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Economy in Brief

U.S. GDP Growth Revised Up and Corporate Profits Rise
by Tom Moeller  March 25, 2011

Real GDP grew 3.1% (SAAR) last quarter, revised up from the 2.8% reported last month. The revision mostly reflected a lessened subtraction from inventory investment and improved capital spending. The Q4 figure roughly equaled Consensus expectations for a revision to 3.0%. Quarterly growth remained the strongest since Q1 2010 and, for the full year, real GDP rose a moderate 2.9% which reversed the 2.6% lost during 2009.

Accompanying the GDP figures were the first estimates of Q4 corporate profits. A 2.3% rise (18.3% y/y) in before-tax profits with IVA & CCA was improved from the 1.6% Q3 increase, but still was below the 3.0%-to-14.4% gains in each quarter back to early-2009. Before-tax profits without IVA and CCA fell 2.6% (+16.1% y/y) while after-tax profits fell 3.3% (+11.4% y/y).

Growth in domestic final demand was little-changed at 3.2%, due mostly to personal consumption growth of 4.0% which was little-revised as well. The strength mostly reflected a 49.2% surge in motor vehicles. Elsewhere, growth in business fixed investment (7.7%) and residential investment (3.3%) were both raised slightly. The decline in government spending (-1.7%), however, was deeper than reported earlier.

Inventories subtracted a lessened 3.4 percentage points from GDP growth last quarter. Perhaps more notable was that the $16.2B rate of accumulation was the weakest of the economic recovery. A little-changed, positive foreign trade effect of 3.3 percentage points reflected a lessened 8.6% rise (8.9% y/y) in exports and a deepened 12.6% decline (+10.9% y/y) in imports

Price inflation as measured by the chained GDP price index was unrevised at 0.4%. The price index for domestic final demand rose 1.9% (1.2% y/y) and the price index for final sales rose 0.2% (1.3% y/y). The GDP figures are available in Haver's USECON and USNA databases and the expectations number is in AS1REPNA.

Chained 2005 $, % AR Q4
(Final)
Q4'10 (Prelim.) Q4'10
(Adv.)
Q3
2010
Q2
2010
Q4
Y/Y
2010 2009 2008
GDP 3.1 2.8 3.2 2.6 1.7 2.8 2.9 -2.6 -0.0
 Inventory Effect -3.4 -3.7 -3.7 1.6 0.8 0.4 1.5 -0.5 -0.5
Final Sales 6.7 6.7 7.1 0.9 0.9 2.4 1.4 -2.1 0.5
 Foreign Trade Effect 3.3 3.4 3.4 -1.7 -3.5 -0.4 -0.5 1.0 -1.1
Domestic Final Demand 3.2 3.1 3.4 2.6 4.3 2.9 1.8 -3.1 -0.6
Demand Components
Personal Consumption 4.0 4.1 4.4 2.4 2.2 2.6 1.8 -1.2 -0.3
Business Fixed Investment 7.7 5.3 4.4 10.0 17.2 10.6 5.7 -17.1 0.3
Residential Investment 3.3 2.7 3.4 -27.3 25.6 -4.6 -3.0 -22.9 -24.0
Government Spending -1.7 -1.5 -0.6 3.9 3.9 1.1 1.0 1.6 2.8
Prices
Chained GDP Price Index 0.4 0.4 0.3 2.1 1.9 1.4 1.0 0.9 2.2
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