From the February 2000 SURVEY OF CURRENT
BUSINESS{This article was prepared by Daniel Larkins, Larry R. Moran, Ralph W. Morris, and Deborah Y. Sieff.}
Real gross domestic product (GDP) increased 5.8 percent in the fourth quarter of 1999, according to the "advance" estimates of the national income and product accounts (NIPA's), after increasing 5.7 percent in the third quarter (table 1 and chart 1)./1/ The price index for gross domestic purchases increased 2.3 percent after increasing 1.7 percent. Real disposable personal income increased 4.6 percent after increasing 2.9 percent; the personal saving rate (personal saving as a percentage of current-dollar disposable personal income) continued its downtrend, decreasing to 1.9 percent from 2.1 percent.
The largest contributors to the fourth-quarter increase in real GDP were personal consumption expenditures (PCE), government spending, inventory investment, and exports (table 2). (These components, along with private nonresidential fixed investment, also contributed substantially to the third-quarter increase in real GDP.) PCE increased 5.3 percent in the fourth quarter and contributed 3.6 percentage points to the growth in GDP; expenditures for durable goods, for nondurable goods, and for services all increased. Government spending increased 8.4 percent and contributed 1.5 percentage points; spending by the Federal Government and by State and local governments both increased. Inventory investment increased $27.4 billion, as the pace of accumulation increased to $65.4 billion from $38.0 billion, and contributed 1.2 percentage points to GDP growth. Exports increased 6.9 percent and contributed 0.7 percentage point. The increases in these components were partly offset by a 10.6-percent increase in imports, which subtracted 1.4 percentage points from GDP growth.
Motor vehicles.—Real motor vehicle output increased 6.1 percent in the fourth quarter after increasing 26.2 percent in the third (table 3)./2/ The slowdown was more than accounted for by truck output, which decreased after increasing substantially; auto output accelerated.
Final sales of motor vehicles to domestic purchasers decreased 0.4 percent after increasing 18.3 percent, as a step-up in consumer purchases was more than offset by a downturn in purchases by businesses (private fixed investment). Truck sales decreased after a sharp increase; auto sales increased a little more than in the third quarter.
Factors frequently considered in analyses of consumer spending were favorable in the fourth quarter. The growth of real disposable personal income picked up to 4.6 percent from 2.9 percent, and the unemployment rate decreased to 4.1 percent from 4.2 percent. The Index of Consumer Sentiment (a measure of consumer attitudes and expectations prepared by the University of Michigan's Survey Research Center) remained at a high level.
Factors specific to motor vehicle purchases were mixed. Interest rates on new-car loans increased, but manufacturers continued to offer attractive sales-incentive programs.
Imports of motor vehicles decreased slightly after a substantial increase, and exports increased substantially after decreasing.
Motor vehicle inventory investment increased less than in the third quarter. The inventory-sales ratio for new domestic autos, which is calculated from units data, increased to 2.3 at the end of the fourth quarter from 2.1 at the end of the third; the traditional industry target is 2.4.
The price index for gross domestic purchases, which measures the prices paid for goods and services purchased by U.S. residents, increased 2.3 percent in the fourth quarter after increasing 1.7 percent in the third (table 4). Prices of gross domestic purchases less food and energy increased 2.0 percent after increasing 1.2 percent (chart 2). The step-ups were accounted for by prices of PCE and of private nonresidential fixed investment.
PCE prices increased 2.5 percent after increasing 1.8 percent. Prices of PCE other than food and energy increased 2.1 percent after increasing 1.2 percent; prices of clothing and shoes turned up, and prices of brokerage services, of housing, and of household operation other than electricity and gas accelerated. Food prices increased about the same as in the third quarter; step-ups in meat and dairy prices were offset by downturns in prices of poultry and of fruits and vegetables. Prices of energy goods and services increased 10.6 percent after increasing 14.2 percent, reflecting decelerations in the prices of gasoline and oil and of natural gas.
Prices of private nonresidential fixed investment increased 0.1 percent after decreasing 1.3 percent. Prices of equipment and software decreased 1.0 percent after decreasing 2.7 percent; software prices stepped up, and auto prices decreased much less than in the third quarter. Prices of structures increased 3.9 percent after increasing 3.4 percent.
Prices of government consumption expenditures and gross investment increased 3.0 percent after increasing 3.3 percent. A slowdown in prices paid by State and local governments more than offset a step-up in prices paid by the Federal Government. Prices paid by State and local governments increased 3.4 percent after increasing 4.2 percent. Prices paid by the Federal Government increased 2.2 percent after increasing 1.8 percent.
The GDP price index, which measures the prices paid for goods and services produced in the United States, increased 2.0 percent after increasing 1.1 percent. The GDP price index, unlike the price index for gross domestic purchases, includes the prices of exports and excludes the prices of imports. Export prices increased 2.4 percent after increasing 1.3 percent; prices accelerated for automotive vehicles, engines, and parts, for civilian aircraft, engines, and parts, and for durable industrial supplies and materials. Import prices increased 4.2 percent after increasing 6.2 percent; prices slowed substantially for nonpetroleum industrial supplies and materials and for petroleum and products.
Current-dollar disposable personal income (DPI) increased 7.2 percent in the fourth quarter after increasing 4.8 percent in the third. The personal saving rate (saving as a percentage of current-dollar DPI) decreased to 1.9 percent from 2.1 percent, as personal outlays increased more than DPI; the decrease in the saving rate was the smallest in several quarters (chart 3).
Personal income increased $139.2 billion after increasing $98.8 billion (table 5). The step-up was primarily accounted for by upturns in farm proprietors' income and in rental income of persons; wage and salary disbursements increased less than in the third quarter, and other components of personal income increased about the same amount in both quarters.
Farm proprietors' income increased $16.5 billion after decreasing $13.1 billion. The upturn primarily reflected the pattern of farm subsidy payments, which increased $16.8 billion after decreasing $7.9 billion.
Rental income of persons increased $9.2 billion after decreasing $9.8 billion. The upturn was largely accounted for by a rebound from $4.7 billion of uninsured losses in the third quarter that had resulted from Hurricane Floyd.
Wage and salary disbursements increased $67.8 billion after increasing $76.8 billion. Disbursements slowed most in the goods-producing and the distributive industries. In private wages and salaries, the slowdown mainly reflected a downturn in average weekly hours and a slowdown in average hourly earnings.
In 1999, the U.S. economy experienced another year of above-average growth in production and income and below-average inflation. Real GDP and real DPI both increased 4.0 percent, a little less than in 1998 but above their average growth rates for the current expansion; for the expansion, which began in the second quarter of 1991, the average annual growth rates are 3.6 percent for real GDP and 3.0 percent for real DPI./3/ The price index for gross domestic purchases increased 1.5 percent in 1999, up from 0.7 percent in 1998 but less than the 1.8-percent average rate of increase for the expansion as a whole.
PCE increased 5.3 percent in 1999 and contributed 3.5 percentage points to the growth of real GDP; almost half of the PCE increase was in services. Nonresidential fixed investment increased 8.3 percent and contributed 1.0 percentage points to real GDP growth; equipment and software more than accounted for the increase. Government spending increased 3.7 percent and contributed 0.6 percentage point; most of the increase was accounted for by State and local government. The contributions of these components were partly offset by imports, which increased 11.8 percent and subtracted 1.5 percentage points from GDP growth.
The growth in real DPI reflected a larger increase in current-dollar DPI than in PCE prices. The increase in current-dollar DPI was largely accounted for by wage and salary disbursements, which increased $286.7 billion (or 6.8 percent); proprietors' income, transfer payments to persons, and personal interest income also contributed. Personal tax and nontax payments increased $79.4 billion. The personal saving rate decreased to 2.4 percent from 3.7 percent.
The increase in the price index for gross domestic purchases mainly reflected increases in prices of PCE and of government consumption expenditures and gross investment that were partly offset by a decrease in prices of nonresidential fixed investment. About half of the step-up in gross domestic purchases prices was attributable to an acceleration in food prices and an upturn in energy prices; the price index for gross domestic purchases excluding food and energy increased 1.4 percent after increasing 1.0 percent.
See box 1 for Fourth Quarter 1999 Advance GDP Estimate Source Data and Assumptions. An updated schedule for publication of revised estimates is available in box 2.
Footnotes:
1. Quarterly estimates in the NIPA's are expressed at seasonally adjusted annual rates. Quarter-to-quarter dollar changes are the differences between the published estimates. Quarter-to-quarter percent changes are annualized and are calculated from unrounded data unless otherwise specified.
Real estimates are calculated using a chain-type Fisher formula with annual weights for all years and for all quarters except those for the most recent year, which are calculated using quarterly weights; real estimates are expressed both as index numbers (1996 = 100) and as chained (1996) dollars. Price indexes (1996 = 100) are also calculated using a chain-type Fisher formula.
2. For more information on motor-vehicle developments, see "Motor Vehicles, 1999" in this issue.
3. The 1999 increases are calculated from annual levels for 1998 and 1999. From fourth-quarter 1998 to fourth-quarter 1999, real GDP increased 4.2 percent, and real DPI increased 3.8 percent.
