Gross Domestic Product, 4th quarter and annual 2016 (third estimate); Corporate Profits, 4th quarter and annual 2016

Historical release narrative reproduced from the official public-domain U.S. Bureau of Economic Analysis source. Statistical tables, charts, standard technical appendices and administrative material are omitted; formatting is adapted for reading. Figures retain the release's original vintage and may have been revised. Consult the linked source for the complete release and current data.

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

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)