Technical Note
Gross Domestic Product
Fourth Quarter of 2008 (Final) Corporate Profits, 4th quarter 2008
March 26, 2009

*See the navigation bar at the right side of the technical note text for supplementary materials.


This technical note provides background information about the source data and
estimating methods used to produce the estimates presented in the GDP news
release.  The complete set of estimates for the fourth quarter is available on
BEA's Web site at www.bea.gov; a brief summary of "highlights" is also posted
on the Web site.  In a few weeks, the estimates will be published in BEA's
monthly journal, the Survey of Current Business, along with a more detailed
analysis of the estimates ("GDP and the Economy").


Sources of Revision to Real GDP

Real GDP decreased 6.3 percent (annual rate) in the fourth quarter (that is, from
the third quarter to the fourth), which was 0.1 percentage point more of a
decrease than the preliminary estimate.  Downward revisions to inventory
investment, to exports of services, and to investment in nonresidential structures
were partly offset by a downward revision to imports of services and an upward
revision to exports of goods:

*     The downward revision to inventory investment reflected a downward
      revision to manufacturing inventories, based on revised Census inventory
      data for December.

*     The downward revisions to exports and imports of services reflected
      revised quarterly services data from BEA’s international transactions
      accounts.

*     The downward revision to investment in nonresidential structures was
      primarily to commercial and health care structures, based on revised
      Census construction spending (value put in place) data for November and
      December.

*     The upward revision to exports of goods primarily reflected a revision to
      industrial supplies and materials, based primarily on a large downward
      revision to the BLS export price index for copper.

The price index for gross domestic purchases—the prices paid by U.S. residents
for goods and services, wherever produced—decreased 3.9 percent in the fourth
quarter, which was 0.2 percentage point less of a decrease than the preliminary
estimate.  The largest contributors to the revision were the prices associated with
inventory investment and personal consumption expenditures (PCE).  For
inventory investment, the revision to prices primarily reflected a downward
revision to petroleum inventories, which reduced the relative weight of petroleum
prices, which were falling.  For PCE, the revision to prices primarily reflected an
upward revision to the price for banking services, based on the incorporation of
newly available Federal Reserve Board tabulations of Call Report data for the
fourth quarter and revised data for the third quarter.


Corporate Profits

Profits from current production decreased $250.3 billion, or 16.5 percent
(quarterly rate), in the fourth quarter.  Domestic profits of financial corporations
decreased $178.7 billion, domestic profits of nonfinancial corporations decreased
$89.1 billion, and rest-of-the-world profits increased $17.5 billion in the fourth
quarter.  The decrease in nonfinancial corporate profits reflected decreases in all
the major industries except wholesale trade.

During the last year, a number of corporations have announced bad-debt
expenses or asset write-downs.  In the national accounts, bad-debt expenses,
asset write-downs, and other types of capital losses are treated as factors that
reduce the value of corporate assets on the balance sheet rather than as current-
period expenses that lower profits.  As a result of this treatment, profit estimates
based on corporate financial accounting can differ markedly from estimates of
NIPA corporate profits, and tend to be lower than NIPA corporate profits during
periods when corporations report unusually large bad-debt expenses or asset
write-downs.  Additional information is available in an FAQ (“How are bad-debt
expenses, asset write-downs, and loan-loss provisions treated in estimating
NIPA corporate profits?”) available on BEA’s Web site at www.bea.gov.


Brent R. Moulton
Associate Director for National Economic Accounts
Bureau of Economic Analysis
(202) 606-9606