Text: Commerce Dept Tech Note On 4Q US GDP - Third Release>

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

Economic Analysis technical note for the third release of fourth 

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

Updates to Real GDP

     With the third estimate, real GDP increased 2.9 percent (annual 

rate) in the fourth quarter of 2017, an upward revision of 0.4 percentage 

point from the second estimate. The upward revision to the percent change 

in real GDP reflected upward revisions to consumer spending on services 

and to nonfarm inventory investment. 

     - The revision to consumer spending for services was primarily to 

transportation services reflecting the incorporation of newly available 

and revised data from the Census Bureau's Quarterly Services Report. 

     - Within nonfarm private inventory investment, the revision was 

accounted for by revised seasonal factors to all months of the quarter 

and an upward revision to wholesale trade nondurable goods inventories 

for December from the Census Bureau's Monthly Wholesale Trade Report. 

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 0.9 percent in the fourth quarter, following a 2.4 

percent increase in the third 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. 

     Profits from current production, measured in current dollars, 

decreased $1.1 billion, or 0.1 percent (quarterly rate), in the fourth 

quarter, compared with an increase of $90.2 billion, or 4.3 percent, in 

the third. In the fourth quarter, profits of domestic financial 

corporations decreased $14.6 billion, profits of domestic nonfinancial 

corporations increased $19.4 billion, and rest-of-the-world profits 

decreased $5.9 billion. 

Impacts of the 2017 Tax Cuts and Jobs Act

     For the fourth quarter of 2017, changes to the expensing of bonus 

depreciation and a one-time deemed repatriation tax went into effect. 

Bonus Depreciation

     The new tax law provides for full expensing of qualified 

investments placed in service after September 27, 2017 and before 

January 1, 2023 and increases the expensing limitation from $500,000 to 

$1 million. BEAs estimate of profits from current production is not 

affected by the change; it reflects economic depreciation based on an 

estimate of the reduction in the value of fixed capital used in the 

production process. 

     For a more detailed discussion of the effect of bonus depreciation 

tax provisions, see the FAQ "How do changes in the tax treatment of 

depreciation impact NIPA Corporate Profits?" For detailed data, see the 

table "Net Effects of Changes in the Tax Treatment of Depreciation on 

Selected Measures of Corporate Profits" 

One-Time Deemed Repatriation Tax

     The new tax law imposes a one-time deemed repatriation tax on 

accumulated foreign earnings. This tax is recorded as a capital transfer 

from business to federal government of $250 billion at a quarterly rate 

($1 trillion at an annual rate) in the fourth quarter. This transaction 

does not impact GDI, national income, national savings, or corporate 

profits, but does decrease corporate cash flow, which can be seen on 

line 26 of NIPA table 1.12 National Income by Type of Income. 

     For more information about the 2017 Tax Cuts and Jobs Act, 

including tax changes that will affect the first quarter of 2018, see 

the FAQ "How does the 2017 Tax Cuts and Jobs Act affect BEA's business 

income statistics?" 

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

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