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GDP revised downward
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February 27, 1998: 9:03 a.m. ET
Gross domestic product and inflation indicator both held back by revision
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NEW YORK (CNNfn) - The U.S. gross domestic product for the fourth quarter was revised downward Friday, but still indicated robust growth in the nation's economy.
The U.S. Commerce Department revised its fourth quarter GDP figures down to an increase of 3.9 percent from the initial 4.3 percent gain released earlier. That revision was slightly less drastic than the 3.6 percent figure predicted by economists.
The gross domestic product figure calculates the value of all goods and services produced in the United States and is the broadest measure of national economic activity.
The adjustment to the fourth quarter figures did not affect the overall GDP for 1997, which stood at 3.8 percent to $7.19 trillion, a nine-year high for the GDP.
The implicit price deflator -- a main indicator of underlying inflationary pressures -- was revised lower to a gain of 1.4 percent during the fourth quarter from the initial figure of a 1.5 percent gain.
The GDP price index, a measure of price changes also used in the inflation equation, also was revised to a 1.4 percent increase from 1.5 percent.
The Commerce Department said the revisions were the result of a rise in imports and shrinking government spending and investment. Imports increased at a 6.4 percent rate in the fourth quarter, up from its 1.3 percent initial estimate. Federal government spending and investment dropped 2.1 percent in the quarter.
The revisions took the edge off an initially strong GDP report, which could have touched off warning bells at the Federal Reserve and led them to mull an interest rate increase.
However, Bruce Bartlett, an economist at the National Center for Policy Analysis, said that lower revisions for both growth and inflationary indicators may have lessened that effect. "I think from the Fed's point of view, these numbers are looking pretty good," adding that the figures pave the way for an easing of interest rates somewhere down the road.
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