As GDP releases go, this one doesn’t garner much attention because of the limited amount of new information. The new information that merits some discussion includes revisions and profits. First up, revisions. GDP growth was revised up from 2.8 percent at an annual rate to 3.1 percent. How large is the typical revision? 0.3 percentage point, so today’s revision is of average size. Also, if you recall last month, the numbers were revised down by 0.4 percentage point. What does all of this mean? It means that the economy was growing at about a 3 percent annual rate at the end of last year, and today’s revision doesn’t alter the fundamental view of what is happening to the economy.
Second up, profits. On a quarter-to-quarter basis, corporate profits can fluctuate for a wide number of reasons, and a special circumstance affected the profit numbers released today. If you don’t care about the special circumstance, then the basic story to take away is that overall domestic corporate profits remain below their pre-recession peaks (especially if you adjust for prices), although they have bounced back considerably from their lows (see yesterday’s blog for some nice graphs [3]). The more nuanced story involves how the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (affectionately referred to as TRUIRJCA and is pronounced pretty much the way it looks) allowed companies to take advantage of accelerated depreciation going back to September 2010. See BEA’s technical note [4] for the captivating details.
Finally, to put the profits into perspective, below are updated versions of the graphs I posted yesterday.
~Mark Doms, Chief Economist, U.S. Department of Commerce
March 25, 2011
