GNP Revised Upward to 4.4% for 1st Quarter; Trade Gains Are Cited

The economy was slightly stronger than previously estimated in the first three months of the year, expanding at an inflation-adjusted 4.4% annual rate, the Commerce Department reported Thursday.

The department previously estimated that the gross national product grew at a 4.3% annual pace in the first quarter. It said trade gains accounted for the modest revision in its third and final estimate of the quarter’s gross national product.

The report provides further evidence that the economy is being driven by a welcome mix of export growth and business investment, said Tony Villamil, the department’s chief economist.

“The final GNP estimates show the continuation of moderate but sustainable economic growth,” Villamil said.

The report also suggests that inflation remained in check in the first quarter. The fixed weights index, measuring price changes for a constant basket of goods and services, advanced at 4.6% annual rate against a previous estimate of 5% annual growth.

The inflation gauge would have been in line with the 4.2% rate of the final quarter of 1988 if not for a one-time federal pay increase, Villamil said.

“It (the gauge) reconfirms the view that inflation is at the peak and is not accelerating,” he added.

Drought Hurt ’88 Figures

As the trade picture improved, inventories in the first quarter were smaller than previously estimated, the department said. Lower stocks of goods are viewed favorably by economists since they suggest that goods are moving out of factories at a faster rate, helping the economy grow.

“The revised GNP number reflected improved quality, so to speak, because inventories were lowered and net exports were raised,” said Cynthia Latta, senior economist at Data Resources in Lexington, Mass.