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Economy in Brief

US GDP & Corporate Profit Growth Revised Up
by Tom Moeller June 29, 2005

US real GDP growth in 1Q '05 was revised up further to 3.8% (AR), in line with Consensus expectations.

Corporate profit growth (w/IVA & CCA) also was revised up to 6.0% (15.4% y/y) versus the preliminary estimate of a 4.5% increase. Profitability amongst US nonfinancial corporations rose 3.4% (22.6% y/y) instead of declining 0.8% as initially estimated.

The upward revision to profits stemmed from an increase in profit margins which were initially estimated to have declined.

Growth in domestic demand growth also was revised up to 3.5% Growth in business investment was raised slightly to 4.1% (10.9% y/y) and growth in residential building was raised sharply to 11.5% (8.1% y/y). Real PCE growth was left unchanged at 3.6% (3.6% y/y).

The drag on US output growth from a larger foreign trade deficit was little changed as exports grew 8.9% and imports rose 9.6% while the contribution to GDP growth from faster inventory accumulation also was little revised at 0.7%.

The chain price index was revised down to 2.9% growth as the price index for domestic demand was lowered to 2.7% (2.7% y/y).

Chained 2000$, % AR 1Q '05 (Final) 1Q '05 (Prelim.) 4Q '04 Y/Y 2004 2003 2002
GDP 3.8% 3.5% 3.8% 3.7% 4.4% 3.0% 1.9%
  Inventory Effect 0.7% 0.8% 0.5% 0.2% 0.4% -0.1% 0.4%
Final Sales 3.0% 2.7% 3.4% 3.5% 4.0% 3.1% 1.4%
  Foreign Trade Effect -0.6% -0.7% -1.4% -0.6% -0.4% -0.3% -0.7%
Domestic Final Demand 3.5% 3.2% 4.5% 4.1% 4.4% 3.4% 2.1%
Chained GDP Price Index 2.9% 3.2% 2.3% 2.4% 2.2% 1.8% 1.7%
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