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Economy in Brief

US GDP & Profits Revised Up for 1Q. Price Gain Easier
by Tom Moeller June 29, 2006

U.S. real GDP grew faster during the first quarter than estimated last month. The 5.6% (AR) annual rate of growth was upwardly revised from 5.3% and from the initial estimate of 4.8%. The revised figure matched Consensus expectations and slower GDP growth near 3.0% is widely forecast for 2Q.

Growth in corporate profits was revised up sharply to 11.9% (28.5% y/y) from the initial estimate of a 7.9% gain during 1Q. Growth in the earnings of nonfinancial corporations was doubled to 9.4% (35.2% y/y) as profit margins surged to another record high. Overseas profits' growth also was revised up sharply to 14.4% (23.4% y/y) while strong 16.5% (18.4% y/y) growth in financial corporate profits was little changed.

Much of the upward revision to GDP growth owed to a lessening of the subtraction from a wider foreign trade deficit to -0.2% from -0.6%. Import growth was dropped to 10.7% (6.1% y/y) and the strength in exports was unchanged at 14.7% (8.1% y/y).

Strong growth in domestic final demand growth of 5.8% was little changed as personal consumption grew a little changed 5.0% (3.3% y/y). The revised estimate of growth in business fixed investment indicated a slightly stronger 14.2% (8.9% y/y) rate of increase. Residential investment grew 3.3% (6.0% y/y), about as estimated last month.

Inventories subtracted 0.2 percentage points from 1Q GDP growth, about the same as the -0.1 estimated last month but still less than the initial estimate of a 0.5% subtraction.

The estimate of the GDP chain price index was revised down slightly to 3.1%. Less final sales of computers, the chain price index grew 3.3% (3.3% y/y).

Real GDP per capita grew 4.8% (2.7% y/y) last quarter though per capita disposable income grew just 0.7% (0.4% y/y).

Intangible capital and economic growth from the Board of Governors of the Federal Reserve System is available here.

Chained 2000$, % AR 1Q '06 (Final) 1Q '06 (Prelim.) 4Q '05 Y/Y 2005 2004 2003
GDP 5.6% 5.3% 1.7% 3.7% 3.5% 4.2% 2.7%
  Inventory Effect -0.2% -0.1% 1.9% -0.2% -0.3% 0.3% 0.0%
Final Sales 5.9% 5.5% -0.2% 3.9% 3.8% 3.9% 2.7%
  Foreign Trade Effect -0.2% -0.6% -1.4% 0.0% -0.1% -0.5% -0.3%
Domestic Final Demand 5.8% 5.7% 1.1% 3.9% 3.9% 4.4% 3.0%
Chained GDP Price Index 3.1% 3.3% 3.5% 3.1% 2.8% 2.6% 2.0%
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