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 3.4 percent in the second quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent.
2nd Quarter GDP Advance Estimate At a Glance
- Real Annual Growth Rate: 3.4%
- Previous Quarter Rate: 0.6%
- Current Dollar GDP Growth: 6.2%
- GDP Implicit Price Deflator: 2.7%
NATIONAL INCOME AND PRODUCT ACCOUNTS
* SECOND QUARTER 2007 GDP (ADVANCE)
* REVISED ESTIMATES: 2004 THROUGH FIRST QUARTER 2007
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 3.4 percent in the second quarter of 2007,
according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real
GDP increased 0.6 percent.
The Bureau emphasized that the second-quarter “advance” estimates are based on source data that
are incomplete or subject to further revision by the source agency (see the box on page 3). The second-
quarter “preliminary” estimates, based on more comprehensive data, will be released on August 30,
2007.
BOX
The estimates released today reflect the annual revision to the national income and product
accounts (NIPAs), beginning with the estimates for the first quarter of 2004. Annual revisions, which
are usually released in July, incorporate source data that are more complete, more detailed, and
otherwise more reliable than those previously available. This release includes the revised quarterly
estimates of GDP, corporate profits, and personal income and provides an overview of the effects of
the revision.
The August 2007 Survey of Current Business will contain NIPA tables and an article describing
the revisions. The revised estimates will be available on BEA’s Web site at www.bea.gov.
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. Prices indexes are chain-type measures.
This new release is available on BEA’s Web site at http://www.bea.gov/newsreleases/rels.htm.
The increase in real GDP in the second quarter primarily reflected positive contributions from
personal consumption expenditures (PCE) for services, exports, nonresidential structures, federal
government spending, and state and local government spending that were partly offset by a negative
contribution from residential fixed investment. Imports, which are a subtraction in the calculation of
GDP, decreased.
The acceleration in real GDP growth in the second quarter primarily reflected a downturn in
imports, upturns in federal government spending and in private inventory investment, accelerations in
exports and in nonresidential structures, and a smaller decrease in residential fixed investment that were
partly offset by a notable deceleration in PCE.
Final sales of computers contributed 0.16 percentage point to the second-quarter growth in real
GDP after subtracting 0.01 percentage point from the first-quarter growth. Motor vehicle output
contributed 0.03 percentage point to the second-quarter growth in real GDP after contributing 0.18
percentage point to the first-quarter growth.
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 3.9 percent in the second quarter, compared with an increase of 3.8 percent in the first.
Excluding food and energy prices, the price index for gross domestic purchases increased 1.7 percent
in the second quarter, compared with 3.1 percent in the first.
Real personal consumption expenditures increased 1.3 percent in the second quarter, compared
with an increase of 3.7 percent in the first. Durable goods increased 1.6 percent, compared with an
increase of 8.8 percent. Nondurable goods decreased 0.8 percent, in contrast to an increase of 3.0
percent. Services expenditures increased 2.2 percent, compared with an increase of 3.1 percent.
Real nonresidential fixed investment increased 8.1 percent in the second quarter, compared with
an increase of 2.1 percent in the first. Nonresidential structures increased 22.1 percent, compared with
an increase of 6.4 percent. Equipment and software increased 2.3 percent, compared with an increase of
0.3 percent. Real residential fixed investment decreased 9.3 percent, compared with a decrease of 16.3
percent.
Real exports of goods and services increased 6.4 percent in the second quarter, compared with an
increase of 1.1 percent in the first. Real imports of goods and services decreased 2.6 percent, in contrast
to an increase of 3.9 percent.
Real federal government consumption expenditures and gross investment increased 6.7 percent in
the second quarter, in contrast to a decrease of 6.3 percent in the first. National defense increased 9.5
percent, in contrast to a decrease of 10.8 percent. Nondefense increased 1.3 percent, compared with an
increase of 3.8 percent. Real state and local government consumption expenditures and gross
investment increased 2.9 percent, compared with an increase of 3.0 percent.
The real change in private inventories added 0.15 percentage point to the second-quarter change in
real GDP after subtracting 0.65 percentage point from the first-quarter change. Private businesses
increased inventories $3.6 billion in the second quarter, following increases of $0.1 billion in the first
quarter and $17.4 billion in the fourth.
Real final sales of domestic product — GDP less change in private inventories — increased 3.2
percent in the second quarter, compared with an increase of 1.3 percent in the first.
Gross domestic purchases
Real gross domestic purchases — purchases by U.S. residents of goods and services wherever
produced — increased 2.1 percent in the second quarter, compared with an increase of 1.1 percent in the
first.
Disposition of personal income
Current-dollar personal income increased $114.3 billion (4.0 percent) in the second quarter,
compared with an increase of $283.9 billion (10.5 percent) in the first. Personal income in the first
quarter was boosted by large bonus payments and the exercise of stock options.
Personal current taxes increased $27.7 billion in the second quarter, compared with an increase of
$58.0 billion in the first.
Disposable personal income increased $86.6 billion (3.5 percent) in the second quarter, compared
with an increase of $225.9 billion (9.5 percent) in the first. Real disposable personal income decreased
0.8 percent, in contrast to an increase of 5.9 percent.
Personal outlays increased $138.3 billion (5.7 percent) in the second quarter, compared with an
increase of $160.3 billion (6.7 percent) in the first. Personal saving — disposable personal income less
personal outlays — was $55.9 billion in the second quarter, compared with $107.6 billion in the first.
The personal saving rate — saving as a percentage of disposable personal income — was 0.6 percent in
the second quarter, compared with 1.1 percent in the first. Saving from current income may be near zero
or negative when outlays are financed by borrowing (including borrowing financed through credit cards
or home equity loans), by selling investments or other assets, or by using savings from previous periods.
For more information, see the FAQs on “Personal Saving” on BEA’s Web site. For a comparison of
personal saving in BEA?s national income and product accounts with personal saving in the Federal
Reserve Board’s flow of funds accounts, go to http://www.bea.gov/bea/dn/nipaweb/Nipa-Frd.asp.
Current-dollar GDP
Current-dollar GDP — the market value of the nation’s output of goods and services — increased
6.2 percent, or $204.0 billion, in the second quarter to a level of $13,755.9 billion. In the first quarter,
current-dollar GDP increased 4.9 percent, or $159.6 billion.
BOX
Information on the assumptions used for unavailable source data is provided in a technical note
that is posted with the news release on BEA’s Web site. Within a few days after the release, a detailed
“Key Source Data and Assumptions” file is posted on the Web site. In the middle of each month, an
analysis of the current quarterly estimates of GDP and related series is made available on the Web site;
click on Survey of Current Business, “GDP and the Economy.”
Revision of the National Income and Product Accounts
The revised estimates, which begin with 2004, reflect the results of the regular annual revision of
the national income and product accounts (NIPAs). These revisions, usually made each July,
incorporate newly available and more comprehensive source data, as well as improved estimating
methodologies. Because of the additional data shown, tables 3, 11, and 12 are each divided into two
separate tables — 3A and 3B, 11A and 11B, and 12A and 12B.
There are also a number of special tables that compare the revised and previously published
estimates for selected periods: Table 1A shows the percent change in real GDP and related measures;
table 1B shows revisions to current-dollar GDP, to national income, and to disposition of personal
income; table 2A shows contributions to the percent change in real GDP; table 4A shows the percent
change in the chain-type price indexes for GDP and related measures; and table 12C shows revisions to
corporate profits by industry.
This section of the release discusses the highlights of the revisions and describes their sources.
Summary of major revisions
* For 2003-2006, real GDP grew at an average annual rate of 3.2 percent, 0.3 percentage point less
than in the previously published estimates.
* Both the revised and the previously published estimates show similar quarterly patterns of growth
in real GDP. For the 13 quarters from the first quarter of 2004 to the first quarter of 2007, the
average revision (without regard to sign) was 0.5 percentage point. The largest quarterly
revisions to the percent change in real GDP were for the third quarter of 2006 (from 2.0 percent
to 1.1 percent), for the first quarter of 2004 (from 3.9 percent to 3.0 percent), and for the first
quarter of 2006 (from 5.6 percent to 4.8 percent). The largest upward revision was for the third
quarter of 2004 (from 3.1 percent to 3.6 percent).
* The average annual rate of growth of real disposable personal income for 2003-2006 was 2.8
percent, 0.3 percentage point more than in the previously published estimates.
Revisions to 2004-2006 estimates
The percent change from the preceding year in real GDP was revised down for all 3 years: From
3.9 percent to 3.6 percent for 2004, from 3.2 percent to 3.1 percent for 2005, and from 3.3 percent to 2.9
percent for 2006.
For 2004, the largest contributors to the downward revision to real GDP growth were downward
revisions to personal consumption expenditures (PCE) for services and to state and local government
spending, and an upward revision to imports; these revisions were partly offset by an upward revision to
exports. For 2005, the largest contributors to the downward revision were downward revisions to PCE
for nondurable goods, to residential fixed investment, and to PCE for durable goods; these downward
revisions were partly offset by upward revisions to inventory investment and to equipment and software.
For 2006, the largest contributors to the downward revision were downward revisions to inventory
investment, to PCE for durable goods, to state and local government spending, and to exports; these
downward revisions were partly offset by an upward revision to PCE for services.
The percent change from fourth quarter to fourth quarter in real GDP was revised down for all 3
years: From 3.4 percent to 3.1 percent for 2004, from 3.1 percent to 2.9 percent for 2005, and from 3.1
percent to 2.6 percent for 2006. The average annual rate of growth of real GDP from the fourth quarter
of 2003 to the first quarter of 2007 is 2.7 percent, 0.3 percentage point less than in the previously
published estimates.
The percent change from the preceding year in the price index for gross domestic purchases was
unrevised at 3.1 percent for 2004, was revised up from 3.5 percent to 3.7 percent for 2005, and was
revised up from 3.1 percent to 3.3 percent for 2006. For the quarters of 2004 to 2006, the percent
change in the price index was revised up for eight quarters, was revised down for one quarter (the fourth
quarter of 2006), and was unrevised for three quarters; the largest upward revision was 0.4 percentage
point (the first quarter of 2005).
Current-dollar GDP was revised down for all 3 years: $26.6 billion, or 0.2 percent, for 2004;
$21.9 billion, or 0.2 percent, for 2005; and $51.9 billion, or 0.4 percent, for 2006. The percent change
from the preceding year was revised down from 6.9 percent to 6.6 percent for 2004; was revised up from
6.3 percent to 6.4 percent for 2005; and was revised down from 6.3 percent to 6.1 percent for 2006.
Current-dollar GNP (GDP plus net receipts of income from the rest of the world) was revised up $3.4
billion, or less than 0.1 percent, for 2004; was revised up $14.7 billion, or 0.1 percent, for 2005; and was
revised down $23.8 billion, or 0.2 percent, for 2006. Net receipts of income was revised up for all 3
years: $29.9 billion for 2004, $36.7 billion for 2005, and $28.1 billion for 2006. The revisions to net
receipts of income — which affect GNP, national income, corporate profits, net interest and
miscellaneous payments, and personal interest income — result from the revisions to BEA’s
international transactions accounts (ITAs) that were released in June. Although the revisions to the
ITAs extended back to 1997, the revisions prior to 2004 are not incorporated into the NIPAs at this time.
(An article describing the revisions to the ITAs was published in the July 2007 issue of the Survey of
Current Business.)
National income was revised up $50.9 billion, or 0.5 percent, for 2004; was revised up $75.8
billion, or 0.7 percent, for 2005; and was revised down $55.4 billion, or 0.5 percent, for 2006. For 2004,
the upward revision was primarily accounted for by a large upward revision to corporate profits. For
2005, large upward revisions to net interest and miscellaneous payments and to corporate profits were
partly offset by downward revisions to rental income of persons and to business current transfer
payments. Within compensation of employees, a downward revision to supplements to wages and
salaries was largely offset by an upward revision to wage and salary accruals. For 2006, large
downward revisions to corporate profits, to compensation of employees, and to rental income of persons
were partly offset by a large upward revision to net interest and miscellaneous payments.
Corporate profits from current production — profits before tax with inventory valuation and capital
consumption adjustments — was revised up $48.6 billion, or 4.1 percent, for 2004; was revised up $42.1
billion, or 3.2 percent, for 2005; and was revised down $62.0 billion, or 3.8 percent, for 2006. For 2004
and 2005, upward revisions to profits before tax were partly offset by downward revisions to the capital
consumption adjustment. For 2006, a large downward revision to the capital consumption adjustment
accounted for most of the revision, although profits before tax was also revised down.
For 2004, profits of domestic nonfinancial corporations, profits from the rest of the world, and
profits of domestic financial corporations were revised up. For 2005, upward revisions to profits of
domestic financial corporations and to profits from the rest of the world were partly offset by a
downward revision to profits of domestic nonfinancial corporations. For 2006, a large downward
revision to profits of domestic nonfinancial corporations was partly offset by upward revisions to profits
from the rest of the world and to profits of domestic financial corporations.
Personal income was revised down $4.2 billion, or less than 0.1 percent, for 2004; was revised up
$61.9 billion, or 0.6 percent, for 2005; and was revised up $92.2 billion, or 0.8 percent, for 2006. For
2004, a downward revision to rental income of persons was partly offset by an upward revision to
compensation of employees. For 2005, large upward revisions to personal interest income and to
personal dividend income were partly offset by a large downward revision to rental income of persons.
For 2006, large upward revisions to personal interest income and to personal dividend income were
partly offset by downward revisions to compensation of employees, to rental income of persons, and to
proprietors’ income. Within compensation of employees, supplements to wages and salaries accounted
for most of the downward revision, although wage and salary disbursements was also revised down. In
addition, contributions for government social insurance, which are subtracted in the calculation of
personal income, was revised down.
Disposable personal income (DPI) (personal income less personal current taxes) was revised down
$0.7 billion, or less than 0.1 percent, for 2004; was revised up $55.9 billion, or 0.6 percent, for 2005;
and was revised up $100.0 billion, or 1.0 percent, for 2006. The revisions were roughly similar to those
to personal income, reflecting relatively small revisions to personal current taxes. Personal current taxes
was revised down $3.5 billion for 2004, was revised up $6.0 billion for 2005, and was revised down
$7.8 billion for 2006. The percent change from the preceding year in real DPI was unrevised at 3.6
percent for 2004, was revised up from 1.2 percent to 1.7 percent for 2005, and was revised up from 2.6
percent to 3.1 percent for 2006.
Personal outlays — PCE, personal interest payments, and personal current transfer payments — was
revised down for all 3 years: $8.0 billion for 2004, $23.5 billion for 2005, and $35.2 billion for 2006.
Downward revisions to PCE more than accounted for the revisions for all 3 years. The personal saving
rate (personal saving as a percentage of DPI) was revised up from 2.0 percent to 2.1 percent for 2004,
was revised up from negative 0.4 percent to positive 0.5 percent for 2005, and was revised up from
negative 1.0 percent to positive 0.4 percent for 2006.
The statistical discrepancy is current-dollar GDP less current-dollar gross domestic income (GDI).
It arises because most components of GDP and of GDI are estimated independently. GDP measures
final expenditures — the sum of consumer spending, private investment, net exports, and government
spending. GDI measures the incomes earned in the production of GDP. In concept, GDP is equal to
GDI. In practice, they differ because they are estimated using different source data and different
methods.
As a result of the annual revision, the statistical discrepancy as a percentage of GDP was revised
from 0.6 percent to 0.2 percent for 2004, was revised from 0.6 percent to less than 0.1 percent for 2005,
and was unrevised at negative 0.1 percent for 2006. The revisions to the discrepancy for 2004 and for
2005 reflected downward revisions to GDP and upward revisions to GDI. For 2006, GDP and GDI
were both revised down by similar magnitudes.
Business cycle
From the cyclical trough of GDP in the third quarter of 2001 to the first quarter of 2007, the
revised estimates show that real GDP increased at an average annual rate of 2.7 percent; the previously
published estimates showed an average increase of 2.9 percent.
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