THE ECONOMY : U.S. Will Shift Output Gauges

The gross national product, the time-honored gauge of U.S. economic performance, will be downgraded this week as government officials unveil a different measure that focuses more on activity inside the nation’s borders.

Beginning with Wednesday’s release of revised third-quarter figures, the Commerce Department will concentrate on gross domestic product, which measures goods and services produced in the country, rather than on the more familiar gross national product.

The change will probably make the most recent recession appear deeper than previously thought, one economist said.

But economists believe that the new standard will more accurately reflect the state of the economy and will be more useful for making comparisons with other countries.

The GDP figure leaves out profit earned by overseas subsidiaries of U.S. companies or by Americans working abroad. Most countries have switched to GDP reporting from GNP.

Economists and government officials say GDP more accurately measures how the economy is performing in terms of job creation.

The broader GNP figure--bringing in factors from overseas--often includes distortions that have little to do with the way the economy’s performance is felt by most Americans.

The revisions may alter perceptions about the recession that began in mid-1990, some economists suggested.

“One byproduct of the comprehensive benchmark revision will be an estimate of the decline in GNP during the 1990-91 recession being greater than has been originally presumed,” said economist Elliott Platt of Donaldson, Lufkin & Jenrette Securities Corp.

“Another likely byproduct should be an upward revision of previously reported inflation statistics for the recession period,” Platt said.

In its initial report, the Commerce Department said the economy grew in the third quarter at a 2.4% annual rate as measured by GNP or at a 2.5% rate according to GDP.

When the department reports its revised figure Wednesday, it will also change the base year for calculating changes to 1987 from 1982 and will revise the old GNP series back to 1929.

The economy is generally considered to have sunk into recession in July, 1990, and to have reached a trough in the first three months of 1991.

The White House insists that a modest recovery began in May. But industrial output was stagnant for the third straight month in October.

Notwithstanding mounting fourth-quarter weakness, most analysts believe that the domestic economy grew in the July-September quarter more strongly than first estimated.

“Inventory accumulation for September was, for example, far stronger than the Commerce Department had estimated, while construction outlays were slightly stronger,” Platt noted.

Samuel Kahan, chief economist for Fuji Securities, also said the economy had a relatively strong spurt of growth in the third quarter.

He said third-quarter GNP could be revised upward to as high as a 3.4% annual rate.

GDP VS. GNP

Comparing previously published quarterly estimates (in percents)

1990 1991 4th 1st 2nd 3rd Gross domestic product -3.7 -3.0 +1.2 +2.3 Gross national product -1.6 -2.8 -0.5 +2.4

Note: Figures will be revised when the government releases its official revisions of the data on Wednesday.

Source: Commerce Department