Will Revisions Raise Q4 GDP?

By John S. McClenahen In three weeks the U.S. Commerce Department is scheduled to release another estimate of GDP in the fourth quarter of 2003. Meanwhile, in the wake of last Friday's first take -- fourth quarter GDP growth at an unexpectedly low 4% annual rate -- the big question is whether more complete data will raise the figure. U.S. GDP increased at a blistering 8.2% annual rate in the third quarter of last year, and the deceleration of GDP growth in the fourth quarter was a result of a lower rate of increase in consumer spending, a higher rate of imports, a smaller increase in spending on computers and software, and a lower rate of residential fixed investment, the Commerce Department said when it released data on Jan. 30. Final sales of computers, for example, contributed just a quarter of a percentage point to GDP growth in the fourth quarter of 2003 after accounting for 0.65 of a percentage point in the third quarter. For the full year 2003, inflation-adjusted U.S. GDP grew 3.1%, compared with 2.2% in 2002, the first year following the 2001 recession. 2003 was "a better year than was expected 12 months ago but still quite a lackluster annual performance in view of the massive amount of fiscal, monetary and mortgage cashout stimulus that was in the system," claims David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York. The implicit GDP price deflator, a key measure of inflation, was just 1.6% in 2003, only one-tenth of a percentage point higher than 2002's 1.5%. "Rising inflation remains a forecast, not a present-day reality," insists Rosenberg. "The big story is that the economy is back growing either at or below potential and core inflation remains low."

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