US GDP, PERSONAL CONSUMPTION GROWTH SLASHED IN Q1

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UPDATE: The final reading for first quarter U.S. GDP growth is out.

GDP growth came in at 1.8% annualized in Q1, down significantly from the 2.4% estimate published last month.

Personal consumption growth was revised down to 2.6% from 3.4%.

A key note from the release on differences from the second estimate: "With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was less  than previously estimated, and exports and imports are now estimated to have declined (for more  information, see "Revisions" on page 3)."

Below is the full text from the release:

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 1.8 percent in the first quarter of 2013 (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, real GDP increased 0.4 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, real GDP increased 2.4 percent. With  the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was less  than previously estimated, and exports and imports are now estimated to have declined (for more  information, see "Revisions" on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from PCE,  private inventory investment, and residential fixed investment that were partly offset by negative  contributions from federal government spending, state and local government spending, and exports.

Imports, which are a subtraction in the calculation of GDP, decreased...

The acceleration in real GDP in the first quarter primarily reflected an upturn in private inventory investment, an acceleration in PCE, and smaller decreases in federal government spending and in exports that were partly offset by a deceleration in nonresidential fixed investment and a smaller decrease in imports.

Motor vehicle output added 0.33 percentage point to the first-quarter change in real GDP after  adding 0.18 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 0.10 percentage point to the fourth- quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,  increased 1.2 percent in the first quarter, unrevised from the second estimate; this index increased 1.6  percent in the fourth quarter. Excluding food and energy prices, the price index for gross domestic  purchases increased 1.5 percent in the first quarter, compared with an increase of 1.2 percent in the  fourth.

Real personal consumption expenditures increased 2.6 percent in the first quarter, compared with  an increase of 1.8 percent in the fourth. Durable goods increased 7.6 percent, compared with an increase  of 13.6 percent. Nondurable goods increased 2.8 percent, compared with an increase of 0.1 percent.

Services increased 1.7 percent, compared with an increase of 0.6 percent.

Real nonresidential fixed investment increased 0.4 percent in the first quarter, compared with an  increase of 13.2 percent in the fourth. Nonresidential structures decreased 8.3 percent, in contrast to an  increase of 16.7 percent. Equipment and software increased 4.1 percent, compared with an increase of  11.8 percent. Real residential fixed investment increased 14.0 percent, compared with an increase of  17.6 percent.

Real exports of goods and services decreased 1.1 percent in the first quarter, compared with a  decrease of 2.8 percent in the fourth. Real imports of goods and services decreased 0.4 percent,  compared with a decrease of 4.2 percent.

Real federal government consumption expenditures and gross investment decreased 8.7 percent  in the first quarter, compared with a decrease of 14.8 percent in the fourth. National defense decreased  12.0 percent, compared with a decrease of 22.1 percent. Nondefense decreased 2.1 percent, in contrast  to an increase of 1.7 percent. Real state and local government consumption expenditures and gross  investment decreased 2.1 percent, compared with a decrease of 1.5 percent.

The change in real private inventories added 0.57 percentage point to the first-quarter change in  real GDP, after subtracting 1.52 percentage points from the fourth-quarter change. Private businesses  increased inventories $36.7 billion in the first quarter, following increases of $13.3 billion in the fourth  quarter and $60.3 billion in the third.

Real final sales of domestic product -- GDP less change in private inventories -- increased 1.2  percent in the first quarter, compared with an increase of 1.9 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever  produced -- increased 1.8 percent in the first quarter; it was unchanged 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 1.2 percent in the first quarter, compared with an increase of 0.9  percent in the fourth. GNP includes, and GDP excludes, net receipts of income from the rest of the  world, which decreased $17.7 billion in the first quarter after increasing $19.2 billion in the fourth; in  the first quarter, receipts decreased $16.3 billion, and payments increased $1.4 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased  3.1 percent, or $120.0 billion, in the first quarter to a level of $15,984.1 billion. In the fourth quarter,  current-dollar GDP increased 1.3 percent, or $53.1 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 2.5 percent in the first quarter,  compared with an increase of 5.5 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 downward revision to the percent change in real GDP primarily reflected downward  revisions to personal consumption expenditures, to exports, and to nonresidential fixed investment that  were partly offset by a downward revision to imports.

Advance Estimate Second Estimate Third Estimate

(Percent change from preceding quarter)

Real GDP...................................... 2.5 2.4 1.8

Current-dollar GDP............................ 3.7 3.6 3.1

Gross domestic purchases price index.......... 1.1 1.2 1.2

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital  consumption adjustments) decreased $28.0 billion in the first quarter, in contrast to an increase of $45.4  billion in the fourth quarter. Current-production cash flow (net cash flow with inventory valuation  adjustment) -- the internal funds available to corporations for investment -- increased $125.6 billion in  the first quarter, in contrast to a decrease of $89.8 billion in the fourth.

Taxes on corporate income decreased $10.5 billion in the first quarter, compared with a decrease  of $4.4 billion in the fourth. Profits after tax with inventory valuation and capital consumption  adjustments decreased $17.5 billion in the first quarter, in contrast to an increase of $49.8 billion in the  fourth. Dividends decreased $103.5 billion, in contrast to an increase of $124.3 billion. The large  fourth-quarter increase reflected accelerated and special dividends paid by corporations at the end of  2012 in anticipation of changes to individual income tax rates. Current-production undistributed profits  increased $85.8 billion, in contrast to a decrease of $74.3 billion.

Domestic profits of financial corporations decreased $3.4 billion in the first quarter, compared  with a decrease of $3.5 billion in the fourth. Domestic profits of nonfinancial corporations decreased  $5.0 billion in the first quarter, in contrast to an increase of $24.8 billion in the fourth. 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 an increase in the unit nonlabor costs incurred by  corporations that was partly offset by a decrease in unit labor costs; unit prices were unchanged.

The rest-of-the-world component of profits decreased $19.6 billion in the first quarter, in contrast  to an increase of $24.1 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 decrease 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 nonfinancial corporations decreased. The decrease in  nonfinancial corporations primarily reflected decreases in "other" nonfinancial and in manufacturing that  were partly offset by increases in information and in wholesale trade. Within manufacturing, the largest  decreases were in petroleum and coal products and in machinery.

Profits before tax decreased $34.7 billion in the first quarter, in contrast to an increase of $27.3  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 increased $12.5 billion in the first quarter (from -$199.5 billion to -$187.0 billion), compared  with an increase of $0.5 billion in the fourth. The inventory valuation adjustment decreased $5.8 billion  (from -$9.2 billion to -$15.0 billion), in contrast to an increase of $17.6 billion.

The first-quarter changes in taxes on corporate income and in the capital consumption  adjustment mainly reflect the expiration of bonus depreciation claimed under the American Taxpayer  Relief Act of 2012. For detailed data, see the table "Net Effects of the Tax Acts of 2002, 2003, 2008,  2009, 2010, and 2012 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 using consistent depreciation  profiles based on used-asset prices. For more details on the effect of 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 quarter of 2012?"

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