Survey of Current Business
April 2019
Volume 99, Number 4

GDP and the Economy

Third Estimates for the Fourth Quarter of 2018

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Real gross domestic product (GDP) increased at an annual rate of 2.2 percent in the fourth quarter of 2018, according to the “third” estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 The third estimate of real GDP growth was 0.4 percentage point lower than the initial estimate released in February.2 The revised estimates reflected downward revisions to consumer spending, state and local government spending, and nonresidential fixed investment. These revisions were partly offset by a downward revision to imports, which are a subtraction in the calculation of GDP.3 In the third quarter of 2018, real GDP increased 3.4 percent.

The increase in real GDP in the fourth quarter reflected positive contributions from increases in consumer spending, nonresidential fixed investment, exports, private inventory investment, and federal government spending. These increases were partly offset by negative contributions from decreases in residential fixed investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased (chart 2).

The deceleration in real GDP growth in the fourth quarter reflected decelerations in private inventory investment (line 14), consumer spending (line 2), and federal government spending (line 23) and a downturn in state and local government spending (line 26). These movements were partly offset by an upturn in exports (line 16) and an acceleration in nonresidential fixed investment (line 9). Imports increased less in the fourth quarter than in the third quarter (line 19).

  • The deceleration in private inventory investment primarily reflected a downturn in manufacturing and a deceleration in wholesale trade industries.
  • The deceleration in consumer spending reflected decelerations in both goods (line 3) and services (line 6). Within goods, the main contributors were widespread decelerations in spending on nondurable goods, except gasoline and other energy goods, which increased in the fourth quarter after decreasing in the third quarter. The deceleration in spending on services primarily reflected a downturn in food services and accommodations.
  • Within federal government spending, the deceleration reflected a downturn in nondefense spending (line 25) that was partly offset by an acceleration in defense spending (line 24). The downturn in nondefense spending reflected a downturn in compensation of general government employees because of the reduced hours worked related to the partial government shutdown (see the note).
  • The downturn in state and local government spending primarily reflected a downturn in investment in structures.
  • The upturn in exports primarily reflected an upturn in exports of goods (line 17). The leading contributors to the upturn in exports of goods were petroleum and products, other exports of goods, and nonautomotive capital goods. A notable offset was in foods, feeds, and beverages, which decreased more in the fourth quarter than in the third quarter.
  • The acceleration in nonresidential fixed investment reflected accelerated investment in intellectual property products (line 12), mainly for research and development, and in equipment (line 11), mainly due to an upturn in transportation equipment investment.
  • The deceleration in imports reflected a deceleration in imports of goods that was partly offset by an acceleration in imports of services. Within goods imports, the leading contributors were downturns in imports of petroleum and products and of nonautomotive capital goods.

Real gross domestic income (GDI) increased 1.7 percent in the fourth quarter of 2018 after increasing 4.6 percent in the third quarter (line 27). The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 1.9 percent in the fourth quarter after increasing 4.0 percent in the third quarter (line 28).

Table 1. Real Gross Domestic Product (GDP) and Related Measures
[Seasonally adjusted at annual rates]
Line   Share of current-dollar GDP (percent) Change from preceding period (percent) Contribution to percent change in real GDP (percentage points)
2018 2018 2018
IV I II III IV I II III IV
1 Gross domestic product1 100.0 2.2 4.2 3.4 2.2 2.2 4.2 3.4 2.2
2 Personal consumption expenditures 68.0 0.5 3.8 3.5 2.5 0.36 2.57 2.37 1.66
3 Goods 21.0 −0.6 5.5 4.3 2.6 −0.13 1.16 0.90 0.54
4 Durable goods 7.1 −2.0 8.6 3.7 3.6 −0.15 0.60 0.26 0.25
5 Nondurable goods 13.9 0.1 4.0 4.6 2.1 0.02 0.56 0.64 0.29
6 Services 47.0 1.0 3.0 3.2 2.4 0.49 1.42 1.47 1.12
7 Gross private domestic investment 18.1 9.6 −0.5 15.2 3.7 1.61 −0.07 2.53 0.66
8 Fixed investment 17.5 8.0 6.4 1.1 3.1 1.34 1.10 0.21 0.54
9 Nonresidential 13.7 11.5 8.7 2.5 5.4 1.47 1.15 0.35 0.73
10 Structures 3.1 13.9 14.5 −3.4 −3.9 0.40 0.43 −0.11 −0.12
11 Equipment 6.0 8.5 4.6 3.4 6.6 0.49 0.27 0.21 0.39
12 Intellectual property products 4.6 14.1 10.5 5.6 10.7 0.58 0.45 0.25 0.46
13 Residential 3.8 −3.4 −1.3 −3.6 −4.7 −0.14 −0.05 −0.14 −0.18
14 Change in private inventories 0.5 ...... ...... ...... ...... 0.27 −1.17 2.33 0.11
15 Net exports of goods and services −3.2 ...... ...... ...... ...... −0.02 1.22 −1.99 −0.08
16 Exports 12.2 3.6 9.3 −4.9 1.8 0.43 1.12 −0.62 0.22
17 Goods 8.0 3.2 13.5 −8.4 1.2 0.26 1.06 −0.72 0.10
18 Services 4.2 4.2 1.5 2.4 2.7 0.18 0.07 0.10 0.11
19 Imports 15.3 3.0 −0.6 9.3 2.0 −0.45 0.10 −1.37 −0.30
20 Goods 12.4 2.4 −0.4 10.5 0.5 −0.30 0.06 −1.24 −0.06
21 Services 2.9 5.5 −1.4 4.3 8.6 −0.15 0.04 −0.12 −0.24
22 Government consumption expenditures and gross investment 17.1 1.5 2.5 2.6 −0.4 0.27 0.43 0.44 −0.07
23 Federal 6.4 2.6 3.7 3.5 1.1 0.17 0.24 0.23 0.07
24 National defense 3.8 3.0 5.9 4.9 6.4 0.11 0.22 0.18 0.24
25 Nondefense 2.6 2.1 0.5 1.6 −6.1 0.06 0.01 0.04 −0.16
26 State and local 10.7 0.9 1.8 2.0 −1.3 0.10 0.20 0.22 −0.14
Addenda:
27 Gross domestic income (GDI)2 ...... 3.9 0.9 4.6 1.7 ...... ...... ...... ......
28 Average of GDP and GDI ...... 3.1 2.5 4.0 1.9 ...... ...... ...... ......
29 Final sales of domestic product ...... 1.9 5.4 1.0 2.1 1.94 5.33 1.03 2.05
30 Goods 29.5 4.1 6.5 6.1 5.7 1.20 1.91 1.77 1.66
31 Services 62.1 1.2 2.9 2.8 1.6 0.73 1.78 1.76 0.99
32 Structures 8.4 3.4 5.5 −2.0 −5.5 0.28 0.47 −0.17 −0.48
33 Motor vehicle output 2.8 9.5 −5.8 9.6 3.3 0.26 −0.17 0.25 0.09

Note. Percent changes are from NIPA tables 1.1.1 and 1.2.1, contributions are from NIPA tables 1.1.2 and 1.2.2, and shares are from NIPA table 1.1.10 or are calculated from NIPA table 1.2.5.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 1.7 percent in the fourth quarter of 2018 after increasing 1.8 percent in the third quarter (table 2, line 1, and chart 3). Price decelerations for most major components were partly offset by an acceleration in the prices paid for federal nondefense spending, reflecting a temporary increase in the prices paid for federal government employee compensation related to the partial federal government shutdown (see the note).

Food prices decelerated slightly (line 20), increasing 0.2 percent after increasing 0.5 percent. Prices for energy goods and services (line 21) turned down, decreasing 1.6 percent in the fourth quarter after increasing 3.3 percent in the third quarter. Gross domestic purchases prices excluding food and energy (line 22) increased 1.8 percent in the fourth quarter, the same increase as in the third quarter.

Consumer prices excluding food and energy (line 25), a measure of the “core” rate of inflation, accelerated, increasing 1.8 percent in the fourth quarter after increasing 1.6 percent in the third quarter.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Table 2. Prices for Gross Domestic Purchases
[Percent change at annual rates; based on seasonally adjusted index numbers (2012=100)]
Line   Change from preceding period (percent) Contribution to percent change in gross domestic purchases prices (percentage points)
2018 2018
I II III IV I II III IV
1 Gross domestic purchases1 2.5 2.4 1.8 1.7 2.5 2.4 1.8 1.7
2 Personal consumption expenditures 2.5 2.0 1.6 1.5 1.63 1.32 1.04 0.98
3 Goods 2.2 0.4 −0.4 −1.1 0.46 0.08 −0.07 −0.23
4 Durable goods −1.1 −1.6 −0.9 −1.5 −0.07 −0.11 −0.06 −0.10
5 Nondurable goods 3.9 1.4 0.0 −1.0 0.53 0.19 −0.01 −0.13
6 Services 2.6 2.7 2.5 2.7 1.17 1.24 1.11 1.22
7 Gross private domestic investment 2.5 3.1 2.0 1.4 0.42 0.53 0.35 0.25
8 Fixed investment 2.5 3.2 2.0 1.4 0.42 0.53 0.34 0.24
9 Nonresidential 0.7 2.0 1.6 1.1 0.09 0.26 0.21 0.14
10 Structures 3.2 5.1 3.1 5.8 0.09 0.15 0.09 0.17
11 Equipment −0.3 0.8 1.2 −0.7 −0.02 0.05 0.07 −0.04
12 Intellectual property products 0.4 1.4 1.0 0.3 0.02 0.06 0.04 0.01
13 Residential 8.8 7.3 3.6 2.6 0.32 0.27 0.13 0.10
14 Change in private inventories ...... ...... ...... ...... 0.01 −0.01 0.01 0.01
15 Government consumption expenditures and gross investment 2.9 3.3 2.5 2.6 0.48 0.55 0.41 0.42
16 Federal 1.8 2.0 1.5 2.7 0.11 0.13 0.10 0.16
17 National defense 1.4 1.3 1.2 1.6 0.05 0.05 0.04 0.06
18 Nondefense 2.4 3.0 2.0 4.2 0.06 0.08 0.05 0.10
19 State and local 3.6 4.1 3.0 2.5 0.37 0.42 0.32 0.26
Addenda:
  Gross domestic purchases:                
20 Food 0.4 1.1 0.5 0.2 0.02 0.05 0.03 0.01
21 Energy goods and services 12.6 0.4 3.3 −1.6 0.33 0.01 0.09 −0.04
22 Excluding food and energy 2.4 2.5 1.8 1.8 2.19 2.33 1.68 1.68
  Personal consumption expenditures (PCE):                
23 Food and beverages purchased for off-premises consumption 0.2 1.2 0.4 0.3 ...... ...... ...... ......
24 Energy goods and services 12.7 0.7 3.3 −2.0 ...... ...... ...... ......
25 Excluding food and energy 2.2 2.1 1.6 1.8 ...... ...... ...... ......
26 Gross domestic product 2.0 3.0 1.8 1.7 ...... ...... ...... ......
27 Exports of goods and services 4.0 5.8 0.3 −1.4 ...... ...... ...... ......
28 Imports of goods and services 7.3 0.8 0.4 −1.0 ...... ...... ...... ......

Note. Most percent changes are from NIPA table 1.6.7; percent changes for PCE for food and energy goods and services and for PCE excluding food and energy are from NIPA table 2.3.7. Contributions are from NIPA table 1.6.8. GDP, export, and import prices are from NIPA table 1.1.7.


 

According to the third estimate of the NIPAs, real GDP increased 2.2 percent in the fourth quarter, a downward revision of 0.4 percentage point from the initial estimate (table 3, line 1); the general picture of economic growth remains the same. The revision primarily reflected downward revisions to consumer spending (line 2), state and local government spending (line 26), and private fixed investment (line 8) that were partly offset by a downward revision to imports (line 19).

  • The downward revision to consumer spending reflected widespread revisions to spending on goods; the largest contributor was recreation goods and vehicles. Within services, a downward revision to household consumption of health care services was mostly offset by an upward revision to nonprofit hospital services.
  • Within state and local government spending, the downward revision was primarily to investment in structures.
  • The downward revision to private fixed investment was mainly to intellectual property products, specifically software investment.
  • Within imports, the downward revision was to imports of goods, specifically imports of petroleum.
Table 3. Initial and Third Estimates for the Fourth Quarter of 2018
[Seasonally adjusted at annual rates]
Line   Change from preceding period (percent) Contribution to percent change in real GDP (percentage points)
Initial estimate Third estimate Third estimate minus initial estimate Initial estimate Third estimate Third estimate minus initial estimate
1 Gross domestic product (GDP)1 2.6 2.2 −0.4 2.6 2.2 −0.4
2 Personal consumption expenditures 2.8 2.5 −0.3 1.92 1.66 −0.26
3 Goods 3.9 2.6 −1.3 0.80 0.54 −0.26
4 Durable goods 5.9 3.6 −2.3 0.41 0.25 −0.16
5 Nondurable goods 2.8 2.1 −0.7 0.39 0.29 −0.10
6 Services 2.4 2.4 0.0 1.11 1.12 0.01
7 Gross private domestic investment 4.6 3.7 −0.9 0.82 0.66 −0.16
8 Fixed investment 3.9 3.1 −0.8 0.69 0.54 −0.15
9 Nonresidential 6.2 5.4 −0.8 0.82 0.73 −0.09
10 Structures −4.2 −3.9 0.3 −0.13 −0.12 0.01
11 Equipment 6.7 6.6 −0.1 0.39 0.39 0.00
12 Intellectual property products 13.1 10.7 −2.4 0.56 0.46 −0.10
13 Residential −3.5 −4.7 −1.2 −0.14 −0.18 −0.04
14 Change in private inventories ...... ...... ...... 0.13 0.11 −0.02
15 Net exports of goods and services ...... ...... ...... −0.22 −0.08 0.14
16 Exports 1.6 1.8 0.2 0.19 0.22 0.03
17 Goods 1.6 1.2 −0.4 0.13 0.10 −0.03
18 Services 1.4 2.7 1.3 0.06 0.11 0.05
19 Imports 2.7 2.0 −0.7 −0.41 −0.30 0.11
20 Goods 1.6 0.5 −1.1 −0.20 −0.06 0.14
21 Services 7.5 8.6 1.1 −0.21 −0.24 −0.03
22 Government consumption expenditures and gross investment 0.4 −0.4 −0.8 0.07 −0.07 −0.14
23 Federal 1.6 1.1 −0.5 0.10 0.07 −0.03
24 National defense 6.9 6.4 −0.5 0.25 0.24 −0.01
25 Nondefense −5.6 −6.1 −0.5 −0.15 −0.16 −0.01
26 State and local −0.3 −1.3 −1.0 −0.03 −0.14 −0.11
Addenda:
27 Final sales of domestic product 2.5 2.1 −0.4 2.46 2.05 −0.41
28 Gross domestic income (GDI) ...... 1.7 ...... ...... ...... ......
29 Average of GDP and GDI ...... 1.9 ...... ...... ...... ......
30 Gross domestic purchases price index 1.6 1.7 0.1 ...... ...... ......
31 GDP price index 1.8 1.7 −0.1 ...... ...... ......

Measured in current dollars, profits from current production (corporate profits with the inventory valuation (IVA) adjustment and the capital consumption adjustment (CCAdj)) decreased $9.7 billion, or 0.4 percent at a quarterly rate, in the fourth quarter of 2018 after increasing $78.2 billion, or 3.5 percent, in the third quarter (table 4, line 1). In the fourth quarter, profits of domestic financial corporations decreased $25.2 billion (line 3), profits of domestic nonfinancial corporations increased $13.6 billion (line 4), and rest-of-the-world profits increased $1.9 billion (line 5).

Profits after tax (with IVA and CCAdj) decreased $0.7 billion in the fourth quarter after increasing $69.3 billion in the third quarter (line 10).

Table 4. Corporate Profits
[Seasonally adjusted]
Line   Billions of dollars (annual rate) Percent change from preceding quarter (quarterly rate)
Level Change from preceding quarter
2018 2018 2018
IV I II III IV I II III IV
  Current production measures:                  
1 Corporate profits with IVA and CCAdj 2,310.8 26.7 65.0 78.2 −9.7 1.2 3.0 3.5 −0.4
2 Domestic industries 1,825.5 23.0 69.5 76.9 −11.6 1.4 4.1 4.4 −0.6
3 Financial 426.4 −9.3 16.5 −6.1 −25.2 −2.1 3.7 −1.3 −5.6
4 Nonfinancial 1,399.1 32.3 53.0 83.0 13.6 2.7 4.2 6.4 1.0
5 Rest of the world 485.3 3.7 −4.5 1.3 1.9 0.8 −0.9 0.3 0.4
6 Receipts from the rest of the world 819.4 20.9 0.5 −9.5 8.8 2.6 0.1 −1.2 1.1
7 Less: Payments to the rest of the world 334.1 17.2 5.0 −10.8 6.9 5.4 1.5 −3.2 2.1
                     
9 Less: Taxes on corporate income 234.7 −121.8 22.8 8.9 −9.0 −36.5 10.7 3.8 −3.7
                     
10 Equals: Profits after tax 2,076.2 148.4 42.2 69.3 −0.7 8.2 2.1 3.5 0.0
11 Net dividends 1,279.5 18.4 9.8 27.6 28.9 1.5 0.8 2.3 2.3
12 Undistributed profits from current production 796.7 130.0 32.4 41.7 −29.5 20.9 4.3 5.3 −3.6
                     
13 Net cash flow with IVA 2,614.9 1,150.1 59.4 56.2 0.6 85.3 2.4 2.2 0.0
CCAdj
Capital consumption adjustment
IVA
Inventory valuation adjustment

Note. Levels of these and other profits series are shown in NIPA tables 1.12 and 6.16D.



Industry profits (corporate profits by industry with IVA) decreased $5.9 billion, or 0.3 percent at a quarterly rate, in the fourth quarter of 2018 after increasing $82.3 billion, or 3.9 percent, in the third quarter (table 5, line 1).

Table 5. Corporate Profits by Industry
[Seasonally adjusted]
Line   Billions of dollars (annual rate) Percent change from preceding quarter (quarterly rate)
Level Change from preceding quarter
2018 2018 2018
IV I II III IV I II III IV
  Industry profits:                  
1 Corporate profits with IVA 2,183.6 26.6 70.4 82.3 −5.9 1.3 3.5 3.9 −0.3
2 Domestic industries 1,698.3 23.0 74.9 81.0 −7.8 1.5 4.8 5.0 −0.5
3 Financial 430.9 −9.2 17.1 −5.3 −25.4 −2.0 3.8 −1.1 −5.6
4 Nonfinancial 1,267.4 32.2 57.8 86.3 17.5 3.0 5.2 7.4 1.4
5 Utilities −4.3 −2.5 0.4 −1.6 −2.1 --- --- --- ---
6 Manufacturing 319.4 −26.0 29.2 35.2 16.5 −9.8 12.2 13.1 5.4
7 Wholesale trade 127.9 2.3 −5.4 33.9 10.7 2.7 −6.0 40.7 9.2
8 Retail trade 155.2 16.2 −14.3 23.7 −9.6 11.6 −9.2 16.8 −5.8
9 Transportation and warehousing 68.1 −2.7 6.2 −1.6 15.7 −5.4 12.9 −3.0 29.9
10 Information 152.4 24.9 12.7 1.0 −10.2 20.1 8.5 0.6 −6.3
11 Other nonfinancial 448.8 20.0 29.0 −4.4 −3.4 4.9 6.8 −1.0 −0.8
12 Rest of the world 485.3 3.7 −4.5 1.3 1.9 0.8 −0.9 0.3 0.4
Addenda:
13 Profits before tax (without IVA and CCAdj) 2,180.7 26.4 86.1 26.8 −43.2 1.3 4.1 1.2 −1.9
14 Profits after tax (without IVA and CCAdj) 1,946.0 148.1 63.4 17.9 −34.2 8.5 3.3 0.9 −1.7
15 IVA 2.9 0.2 −15.7 55.5 37.3 --- --- --- ---
16 CCAdj 127.2 0.1 −5.4 −4.1 −3.8 --- --- --- ---
CCAdj
Capital consumption adjustment
IVA
Inventory valuation adjustment

Note. Levels of these and other profits series are shown in NIPA tables 1.12, 1.14, 1.15, and 6.16D.



 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2018 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. This “initial” estimate of GDP for the fourth quarter of 2018 reflects a combination of data and methods typically used for both the advance and second current quarterly estimates.
  3. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”