Technical Note

Gross Domestic Product, First Quarter 1999 (Advance)

These technical notes provide background information about the source data and estimating methods used to produce the estimates presented in the GDP news releases; these notes also provide some perspective on the estimates. Additional material will become available in the next several days; much of it will be posted to BEA's web site <http: www.bea.doc.gov>. In a few weeks, the estimates will be published in BEA's monthly journal, the Survey of Current Business. The Survey, which also is available on BEA's web site, will provide a more detailed analysis of the estimates ("The Business Situation").

Real GDP: Based on source data available at this time, BEA estimates that real GDP increased 4.5 percent (annual rate) in the first quarter of 1999 after increasing 6.0 percent in the fourth quarter of 1998.

The 4.5-percent GDP growth in the first quarter was more than accounted for by a 6.7-percent increase in consumer spending and a 9.9-percent increase in fixed investment; these increases were partially offset by a drop in exports and an increase in imports. The slowdown in GDP growth was mainly accounted for by a downturn in exports; slower growth in nonresidential fixed investment also contributed.

Gross domestic purchases, a measure of domestic demand calculated as GDP less net exports, increased 6.8 percent in the first quarter after increasing 5.4 percent in the fourth. This acceleration largely reflects larger first-quarter increases in consumer spending for nondurable goods and services and in State and local government spending, and a turnaround in nonfarm inventory investment.

Motor vehicle output, which is reflected in both the final sales and inventory investment components of GDP, decreased in the first quarter after increasing sharply in the fourth. The fourth-quarter increase had partly reflected a rebound from a midsummer strike at a motor vehicle manufacturer. GDP excluding motor vehicle output increased 5.2 percent in the first quarter after increasing 3.8 percent in the fourth.

Final sales of computers increased only slightly in the first quarter after a large increase in the fourth quarter. In the first quarter, final sales of computers did not significantly affect GDP growth; in the fourth quarter, GDP increased 6.0 percent, and GDP less final sales of computers increased 5.6 percent. (See appendix table A of the news release.)

Prices: The price index for gross domestic purchases increased 1.0 percent in the first quarter after increasing 0.9 percent in the fourth. Excluding food and energy prices, which are normally more volatile than many other prices, the price index increased 1.1 percent, the same increase as in the fourth.

The price index for GDP increased 1.4 percent in the first quarter after increasing 0.8 percent in the fourth. The smaller first-quarter increase in the price index for gross domestic purchases than for GDP primarily reflected decreases in import prices, which are included in gross domestic purchases but excluded from GDP. Import prices decreased more in the first quarter than in the fourth, reflecting larger decreases in petroleum and in nonpetroleum product prices.

Disposition of personal income: Disposable personal income (DPI) in current dollars increased 5.6 percent in the first quarter, after increasing 5.4 percent in the fourth. The step-up reflects larger increases in transfer payments and in wages and salaries and a smaller increase in personal taxes that were partially offset by a downturn in farm proprietors' income and a larger increase in personal contributions for social insurance.

Personal saving in the national income and product accounts measures saving out of current income and is defined as DPI less personal outlays. Personal saving was a negative $30.9 billion in the first quarter, compared with negative $0.6 billion in the fourth. The personal saving rate--saving as a percentage of disposable personal income--was a negative 0.5 percent in the first quarter; in the fourth quarter, it was zero. Personal saving can be negative when outlays are financed by borrowing--including borrowing through credit cards or home equity loans--selling investments or other assets, or by using savings from previous periods. In assessing the adequacy of saving, it is also important to look at changes in wealth as well as at national saving, as discussed in "Note on the Personal Saving" in the February 1999 Survey of Current Business (pages 8-9).

Source data for the advance estimate

The advance estimate for the first quarter is based on preliminary and incomplete source data. Three months of source data are available for consumer spending on goods; investment in producers' durable equipment other than aircraft; motor vehicle sales and inventories; federal government spending; and consumer, producer, and international prices. Only two months of data are available for most other key data sources; BEA's assumptions for March are shown in table A.

• For shipments of commercial aircraft, a decline in March was assumed, based on trade source data.
• For exports of goods, excluding gold, an increase was assumed for March; for imports of goods, excluding gold, a decline was assumed.
• For the change in non-motor-vehicle inventories, a smaller increase than in February.
• For nonresidential buildings and for state and local construction, decreases were assumed.

Robert P. Parker Chief Statistician
Bureau of Economic Analysis
202-606-9607
April 30, 1999

Table A.--KEY ASSUMPTIONS FOR THE ADVANCE ESTIMATES OF GDP
FOR THE FIRST QUARTER OF 1999

For many of the key series used to prepare the advance estimate of GDP, including sales of retail stores, unit automobile and truck sales and inventories, manufacturers' shipments of nondefense capital goods (other than aircraft), federal defense spending, and consumer and producer price indexes, actual data are available for all months of the quarter.

For the key series shown in this table, actual data for the third month of the quarter usually are not available in time for inclusion in the advance GDP estimate. BEA makes assumptions for the source data that are not yet available; assumptions for March 1999 are shown in the last column of the table. For most series shown, the data for February are preliminary and subject to further revision. Occasionally, the data for earlier months are also subject to revision.

All series shown in the table are in billions of dollars, seasonally adjusted at annual rates, and are published by the Bureau of the Census.

                                 1998                                   1999

 
 
                      Oct.        Nov.       Dec.        Jan.       Feb.      Mar.*
 Private fixed investment:

   Nonresidential structures:
     Buildings:
1         Value of new nonresidential
          construction put in place........             174.2       176.7      179.0       176.5      183.3      178.4

  Producers' durable equipment:
2  Manufacturers' shipments of
     complete aircraft.....................              67.2        55.5       44.9        58.3       37.6       36.5

  Residential structures:
    Value of new residential
      construction put in place:
3      1-unit structures......................          193.8       198.5      203.2       206.1      209.2      212.2

4     2-or-more-unit structures..........                25.4        25.0       25.0        26.3       26.7       27.0

  Change in business inventories,
    nonfarm:

5  Change in inventories for
      manufacturing and trade (except
       nonmerchant wholesalers) for
      industries other than motor
     vehicles and equipment in trade..                   12.2       37.7       -31.1        -8.0       31.5       24.8

 Net exports:

  Exports of goods:
6   U.S. exports of goods,
      balance-of-payments basis........                 699.0      685.3      673.6       662.0      652.1      656.6

6a        Excluding gold.......................         689.1      677.4      670.6       659.3      649.1      653.0


   Imports of goods:
7  U.S. imports of goods,
          balance-of-payments basis.......              942.3      945.3      919.6       941.1      965.9      955.1

7a        Excluding gold......................          934.2      938.1      915.2       937.6      963.2      952.1


8   Net exports of goods....................           -243.3     -260.0     -246.0      -279.1     -313.8     -298.5

8a        Excluding gold.......................        -245.1     -260.7     -244.6      -278.3     -314.1     -299.1

 Government:

  State and local:
   Structures:
9      Value of new construction put
               In place..........................       131.0      130.6      133.5       141.0      146.4      140.1
______________________
 * Assumption.