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Economy in Brief

US GDP Growth Unrevised, Corporate Profits Firm
by Tom Moeller March 30, 2005

US real GDP growth in 4Q04 was unrevised at 3.8% (AR). The Consensus expectation had been for a slight upward revision to 4.0% growth.

Reported for the first time, total U.S. operating corporate profits surged 13.5% (12.4% y/y) and the gain was held back by no change in profits earned abroad. Domestic profits grew 16.2% (18.3% y/y) and reflected a 30.1% rebound in financial sector profits which were depressed by hurricanes in 3Q.

Profits earned in the nonfinancial corporate sector grew 10.3% (24.2% y/y), the strongest gain since 2Q03 and were aided by continued profit margin expansion. Labor costs per unit of output fell for the first time in over a year as productivity remained strong. Non-labor costs continued the decline in place for nearly three years. Pricing power improved and real gross value added (output) grew a strong 1.6% (5.3% y/y).

Domestic demand growth was unrevised at 4.5% as growth in business fixed investment in equipment & software held firm at 18.4% (14.5% y/y). Consumer spending growth also held solid at 4.2% (3.8% y/y). Less computers real GDP grew 3.3% (3.8% y/y).

Price inflation was revised up slightly to 2.3%. The price index for domestic demand was revised higher to 2.9% (2.9% y/y) and continued to reflect a strong 5.3% (4.8% y/y) rise at the state & local government level.

Perspectives on Monetary Policy and Central Banking from New York Federal Reserve Bank President Timothy F. Geithner can be found here.

Chained 2000$, % AR 4Q '04 (Final) 4Q '04 (Prelim. 3Q '04 Y/Y 2004 2003 2002
GDP 3.8% 3.8% 4.0% 3.9% 4.4% 3.0% 1.9%
  Inventory Effect 0.5% 0.6% -1.0% 0.3% 0.4% -0.1% 0.4%
Final Sales 3.4% 3.2% 5.0% 3.6% 4.0% 3.1% 1.4%
  Trade Effect -1.4% -1.4% -0.1% -0.6% -0.4% -0.3% -0.7%
Domestic Final Demand 4.5% 4.5% 4.9% 4.2% 4.4% 3.4% 2.1%
Chained GDP Price Index 2.3% 2.1% 1.4% 2.4% 2.2% 1.8% 1.7%
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