Text: Commerce Dept Tech Note On 1Q US GDP - Advance Release>

     WASHINGTON (MNI) - The following is the text of a Bureau of 

Economic Analysis technical note for the advance release of first 

quarter U.S. GDP released by the Commerce Department: 

     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 

first 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"). 

Key Source Data and Assumptions for the Advance Estimate

     The advance GDP estimate for the first quarter of 2018 is based on 

source data that are incomplete and subject to updates. Three months of 

source data were available for consumer spending on goods; shipments of 

capital equipment; motor vehicle sales and inventories; durable goods 

manufacturing inventories; wholesale and retail trade inventories; 

exports and imports of goods; federal government outlays; and consumer, 

producer, and international prices. For major source data series for 

which only two months of data were available, BEA's key assumptions for 

the third month are shown in the "Key Source Data and Assumptions" table 

on the BEA Web site. 

Real GDP

     Real GDP increased 2.3 percent (annual rate) in the first quarter 

of 2018, following an increase of 2.9 percent in the fourth quarter of 

2017. The increase in real GDP in the first quarter reflected positive 

contributions from nonresidential fixed investment, consumer spending, 

exports, and private inventory investment. Imports, which are a 

subtraction in the calculation of GDP, increased. 

     The deceleration in real GDP growth in the first quarter reflected 

slowdowns in consumer spending, residential fixed investment, exports, 

and state and local government spending. These movements were partly 

offset by an upturn in private inventory investment. Imports, which are 

a subtraction in the calculation of GDP, decelerated. 

     - Real consumer spending slowed in the first quarter, reflecting a 

downturn in new motor vehicles, based on Ward's Automotive unit sales 

data and registrations data from R.L. Polk & Company. In addition, a 

downturn in spending on clothing and footwear and a deceleration in 

spending on food and beverages contributed to the deceleration, based on 

data from the Census Bureau's Advance and Monthly Retail Trade Surveys. 

     - Real residential fixed investment slowed, primarily reflecting a 

downturn in brokers' commissions, based on data from the National 

Association of Realtors' Existing Homes Sales and from the Census 

Bureau's New Residential Sales reports. 

     - Real private inventory investment turned up in the first quarter, 

most notably in wholesale trade industries. The upturn in the first 

quarter was relatively widespread, based on the Census Bureau's Monthly 

Wholesale Trade Report and the "inventory valuation adjustment," which 

is the difference between the historical costs at which businesses value 

their inventories and the current costs that are used for measuring the 

contribution of inventories to GDP during the quarter. 

Prices

     Gross domestic purchases prices increased 2.8 percent in the first 

quarter of 2018, after increasing 2.5 percent in the fourth quarter of 

2017. Excluding food and energy, prices increased 2.7 percent in the 

first quarter of 2018, compared with an increase of 2.0 percent. 

     The PCE price index increased 2.7 percent in the first quarter, 

unchanged from the fourth quarter. Excluding food and energy prices, the 

PCE price index increased 2.5 percent after increasing 1.9 percent. 

Accelerations in prices for clothing and footwear and for healthcare 

services contributed to the acceleration, based on CPIs and PPIs from 

the Bureau of Labor Statistics. 

Disposable Personal Income

     Real disposable personal income increased 3.4 percent in the first 

quarter, following an increase of 1.1 percent in the fourth quarter. The 

personal saving rate was 3.1 percent in the first quarter, compared with 

2.6 percent in the fourth quarter. 

Impact of the 2017 Tax Cuts and Jobs Act

     Personal income and the personal saving rate. Increases in the 

first quarter estimates of disposable personal income and the personal 

saving rate mostly result from a decrease in personal current taxes, 

which reflect the effects of the Tax Cuts and Jobs Act (TCJA). BEA 

estimates that the TCJA reduced personal current taxes by $115.5 billion 

at an annual rate.  BEA's preliminary estimates of the effects of the 

TCJA are based in part on projections prepared by the Treasury 

Department's Office of Tax Analysis. For more information on the TCJA's 

effects on personal taxes, see: "How will the 2017 Tax Cuts and Jobs Act 

impact personal taxes?" 

     Wages and salaries in the first quarter were adjusted up by $10.0 

billion (annualized rate) to account for bonuses that are not included 

in the monthly source data in the Current Employment Statistics from the 

Bureau of Labor Statistics. This adjustment reflects one-time bonuses 

paid by businesses reported publicly in response to the TCJA and was 

derived based on news releases covering estimates of the number of 

employees receiving bonuses and payment amounts. BEA will release 

QCEW-based estimates of wages and salaries, that will include both 

regular and TCJA-related bonus activity, for the first quarter of 2018 

on July 27. 

Looking Ahead: Comprehensive Update Scheduled for July 27

     On July 27, BEA will present the results of its 15th comprehensive 

(or benchmark) update of the National Income and Product Accounts 

(NIPAs), in addition to presenting the advance estimate of GDP for the 

second quarter of 2018. The full, historical time span of the NIPAs, 

1929-2017 and the first quarter of 2018, will be open for revision. 

Details on the statistical, definitional, and presentational changes 

planned are available in the April Survey of Current Business article 

"Preview of the 2018 Comprehensive Update of the National Income and 

Product Accounts." 

The comprehensive update will reflect:

     - The incorporation of new and revised source data, including the 

2012 benchmark input-output accounts, which provide the most thorough 

and detailed information on the structure of the U.S. economy 

     - Changes in methodologies that address data gaps or implement 

other improvements, including enhanced seasonally adjusted measures and 

improved quality adjusted price indexes for fixed investment in 

software, medical equipment, and communications equipment. 

     - Reclassification of research and development (R&D) for software 

originals from own-account software to R&D 

     -  Recognition of capital services in own-account investment in 

software and R&D 

     - The introduction of new not seasonally adjusted estimates for 

GDP, GDI, and their major components 

     Additionally, the reference year for chain-type quantity and price 

indexes and chained-dollar estimates will be updated from 2009 to 2012. 

     ** MNI Washington Bureau (202) 371-2121 ** 

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