.

Revisions

The “second” estimate of the first-quarter change in real GDP is 0.3 percentage point, or $11.4
billion, lower than the advance estimate issued last month, primarily reflecting a downward revision to
private inventory investment, an upward revision to imports, and downward revisions to state and local
government spending and to personal consumption expenditures that were partly offset by upward
revisions to nonresidential fixed investment and to exports.

Advance Estimate Second Estimate
(Percent change from preceding quarter)

Real GDP……………………………. 2.2 1.9
Current-dollar GDP…………………… 3.8 3.6
Gross domestic purchases price index…….. 2.4 2.4

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) increased $11.4 billion in the first quarter, compared with an increase of
$16.8 billion in the fourth quarter. Current-production cash flow (net cash flow with inventory valuation
adjustment) — the internal funds available to corporations for investment — decreased $98.4 billion in
the first quarter, in contrast to an increase of $44.8 billion in the fourth.

Taxes on corporate income increased $75.8 billion in the first quarter, in contrast to a decrease
of $0.7 billion in the fourth. Approximately $50 billion of the increase reflected the effect of the
expiration of “bonus depreciation” in 2011 (see below). Profits after tax with inventory valuation and
capital consumption adjustments decreased $64.4 billion in the first quarter, in contrast to an increase of
$17.5 billion in the fourth. Dividends increased $10.0 billion, compared with an increase of $10.3
billion; current-production undistributed profits decreased $74.3 billion, in contrast to an increase of
$7.2 billion.

Domestic profits of financial corporations increased $20.6 billion in the first quarter, compared
with an increase of $29.9 billion in the fourth. Domestic profits of nonfinancial corporations increased
$6.3 billion, compared with an increase of $28.4 billion. In the first quarter, real gross value added of
nonfinancial corporations increased, and profits per unit of real value added decreased. The decrease in
unit profits reflected a decrease in unit prices; a decrease in unit labor costs corporations incurred was
offset by an increase in unit nonlabor costs.

The rest-of-the-world component of profits decreased $15.5 billion in the first quarter, compared
with a decrease of $41.5 billion in the fourth. 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
decrease was accounted for by a larger increase in payments than in receipts.

Profits before tax increased $251.2 billion in the first quarter, in contrast to a decrease of $8.3
billion in the fourth. 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 $230.4 billion in the first quarter (from $100.9 billion to -$129.5 billion),
compared with a decrease of $1.8 billion in the fourth. The inventory valuation adjustment decreased
$9.4 billion (from -$18.6 billion to -$28.0 billion), in contrast to an increase of $26.9 billion.

The large increase in first-quarter taxes on corporate income and the large decrease in the first-
quarter capital consumption adjustment mainly reflected the expiration of bonus depreciation claimed
under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. For
detailed data, see the table “Net Effects of the Tax Acts of 2002, 2003, 2008, 2009, and 2010 on
Selected Measures of Corporate Profits” at www.bea.gov/national/xls/technote_tax_acts.xls. 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. For more detail on
the effect of the changes in the tax act provisions on the capital consumption adjustment, see FAQ #999
on the BEA Web site, “Why does the capital consumption adjustment for domestic business decline so much
in the first quarters of 2011 and 2012?”

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