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Gross Domestic Product
First Quarter of 2018 (Second Estimate)
May 30, 2018
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 first quarter is available on BEA's Web site at www.bea.gov; a summary of "highlights" is also posted
on the Web site. In a few weeks, the Survey of Current Business, BEA’s online monthly journal, will
publish a more detailed analysis of the estimates ("GDP and the Economy").
Updates to Real GDP
Real GDP increased 2.2 percent (annual rate) in the first quarter of 2018, a downward revision of 0.1
percentage point from the advance estimate. The revision primarily reflected less private investment in
inventories and less consumer spending on services. Revised data also showed more nonresidential
fixed investment and more consumer spending on goods.
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The downward revision to private inventory investment reflected a revision to wholesale trade
inventories based on revised data from the Census Bureau’s Manufacturing and Trade
Inventories and Sales report. Updated wholesale trade, manufacturing, and retail trade
inventories estimates reflected data that were benchmarked to the most recent annual surveys
and were incorporated on a best-change basis.
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The downward revision to consumer spending on services reflected a revision to healthcare
spending based on the new Census Advance Quarterly Services Report (QSR).
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The upward revision to nonresidential fixed investment reflected a revision to intellectual
property products (IPP). Within IPP, software investment was revised up, based on the new
Census QSR. In addition, research and development (R&D) was revised up, based on new R&D
expense data from company financial reports.
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The upward revision to consumer spending on goods reflected a revision to motor vehicles and
parts (specifically, used motor vehicles) based on the revised Census Monthly Retail Sales
report. The updated consumer spending estimates also reflected benchmarked Census retail
sales data.
Gross Domestic Income and Corporate Profits
Real gross domestic income (GDI), which measures output of the economy as the costs incurred and the
incomes earned in the production of goods and services (as measured by GDP), increased 2.8 percent in
the first quarter. The average of real GDP and real GDI increased 2.5 percent.
Profits from current production decreased $12.4 billion, or 0.6 percent (quarterly rate), in the first
quarter. Domestic profits of financial corporations increased $2.2 billion, domestic profits of
nonfinancial corporations decreased $19.0 billion, and rest-of-the-world profits increased $4.4 billion.
National after-tax profits without inventory valuation and capital consumption adjustments (shown in
line 45 of NIPA table 1.12 “National Income by Type of Income”), conceptually closest to S&P 500
profits, increased $131.6 billion in the first quarter, following a $178.1 billion decrease in the fourth
quarter.
First-Quarter Impacts of the 2017 Tax Cuts and Jobs Act
The 2017 Tax Cuts and Jobs Act (TCJA) resulted in significant movements among the components of
domestic corporate profits, including taxes on corporate income and net dividends. Because BEA’s
featured measure of corporate profits reflects profits before subtracting taxes and payments to
shareholders, GDI was not directly impacted by the TCJA.
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Taxes on corporate income decreased $117.4 billion in the first quarter. The large decline
primarily reflected a reduction in the federal domestic corporate income tax rate that decreased
from 35 to 21 percent. The lower corporate tax rate took effect on January 1, 2018.
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Net dividends (paid) by domestic corporations decreased $1.1 trillion in the first quarter (line 18,
table 1.10, “Gross Domestic Income by Type of Income”), reflecting an increase in dividends
received from the rest of the world (line 11, table 4.1, “Foreign Transactions in the National
Income and Product Accounts”). The large increase in dividends received from the rest of the
world was based on preliminary data from BEA’s International Transactions Accounts and
reflected changes in U.S. tax law that eliminated taxes on repatriated profits to U.S.
multinationals from their affiliates abroad.
For more information, see “How does the 2017 Tax Cuts and Jobs Act affect BEA's business income
statistics?” and “How are the International Transactions Accounts affected by an increase in direct
investment dividend receipts?”.
Updates to Wages and Salaries, Disposable Personal Income, and GDI
First quarter wages and salaries increased $119.5 billion, an upward revision of $3.1 billion from earlier
estimates. The updated first quarter estimate primarily reflected the incorporation of revised data for
the months of January through March from the Bureau of Labor Statistics (BLS) Current Employment
Statistics (CES) report. The first-quarter estimate also included a $10.0 billion (annual rate) upward
adjustment to account for bonuses that are not included in the monthly CES data. This adjustment
reflected one-time bonus payments reported by businesses in response to the TCJA. The adjustment
was derived from news reports covering estimates of the number of employees receiving bonuses and
payment amounts.
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On July 27, BEA will release updated wages and salaries estimates that incorporate first-quarter BLS
Quarterly Census of Employment and Wages (QCEW) data. The QCEW captures irregular payments, such
as bonuses and gains from the exercise of stock options, and will reflect both regular and TCJA-related
bonus activity that took place in the first quarter.
In addition to presenting updated estimates for the first quarter, today's release presents revised
estimates of fourth-quarter wages and salaries, personal taxes, and contributions for government social
insurance. These estimates reflect new wage and salary tabulations for the fourth quarter from the
QCEW.
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Wages and salaries are now estimated to have increased $100.4 billion in the fourth quarter of
2017, an upward revision of $7.8 billion.
•
Real disposable personal income is now estimated to have increased 1.2 percent (annual rate) in
the fourth quarter and 3.3 percent in the first. (By comparison, the estimates that were available
last month showed increases of 1.1 percent in the fourth quarter and 3.4 percent in the first.)
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The revision to fourth-quarter wages and salaries also resulted in a revision to gross domestic
income. Real GDI is now estimated to have increased 1.0 percent in the fourth quarter, an
upward revision of 0.1 percentage point.
Comprehensive Update Scheduled for July 27
On July 27, BEA will present the results of its 15th comprehensive (or benchmark) update of the National
Income and Product Accounts (NIPAs), in addition to presenting the advance estimate of GDP for the
second quarter of 2018. The full historical time span of the NIPAs, 1929-2017 and the first quarter of
2018, will be open for revision. More details on the scope of the update are available in the April Survey
of Current Business article "Preview of the 2018 Comprehensive Update of the National Income and
Product Accounts."
The comprehensive update will reflect:
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The incorporation of the 2012 benchmark input-output accounts
Enhanced seasonally adjusted estimates
Improved price indexes for software, medical equipment, and communications equipment
The introduction of new not seasonally adjusted estimates for GDP, GDI, and their major
components
An updated reference year for chain-type quantity and price indexes and chained-dollar
estimates from 2009 to 2012
Erich H. Strassner
Associate Director, National Economic Accounts
Bureau of Economic Analysis
(301) 278-9612
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@FedFRASER