Revised GDP Estimates

The BEA released their final estimates of US GDP for the first quarter of 2004. While their preliminary estimate had been that the US economy grew by 4.4%, their final estimate is that it only grew by 3.9%. This is an unusually large revision, by the way. Part of the downward revision was due to more imports entering the US during the quarter than previously estimated, and less personal consumption spending on consumer services.

But another reason for the revision was a rise in the estimated inflation rate. The final estimate for the economy’s broadest measure of inflation was that it rose at a 3.5% annual rate during the quarter. That’s the highest quarterly rate of inflation on final sales in the US since 1990 (though there was one quarter in 2003 that was close).

One last thing worth noting: most of the increase in national income reflected in this report is not being received by employees as compensation. Between the first quarter of 2003 and the first quarter of 2004 total national income (in nominal terms) rose by $757 billion. Of that increase, only about $215 billion, or about 28%, was paid out to workers in wage and salaries. Another $80 billion was received by employees in the form of other compensation, primarily health and retirement benefits. On the other hand, fully $300 billion of the increase in national income over the year was received by corporations in the form of profits.

It’s a good time to be big business.