EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Friday, July 29, 2016
BEA 16—40


* See the navigation bar at the right side of the news release text for links to data tables,
contact personnel and their telephone numbers, and supplementary materials.


Lisa Mataloni: (301) 278-9080 (GDP) gdpniwd@bea.gov
Brent Moulton: (301) 278-9606 (Annual Update)  
Jeannine Aversa: (301) 278-9003 (News Media) Jeannine.aversa@bea.gov
National Income and Product Accounts
Gross Domestic Product: Second Quarter 2016 (Advance Estimate)
Annual Update: 2013 through First Quarter 2016
Real gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016
(table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first
quarter, real GDP increased 0.8 percent (revised).

The Bureau emphasized that the second-quarter advance estimate released today is based on source
data that are incomplete or subject to further revision by the source agency (see “Source Data for the
Advance Estimate” on page 2). The "second" estimate for the second quarter, based on more complete
data, will be released on August 26, 2016.

The increase in real GDP in the second quarter reflected positive contributions from personal
consumption expenditures (PCE) and exports that were partly offset by negative contributions from
private inventory investment, nonresidential fixed investment, residential fixed investment, and state
and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
Real GDP: Percent Change from Preceding Quarter
                    Annual Update of the National Income and Product Accounts

The estimates released today reflect the results of the annual update of the national income and
product accounts (NIPAs) in conjunction with the "advance" estimate of GDP for the second quarter of
2016. The update covers the first quarter of 2013 through the first quarter of 2016. For more
information, see "Information on the 2016 Annual Update" on BEA’s Web site. Additionally, the August
Survey of Current Business will contain an article that describes the results in detail.
_______


The acceleration in real GDP growth in the second quarter reflected an acceleration in PCE, an upturn in
exports, and smaller decreases in nonresidential fixed investment and in federal government spending.
These were partly offset by a larger decrease in private inventory investment, and downturns in
residential fixed investment and in state and local government spending.

Current-dollar GDP increased 3.5 percent (table 1), or $155.9 billion, in the second quarter to a level of
$18,437.6 billion (table 3A). In the first quarter, current dollar GDP increased 1.3 percent (revised), or
$58.9 billion.

The price index for gross domestic purchases increased 2.0 percent in the second quarter, compared
with an increase of 0.2 percent in the first (revised) (table 4). The PCE price index increased 1.9 percent,
compared with an increase of 0.3 percent. Excluding food and energy prices, the PCE price index
increased 1.7 percent, compared with an increase of 2.1 percent (Appendix table A).


Disposition of personal income (table 10)

Current-dollar personal income increased $111.4 billion in the second quarter, compared with an
increase of $52.8 billion in the first (revised). The acceleration in personal income primarily reflected
upturns in wages and salaries, personal dividend income, and farm proprietors’ income that were offset
by slowdowns in personal current transfer receipts.

Disposable personal income increased $106.3 billion, or 3.1 percent, in the second quarter, compared
with an increase of $83.4 billion, or 2.5 percent, in the first (revised). Real disposable personal income
increased 1.2 percent, compared with an increase of 2.2 percent.

Personal saving was $763.1 billion in the second quarter, compared with $847.8 billion in the first
(revised). The personal saving rate -- personal saving as a percentage of disposable personal income --
was 5.5 percent in the second quarter, compared with 6.1 percent in the first.


Source Data for the Advance Estimate

Information on the assumptions used for unavailable source data in the advance estimate 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. For information on
updates to GDP, see the “Additional Information” page at the back of this release.


Revisions for the first quarter of 2016

For the first quarter of 2016, real GDP is now estimated to have increased 0.8 percent; in the previously
published estimates, first-quarter GDP was estimated to have increased 1.1 percent. The 0.3-percentage
point downward revision to the percent change in first-quarter real GDP primarily reflected downward
revisions to residential fixed investment, to private inventory investment, and to exports that were
partly offset by upward revisions to nonresidential fixed investment, to PCE, to state and local
government spending, to imports, and to federal government spending.



                                         First Quarter 2016
                                Previous Estimate       Revised
                            (Percent change from preceding quarter)
Real GDP                               1.1                0.8
Current-dollar GDP                     1.4                1.3
Real GDI                               2.9                0.9
Average of GDP and GDI                 2.0                0.9
Gross domestic purchases price index   0.2                0.2
PCE price index                        0.2                0.3


                     Annual Update of the National Income and Product Accounts


Updated estimates of the national income and product accounts (NIPAs), which are usually made each
July, incorporate newly available and more comprehensive source data, as well as improved estimation
methodologies. This year, the notable revisions primarily reflect the incorporation of newly available
and revised source data. The timespan of the revisions is the first quarter of 2013 through the first
quarter of 2016. The reference year remains 2009.

With the release of the updated statistics, select NIPA tables will be available on BEA’s Web site
(www.bea.gov).  Shortly after the GDP release, BEA will post a table on its Web site showing the major
current-dollar revisions and their sources for each component of GDP, national income, and personal
income.  Additionally, the August 2016 Survey of Current Business will contain an article describing these
revisions.


Real GDP (Tables 1A, 1B, and 2A)

The updated statistics largely reflect the incorporation of newly available and revised source data (see
the box below) and improvements to existing methodologies.

* From 2012 to 2015, real GDP increased at an average annual rate of 2.2 percent; in the
  previously published estimates, real GDP had increased at an average annual rate of 2.1 percent.
  From the fourth quarter of 2012 to the first quarter of 2016, real GDP increased at an average
  annual rate of 2.2 percent, the same as previously published.

* The percent change in real GDP was revised up 0.2 percentage point for 2013, was the same as
  previously published for 2014, and was revised up 0.2 percentage point for 2015.

     o  For 2013, upward revisions to inventory investment, exports, and residential and
        nonresidential fixed investment were partly offset by a downward revision to personal
        consumption expenditures (PCE).

     o  For 2014, a downward revision to inventory investment, an upward revision to imports,
        and a downward revision to state and local government spending were offset by
        upward revisions to exports, PCE, and residential fixed investment.

     o  For 2015, upward revisions to state and local government spending and to residential
        fixed investment, a downward revision to imports, and an upward revision to PCE were
        partly offset by downward revisions to exports and nonresidential fixed investment.

* The revisions to the annual estimates typically reflect partly offsetting revisions to the quarters
  within the year.

     o  For 2013, the annual rate of change in GDP was revised up 0.9 percentage point for the
        first quarter, 0.1 percentage point for the third quarter, and 0.2 percentage point for the
        fourth quarter; these upward revisions were partly offset by a downward revision of 0.3
        percentage point for the second quarter.

     o  For 2014, upward revisions of 0.7 percentage point for the third quarter and 0.2
        percentage point for the fourth quarter were offset by downward revisions of 0.3
        percentage point for the first quarter and 0.6 percentage point for the second quarter.

     o  For 2015, an upward revision of 1.4 percentage point for the first quarter was partly
        offset by downward revisions of 1.3 percentage point for the second quarter and 0.5
        percentage point for the fourth quarter; the growth rate for the third quarter was the
        same as previously published.

* For the first quarter of 2013 through the first quarter of 2016, the average revision (without
  regard to sign) in the percent change in real GDP was 0.5 percentage point.  The revisions did
  not change the direction of the change in real GDP (increase or decrease) for any of the
  quarters.

* For the period of economic expansion from the second quarter of 2009 to the first quarter of
  2016, real GDP increased at an average annual rate of 2.1 percent, the same as previously
  published.

* Current-dollar GDP was revised up for all 3 years:  $28.4 billion, or 0.2 percent, for 2013; $45.0
  billion, or 0.3 percent, for 2014; and $89.7 billion, or 0.5 percent, for 2015.


Gross domestic income (GDI) and the statistical discrepancy (Tables 1A and 1B)

* From 2012 to 2015, real GDI increased at an average annual rate of 2.3 percent; in the
  previously published estimates, real GDI had increased at an average annual rate of 2.1 percent.
  From the fourth quarter of 2012 to the first quarter of 2016, real GDI increased at an average
  annual rate of 2.1 percent; in the previously published estimates, real GDI had increased at an
  average annual rate of 2.2 percent.

* The statistical discrepancy is current-dollar GDP less current-dollar GDI.  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.

* The statistical discrepancy as a percentage of GDP was revised up from -1.1 percent to -0.8
  percent for 2013, was revised down from -1.2 percent to -1.5 percent for 2014, and was revised
  down from -1.2 percent to -1.4 percent for 2015.

* The average of GDP and GDI is a supplemental measure of U.S. economic activity. In real, or
  inflation-adjusted, terms this measure increased at an average annual rate of 2.2 percent from
  2012 to 2015, an upward revision of 0.1 percentage point.


Price measures

* Gross domestic purchases - From the fourth quarter of 2012 to the first quarter of 2016, the
  average annual rate of increase in the price index for gross domestic purchases was 1.0 percent,
  the same as previously published.

* Personal consumption expenditures - From the fourth quarter of 2012 to the first quarter of
  2016, the average annual rate of increase in the price index for PCE was 0.9 percent, the same
  as previously published; the increase in the “core” PCE price index (which excludes food and
  energy) was 1.5 percent, the same as previously published.


Income and saving measures (Table 1B)

* National income was revised down $13.5 billion, or 0.1 percent, for 2013, was revised up $77.4
  billion, or 0.5 percent, for 2014, and was revised up $119.0 billion, or 0.8 percent, for 2015.

     o For 2013, downward revisions to net interest and corporate profits were partly offset by
       an upward revision to rental income of persons.

     o For 2014, upward revisions to corporate profits, business current transfer payments,
       and supplements to wages and salaries were partly offset by downward revisions to
       farm proprietors’ income and to rental income of persons.

     o For 2015, upward revisions to corporate profits, business current transfer payments,
       wages and salaries, nonfarm proprietors’ income, and supplements to wages and
       salaries, were partly offset by a downward revision to farm proprietors’ income.

* Corporate profits was revised down $4.5 billion, or -0.2 percent, for 2013, was revised up $79.1
  billion, or 3.8 percent, for 2014, and was revised up $79.1 billion, or 3.9 percent, for 2015.

* Personal income was revised up $5.3 billion, or less than 0.1 percent, for 2013, was revised up
  $115.5 billion, or 0.8 percent, for 2014, and was revised up $107.8 billion, or 0.7 percent, for
  2015.

* From 2012 to 2015, the average annual rate of growth of real disposable personal income was
  revised up 0.2 percentage point from 1.6 percent to 1.8 percent.

* The personal saving rate (personal saving as a percentage of disposable personal income) was
  revised up from 4.8 percent to 5.0 percent for 2013, was revised up from 4.8 percent to 5.6
  percent for 2014, and was revised up from 5.1 percent to 5.8 percent for 2015.


New and revised source data

The updated statistics incorporated data from the following major federal statistical sources:

Agency                                      Data                                     Years Covered and Vintage

Census Bureau                       Annual surveys of wholesale trade               2013 (revised), 2014 (new)
                                    Annual surveys of retail trade                  2013 (revised), 2014 (new)
                                    Annual survey of manufactures                   2013 (revised), 2014 (new)
                                    Monthly indicators of manufactures,
                                      merchant wholesale trade, and retail trade    2013–2015 (revised)
                                    Service annual survey                           2013 and 2014 (revised), 2015 (new)
                                    Annual surveys of state and local
                                    government finances                             Fiscal year (FY) 2013 (revised), FY 2014 (new)

                                    Monthly survey of construction spending
                                      (value put in place)                          2013–2015 (revised)
                                    Quarterly services survey                       2013–2015 (revised)
                                    Current population survey/housing vacancy
                                      survey                                        2013 and 2014 (revised), 2015 (new)

Office of Management
  and Budget                        Federal Budget                                  Fiscal years 2015 and 2016

Internal Revenue Service            Tabulations of tax returns for corporations     2013 (revised), 2014 (new)
                                    Tabulations of tax returns for sole
                                      proprietorships and partnerships              2014 (new)

BLS                                 Quarterly census of employment and wages        2013–2015 ( revised)
                                    Survey of occupational employment               2015 (new)

Department of
Agriculture                         Farm statistics                                 2013–2015 (revised)

BEA                                 International transactions accounts             2013-2015 (revised)


Changes in methodology and presentation

The annual update also incorporated improvements to estimating methodologies and to the
presentation of the NIPA estimates, including the following:

* As part of its regular review and update of seasonal adjustment factors, BEA incorporated
  refined and improved seasonal adjustments for several GDP components. For more information,
  read Residual Seasonality in GDP and GDI: Findings and Next Steps at www.bea.gov/national

* Beginning with this advance estimate of GDP for the second quarter of 2016, BEA incorporates
  newly available Census Bureau data on wholesale and retail trade inventories that are scheduled
  to be released in time for the advance estimates of the NIPAs. BEA previously estimated inventories
  for the quarter based on Census Bureau-reported inventory data for the first two months of the
  quarter and BEA assumptions for the third month. The accelerated release of these data by the Census
  Bureau allows BEA to calculate a more accurate estimate of the change in private inventories
  component of GDP for the advance estimate.

* In November 2015, the Census Bureau released revised monthly
  estimates of construction spending for January 2005 through October 2015. BEA
  uses these data to prepare annual estimates of private fixed investment for
  residential structures. For this annual update, BEA incorporated revised
  Census Bureau data into its annual estimates of residential improvements for
  2013 through 2015 on a best-change basis. Estimates for earlier years will be
  revised during a future update of the NIPAs. For details, see the FAQ “How
  will the revised Census Bureau construction spending data affect BEA’s
  quarterly and annual estimates of private fixed investment?”


                                         *          *          *

                              Next release:  August 26, 2016 at 8:30 A.M. EDT
                      Gross Domestic Product:  Second Quarter 2016 (Second Estimate)
                      Corporate Profits:  Second Quarter 2016 (Preliminary Estimate)

                                         *          *          *


                                         Additional Information

Resources

Additional Resources available at www.bea.gov:
•	Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email
        subscription service, or following BEA on Twitter @BEA_News.
•	Historical time series for these estimates can be accessed in BEA’s Interactive Data Application.
•	Access BEA data by registering for BEA’s Data Application Programming Interface (API).
•	For more on BEA’s statistics, see our monthly online journal, the Survey of Current Business.
•	BEA's news release scheduleNIPA Handbook:  Concepts and Methods of the U.S. National Income and Product Accounts

Definitions

Gross domestic product (GDP) is the value of the goods and services produced by the nation’s economy
less the value of the goods and services used up in production. GDP is also equal to the sum of personal
consumption expenditures, gross private domestic investment, net exports of goods and services, and
government consumption expenditures and gross investment.

Gross domestic income (GDI) is the sum of incomes earned and costs incurred in the production of GDP.
In national economic accounting, GDP and GDI are conceptually equal. In practice, GDP and GDI differ
because they are constructed using largely independent source data. Real GDI is calculated by deflating
gross domestic income using the GDP price index as the deflator, and is therefore conceptually
equivalent to real GDP.

Current-dollar estimates are valued in the prices of the period when the transactions occurred—that is,
at “market value.” Also referred to as “nominal estimates” or as “current-price estimates.”
Real values are inflation-adjusted estimates—that is, estimates that exclude the effects of price changes.
The gross domestic purchases price index measures the prices of final goods and services purchased by
U.S. residents.

The personal consumption expenditure price index measures the prices paid for the goods and services
purchased by, or on the behalf of, “persons.”

Personal income is the income received by, or on behalf of, all persons from all sources:  from
participation as laborers in production, from owning a home or business, from the ownership of
financial assets, and from government and business in the form of transfers. It includes income from
domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or
losses.

Disposable personal income is the income available to persons for spending or saving. It is equal to
personal income less personal current taxes.

Personal outlays is the sum of personal consumption expenditures, personal interest payments, and
personal current transfer payments.

Personal saving is personal income less personal outlays and personal current taxes.
The personal saving rate is personal saving as a percentage of disposable personal income. (For a
comparison of personal saving in BEA's national income and product accounts (NIPAs) with personal
saving in the Federal Reserve Board's financial accounts of the United States, go to
www.bea.gov/national/nipaweb/nipa-frb.asp.

Profits from current production, referred to as corporate profits with inventory valuation adjustment
(IVA) and capital consumption adjustment (CCAdj) in the NIPAs, is a measure of the net income of
corporations before deducting income taxes that is consistent with the value of goods and services
measured in GDP. 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.

For more definitions, see the Glossary: National Income and Product Accounts.


Statistical conventions

Annual rates. Quarterly values are expressed at seasonally-adjusted annual rates (SAAR), unless
otherwise specified. Dollar changes are calculated as the difference between these SAAR values. For
detail, see the FAQ “Why does BEA publish estimates at annual rates?”

Percent changes in quarterly series are calculated from unrounded data and are displayed at annual
rates, unless otherwise specified. For details, see the FAQ “How is average annual growth calculated?”

Quantities and prices. Quantities, or “real” volume measures, and prices are expressed as index
numbers with a specified reference year equal to 100 (currently 2009). Quantity and price indexes are
calculated using a Fisher-chained weighted formula that incorporates weights from two adjacent
periods (quarters for quarterly data and annuals for annual data). “Real” dollar series are calculated by
multiplying the published quantity index by the current dollar value in the reference year (2009) and
then dividing by 100. Percent changes calculated from real quantity indexes and chained-dollar levels
are conceptually the same; any differences are due to rounding.

Chained-dollar values are not additive because the relative weights for a given period differ from those
of the reference year. In tables that display chained-dollar values, a “residual” line shows the difference
between the sum of detailed chained-dollar series and its corresponding aggregate.


Updates to GDP

BEA releases three vintages of the current quarterly estimate for GDP:  "Advance" estimates are
released near the end of the first month following the end of the quarter and are based on source data
that are incomplete or subject to further revision by the source agency; “second” and “third” estimates
are released near the end of the second and third months, respectively, and are based on more detailed
and more comprehensive data as they become available.

Annual and comprehensive updates are typically released in late July. Annual updates generally cover at
least the 3 most recent calendar years (and their associated quarters) and incorporate newly available
major annual source data as well as some changes in methods and definitions to improve the accounts.
Comprehensive (or benchmark) updates are carried out at about 5-year intervals and incorporate major
periodic source data, as well as major conceptual improvements.
The table below shows the average revisions to the quarterly percent changes in real GDP between
different estimate vintages, without regard to sign.

Vintage                               Average Revision Without Regard to Sign
                                         (percentage points, annual rates)
Advance to second                                     0.5
Advance to third                                      0.6
Second to third                                       0.2
Advance to latest                                     1.2
Note - Based on estimates from 1993 through 2014. For more information on GDP updates, see Revision
Information on the BEA Web site.

The larger average revision from the advance to the latest estimate reflects the fact that periodic
comprehensive updates include major statistical and methodological improvements.

Unlike GDP, an advance current quarterly estimate of GDI is not released because data on domestic
profits and on net interest of domestic industries are not available. For fourth quarter estimates, these
data are not available until the third estimate.