GDP Q2 2008 Preliminary

GROSS DOMESTIC PRODUCT AND CORPORATE PROFITS: Second Quarter 2008 (Preliminary)

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 3.3 percent in the second quarter of 2008,
(that is, from the first quarter to the second quarter), according to preliminary estimates released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent.

The GDP estimates released today are based on more complete source data than were available for
the advance estimates issued last month. In the advance estimates, the increase in real GDP was 1.9
percent (see "Revisions" on page 3).

The increase in real GDP in the second quarter primarily reflected positive contributions from
exports, personal consumption expenditures (PCE), federal government spending, nonresidential
structures, and state and local government spending that were partly offset by negative contributions
from private inventory investment, residential fixed investment, and equipment and software. Imports,
which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP growth in the second quarter primarily reflected a larger decrease in
imports, an acceleration in exports, an acceleration in PCE, a smaller decrease in residential fixed
investment, and an upturn in state and local government spending that were partly offset by a larger
decrease in inventory investment.

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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. Price indexes are chain-type measures.

This news release is available on BEA's Web site (www.bea.gov) along with the Technical Note and Highlights
related to this release.
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Final sales of computers contributed 0.15 percentage point to the second-quarter growth in real
GDP after contributing 0.05 percentage point to the first-quarter growth. Motor vehicle output
subtracted 0.99 percentage point from the second-quarter growth in real GDP after subtracting 0.41
percentage point from the first-quarter growth.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 4.2 percent in the second quarter, the same as in the advance estimate; this index increased 3.5
percent in the first quarter. Excluding food and energy prices, the price index for gross domestic
purchases increased 2.2 percent in the second quarter, the same increase as in the first quarter.

Real personal consumption expenditures increased 1.7 percent in the second quarter, compared
with an increase of 0.9 percent in the first. Real nonresidential fixed investment increased 2.2 percent,
compared with an increase of 2.4 percent. Nonresidential structures increased 13.7 percent, compared
with an increase of 8.6 percent. Equipment and software decreased 3.2 percent, compared with a
decrease of 0.6 percent. Real residential fixed investment decreased 15.7 percent, compared with a
decrease of 25.1 percent.

Real exports of goods and services increased 13.2 percent in the second quarter, compared with an
increase of 5.1 percent in the first. Real imports of goods and services decreased 7.6 percent, compared
with a decrease of 0.8 percent.

Real federal government consumption expenditures and gross investment increased 6.8 percent in
the second quarter, compared with an increase of 5.8 percent in the first. National defense increased 7.4
percent, compared with an increase of 7.3 percent. Nondefense increased 5.5 percent, compared with an
increase of 2.9 percent. Real state and local government consumption expenditures and gross
investment increased 2.2 percent, in contrast to a decrease of 0.3 percent.

The real change in private inventories subtracted 1.44 percentage points from the second-quarter
change in real GDP, after subtracting 0.02 percentage point from the first-quarter change. Private
businesses decreased inventories $49.4 billion in the second quarter, following a decrease of $10.2
billion in the first quarter and a decrease of $8.1 billion in the fourth.

Real final sales of domestic product -- GDP less change in private inventories -- increased 4.8
percent in the second quarter, compared with an increase of 0.9 percent in the first.


Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 0.2 percent in the second quarter, compared with an increase of 0.1 percent in the
first.


Gross national product

Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- increased 2.6 percent in the second quarter, compared with an increase of 0.1
percent in the first. GNP includes, and GDP excludes, net receipts of income from the rest of the world,
which decreased $19.4 billion in the second quarter after decreasing $22.5 billion in the first; in the
second quarter, receipts decreased $21.6 billion, and payments decreased $2.2 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
4.6 percent, or $161.7 billion, in the second quarter to a level of $14,312.5 billion. In the first quarter,
current-dollar GDP increased 3.5 percent, or $119.6 billion.


Revisions

The preliminary estimate of the second-quarter increase in real GDP is 1.4 percentage points, or
$39.7 billion, more than the advance estimate issued last month. The upward revision to the percentage
change in real GDP primarily reflected upward revisions to exports and to private inventory investment
and a downward revision to imports.




Advance Preliminary
(Percent change from preceding quarter)

Real GDP....................................... 1.9 3.3
Current-dollar GDP............................. 3.0 4.6
Gross domestic purchases price index........... 4.2 4.2





Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $37.8 billion in the second quarter, compared with a decrease of
$17.6 billion in the first quarter. Current-production cash flow (net cash flow with inventory valuation
and capital consumption adjustments) -- the internal funds available to corporations for investment --
decreased $41.3 billion in the second quarter, in contrast to an increase of $10.1 billion in the first.

Taxes on corporate income increased $7.4 billion in the second quarter, in contrast to a decrease
of $30.6 billion in the first. Profits after tax with inventory valuation and capital consumption
adjustments decreased $45.2 billion in the second quarter, in contrast to an increase of $13.0 billion in
the first. Dividends increased $14.0 billion compared with an increase of $16.1 billion; current-
production undistributed profits decreased $59.2 billion, compared with a decrease of $3.1 billion.

Domestic profits of financial corporations increased $24.7 billion in the second quarter, compared
with an increase of $37.3 billion in the first. Domestic profits of nonfinancial corporations decreased
$46.9 billion in the second quarter, compared with a decrease of $32.1 billion in the first. In the second
quarter, real gross corporate value added increased, and profits per unit of real value added decreased.
The decrease in unit profits reflected a decrease in unit prices and an increase in unit nonlabor costs that
were partly offset by a decrease in unit labor costs.

The rest-of-the-world component of profits decreased $15.6 billion in the second quarter,
compared with a decrease of $22.8 billion in the first. 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 second-quarter
decrease was accounted for by a smaller increase in receipts than in payments.

Profits before tax increased $20.4 billion in the second quarter, in contrast to a decrease of $143.4
billion in the first. 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 decreased $15.0 billion in the second quarter (from -$48.0 billion to -$63.0 billion), in
contrast to an increase of $161.2 billion in the first. The inventory valuation adjustment decreased $43.2
billion (from -$109.4 billion to -$152.6 billion), compared with a decrease of $35.3 billion.