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GDP revised down for 1Q
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May 27, 1999: 11:18 a.m. ET
Restated 4.1% growth rate still considered strong, but below forecasts
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NEW YORK (CNNfn) - U.S. economic growth was a bit slower than originally thought in the first quarter but still came in at a solid 4.1 percent annual rate, boosted by the strongest consumer spending in 11 years.
The revised gross domestic product -- the broadest measure of the nation's economy -- was below both the preliminary 4.5 percent growth rate announced by Commerce Department officials last month and the 4.3 percent consensus of analysts surveyed by Reuters.
GDP growth in the fourth quarter of 1998 was at a 6 percent annual rate, its highest since the second quarter of 1996.
Markets yawn, analysts debate rates
The revised first-quarter figure left many analysts encouraged with the $8.8 trillion U.S. economy's continued expansion, although most predict GDP growth will slow as the year wears on.
Still, the GDP's downward revision did little to dispel the market's inflation fears. In mid-morning trading, the Dow Jones industrial average was down 130.06 to 10,572.10 while the benchmark 30-year bond slipped 6/32, pushing the yield up to 5.81 percent. The bond closed Wednesday with a yield of 5.80 percent.
Commerce officials reported the first-quarter price deflator, a key indicator of inflation, was unchanged at 1.4 percent, in line with analysts' forecasts. But analysts remained split as to what the Federal Reserve might ultimately do with interest rates.
"As it stands right now, we're looking down to about 2.5 percent [GDP growth] in the second quarter and third quarter, which is perfect for what the Fed would want," said Richard Yamarone, senior economist with Argus Research. "That would really play into them well and certainly avoid any rate hike."
But Stephan Roach, chief economist with Morgan Stanley Dean Witter, disagreed. "The economy is violating any semblance of what we think is its inflation-stable speed limit," he said. "So inflation is coming. [The Fed's] got to take rates back to the levels that were prevailing before [last fall's] crisis."
Consumption, corporate profits soar
Revised personal consumption totals climbed a sizzling 6.8 percent, the highest rate since a 7.2 percent increase in the first quarter of 1988, the Commerce Department said.
Corporate profits also climbed at a revised after-tax rate of 4.3 percent, its biggest gain since soaring 7.9 percent in the first quarter of 1995.
Meanwhile, net exports of goods and services fell a revised 6.8 percent, well off the 19.7 percent gain posted during the fourth quarter of 1998, while imports rose to a revised growth rate of 14.2 percent, up from 12.0 percent the quarter before.
The revised first-quarter U.S. savings rate was down 0.6 percent, compared with the 0.5 percent decline reported last month.
Prices grew slightly faster than previously expected in the first quarter, with the GDP price index measure accelerating to a 1.5 percent annual rate of rise rather than the 1.4 percent previously estimated. The index posted a smaller 0.8 percent gain in the fourth quarter last year. 
-- from staff and wire reports
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Commerce Department
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