Final GNP Report Pares Drop to 1.6% in Fourth Quarter
Strong U.S. exports helped moderate the recession in the fourth quarter of last year, newly released economic data suggested Wednesday.
In its final revision of the fourth quarter’s gross national product, the Commerce Department said the nation’s output of goods and services fell by just 1.6% during the final three months of 1990, a sharp improvement over earlier projections.
Previously, the government had said that GNP had fallen 2% during the quarter, the first three-month period to show a decline since 1986. Economists use GNP measurements to determine the extent of a recession--defined as two consecutive quarterly declines in GNP--or an economic recovery.
But with the upward revision in the fourth-quarter figures, economists said Wednesday that they believe that economic conditions in the first quarter of 1991 will turn out to have been better than expected as well.
The end of the Persian Gulf War in the middle of the first quarter brought about a sharp rebound in consumer confidence as well as a decline in oil prices, which economists say should combine to help accelerate the pace of a recovery.
“I think this could prove to be one of the shallowest recessions we’ve seen,” said Jean Sundrla, an economist at Evans Economics in Washington. “It is certainly shaping up that way.”
Sundrla said she now expects that first-quarter GNP will show a decline of just 1% and then predicts that the economy will begin to turn around in the second or third quarter.
The Bush Administration pounced on the improved GNP report to claim that the recession is ending. “In fact, we have seen the first tangible signs of a turnaround,” Treasury Secretary Nicholas F. Brady told a Washington meeting of the U.S. Chamber of Commerce.
“The return to positive growth will be based on strong exports, lower and more stable oil prices, increased credit availability, lower interest rates and renewed consumer confidence,” he added.
For the full year of 1990, the economy grew at a sluggish 1% rate, the Commerce Department said, with most of the growth in the first half of the year offset by the decline in the final quarter.
Wednesday’s figures marked the third release of GNP data for the fourth quarter by the Commerce Department. The first report, issued in January, showed a 2.1% drop, while the second posted a 2% decline.
The government credited much of the quarterly improvement to a surge in exports and a gradual decline in imports, largely because of the decline in the value of the dollar late last year. The Commerce Department said exports increased by $16.7 billion during the quarter, up from an earlier projection of a $10.9-billion gain. U.S. imports, meanwhile, fell $21 billion; the government had earlier said imports had declined by $17.1 billion.
Economists said several other factors also contributed to the improved picture during the fourth quarter. For example, business inventories remained lower than earlier forecast, a sign that manufacturers may take better advantage of a turnaround in consumer spending. In addition, capital spending and investment also were relatively strong during the period.
But most analysts still warn that it may be too early to declare that the recession is actually over.
“I think the economy may still be worse than the GNP numbers are showing,” cautioned Lawrence Chimerine, a Philadelphia economic consultant.
“There is a turn coming, but you can’t really see it in the numbers yet,” added Barry Bosworth, an economist at the Brookings Institution in Washington.
One key concern among many economists is the rekindling of inflation. In the wake of last week’s report that the core inflation rate--excluding the volatile energy and food price components--remained stubbornly high in February, some economists argue that it is becoming increasingly difficult for the Federal Reserve Board to justify further interest rate cuts.
ECONOMISTS’ OUTLOOK
Economists expect a weak recovery. A1
Gross National Product Percent change from previous quarter 1990: 4th quarter (revised): -1.6%
