Foreign Sales Cited as GNP Is Revised Higher

The economy grew at a slightly more robust pace of 0.9% in the fourth quarter last year, rather than the 0.5% reported earlier, but 1989 still marked the weakest GNP expansion in three years, the Commerce Department said Wednesday.

The more robust pace was aided by higher-than-initially reported foreign sales, the department said in explaining its first revision of the quarterly figures, which face a final revision next month.

For the full year, the gross national product, the measure of total goods and services produced, expanded at an inflation-adjusted rate of 3% from 4.4% in 1988 and 3.7% in 1987.

Economists, who had expected a slight downward revision in the fourth-quarter GNP to a 0.4% annual rate of growth, called the upward revision a heartening development.

“Unless there is some real shock, we’re not likely to see any really significant decline in the economy this year, certainly not a recession,” said Sam Kahan, chief economist with Fuji Securities Inc.

The unexpected rise in the GNP figure pushed the dollar higher and Treasury bond prices lower. The dollar rose to 1.7050 West German marks in midday trading from 1.6885 marks at Tuesday’s close in the belief that the GNP figure points to no drop in U.S. interest rates.

Testifying before Congress Wednesday, Federal Reserve Board Chairman Alan Greenspan said he expected “slow but positive” first-quarter expansion in GNP. He compared weak orders for durable goods to a leak in a tire that has been fixed.

“That leak has ended,” Greenspan said. “The system is no longer eroding. It has stabilized and has not exhibited any weakening.”

The National Assn. of Business Economists forecast this week that the economy would grow sluggishly in 1990, expanding at about a 1.7% real annual rate.

Despite the increase in the quarterly growth estimate, the fourth-quarter rate of growth was the weakest GNP performance since the third quarter of 1986, when it grew by 0.8%.

The 3% annual rate of increase in GNP during 1989 was the smallest rise since 1986

GROSS NATIONAL PRODUCT

Percent change from previous quarter at annual rate.

Source: Commerce Department