–2010 GDP Revised Up To +3.0% From Previous +2.9%
–1Q’10, 2Q’10 Were Revised Up; Downward Revisions To 3Q’10, 4Q’10
–Largest Upward Revision To 2Q’10, Now +3.8% Vs Previous +1.7%
–Largest Downward Revision To 4Q’08, Now -8.9% Vs Previous -6.8%
–Contraction Period GDP 4Q07-2Q09 Revised Down To -3.5% Vs Prev -2.8%

By Kevin Kastner

WASHINGTON (MNI) – Armed with updated source data, the Bureau of
Economic Analysis Friday released revised estimates for U.S. economic
growth that show that the increase in GDP in 2010 was slightly better
than previously estimated, but followed downward revisions to the
contraction years of 2008 and 2009.

For this flexible revision, overall GDP and a few other components
were actually revised back to 2002, but revisions prior to 2007 were
very minor.

In 2010, the annual rate of growth in GDP was revised up very
slightly to 3.0% from the 2.9% rise originally estimated. There were
upward revisions to growth in the first and second quarters, but
downward adjustments to growth in the third and fourth quarters. As a
result, the pace of growth now appears to have slowed in each of the
last three quarters from the quarter before it.

On a Q4/Q4 basis, GDP is now reported up 3.1% in 2010, an upward
adjustment from the originally published 2.8% gain.

According to the BEA, the key factors in the revision for 2010 were
upward adjustments to inventory investment and consumption. These were
offset by downward adjustments to nonresidential fixed investment, state
and local government spending, residential fixed investment, and
exports.

The annual revisions are being released to coincide with the
announcement of the revised first-quarter and advance second-quarter GDP
data for 2011.

The reading for fourth quarter 2010 GDP was revised down to a 2.3%
gain from the previously reported 3.1% rise. The reading for third
quarter GDP was revised down to a 2.5% rise from the previously reported
2.6% gain.

Those downward revisions later in the year were offset by upward
revision earlier in the year. The reading for second quarter 2010 GDP
was revised up sharply to a 3.8% rise from the previously reported 1.7%
gain, the largest upward revision to GDP in the period under review.

The reading for first quarter 2010 GDP was revised up to a 3.9%
rise from the previously reported 3.7% increase.

For the usual 3-year revision period of 2008, 2009, and 2010
combined, growth was revised down to a 0.3% decline at an annual rate
from the previously reported flat reading over that period.

For the entire period of the flexible revision going back to 2002,
GDP was revised down slightly to a 1.6% rise at an annual rate from the
previously reported 1.7% rate of growth.

For the period of contraction that began in the first quarter of
2008 and ran through the second quarter of 2009, the change in GDP was
revised down to a 3.5% drop at an annual rate from the previously
reported 2.8% decline.

BEA noted that when the contraction period is not annualized, but
rather reported as the actual drop over the six quarter period, GDP fell
5.1%, larger than the 4.1% decline reported previously and the largest
such contraction in the post-war period.

The trajectory of GDP growth through the recession and recovery
remained roughly unchanged after the revisions, though sharp downward
revisions to the declines in the fourth quarter of 2008 and the first
quarter of 2009 pulled the bottom of the percent change curve even
lower.

GDP growth was revised down in both 2008 and 2009 and was unrevised
in 2007. For 2009, GDP growth was revised down to a 3.5% decline from
the previously reported 2.6% decline. Downward adjustments to
consumption, inventory investment, and nonresidential fixed investment
were the key factors that year.

Growth in 2008 was revised down to a 0.3% annual rate of decline
from the previously reported flat reading. Downward adjustments to
consumption, nonresidential fixed investment, and state and local
government spending were the key factors in the revision to 2008 growth.

Current dollar GDP, like real GDP, was revised up in 2010, but
revised lower in 2008 and 2009. Final sales growth was unrevised in
2010, but revised lower in 2008 and 2009.

The chain price index was revised up in 2009 and 2010 and was
unrevised in 2008. Likewise, the closely watched core PCE price index
was up in 2009 and 2010, but was unrevised in 2008.

PCE was revised up in 2010 and now stands at a 2.0% annual rate of
increase, compared with the 1.7% increase previously reported. PCE was
revised lower in 2009 and 2008 to larger declines.

PCE was revised down in the first and fourth quarters of 2010, and
were revised up slightly in the third quarter

For 2010 as a whole, goods PCE was unrevised at 4.3%, while service
PCE was revised up to a 0.9% rise from the 0.5% gain previously
reported.

Residential fixed investment was revised down in 2010 to a larger
drop, but revised up to slightly smaller drops in 2008 and 2009.
Residential investment was revised down in all four quarters of 2010.

Nonresidential fixed investment was revised down in all three of
the most recent years. In 2010, nonresidential investment was revised
down sharply in the first quarter, offset by upward revisions to the
other three quarters.

Private inventory growth was revised up slightly in 2008, but
revised down sharply in 2009 and down slightly in 2010. Inventory growth
was revised down in first three quarters of 2010, but was revised up in
the fourth quarter.

The net exports gap were revised narrower in each of the last three
years. For 2010, the gaps are now narrower in the second and third
quarters than previously reported, but wider in the first and third
quarters.

Government purchases were revised down in 2008 and 2010, but
revised up very slightly in 2009. Government spending was revised up to
a smaller drop in the first quarter of 2010, but revised lower in the
other three quarters.

On the income side, personal income was revised higher in 2008, but
revised lower in 2009 and 2010. For 2010, there were downward revisions
to interest income, proprietors income, transfer payments, and wage and
salary supplements.

Because the revision to personal taxes were much smaller than the
revisions to personal income, the revisions to disposable personal
income were roughly in line with those in personal income, though it
should be noted that personal taxes were revised up sharply in 2010.

The personal savings rate was revised up sharply in 2008, but
revised lower in 2009 and 2010. The 2010 savings rate now stands at
5.3%, down from the 5.7% previous estimate.

The percent change in pre-tax corporate profits from current
production was revised lower in 2008, but revised up sharply in 2009 to
a positive rate of growth. Corporate profits growth was also revised up
slightly in 2010.

The BEA announced a number of methodology changed for 2011. First,
the BEA said that real petroleum imports will now be calculated by
adjusting quantity data. The prior method required the seasonal
adjustment of the petroleum price index.

Second, newly available financial investment activities data from
the Quarterly Services Survey will be incorporated into the estimate of
PCE for portfolio management and investment advice services.

Finally, the effective rate of mortgage interest paid has been
recalculated based on newly available mortgage servicing data. This
resulted in a recalculation of mortgage interest paid, which in turn
impacted rental income, net interest income, and personal interest
income.

** Market News International Washington Bureau: 202-371-2121 **

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