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 second quarter is available on BEA's Web site at www.bea.gov; a brief summary of "highlights" is
also posted on the Web site. In a few weeks, the Survey of Current Business, BEA’s online monthly
journal, will publish a more detailed analysis of the estimates ("GDP and the Economy").

Sources of Revision to Real GDP

Real GDP increased 1.1 percent (annual rate) in the second quarter of 2016, a downward revision of 0.1
percentage point from the advance estimate. The revision reflected downward revisions to state and
local government spending and to inventory investment and an upward revision to imports, which were
partly offset by upward revisions to nonresidential fixed investment and to consumer spending.

*	The downward revision to state and local government spending was primarily to investment in
        structures, based on newly available Census construction spending data for June and revised
        data for April and May.
*	The downward revision to inventory investment primarily reflected downward revisions to
        “construction, mining, and utilities” and to “other industries,” which were partly offset by an
        upward revision to wholesale trade. The revision to construction, mining, and utilities
        inventories was primarily to utilities and reflected newly available Energy Information
        Administration data. The revision to “other industries” was primarily to information and was
        based on newly available Quarterly Financial Report data from Census Bureau. The revision to
        wholesale trade was based on revised Census wholesale inventory data for April, May, and June.
*	The upward revision to imports was primarily to goods imports. Within goods, the largest
        contributor was “other” goods, which mostly reflected a revision to the territorial adjustment
        based on newly available Census Bureau data on territorial trade for June.
*	The upward revision to nonresidential fixed investment was primarily to intellectual property
        products—specifically, to research and development investment and was based on newly
        available R&D expense data from company financial reports.
*	The largest contributor to the upward revision in consumer spending was a revision to durable
        goods—specifically, “motor vehicles and parts.” The revision to motor vehicle spending was
        mostly to used motor vehicles and was based on revised Census retail sales for used vehicle
        dealers.

Gross Domestic Income and Corporate Profits

Real gross domestic income (GDI), which measures the output of the economy as the costs incurred
and the incomes earned in the production of GDP, increased 0.2 percent in the second quarter. For a
given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the
incorporation of largely independent source data. However, over longer time spans, the estimates of
GDP and GDI tend to follow similar patterns of change. The average of real GDP and real GDI
increased 0.6 percent.

Profits from current production decreased $24.1 billion, or 1.2 percent (quarterly rate), in the second
quarter.  Domestic profits of financial corporations increased $7.2 billion, domestic profits of
nonfinancial corporations decreased $58.2 billion, and rest-of-the-world profits increased $26.9 billion.

Revisions to Wages and Salaries in the First and Second Quarters

In addition to presenting revised estimates for the second quarter, today's release presents revised
estimates of first-quarter wages and salaries, personal taxes, and contributions for government social
insurance. Wages and salaries are now estimated to have decreased $13.4 billion in the first quarter of
2016, a downward revision of $3.1 billion. These estimates reflect the most recently available wage and
salary tabulations for the first quarter from the BLS quarterly census of employment and wages (QCEW)
for all states; the estimates that were available last month were based on preliminary QCEW data for 42
states and the District of Columbia. Real GDI is now estimated to have increased 0.8 percent in the first
quarter, a downward revision of 0.1 percentage point.

In addition to the revisions to first quarter wages and salaries, wages and salaries for the second quarter
are now estimated to have increased $92.6 billion, an upward revision of $44.2 billion. This revision is
based on BEA analysis of historical wage revisions when the QCEW data have been incorporated. The
analysis found that when QCEW-based wages for a quarter have been substantially higher or lower than
the recent trend, wages for the following quarter have subsequently tended to be revised in the opposite
direction. Because the revised wages for the first quarter of 2016 were appreciably lower than the recent
trend, BEA expects the second quarter QCEW data to show a larger increase than had previously been
estimated and has adjusted the wage estimates upward in anticipation of this pattern.

BEA will continue to study the pattern of revisions resulting from the incorporation of QCEW data.  If
BEA can identify a methodological refinement that would reduce future revisions associated with the
incorporation of QCEW-based wage and salary data, it plans to update the methodology and inform
users of the change.

Brent R. Moulton
Associate Director for National Economic Accounts
Bureau of Economic Analysis
(301) 278-9606



                              

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