Technical Note

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                         Technical Note
      Gross Domestic Product, Fourth Quarter 2004 (Final)
             Corporate Profits, Fourth Quarter 2004
                         March 30, 2005

This technical note provides background information about the source data and estimating
methods used to produce the estimates presented in the GDP news release.  The complete
set of estimates for the fourth quarter is available on BEA's Web site www.bea.gov; a brief
summary of "highlights" and this note are also posted on the Web site.  In a few weeks, the
estimates will be published in BEA's monthly journal, the Survey of Current Business, along
with a more detailed analysis of the estimates ("The Business Situation").

Source of Revisions

Real GDP growth in the fourth quarter was 3.8 percent, the same as in the preliminary
estimate released last month.  Small upward revisions to exports and to personal consumption
expenditures for durable goods were offset by a downward revision to private inventory
investment.

The price index for gross domestic purchases increased 2.9 percent in the fourth quarter, 0.1
percentage point more than in the preliminary estimate.  The upward revision primarily
reflected upward revisions to the price indexes for single-family homes and for imputed
financial services.


Corporate Profits and GNP

The news release that presents the final estimate of fourth-quarter GDP also presents the first
estimates of corporate profits and gross national product (GNP) for the quarter. 

Corporate Profits:  Profits from current production (that is, "corporate profits with inventory
valuation and capital consumption adjustments") increased 13.5 percent (quarterly rate) in the
fourth quarter, following a decrease of 4.8 percent in the third.  The third-quarter decrease
in profits from current production reflected a reduction of about $792 billion because of
Hurricanes Charley, Frances, Ivan, and Jeanne.   Excluding the third-quarter effects of the
hurricanes, fourth-quarter profits increased 5.9 percent.  Fourth-quarter profits were 12.4
percent higher than in the fourth quarter of 2003.  The current-production measure of profits
differs from profits as they are usually reported in corporate financial statements.  It excludes
non-operating items, such as special charges and capital gains and losses, and is based on
depreciation of fixed assets and inventory withdrawals valued at current cost, rather than at
historical cost.

Real GNP:  Real GNP increased 3.5 percent in the fourth quarter, 0.3 percentage point less
than the increase in real GDP; GNP increased 4.0 percent in the third quarter.  GNP equals
GDP plus incomes, mainly on investments, earned abroad by U.S. residents, less similar
incomes earned in the United States by residents of other countries.  Net income receipts by
U.S. residents decreased $9.7 billion in the fourth quarter; receipts increased $41.4 billion,
and payments to foreign residents increased $51.1 billion.


The Microsoft Special Dividend

During the fourth quarter, the Microsoft Corporation paid its shareholders a special dividend
of $3.00 per share.  Personal income was boosted by $99.4 billion (annual rate) in the fourth
quarter; GDP and profits of domestic corporations were not affected.  For further information,
see the FAQs on the Microsoft special dividend on BEA's Web site: www.bea.gov.


Carol E. Moylan
Chief, National Income and Wealth Division
Bureau of Economic Analysis
(202) 606-9715
March 30, 2005