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.