· Corporate profits w/ inventory (IVA) and capital consumption adjustments (CCAdj) fell 2.4% (+8.4% y/y), the first quarterly decline since 1Q03. Part of this decline in "operating" profits occurred as the CCAdj for depreciation rose a sharp 6.3%, the largest quarterly advance in three years. However that was offset by a lessened (IVA). 

· "Book" profits before tax fell 2.4% (+9.5% y/y) due to lower profits earned in the financial sector, off 13.4% q/q and 10.5% y/y. Nonfinancial corporate sector profits rose 1.6% (18.9% y/y), though the quarterly rate of gain was the weakest since 1Q03 and reflected no expansion in profits per unit of output (margins).

· Revisions to growth in domestic final demand were modestly positive. Personal consumption grew at a 5.1% (3.6% y/y) rate versus the initial report of 4.4% growth due to upward revisions in most categories. Business investment growth also was revised up to a 13.0% rate (10.1% y/y) with spending on equipment & software growth raised to 17.2% (12.8% y/y). Growth in information processing equipment & software was nearly doubled to 7.6% (13.6% y/y).

· Residential investment grew at a 1.8% rate (8.1% y/y) but its contribution to real GDP growth was halved to 0.1 percentage points versus 0.9 points in 2Q04).

· Slower accumulation of inventories subtracted nearly twice the 0.5 percentage points from GDP growth estimated in the advance report, but that was mostly offset by a lessened drag from foreign trade deterioration. Export growth was revised up to 6.4% (9.5% y/y) and import growth was eased to 6.0% (11.5% y/y).

· Expanded detail indicated that GDP less motor vehicles rose 3.7% (AR, 4.1% y/y) and that GDP less computers rose 3.8% (3.9% y/y), both estimates up a hair from the advance report.

· Price inflation was unrevised at 1.3%, as expected.

· The Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available here. 

2003

2002

2001

3.0%