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Gross Domestic Product
Third Quarter of 2018 (Third Estimate)
December 21, 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 third quarter and a brief summary of "highlights" are available on BEA's Web site at www.bea.gov.
The source data and assumptions for the "third" estimate are shown in a "Key Source Data and
Assumptions" table. 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").
Sources of Revision to Real GDP
With the third estimate, real GDP increased 3.4 percent (annual rate) in the third quarter of 2018, a
downward revision of 0.1 percentage point from the second estimate. The small downward revision to
the percent change in real GDP primarily reflected downward revisions to consumer spending and
exports that were partly offset by an upward revision to private inventory investment.
•
The downward revision to consumer spending reflected a downward revision to goods that was
partly offset by an upward revision to services. Within goods, the largest contributor to the
revision was gasoline and other energy goods, reflecting newly available data for September
from the Energy Information Administration. Within services, the largest contributor to the
upward revision was health care services, based on updated third-quarter Quarterly Services
Report (QSR) data from the Census Bureau.
•
Within exports, both goods and services were revised down. The largest contributor to the
revision in exports of goods was “other” capital goods, and the largest contributor to the
revision in exports of services was maintenance and repair services. The revised estimates
primarily reflected updated price indexes from the Bureau of Labor Statistics and updated
statistics from BEA’s International Transactions Accounts (ITAs).
•
Within private inventory investment, an upward revision to nonfarm inventories was partly
offset by a downward revision to farm inventories. Within nonfarm inventories, the upward
revision primarily reflected an upward revision to wholesale trade industries, that was partly
offset by a downward revision to “other” industries. The revision to wholesale trade was
concentrated in durable goods industries and primarily reflected revised September Census
inventory data. The downward revision to “other” industries, which includes the information
services industry, reflected updated Census Quarterly Financial Report (QFR) data.
In addition, nonresidential fixed investment increased 2.5 percent in the third quarter, the same
increase as in the second estimate. Within nonresidential investment, an upward revision to intellectual
property products, specifically research and development (R&D), was offset by a downward revision to
structures. The upward revision to R&D reflected new Census QSR data and updated company data on
R&D expenses. The downward revision to structures reflected revised August and September Census
construction spending data.
Prices
BEA's featured measure of inflation in the U.S. economy, the price index for gross domestic purchases,
measures the prices of goods and services purchased by U.S. residents, regardless of where the goods
and services are produced. This measure increased 1.8 percent in the third quarter, an upward revision
of 0.1 percentage point. The price index for personal consumption expenditures (PCE) increased 1.6
percent, revised up 0.1 percentage point. Excluding food and energy prices, the PCE price index
increased 1.6 percent, also revised up 0.1 percentage point.
Gross Domestic Income and Corporate Profits
Real gross domestic income (GDI), which measures the output of the economy as the incomes earned
and costs incurred in the production of goods and services (as measured by GDP), increased 4.3 percent
in the third quarter, an upward revision of 0.3 percentage point from earlier estimates. The upward
revision to real GDI primarily reflected an upward revision to domestic industries’ corporate profits.
Profits from current production increased $78.2 billion, or 3.5 percent (quarterly rate), in the third
quarter, an upward revision of $2.2 billion. Domestic profits of financial corporations decreased $6.1
billion, domestic profits of nonfinancial corporations increased $83.0 billion, and rest-of-the-world
profits increased $1.3 billion.
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Within corporate profits, an upward revision to nonfinancial corporate profits, based primarily
on updated Census QFR data, was mostly offset by a downward revision to rest-of-the-world
profits, based on updated data from the ITAs.
BEA’s profits measure that is conceptually most similar to S&P 500 profits—national after-tax profits
without inventory valuation and capital consumption adjustments—increased $17.9 billion in the third
quarter, an upward revision of $4.6 billion. Third-quarter national after-tax profits (shown in line 11 of
table 9 of the GDP news release) increased 6.1 percent from the same quarter one year ago.
Erich H. Strassner
Associate Director, National Economic Accounts
Bureau of Economic Analysis
(301) 278-9612
-2-
@FedFRASER