GDP: Economy Grows 2.2% in Fourth Quarter, Down From 5% in Third

By Ali Meyer | March 27, 2015 | 2:06 PM EDT

In this photo made on Thursday, Feb. 12, 2015, a man welds parts in fans for industrial ventilation systems at the Robinson Fans Inc. plant in Harmony, Pa. The Commerce Department releases fourth-quarter gross domestic product on Friday, March 27, 2015. (AP Photo/Keith Srakocic)

(CNSNews.com) - The U.S economy slowed in the fourth quarter of 2014 as real gross domestic product (GDP) expanded at an annual rate of 2.2 percent, according to the “third” estimate released by the Commerce Department and the Bureau of Economic Analysis (BEA).

Real GDP is adjusted for inflation and represents “the value of the production of goods and services in the BEA. “In the second estimate, the increase in real GDP was also 2.2 percent.”

Wall Street Journal economists predicted an upward revision of 2.4 percent growth.

The fourth quarter real GDP of 2.2 percent, which includes performance from October, November and December of 2014, was lower than the third quarter real GDP estimate of 5.0 percent, which included months July, August and September. It was also lower than the second quarter estimate of 4.6 percent.

Similar to the GDP estimate, Gross Domestic Income or GDI, which measures things like employee compensation, corporate profits and small business income increased at a lower rate in the fourth quarter than it had in the third.

GDI increased at a rate of 3.3 percent in the fourth quarter, which was down from the 6.7 percent in the third quarter.

According to BEA, GDI is “the sum of the income earned - by labor (compensation of employees), by governments (taxes on production and imports less subsidies), and by entrepreneurs (net operating surplus, which is a profits-like measure for private enterprises, and for government enterprises) - and the consumption of fixed capital.”

The BEA report also released data on corporate profits, which showed a decrease from the previous quarter. “Profits from current production decreased $30.4 billion in the fourth quarter, in contrast to an increase of $64.5 billion in the third,” states BEA.

The BEA provides “advance” quarterly estimates of GDP as well as “second” and “third” quarterly estimates.

“‘Advance’ current quarterly estimates (based on incomplete monthly data), are released near the end of the first month after the end of the quarter,” explains BEA. “At the end of each of the following two months, revised estimates are released that incorporate revised and newly available monthly and quarterly data; these releases are referred to as “second” and “third” quarterly estimates.”

BEA will release its advance GDP estimate for the first quarter of 2015 on April 29.

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