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Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 2.2 percent in the fourth quarter of 2014, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 5.0 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 also 2.2 percent. While increases in exports and in personal consumption expenditures (PCE) were larger than previously estimated and the change in private inventories was smaller, GDP growth is unrevised, and the general picture of the economy for the fourth quarter remains the same (see "Revisions" on page 3).
The increase in real GDP in the fourth quarter reflected positive contributions from PCE, nonresidential fixed investment, exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the fourth quarter primarily reflected an upturn in imports, a downturn in federal government spending, a deceleration in nonresidential fixed investment, and a larger decrease in private inventory investment that were partly offset by accelerations in PCE and in state and local 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 (2009) dollars. Price indexes are chain-type measures.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 0.1 percent in the fourth quarter, the same decrease as in the second estimate; this index increased 1.4 percent in the third quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 0.7 percent, compared with an increase of 1.6 percent.
Real personal consumption expenditures increased 4.4 percent in the fourth quarter, compared with an increase of 3.2 percent in the third. Durable goods increased 6.2 percent, compared with an increase of 9.2 percent. Nondurable goods increased 4.1 percent, compared with an increase of 2.5 percent. Services increased 4.3 percent, compared with an increase of 2.5 percent.
Real nonresidential fixed investment increased 4.7 percent in the fourth quarter, compared with an increase of 8.9 percent in the third. Investment in nonresidential structures increased 5.9 percent, compared with an increase of 4.8 percent. Investment in equipment increased 0.6 percent, compared with an increase of 11.0 percent. Investment in intellectual property products increased 10.3 percent, compared with an increase of 8.8 percent. Real residential fixed investment increased 3.8 percent, compared with an increase of 3.2 percent.
Real exports of goods and services increased 4.5 percent in the fourth quarter, the same increase as in the third quarter. Real imports of goods and services increased 10.4 percent, in contrast to a decrease of 0.9 percent.
Real federal government consumption expenditures and gross investment decreased 7.3 percent in the fourth quarter, in contrast to an increase of 9.9 percent in the third. National defense decreased 12.2 percent, in contrast to an increase of 16.0 percent. Nondefense increased 1.5 percent, compared with an increase of 0.4 percent. Real state and local government consumption expenditures and gross investment increased 1.6 percent, compared with an increase of 1.1 percent.
The change in real private inventories subtracted 0.10 percentage point from the fourth-quarter change in real GDP after subtracting 0.03 percentage point from the third-quarter change. Private businesses increased inventories $80.0 billion in the fourth quarter, following increases of $82.2 billion in the third quarter and $84.8 billion in the second.
Real final sales of domestic product -- GDP less change in private inventories -- increased 2.3 percent in the fourth quarter, compared with an increase of 5.0 percent in the third.
Gross domestic purchases
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 3.2 percent in the fourth quarter, compared with an increase of 4.1 percent in the third.
Gross national product
Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- increased 1.4 percent in the fourth quarter, compared with an increase of 5.3 percent in the third. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $30.7 billion in the fourth quarter, in contrast to an increase of $13.3 billion in the third; in the fourth quarter, receipts decreased $28.3 billion, and payments increased $2.3 billion.
Current-dollar GDP
Current-dollar GDP -- the market value of the production of goods and services in the United States -- increased 2.4 percent, or $103.9 billion, in the fourth quarter to a level of $17,703.7 billion. In the third quarter, current-dollar GDP increased 6.4 percent, or $271.6 billion.
Gross domestic income
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 3.1 percent in the fourth quarter, compared with an increase of 5.2 percent in the third. 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 growth rate in real GDP was the same as was estimated last month, primarily reflecting upward revisions to exports and to personal consumption expenditures (PCE) that were mostly offset by a downward revision to private inventory investment.
2014 GDP
Real GDP increased 2.4 percent in 2014 (that is, from the 2013 annual level to the 2014 annual level), compared with an increase of 2.2 percent in 2013.
The increase in real GDP in 2014 reflected positive contributions from PCE, nonresidential fixed investment, exports, state and local government spending, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP growth in 2014 primarily reflected an acceleration in nonresidential fixed investment, a smaller decrease in federal government spending, and accelerations in PCE and in state and local government spending that were partly offset by an acceleration in imports and a deceleration in residential fixed investment.
The price index for gross domestic purchases increased 1.4 percent in 2014, compared with an increase of 1.3 percent in 2013.
Current-dollar GDP increased 3.9 percent, or $650.8 billion, in 2014 to a level of $17,418.9 billion, compared with an increase of 3.7 percent, or $604.9 billion, in 2013.
During 2014 (that is, measured from the fourth quarter of 2013 to the fourth quarter of 2014), real GDP increased 2.4 percent, compared with an increase of 3.1 percent during 2013. The price index for gross domestic purchases increased 1.1 percent during 2014, compared with an increase of 1.3 percent during 2013.
Corporate Profits
Profits from current production
Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) decreased $30.4 billion in the fourth quarter, in contrast to an increase of $64.5 billion in the third.
Profits of domestic financial corporations decreased $12.5 billion in the fourth quarter, in contrast to an increase of $16.1 billion in the third. Profits of domestic nonfinancial corporations increased $18.1 billion, compared with an increase of $32.0 billion. The rest-of-the-world component of profits decreased $36.1 billion in the fourth quarter, in contrast to an increase of $16.5 billion in the third. 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 decreased $36.5 billion, and payments decreased $0.4 billion.
Taxes on corporate income decreased $4.8 billion in the fourth quarter, compared with a decrease of $5.5 billion in the third. Profits after tax with IVA and CCAdj decreased $25.8 billion, in contrast to an increase of $70.1 billion.
Dividends increased $18.6 billion in the fourth quarter, in contrast to a decrease of $3.9 billion in the third. Undistributed profits decreased $44.3 billion, in contrast to an increase of $73.9 billion. Net cash flow with IVA -- the internal funds available to corporations for investment -- increased $12.2 billion, compared with an increase of $46.9 billion.
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. The IVA increased $27.5 billion in the fourth quarter, compared with an increase of $16.7 billion in the third. The CCAdj increased $3.9 billion, compared with an increase of $0.9 billion.
For the year 2014, profits from current production decreased $17.1 billion, in contrast to an increase of $84.1 billion in 2013. Profits of domestic financial corporations decreased, and profits of domestic nonfinancial corporations increased. The rest-of-the-world component of profits decreased $9.0 billion in 2014, in contrast to an increase of $1.3 billion in 2013.
For the year 2014, taxes on corporate income increased $118.3 billion, compared with an increase of $19.5 billion in 2013. Profits after tax with IVA and CCAdj decreased $135.4 billion, in contrast to an increase of $64.6 billion. Dividends decreased $54.5 billion, in contrast to an increase of $102.5 billion. Undistributed profits decreased $80.9 billion, compared with a decrease of $37.9 billion.
Corporate profits with IVA
According to the measure of profits before tax with inventory valuation adjustment, profits of domestic financial corporations decreased $13.0 billion in the fourth quarter, in contrast to an increase of $16.2 billion in the third. Profits of domestic nonfinancial corporations increased $14.7 billion, compared with an increase of $31.1 billion. The fourth-quarter increase in profits of nonfinancial corporations primarily reflected increases in retail trade, in "other" nonfinancial industries, and in manufacturing that were partly offset by decreases in utilities and in transportation and warehousing.
For the year 2014, profits of domestic financial corporations decreased $22.5 billion, compared with an increase of $44.6 billion in 2013. Profits of domestic nonfinancial corporations increased $212.4 billion in 2014, compared with an increase of $66.2 billion. The 2014 increase in profits of domestic nonfinancial corporations was widespread across all industries. The largest increases were in manufacturing, in "other" nonfinancial industries, and in utilities.
Gross value added of nonfinancial domestic corporate business
In the fourth quarter, real gross value added of nonfinancial corporations increased, and profits per unit of real gross value added were unchanged, reflecting a decrease in unit prices that was offset by decreases in unit labor and nonlabor costs.
Source: U.S. Bureau of Economic Analysis · Original release Mar 27, 2015.
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