The U.S. economy grew at a slower pace than previously estimated in last year's fourth quarter, and the Asian financial crisis contributed to the first drop in corporate profits in more than a year.
The gross domestic product, the total output of goods and services, rose at a 3.7% annual rate, the Commerce Department said, down from an earlier 3.9% estimate because consumer spending wasn't as robust as first calculated.
After-tax corporate profits in last year's fourth quarter fell 2.3% after rising 4.2% during the third quarter, the department said. While it was the first decline since the third quarter of 1996, analysts say the economy is on track for an eighth straight year of expansion.
Asia will "take a little bit of the froth out of the economy, but will still leave it growing at a pretty solid pace," said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C.
In 1997, the economy expanded by 3.8%, topping 1996's 2.8% growth and the strongest showing in nine years. Not adjusted for inflation, the U.S. economy's output was $8.1 trillion in 1997, representing more than a quarter of total global output of goods and services.
Consumer spending and housing "are going gangbusters," said former Federal Reserve Gov. Lyle Gramley, an economic consultant at Mortgage Bankers Assn. of America.
Separately, the Labor Department said the number of Americans filing for state unemployment benefits rose 4,000 to a seasonally adjusted 313,000 in the week ended Saturday. The four-week moving average for jobless claims, which smooths out the weekly volatility, fell to 306,500 from a revised 308,250, suggesting solid job growth.
And the Conference Board said its index of newspaper help-wanted ads rose in February to the highest level since November.
The decline in corporate profits in the fourth quarter was led by a drop in net earnings from international affiliates of U.S. companies--resulting from the economic chaos in Asia and the strength of the dollar against Pacific Rim currencies, the government said.
Rising imports from Asia and declining exports to the region became more evident at the two largest Pacific Coast ports during February.
Los Angeles, the nation's second-busiest port, reported imports grew 8.8% during February, while the adjacent Port of Long Beach, traditionally the nation's busiest facility, said imports rose 4.2%. On the other hand, Long Beach reported an 11.7% drop in exports in February, while Los Angeles said they fell 6.7%.
The final fourth-quarter GDP figure is lower than the government's previous growth rate estimates from February and January of 3.9% and 4.3%. The government issues three estimates of each quarter's GDP as more information becomes available. Analysts had expected no change in the latest report.
Inflation barely registered a blip on the government's radar screen. The GDP price deflator, a measure of prices followed by many investors, grew at an unrevised 1.4% annual pace in the fourth quarter. The deflator also rose 1.4% in the third quarter, the smallest since a 0.9% increase in the second quarter of 1964.
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Gross Domestic Product
Percentage change from previous quarter, annualized rate:
4th quarter, 1997: 3.7%