Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 28, 1991 TAG: 9102280089
SECTION: BUSINESS PAGE: C6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"The private domestic sector caved in during the fourth quarter," but the blow was cushioned by exports and government spending, said economist Allen Sinai of the Boston Co.
The Commerce Department raised slightly its initial estimate of the gross national product from October through December. It had reported that the GNP - the nation's total output of goods and services and its broadest measure of economic health - had fallen at a 2.1 percent rate.
The Commerce report said the drop in the GNP "was centered in output of motor vehicles." Excluding auto and truck production, the GNP inched up 0.6 percent.
But including motor vehicles, the decline was the steepest since a 3.2 percent drop in the third quarter of 1982 during the depths of the last recession.
Some analysts said the revised figure was consistent with their belief the recession would be short and mild, and sets the stage for a slower downturn in the current quarter.
"The economy is not going to fall over the cliff. This is not 1929," said Robert G. Dederick, an economist with the Northern Trust Co. in Chicago. He said the GNP changes, combined with other recent economic reports, suggest "a conventional recession of the mild variety."
A recession generally is defined as two consecutive quarterly declines in the GNP. The GNP last declined from April through June 1986, but that 1.8 percent contraction did not extend into a second quarter and thus did not qualify as the beginning of a recession.
The Bush administration and some economists say the current recession will last just two quarters and begin growing slowly this spring. Others, like Sinai, contend the contraction will last until midsummer. Most analysts say a rebound in consumer spending is essential to any recovery.
Reflecting consumer sluggishness was an 18.5 percent plunge in housing, a weakness that continues into the current quarter.
Business investments in equipment were better than first thought, increasing by 4.2 percent rather than falling 0.7 percent.
Another source of strength in the fourth quarter was government spending, which increased 4.2 percent, including a 5.3 percent advance by state and local governments.
The economy had risen 1.7 percent at an annual rate in the first quarter, slowed to 0.4 percent in the second and then picked up to 1.4 percent in the third.
by CNB