Washington, DC…Real gross domestic product increased at an annual rate of 4.1 percent in the second quarter of 2018 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first
quarter, real GDP increased 2.2 percent (revised). The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see “Source Data for the Advance Estimate” on page 2). The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2018.

The increase in real GDP in the second quarter reflected positive contributions from personal
consumption expenditures (PCE), exports, nonresidential fixed investment, federal government
spending, and state and local government spending that were partly offset by negative contributions
from private inventory investment and residential fixed investment. Imports, which are a subtraction in
the calculation of GDP, increased (table 2).

Real GDP: Percent Change from Preceding Quarter

BOX._______

Comprehensive Update of the National Income and Product Accounts

The estimates released today also reflect the results of the 15th comprehensive update of the National
Income and Product Accounts (NIPAs). The updated estimates reflect previously announced improvements,
and include the introduction of new not seasonally adjusted estimates for GDP, GDI, and their major
components. For more information, see the Technical Note. Revised NIPA table stubs, initial results, and
background materials are available on the BEA Web site.

END BOX.______

The acceleration in real GDP growth in the second quarter reflected accelerations in PCE and in exports,
a smaller decrease in residential fixed investment, and accelerations in federal government spending
and in state and local spending. These movements were partly offset by a downturn in private inventory
investment and a deceleration in nonresidential fixed investment. Imports decelerated.

Current-dollar GDP increased 7.4 percent, or $361.5 billion, in the second quarter to a level of $20.4
trillion. In the first quarter, current-dollar GDP increased 4.3 percent, or $209.2 billion (table 1 and table
3A).

The price index for gross domestic purchases increased 2.3 percent in the second quarter, compared
with an increase of 2.5 percent in the first quarter (table 4). The PCE price index increased 1.8 percent,
compared with an increase of 2.5 percent. Excluding food and energy prices, the PCE price index
increased 2.0 percent, compared with an increase of 2.2 percent (table 4).

Personal Income (table 8)

Current-dollar personal income increased $183.7 billion in the second quarter, compared with an
increase of $215.8 billion in the first quarter. Decelerations in wages and salaries, government social
benefits, personal interest income, and nonfarm proprietors’ income were partly offset by accelerations
in personal dividend income and rental income, a deceleration in contributions for government social
insurance (a subtraction in the calculation of personal income), and an upturn in farm proprietors’
income.

Disposable personal income increased $167.5 billion, or 4.5 percent, in the second quarter, compared
with an increase of $256.7 billion, or 7.0 percent, in the first quarter. Real disposable personal income
increased 2.6 percent, compared with an increase of 4.4 percent.

Personal saving was $1,051.1 billion in the second quarter, compared with $1094.1 billion in the first
quarter. The personal saving rate — personal saving as a percentage of disposable personal income —
was 6.8 percent in the second quarter, compared with 7.2 percent in the first quarter.

Source Data for the Advance Estimate

Information on the source data and the key assumptions used for unavailable source data in the
advance estimate is provided in a Technical Note that is posted with the news release on BEA’s Web
site. A detailed “Key Source Data and Assumptions” file is also posted for each release. For information
on updates to GDP, see the “Additional Information” section that follows.

Comprehensive Update of the National Income and Product Accounts

Comprehensive updates of the National Income and Product Accounts (NIPAs), which are carried out
about every five years, are an important part of BEA’s regular process for improving and modernizing its
accounts to keep pace with the ever-changing U.S. economy. Updates incorporate newly available and
more comprehensive source data, as well as improved estimation methodologies. The timespan for this
year’s comprehensive update is 1929 through the first quarter 2018.

With today’s release of these updated statistics, most NIPA tables are available on BEA’s Web site
(www.bea.gov). A complete schedule of the table release plan is also available on BEA’s Web site. An
article describing the results will be published in the September 2018 issue of BEA’s monthly journal, the
Survey of Current Business.

Updates for the first quarter of 2018

For the first quarter of 2018, real GDP is now estimated to have increased 2.2 percent (table 1); in the
previously published estimates, first-quarter GDP was estimated to have increased 2.0 percent. The 0.2-
percentage point upward revision to the percent change in first-quarter real GDP primarily reflected
upward revisions to private inventory investment, nonresidential fixed investment, and federal
government spending that were partly offset by downward revisions to PCE and residential fixed
investment. Imports were revised down.

Real GDI is now estimated to have increased 3.9 percent in the first quarter (table 1); in the previously
published estimates, first-quarter GDI was estimated to have increased 3.6 percent.

First Quarter 2018

Previous Estimate Revised
(Percent change from preceding quarter)
Real GDP 2.0 2.2
Current-dollar GDP 4.2 4.3
Real GDI 3.6 3.9
Average of Real GDP and GDI 2.8 3.1
Gross domestic purchases price index 2.7 2.5
PCE price index 2.5 2.5

Summary of historical updates

The picture of the economy presented in the updated estimates is very similar to the picture presented
in the previously published estimates.

* For 1929–2012, the average annual growth rate of real GDP was 3.2 percent, unrevised from the
previously published estimates. For the more recent period, 2007–2017, the growth rate was
1.5 percent, 0.1 percentage point higher than in the previously published estimates.

* For 2012–2017, the average annual growth rate of real GDP was 2.2 percent, the same as in the
previously published estimates. The percent change in real GDP was unrevised for 2012; revised
up 0.1 percentage point for 2013; revised down 0.1 percentage point for 2014; unrevised for
2015; revised up 0.1 percentage point for 2016; and revised down 0.1 percentage point for
2017.

* For 2012–2017, the average rate of change in the prices paid by U.S. residents, as measured by
the gross domestic purchasers’ price index, was 1.2 percent, 0.1 percentage point lower than in
the previously published estimates.

* For the period of contraction from the fourth quarter of 2007 to the second quarter of 2009,
real GDP decreased at an average annual rate of 2.7 percent; in the previously published
estimates, it decreased 2.8 percent.

* For the period of expansion from the second quarter of 2009 to the first quarter of 2018, real
GDP increased at an average annual rate of 2.2 percent, the same as previously published.

Improvements incorporated in this comprehensive update

Comprehensive updates encompass three major types of improvements:

* Changes in definitions and in classifications that update the accounts to more accurately portray
the evolving U.S. economy,

* Changes in presentations that make the NIPA tables more informative, and

* Statistical changes that introduce new and improved methodologies and that bring in newly
available and revised source data (see box below).

The improvements incorporated in the updated estimates were previewed in an article the April 2018
Survey of Current Business. Additional information regarding improvements introduced as part of the
2018 Comprehensive Update, including background materials and presentational changes, is available
on BEA’s Web site.

Changes in definitions, classifications, and presentations

The changes in definitions, in classifications, and in presentations introduced in this comprehensive
update include the following:

* Expenditures for research and development (R&D) for software are reclassified from fixed
investment in own-account software to fixed investment in R&D. The new treatment resolves an
inconsistency between the NIPA measures and the primary source data underlying the
estimates of investment in R&D and allows users to better understand the effects of innovation
and intangible assets on the economy.

* The accuracy of measures of intangible investment is improved by incorporating the value of the
return to fixed capital into the estimates of own account investment in software and R&D,
consistent with international guidelines.

* Payments by the Federal Reserve banks to the U.S. government are reclassified from taxes on
corporate income to dividend payments. This reclassification will improve the consistency of the
NIPAs with international guidelines and with the practices of other countries.

* A new presentation of the estimates of federal and state and local government investment in
structures for 1929–1996 is consistent with the estimates beginning in 1997.

* Updated tables present an improved, expanded presentation of taxes on production and
imports.

* Updated descriptions of selected series in personal consumption expenditures (PCE) are
introduced to better reflect the rapidly changing digital economy.

* The reference year for the chain-type quantity and price indexes and for the chained-dollar
estimates is updated to 2012 from 2009.

Statistical changes. Important statistical changes that introduce new and improved methodologies and
that bring in newly available source data include the following:

* BEA’s 2012 benchmark input-output (I-O) accounts, which incorporate results of the 2012
Economic Census and provide the most thorough and detailed information on the structure of
the U.S. economy, are used to benchmark the expenditure components of GDP.

* Additional improvements to seasonal adjustment procedures are introduced, reflecting the
findings of BEA’s detailed review of the components of GDP and gross domestic income (GDI).
The revised NIPA estimates reflect updates to seasonal factors for 2002 forward, as well as
updates to a more limited set of seasonal factors prior to 2002. An article in the August Survey
of Current Business will describe BEA’s latest research on seasonal adjustment in GDP and GDI.

* BEA now provides quarterly estimates of GDP, GDI, and their major components that are not
seasonally adjusted. These statistics are available in new tables in “Section 8: Not Seasonally
Adjusted Estimates” of the NIPA tables presented in the interactive data application on BEA’s
Web site.

* Improved price indexes for software, medical equipment, and communications equipment are
incorporated into BEA’s estimates. The improved price indexes reflect recent research on rapid
innovations and quality improvements of these products and provide a more accurate measure
of their contribution to growth and productivity.

Footnote 1. See Moulton and Cowan, “Residual Seasonality in GDP and GDI: Findings and Next Steps”
in the July 2016 Survey.

* More accurate current-dollar estimates of private investment in information and
communications technology.

* Improved methods for measuring the implicit output of savings institutions and credit unions
are introduced. The updated estimates are consistent with the methodology used for estimating
the implicit output of commercial banks and provide a better measure of the activities of the
financial sector.

* The treatment of state and local government defined pension plans is now harmonized with the
treatment of federal plans; both plans are now measured using a similar, consistent approach.

Real GDP (Table 1A)

The updated statistics largely reflect the incorporation of newly available and revised source data (see
the box below) and improvements to existing methodologies.

* From 2012 to 2017, real GDP increased at an average annual rate of 2.2 percent, the same as
previously published. From the fourth quarter of 2012 to the first quarter of 2018, real GDP
increased at an average annual rate of 2.3 percent, the same as in the previously published
estimates.

Real GDP: Percent Change from Preceding Quarter

o For 2012, real GDP growth was unrevised. Upward revisions to nonresidential fixed
investment and inventory investment were offset by an upward revision to imports and
by a downward revision to state and local government spending.

o For 2013, real GDP growth was revised up 0.1 percentage point. Upward revisions to
nonresidential fixed investment, state and local government spending, inventory
investment, and federal government spending were partly offset by an upward revision
to imports.

o For 2014, real GDP growth was revised down 0.1 percentage point. An upward revision
to imports and downward revisions to inventory investment and state and local
government spending were partly offset by upward revisions to nonresidential fixed
investment.

o For 2015, real GDP growth was unrevised. Upward revisions to state and local
government spending, personal consumption expenditures (PCE), exports, and
inventory investment were offset by an upward revision to imports and by a downward
revision to nonresidential fixed investment.

o For 2016, real GDP growth was revised up 0.1 percentage point. Upward revisions to
nonresidential fixed investment, state and local government spending, residential
investment, exports, and federal government spending were partly offset by a
downward revision to inventory investment and by an upward revision to imports.

o For 2017, real GDP growth was revised down 0.1 percentage point. A downward
revision to PCE, an upward revision to imports, and downward revisions to state and
local government spending and exports were partly offset by upward revisions to
inventory investment, nonresidential fixed investment, residential investment, and
federal government spending.

* From the first quarter of 2012 through the fourth quarter of 2017, the average revision (without
regard to sign) in the percent change in real GDP was 0.4 percentage point. The revisions did not
change the direction of the change in real GDP (increase or decrease) for any of these quarters.

* Current-dollar GDP was revised up for all years from 2012 to 2017: by $41.8 billion, or 0.3
percent, for 2012; $93.3 billion, or 0.6 percent, for 2013; $94.1 billion, or 0.5 percent, for 2014,
$98.6 billion, or 0.5 percent, for 2015, $82.7 billion, or 0.4 percent, for 2016, and $94.8 billion,
or 0.5 percent, for 2017.

Gross domestic income (GDI) and the statistical discrepancy (Table 1A)

* From 2012 to 2017, real GDI increased at an average annual rate of 2.0 percent, unrevised from
the previous estimate. From the fourth quarter of 2012 to the fourth quarter of 2017, real GDI
increased at an average annual rate of 2.1 percent; in the previously published estimates, real
GDI increased at an average annual rate of 2.0 percent.

* The statistical discrepancy as a percentage of GDP was revised from -1.3 percent to -1.5 percent
for 2012; was revised from -0.8 percent to -1.0 percent for 2013; was revised from -1.3 percent
to -1.7 percent for 2014; was unrevised at -1.4 percent for 2015; was revised from -0.8 percent
to -0.7 percent for 2016; and was revised from -0.2 percent to -0.7 percent for 2017.

* The average of GDP and GDI is a supplemental measure of U.S. economic activity. In real, or
inflation-adjusted, terms this measure increased at an average annual rate of 2.1 percent from
2012 to 2017, the same as previously published.

Price measures (Table 4)

* Gross domestic purchases – From the fourth quarter of 2012 to the fourth quarter of 2017, the
average annual rate of increase in the price index for gross domestic purchases was 1.2 percent,
0.1 percentage point lower than the previously published estimates.

* Personal consumption expenditures – From the fourth quarter of 2012 to the fourth quarter of
2017, the average annual rate of increase in the price index for PCE was 1.2 percent, the same
as previously published. The increase in the “core” PCE price index, which excludes food and
energy, was 1.6 percent, 0.1 percentage point higher than previously published.

Income and saving measures (Table 1A)

* National income was revised up $32.8 billion, or 0.2 percent, for 2012; was revised up $49.9
billion, or 0.3 percent, for 2013; was revised up $101.4 billion, or 0.7 percent, for 2014; was
revised up $43.4 billion, or 0.3 percent, for 2015; was revised up $6.9 billion, or less than 0.1
percent, for 2016; and was revised up $146.2 billion, or 0.9 percent, for 2017.

o For 2012, an upward revision to proprietors’ income was partly offset by downward
revisions to supplements to wages and salaries and to net interest.

o For 2013, upward revisions to proprietors’ income and to taxes on production and
imports were partly offset by downward revisions to net interest, corporate profits, and
rental income.

o For 2014, upward revisions to proprietors’ income and to taxes on production and
imports were partly offset by downward revisions to corporate profits and net interest.

o For 2015, upward revisions to proprietors’ income and to taxes on production and
imports were partly offset by downward revisions to corporate profits and rental
income.

o For 2016, upward revisions to proprietors’ income and to taxes on production and
imports were partly offset by downward revisions to corporate profits, net interest,
supplements to wages and salaries and rental income.

Footnote 2. The statistical discrepancy is current dollar GDP less current dollar GDI. GDP measures
final expenditures — the sum of consumer spending, private investment, net exports, and government
spending. GDI measures the incomes earned in the production of GDP. In concept, GDP is equal to GDI.
In practice, they differ because they are estimated using different source data and different methods.

o For 2017, upward revisions to proprietors’ income, wages and salaries, and taxes on
production and imports were partly offset by downward revisions to corporate profits,
rental income, and net interest.

* Corporate profits was revised down $0.8 billion, or less than 0.1 percent, for 2012; was revised
down $22.2 billion, or 1.1 percent, for 2013; was revised down $21.7 billion, or 1.0 percent, for
2014; was revised down $60.2 billion, or 2.8 percent, for 2015; was revised down $38.5 billion,
or 1.9 percent, for 2016; and revised down $65.4 billion, or 3.0 percent, for 2017.

* Personal income was revised up $95.0 billion, or 0.7 percent, for 2012; was revised up $107.4
billion, or 0.8 percent, for 2013; was revised up $173.6 billion, or 1.2 percent, for 2014; was
revised up $166.6 billion, or 1.1 percent, for 2015; was revised up $196.4 billion, or 1.2 percent,
for 2016; and was revised up $401.9 billion, or 2.4 percent, for 2017.

* From 2012 to 2017, the average annual rate of growth of real disposable personal income was
revised up 0.4 percentage point from 1.8 percent to 2.2 percent.

* The personal saving rate (personal saving as a percentage of disposable personal income) was
revised up from 7.6 percent to 8.9 percent for 2012; was revised up from 5.0 percent to 6.4
percent for 2013; was revised up from 5.7 percent to 7.3 percent for 2014; was revised up from
6.1 percent to 7.6 percent for 2016; was revised up from 4.9 percent to 6.7 percent for 2016;
and was revised up from 3.4 percent to 6.7 percent for 2017.

Real GDP: Percent Change from Preceding Quarter

New and revised source data

The updated statistics incorporated data from the following major federal statistical sources:

Agency/Data Years Covered and Vintage
Census Bureau
Annual capital expenditures survey 2015 (revised); 2016 (new)
Annual wholesale trade survey 2008-2015 (revised); 2016 (new)
Annual retail trade survey 2011-2015 (revised); 2016 (new)
Annual survey of manufactures 2015 (revised); 2016 (new)
Monthly indicators of manufactures, merchant
wholesale trade, and retail trade 2008–2017 (revised)
Service annual survey 2015 and 2016 (revised); 2017 (new)
Annual surveys of state and local government finances Fiscal year (FY) 2015 (revised); FY 2016 (new)
Monthly survey of construction spending (value put in
place) 2013–2017 (revised)
Quarterly services survey 2014–2017(revised)
Current population survey/housing vacancy survey 2015 and 2016 (revised); 2017 (new)

Office of Management and Budget Federal Budget Fiscal years 2017 and 2018

Internal Revenue Service
Tabulations of tax returns for corporations 2015 (revised)
Tabulations of tax returns for sole proprietorships and
partnerships 2016 (new)

BLS
Quarterly census of employment and wages 2016–2017 (revised)
Survey of occupational employment 2017 (new)

Department of Agriculture Farm statistics 2008–2017 (revised)

BEA
International transactions accounts 1999-2017 (revised)

Next release: August 29, 2018 at 8:30 A.M. EDT
Gross Domestic Product: Second Quarter 2018 (Second Estimate)
Corporate Profits: Second Quarter 2018 (Preliminary Estimate)

Additional Information

Resources

Additional resources available at www.bea.gov:

* Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email subscription service, or
following BEA on Twitter @BEA_News.
* Historical time series for these estimates can be accessed in BEA’s interactive data application.
* Access BEA data by registering for BEA’s data application programming interface (API).
* For more on BEA’s statistics, see our monthly online journal, the Survey of Current Business.
* BEA’s news release schedule
* NIPA Handbook: Concepts and Methods of the U.S. National Income and Product Accounts

Definitions

Gross domestic product (GDP) is the value of the goods and services produced by the nation’s economy less the value of the
goods and services used up in production. GDP is also equal to the sum of personal consumption expenditures, gross private
domestic investment, net exports of goods and services, and government consumption expenditures and gross investment.

Gross domestic income (GDI) is the sum of incomes earned and costs incurred in the production of GDP. In national economic
accounting, GDP and GDI are conceptually equal. In practice, GDP and GDI differ because they are constructed using largely
independent source data. Real GDI is calculated by deflating gross domestic income using the GDP price index as the deflator,
and is therefore conceptually equivalent to real GDP.

Current-dollar estimates are valued in the prices of the period when the transactions occurred—that is, at “market value.” Also
referred to as “nominal estimates” or as “current-price estimates.”

Real values are inflation-adjusted estimates—that is, estimates that exclude the effects of price changes.

The gross domestic purchases price index measures the prices of final goods and services purchased by U.S. residents.

The personal consumption expenditure price index measures the prices paid for the goods and services purchased by, or on the
behalf of, “persons.”
Personal income is the income received by, or on behalf of, all persons from all sources: from participation as laborers in
production, from owning a home or business, from the ownership of financial assets, and from government and business in the
form of transfers. t includes income from domestic sources as well as the rest of world. It does not include realized or
unrealized capital gains or losses.

Disposable personal income is the income available to persons for spending or saving. It is equal to personal income less
personal current taxes.

Personal outlays is the sum of personal consumption expenditures, personal interest payments, and personal current transfer
payments.

Personal saving is personal income less personal outlays and personal current taxes.

The personal saving rate is personal saving as a percentage of disposable personal income.

Profits from current production, referred to as corporate profits with inventory valuation adjustment (IVA) and capital
consumption adjustment (CCAdj) in the National Income and Product Accounts (NIPAs), is a measure of the net income of
corporations before deducting income taxes that is consistent with the value of goods and services measured in GDP. The IVA
and CCAdj are adjustments that convert inventory withdrawals and depreciation of fixed assets reported on a tax-return,
historical-cost basis to the current-cost economic measures used in the national income and product accounts. Profits for
domestic industries reflect profits for all corporations located within the geographic borders of the United States. The rest-of-
the-world (ROW) component of profits is measured as the difference between profits received from ROW and profits paid to
ROW.

For more definitions, see the Glossary: National Income and Product Accounts.

Statistical conventions

Annual-vs-quarterly rates. Quarterly seasonally adjusted values are expressed at annual rates, unless otherwise specified. This
convention is used for BEA’s featured, seasonally adjusted measures to facilitate comparisons with related and historical data.
For details, see the FAQ “Why does BEA publish estimates at annual rates?” Quarterly not seasonally adjusted values are
expressed only at quarterly rates.
Percent changes. Percent changes in quarterly seasonally adjusted series are displayed at annual rates, unless otherwise
specified. For details, see the FAQ “How is average annual growth calculated?” Percent changes in quarterly not seasonally
adjusted values are calculated from the same quarter one year ago. All published percent changes are calculated from
unrounded data.

Calendar years and quarters. Unless noted otherwise, annual and quarterly data are presented on a calendar basis.

Quantities and prices. Quantities, or “real” volume measures, and prices are expressed as index numbers with a specified
reference year equal to 100 (currently 2012). Quantity and price indexes are calculated using a Fisher-chained weighted
formula that incorporates weights from two adjacent periods (quarters for quarterly data and annuals for annual data). For
details on the calculation of quantity and price indexes, see Chapter 4: Estimating Methods in the NIPA Handbook.

Chained-dollar values are calculated by multiplying the quantity index by the current dollar value in the reference year (2012)
and then dividing by 100. Percent changes calculated from real quantity indexes and chained-dollar levels are conceptually the
same; any differences are due to rounding. Chained-dollar values are not additive because the relative weights for a given
period differ from those of the reference year. In tables that display chained-dollar values, a “residual” line shows the
difference between the sum of detailed chained-dollar series and its corresponding aggregate.

Updates to GDP

BEA releases three vintages of the current quarterly estimate for GDP: “Advance” estimates are released near the end of the
first month following the end of the quarter and are based on source data that are incomplete or subject to further revision by
the source agency; “second” and “third” estimates are released near the end of the second and third months, respectively, and
are based on more detailed and more comprehensive data as they become available.

Annual and comprehensive updates are typically released in late July. Annual updates generally cover at least the 5 most recent
calendar years (and their associated quarters) and incorporate newly available major annual source data as well as some
changes in methods and definitions to improve the accounts. Comprehensive (or benchmark) updates are carried out at about
5-year intervals and incorporate major periodic source data, as well as major conceptual improvements.

The table below shows the average revisions to the quarterly percent changes in real GDP between different estimate vintages,
without regard to sign.

Vintage Average Revision Without Regard to Sign
(percentage points, annual rates)
Advance to second 0.5
Advance to third 0.6
Second to third 0.2
Advance to latest 1.3
Note – Based on estimates from 1993 through 2016. For more information on GDP updates, see Revision Information on the BEA Web site.

The larger average revision from the advance to the latest estimate reflects the fact that periodic comprehensive updates
include major statistical and methodological improvements.

Unlike GDP, an advance current quarterly estimate of GDI is not released because data on domestic profits and on net interest
of domestic industries are not available. For fourth quarter estimates, these data are not available until the third estimate.