Financial Options

The real GDP growth for the fourth quarter of 2006 was 2.5% on an annual basis, according to the final estimate released Thursday by the Bureau of Economic Analysis. This was higher than the 2.2% rate in the advance estimate. The price index for gross domestic purchases, a measure of retail price inflation, rose 2.4% excluding food and energy, up from 2.2% in the third quarter. For the year, GDP grew 3.3%.

Corporate profits dropped $4.9 billion, following a increase of $61.5 billion in the third quarter.
For the year, corporate profits rose 21.4%, following a 12.5% increase in 2005.

GDP,Gross Domestic Product,economic growth,corporate profits

GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2006 (FINAL)
CORPORATE PROFITS: FOURTH QUARTER 2006

Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 2.5 percent in the fourth quarter of 2006,
according to final estimates released by the Bureau of Economic Analysis. In the third quarter, real
GDP increased 2.0 percent.

The GDP estimates released today are based on more complete source data than were available for
the preliminary estimates issued last month. In the preliminary estimates, the increase in real GDP was
2.2 percent (see «Revisions» on page 3).

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

The small acceleration in real GDP growth in the fourth quarter primarily reflected a downturn in
imports and accelerations in PCE, in exports, and in federal government spending that were partly offset
by downturns in private inventory investment and in equipment and software and a deceleration in
nonresidential structures.

Final sales of computers contributed 0.22 percentage point to the fourth-quarter growth in real
GDP after contributing 0.07 percentage point to the third-quarter growth. Motor vehicle output
subtracted 1.18 percentage points from the fourth-quarter growth in real GDP after contributing 0.76
percentage point to the third-quarter growth.

FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise
specified. Quarter-to-quarter dollar changes are differences between these published estimates. Percent
changes are calculated from unrounded data and are annualized. «Real» estimates are in chained (2000)
dollars. Prices indexes are chain-type measures.

This news release is available on BEA's Web site at www.bea.gov/bea/rels.htm.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 0.2 percent in the fourth quarter, the same as in the preliminary estimate; this index increased
2.2 percent in the third quarter. Excluding food and energy prices, the price index for gross domestic
purchases increased 2.4 percent in the fourth quarter, compared with an increase of 2.2 percent in the
third.

Real personal consumption expenditures increased 4.2 percent in the fourth quarter, compared
with an increase of 2.8 percent in the third. Real nonresidential fixed investment decreased 3.1 percent,
in contrast to an increase of 10.0 percent. Nonresidential structures increased 0.8 percent, compared
with an increase of 15.7 percent. Equipment and software decreased 4.8 percent, in contrast to an
increase of 7.7 percent. Real residential fixed investment decreased 19.8 percent, compared with a
decrease of 18.7 percent.

Real exports of goods and services increased 10.6 percent in the fourth quarter, compared with an
increase of 6.8 percent in the third. Real imports of goods and services decreased 2.6 percent, in
contrast to an increase of 5.6 percent.

Real federal government consumption expenditures and gross investment increased 4.6 percent in
the fourth quarter, compared with an increase of 1.3 percent in the third. National defense increased
12.3 percent, in contrast to a decrease of 1.2 percent. Nondefense decreased 9.6 percent, in contrast to
an increase of 6.5 percent. Real state and local government consumption expenditures and gross
investment increased 2.7 percent, compared with an increase of 1.9 percent.

The real change in private inventories subtracted 1.16 percentage points from the fourth-quarter
change in real GDP, after adding 0.06 percentage point to the third-quarter change. Private businesses
increased inventories $22.4 billion in the fourth quarter, following increases of $55.4 billion in the third
quarter and $53.7 billion in the second.

Real final sales of domestic product -- GDP less change in private inventories -- increased 3.7
percent in the fourth quarter, compared with an increase of 1.9 percent in the third.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever
produced -- increased 0.8 percent in the fourth quarter, compared with an increase of 2.0 percent in the
third.

Gross national product

Real gross national product -- the goods and services produced by the labor and property supplied
by U.S. residents -- increased 3.5 percent in the fourth quarter, compared with 1.8 percent in the third.
GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased
$29.4 billion in the fourth quarter after decreasing $5.5 billion in the third; in the fourth quarter, receipts
increased $28.2 billion, and payments decreased $1.2 billion.

Current-dollar GDP

Current-dollar GDP -- the market value of the nation's output of goods and services -- increased
4.1 percent, or $135.6 billion, in the fourth quarter to a level of $13,458.2 billion. In the third quarter,
current-dollar GDP increased 3.8 percent, or $125.3 billion.

Revisions

The final estimate of the fourth-quarter increase in real GDP is 0.3 percentage point, or $6.5
billion, higher than the preliminary estimate issued last month. The upward revision to the percent
change in real GDP primarily reflected an upward revision to private inventory investment that was
partly offset by a downward revision to equipment and software investment.

Advance Preliminary Final
(Percent change from preceding quarter)

Real GDP............................... 3.5 2.2 2.5
Current-dollar GDP..................... 5.0 3.9 4.1
Gross domestic purchases price index... 0.1 0.2 0.2

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital
consumption adjustments) decreased $4.9 billion in the fourth quarter, in contrast to an increase of $61.5
billion in the third quarter. Current-production cash flow (net cash flow with inventory valuation and
capital consumption adjustments) -- the internal funds available to corporations for investment --
decreased $1.1 billion in the fourth quarter, in contrast to an increase of $30.2 billion in the third.

Taxes on corporate income decreased $14.4 billion in the fourth quarter, in contrast to an increase
of $14.5 billion in the third. Profits after tax with inventory valuation and capital consumption
adjustments increased $9.6 billion, compared with an increase of $47.0 billion. Dividends increased
$21.0 billion, compared with an increase of $19.3 billion; current-production undistributed profits
decreased $11.5 billion, in contrast to an increase of $27.8 billion.

Domestic profits of financial corporations increased $20.5 billion in the fourth quarter, in contrast
to a decrease of $9.1 billion in the third. Domestic profits of nonfinancial corporations decreased $62.6
billion in the fourth quarter, in contrast to an increase of $75.8 billion in the third. In the fourth quarter,
real gross value added of nonfinancial corporations increased, and profits per unit of real value added
decreased. The decrease in unit profits reflected a small increase in unit prices that was more than offset
by increases in both the unit labor and nonlabor costs corporations incurred.

The rest-of-the-world component of profits increased $37.3 billion in the fourth quarter, in
contrast to a decrease of $5.3 billion in the third. This measure is calculated as (1) receipts by U.S.
residents of earnings from their foreign affiliates plus dividends received by U.S. residents from
unaffiliated foreign corporations minus (2) payments by U.S. affiliates of earnings to their foreign
parents plus dividends paid by U.S. corporations to unaffiliated foreign residents. The fourth-quarter
increase was accounted for by an increase in receipts and a decrease in payments.

Profits before tax with inventory valuation adjustment is the best available measure of industry
profits because estimates of the capital consumption adjustment by industry do not exist. This measure
reflects depreciation-accounting practices used for federal income tax returns. According to this
measure, domestic profits of financial corporations increased, while domestic profits of nonfinancial
corporations decreased. The decrease in nonfinancial corporations reflected decreases in ?other?
nonfinancial industries, in wholesale trade, in manufacturing, and in transportation and warehousing that
were partly offset by increases in retail trade, in information, and in utilities. Within manufacturing, the
decrease reflected a decrease in nondurable goods -- especially petroleum and coal products -- that was
partly offset by an increase in durable goods.

Profits before tax decreased $16.4 billion in the fourth quarter, in contrast to an increase of $42.5
billion in the third. The before-tax measure of profits does not reflect, as does profits from current
production, the capital consumption and inventory valuation adjustments. These adjustments convert
depreciation of fixed assets and inventory withdrawals reported on a tax-return, historical-cost basis to
the current-cost measures used in the national income and product accounts. The capital consumption
adjustment decreased $9.3 billion in the fourth quarter (from -$162.4 billion to -$171.7 billion),
compared with a decrease of $1.6 billion in the third. The inventory valuation adjustment increased
$20.7 billion (from -$38.2 billion to -$17.5 billion), compared with an increase of $20.7 billion.

Corporate profits in 2006

Profits from current production increased 21.4 percent in 2006, compared with an increase of 12.5
percent in 2005. Domestic profits increased 21.1 percent, compared with an increase of 12.7 percent.
The rest-of-the-world component of profits increased 23.4 percent, compared with an increase of 11.7
percent.

Taxes on corporate income increased 18.9 percent in 2006, compared with an increase of 33.1
percent in 2005. Profits after tax with inventory valuation and capital consumption adjustments
increased 22.5 percent, compared with an increase of 5.5 percent. Dividends increased 11.3 percent,
compared with an increase of 6.9 percent; current-production undistributed profits increased 40.6
percent, compared with an increase of 3.4 percent.

According to the measure of profits before tax with inventory valuation adjustment, domestic
profits of financial and nonfinancial corporations increased in 2006. The increase in nonfinancial
corporations reflected increases in all industries shown except motor vehicles; the largest increase was in
manufacturing. Within manufacturing, the largest increase was in petroleum and coal products.

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