EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, TUESDAY, NOVEMBER 25, 2003

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1 EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, TUESDAY, NOVEMBER 25, 2003 Virginia H. Mannering: (202) (GDP) BEA Kenneth A. Petrick: (202) (Profits) Recorded message: (202) GROSS DOMESTIC PRODUCT: THIRD QUARTER 2003 (PRELIMINARY) CORPORATE PROFITS: THIRD QUARTER 2003 (PRELIMINARY) Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 8.2 percent in the third quarter of 2003, according to preliminary estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.3 percent. The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 7.2 percent (see "Revisions" on page 3). The major contributors to the increase in real GDP in the third quarter were personal consumption expenditures (PCE), equipment and software, exports, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. The Bureau of Economic Analysis plans to release the results of its 12 th comprehensive (or benchmark) revision of the national income and product accounts (NIPAs) on December 10, An article in the June 2003 issue of the Survey of Current Business discussed the changes in definitions and concepts that will be implemented in the revision; an article in the August 2003 issue described changes in presentation, including new and redesigned tables; and an article in the September 2003 issue described changes in statistical methods. Information is available on BEA s Web site: NOTE.--Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to-quarter dollar changes are differences between these published estimates. Percent changes are calculated from unrounded data and annualized. "Real" estimates are in chained (1996) dollars. Price indexes are chain-type measures. This news release is available on BEA's Web site at < - more -

2 - 2 - The acceleration in real GDP growth in the third quarter primarily reflected an acceleration in PCE, an upturn in exports, a deceleration in imports, an upturn in private inventory investment, and accelerations in equipment and software and in residential fixed investment that were partly offset by a downturn in federal national defense spending. Final sales of computers contributed 0.52 percentage point to the third-quarter change in real GDP after contributing 0.18 percentage point to the second-quarter change. Motor vehicle output increased in the third quarter and decreased in the second. Motor vehicle output contributed 1.19 percentage points to the third-quarter change in real GDP after subtracting 0.11 percentage point from the second-quarter change. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.8 percent in the third quarter, 0.1 percentage point less than the advance estimate; this index increased 0.4 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent in the second quarter, compared with an increase of 0.8 percent in the first. Real personal consumption expenditures increased 6.4 percent in the third quarter, compared with an increase of 3.8 percent in the second. Real nonresidential fixed investment increased 14.0 percent, compared with an increase of 7.3 percent. Nonresidential structures increased 0.2 percent, compared with an increase of 4.2 percent. Equipment and software increased 18.4 percent, compared with an increase of 8.3 percent. Real residential fixed investment increased 22.7 percent, compared with an increase of 6.6 percent. Real exports of goods and services increased 11.0 percent in the third quarter, in contrast to a decrease of 1.0 percent in the second. Real imports of goods and services increased 1.5 percent, compared with an increase of 8.8 percent. Real federal government consumption expenditures and gross investment decreased 0.4 percent in the third quarter, in contrast to an increase of 25.5 percent in the second. National defense decreased 1.6 percent, in contrast to an increase of 45.8 percent. Nondefense increased 2.2 percent, in contrast to a decrease of 5.4 percent. Real state and local government consumption expenditures and gross investment increased 2.3 percent, in contrast to a decrease of 0.2 percent. The real change in private inventories added 0.16 percentage point to the third-quarter change in real GDP, after subtracting 0.74 percentage point from the second-quarter change. Private businesses reduced inventories $14.1 billion in the third quarter, following a decrease of $17.6 billion in the second quarter and an increase of $4.8 billion in the first. Real final sales of domestic product -- GDP less change in private inventories -- increased 8.0 percent in the third quarter, compared with an increase of 4.0 percent in the second. Gross domestic purchases Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 7.0 percent in the third quarter, compared with an increase of 4.4 percent in the second. - more -

3 - 3 - Gross national product Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- increased 8.1 percent in the third quarter, compared with an increase of 3.5 percent in the second. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which decreased $3.0 billion in the third quarter after increasing $5.9 billion in the second; in the third quarter, receipts increased $5.1 billion, and payments increased $8.1 billion. Current-dollar GDP Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 10.0 percent, or $260.7 billion, in the third quarter to a level of $11,063.4 billion. In the second quarter, current-dollar GDP increased 4.3 percent, or $114.3 billion. Revisions The preliminary estimate of the third-quarter increase in real GDP is 1.0 percentage point, or $24.0 billion, higher than the advance estimate issued last month. The upward revision to the percentage change in real GDP primarily reflected upward revisions to private inventory investment, to equipment and software, to exports, to state and local government spending, and to residential fixed investment that were partly offset by an upward revision to imports. Advance Preliminary (Percent change from preceding quarter) Real GDP Current-dollar GDP Gross domestic purchases price index Corporate Profits Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $105.5 billion in the third quarter. In the second quarter, profits increased $80.6 billion. Current-production cash flow (net cash flow with inventory valuation and capital consumption adjustments) -- the internal funds available to corporations for investment -- increased $71.3 billion in the third quarter, compared with an increase of $70.8 billion in the second. Domestic profits of financial corporations increased $20.3 billion in the third quarter, compared with an increase of $8.4 billion in the second. Domestic profits of nonfinancial corporations increased $83.8 billion in the third quarter, compared with an increase of $70.5 billion in the second. In the third quarter, both real gross corporate product and profits per unit of real product increased. The increase in unit profits reflected an increase in the prices corporations received and a decrease in unit costs; both unit labor and nonlabor costs decreased. - more -

4 - 4 - The rest-of-the-world component of profits increased $1.4 billion in the third quarter, compared with an increase of $1.7 billion in the second. This measure is calculated as (1) receipts by U.S. residents of earnings from their foreign affiliates plus dividends received by U.S. residents from unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. The third-quarter increase was accounted for by a larger increase in receipts than in payments. Profits before tax with inventory valuation adjustment is the best available measure of industry profits because estimates of the capital consumption adjustment by industry do not exist. This measure reflects the depreciation-accounting practices used for federal income tax returns. According to this measure, domestic profits of both financial and nonfinancial corporations increased. The increase in the profits of nonfinancial corporations was widespread among major industry groups with the largest increases occurring in the transportation and utilities group, nondurable manufacturing, and wholesale trade. The patterns of profits before tax and of profits tax liability for the second and third quarters reflect the timing of provisions of the Jobs and Growth Tax Relief Reconciliation Act of The before-tax measure of profits does not reflect, as does profits from current production, the capital consumption and inventory valuation adjustments. These adjustments convert depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to the current-cost measures used in the national income and product accounts. (For more information, see The Business Situation in the October issue of the Survey of Current Business.) Profits before tax increased $78.2 billion in the third quarter, in contrast to a decrease of $27.9 billion in the second. The capital consumption adjustment increased $30.9 billion in the third quarter (from $199.0 billion to $229.9 billion), compared with an increase of $83.7 billion in the second. The inventory valuation adjustment decreased $3.4 billion (from -$2.2 billion to -$5.6 billion), in contrast to an increase of $24.7 billion. Profits tax liability increased $28.6 billion in the third quarter, in contrast to a decrease of $3.5 billion in the second. Profits after tax increased $49.5 billion, in contrast to a decrease of $24.3 billion. Dividends increased $7.5 billion, compared with an increase of $7.9 billion; undistributed profits increased $42.0 billion, in contrast to a decrease of $32.2 billion. - more -

5 - 5 - BEA s major national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA s Web site: < Summary BEA estimates are available on recorded messages at the time of public release at the following telephone numbers: (202) Gross domestic product (202) Personal income and outlays (202) U.S. international transactions Most of BEA s estimates and analyses are published in the Survey of Current Business, BEA s monthly journal. Subscriptions and single copies of the printed Survey are for sale by the Superintendent of Documents, U.S. Government Printing Office. Internet: <bookstore.gpo.gov>; phone: ; fax: ; mail: Stop SSOP, Washington, DC * * * Next release -- December 23, 2003, at 8:30 A.M. EST for: Gross Domestic Product: Third Quarter 2003 (Final) Corporate Profits: Third Quarter 2003 (Revised) Release dates in 2004 Gross domestic product 2003: IV and 2002 annual 2004:I 2004:II 2004:III Advance... January 30 April 29 July 30 October 29 Preliminary.. February 27 May 27 August 27 November 30 Final... March 25 June 25 September 29 December 22 Corporate Profits Preliminary..... May 27 August 27 November 30 Final... March 25 June 25 September 29 December 22 - more -

6 Table 1. Real Gross Domestic Product and Related Measures: Percent Change From Preceding Period [Percent] IV I II III IV I II III IV I II III IV I II III r Gross domestic product (GDP) Personal consumption expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Goods Services Imports Goods Services Government consumption expenditures and gross investment Federal National defense Nondefense State and local Final sales of domestic product Gross domestic purchases Final sales to domestic purchasers Gross national product (GNP) Disposable personal income Current-dollar measures: GDP Final sales of domestic product Gross domestic purchases Final sales to domestic purchasers GNP Disposable personal income r revised. See Explanatory Note at the end of the tables. Table 2. Contributions to Percent Change in Real Gross Domestic Product IV I II III IV I II III IV I II III IV I II III r Percent change at annual rate: Gross domestic product Percentage points at annual rates: Personal consumption expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Goods Services Imports Goods Services Government consumption expenditures and gross investment Federal National defense Nondefense State and local r revised See Explanatory Note at the end of the tables.

7 Table 3. Gross Domestic Product and Related Measures: Level and Change From Preceding Period 2002 Billions of current dollars Seasonally adjusted at annual rates Billions of chained (1996) dollars Seasonally adjusted at annual rates Change from preceding period III IV I II III r III IV I II III r II III r Gross domestic product (GDP)... 10, , , , , , , , , , , , Personal consumption expenditures... 7, , , , , , , , , , , , Durable goods , , , , , Motor vehicles and parts Furniture and household equipment Other Nondurable goods... 2, , , , , , , , , , , , Food... 1, , , , , , Clothing and shoes Gasoline, fuel oil, and other energy goods Gasoline and oil Fuel oil and coal Other Services... 4, , , , , , , , , , , , Housing... 1, , , , , , Household operation Electricity and gas Other household operation Transportation Medical care... 1, , , , , , , , , Recreation Other... 1, , , , , , Gross private domestic investment... 1, , , , , , , , , , , , Fixed investment... 1, , , , , , , , , , , , Nonresidential... 1, , , , , , , , , , , , Structures Nonresidential buildings, including farm Utilities Mining exploration, shafts, and wells Other structures Equipment and software , Information processing equipment and software Computers and peripheral equipment Software Other Industrial equipment Transportation equipment Other Residential Structures Single family Multifamily Other Equipment Change in private inventories Farm Construction, mining, and utilities Manufacturing Wholesale trade Retail trade Other industries Net exports of goods and services Exports... 1, , , , , , , , , , , , Goods Foods, feeds, and beverages Industrial supplies and materials Capital goods, except automotive Automotive vehicles, engines, and parts Consumer goods, except automotive Other Services Imports... 1, , , , , , , , , , , , Goods... 1, , , , , , , , , , , , Foods, feeds, and beverages Industrial supplies and materials, except petroleum and products Petroleum and products Capital goods, except automotive Automotive vehicles, engines, and parts Consumer goods, except automotive Other Services See note at the end of the table.

8 Table 3. Gross Domestic Product and Related Measures: Level and Change From Preceding Period Continued 2002 Billions of current dollars Seasonally adjusted at annual rates Billions of chained (1996) dollars Seasonally adjusted at annual rates Change from preceding period III IV I II III r III IV I II III r II III r Government consumption expenditures and gross investment... 1, , , , , , , , , , , , Federal National defense Consumption expenditures Gross investment Nondefense Consumption expenditures Gross investment State and local... 1, , , , , , , , , , , , Consumption expenditures... 1, , , , , , Gross investment Residual Final sales of domestic product... 10, , , , , , , , , , , , Gross domestic purchases... 10, , , , , , , , , , , , Final sales to domestic purchasers... 10, , , , , , , , , , , , Gross domestic product... 10, , , , , , , , , , , , Plus: Income receipts from the rest of the world Less: Income payments to the rest of the world Equals: Gross national product... 10, , , , , , , , , , , , Net domestic product... 9, , , , , , , , , , , , r revised NOTE. Users are cautioned that particularly for components that exhibit rapid change in prices relative to other prices in the economy, the chained-dollar estimates should not be used to measure the component s relative importance or its contribution to the growth rate of more aggregate series. For accurate estimates of the contributions to percent changes in real GDP, use table 2. See Explanatory Note at the end of the tables. Table 4. Chain-Type Price Indexes for Gross Domestic Product and Related Measures: Percent Change From Preceding Period [Percent] IV I II III IV I II III IV I II III IV I II III r Gross domestic product (GDP) Personal consumption expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Goods Services Imports Goods Services Government consumption expenditures and gross investment Federal National defense Nondefense State and local Final sales of domestic product Gross domestic purchases Final sales to domestic purchasers Gross national product (GNP) Implicit price deflators: GDP Gross domestic purchases GNP r revised See Explanatory Note at the end of the tables.

9 Table 5. Quantity and Price Indexes for Gross Domestic Product [Index numbers, 1996=100] Seasonally adjusted III IV I II III r Gross domestic product: Chain-type quantity index Chain-type price index Implicit price deflator Personal consumption expenditures: Chain-type quantity index Chain-type price index Durable goods: Chain-type quantity index Chain-type price index Nondurable goods: Chain-type quantity index Chain-type price index Services: Chain-type quantity index Chain-type price index Private fixed investment: Chain-type quantity index Chain-type price index Nonresidential: Chain-type quantity index Chain-type price index Residential: Chain-type quantity index Chain-type price index Exports of goods and services: Chain-type quantity index Chain-type price index Imports of goods and services: Chain-type quantity index Chain-type price index Government consumption expenditures and gross investment: Chain-type quantity index Chain-type price index Federal: Chain-type quantity index Chain-type price index State and local: Chain-type quantity index Chain-type price index Final sales of domestic product: Chain-type quantity index Chain-type price index Implicit price deflator Gross domestic purchases: Chain-type quantity index Chain-type price index Implicit price deflator Final sales to domestic purchasers: Chain-type quantity index Chain-type price index Implicit price deflator Gross national product: Chain-type quantity index Chain-type price index Implicit price deflator r revised See Explanatory Note at the end of the tables.

10 Table 6. Real Gross Domestic Product: Historical Perspective [Percent change from preceding year] Gross domestic product (GDP) Personal consumption expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Goods Services Imports Goods Services Government consumption expenditures and gross investment Federal National defense Nondefense State and local Final sales of domestic product Gross domestic purchases Final sales to domestic purchasers Gross national product Real disposable personal income Gross domestic purchases price index GDP price index Personal consumption expenditures price index Table 7. Real Gross Domestic Product: Percent Change From Quarter One Year Ago IV I II III IV I II III IV I II III IV I II III r Gross domestic product (GDP) Personal consumption expenditures Durable goods Nondurable goods Services Gross private domestic investment Fixed investment Nonresidential Structures Equipment and software Residential Change in private inventories Net exports of goods and services Exports Goods Services Imports Goods Services Government consumption expenditures and gross investment Federal National defense Nondefense State and local Final sales of domestic product Gross domestic purchases Final sales to domestic purchasers Gross national product Real disposable personal income Gross domestic purchases price index GDP price index Personal consumption expenditures price index r revised

11 Table 8. Relation of Gross Domestic Product, Gross National Product, and National Income [Billions of dollars] III IV I II III r Gross domestic product... 9, , , , , , , ,063.4 Plus: Income receipts from the rest of the world Less: Income payments to the rest of the world Equals: Gross national product... 9, , , , , , , ,056.7 Less: Consumption of fixed capital... 1, , , , , , , ,424.7 Less: Indirect business tax and nontax liability Less: Business transfer payments Less: Statistical discrepancy Plus: Subsidies less current surplus of government enterprises Equals: National income... 7, , , , , , , ,796.1 Compensation of employees... 5, , , , , , , ,131.0 Wage and salary accruals... 4, , , , , , , ,107.6 Supplements to wages and salaries , , ,023.4 Proprietors income with inventory valuation and capital consumption adjustments Rental income of persons with capital consumption adjustment Corporate profits with inventory valuation and capital consumption adjustments ,002.6 Net interest Addendum: Gross domestic income... 9, , , , , , , ,081.9 r revised Table 9. Personal Income and Its Disposition [Billions of dollars] III IV I II III r Personal income , , , , , , , ,248.6 Wage and salary disbursements... 4, , , , , , , ,107.6 Other labor income Proprietors income with inventory valuation and capital consumption adjustments Farm Nonfarm Rental income of persons with capital consumption adjustment Personal dividend income Personal interest income... 1, , , , , , , ,082.0 Transfer payments to persons... 1, , , , , , , ,383.8 Less: Personal contributions for social insurance Less: Personal tax and nontax payments... 1, , , , , , , Equals: Disposable personal income... 7, , , , , , , ,266.1 Less: Personal outlays... 6, , , , , , , ,982.4 Equals: Personal saving Disposable personal income, billions of chained (1996) dollars , , , , , , , ,283.7 Personal saving as a percentage of disposable personal income r revised 1. Personal income is also equal to national income less corporate profits with inventory valuation and capital consumption adjustments, net interest, contributions for social insurance, and wage accruals less disbursements, plus personal interest income, personal dividend income, government transfer payments to persons, and business transfer payments to persons. 2. Equals disposable personal income deflated by the implicit price deflator for personal consumption expenditures.

12 Table 10. Corporate Profits: Level and Percent Change Billions of dollars Seasonally adjusted at annual rates Percent change from preceding period Quarterly rates Quarter one year ago III IV I II III IV I II III III Corporate profits with inventory valuation and capital consumption adjustments , Profits before tax Profits tax liability Profits after tax Dividends Undistributed profits Inventory valuation adjustment Capital consumption adjustment Corporate profits after tax with inventory valuation and capital consumption adjustments Net cash flow with inventory valuation and capital consumption adjustments , , Undistributed profits with inventory valuation and capital consumption adjustments Consumption of fixed capital Less: Inventory valuation adjustment Equals: Net cash flow , , Table 11. Corporate Profits by Industry: Level and Change From Preceding Period [Billions of dollars] Level III IV I II III Change from preceding period IV I II III Corporate profits with inventory valuation and capital consumption adjustments , Domestic industries Financial Nonfinancial Rest of the world Receipts from the rest of the world Less: Payments to the rest of the world Corporate profits with inventory valuation adjustment Domestic industries Financial Federal Reserve banks Other Nonfinancial Manufacturing Durable goods Primary metal industries Fabricated metal products Industrial machinery and equipment Electronic and other electric equipment Motor vehicles and equipment Other Nondurable goods Food and kindred products Chemicals and allied products Petroleum and coal products Other Transportation and public utilities Transportation Communications Electric, gas, and sanitary services Wholesale trade Retail trade Other Rest of the world