Economic Activity – Brief Article

Economic Activity – Brief Article – Statistical Data Included

Economic Activity

Real GDP and Components, 2001:IIQ(a,b)

(Preliminary estimate)

Change, Percent change, last:

billions Four

of 1996 $ Quarter quarters

Real GDP 3.9 0.2 1.2

Personal consumption 39.0 2.5 3.2

Durables 16.0 7.1 5.9

Nondurables 1.9 0.4 1.9

Services 23.0 2.6 3.4

Business fixed

investment -53.3 -14.6 -2.0

Equipment -43.6 -15.1 -4.2

Structures -10.3 -13.4 4.8

Residential investment 5.2 5.7 0.4

Government spending 21.1 5.4 3.0

National defense 2.0 2.2 2.1

Net exports -6.0 — —

Exports -36.7 -12.2 -2.1

Imports -30.7 -7.7 -0.4

Change in business

inventories -11.3 — —


(a.) Chain-weighted data in billions of 1996 dollars.

(b.) Components of real GDP need not add to totals because current

dollar values are deflated at the most detailed level for which all

required data are available.

(c.) Blue Chip panel of economists.

NOTE: All data are seasonally adjusted and annualized.

SOURCES: U.S. Department of Commerce, Bureau of Economic Analysis

and Bureau of the Census; and Blue Chip Indicators, August 10, 2001.

The preliminary estimate for the national income and product accounts (NIPA) for 2001:IIQ, released on August 29, paints a gloomier picture than the advance estimate for the quarter. According to the preliminary estimate, real GDP growth was a rather anemic 0.2%, down from the earlier estimate of 0.7% (both figures are for the quarter, expressed at annual rates). This makes 2000:IIQ the weakest quarter since 1993. To the extent that there is good news, it is that the economy did not experience negative growth, and thus has not yet entered a recession.

One encouraging aspect of the latest release, and one reason that GDP growth held up as well as it did, was an upward revision to already strong consumer spending. Growth in spending on durables was revised up by more than one percentage point to 7.1%. Several factors may have contributed to the strength in consumer spending. First, after the tax bill was signed in early June, consumers may have begun spending their tax rebate checks before receiving them. Second, labor markets were still tight by historical standards, and workers may not yet have felt the effects of the slowing economy. Finally, consumers may have seen the weakness in output growth as largely transitory, anticipating that output growth would soon return to trend.

Offsetting strong consumer spending, preliminary estimates show that business spending was weak in 2001:IIQ. Firms continued to run down inventories and reduce information technology spending. Some of the drop in IT spending may be attributed to the lingering effects of Y2K. Many firms accelerated IT spending in anticipation of the beginning of 2000 and may not need to purchase as much equipment because many machines are still fairly new. In addition, some firms may be waiting for the release of Microsoft Windows XP (due in late October) before buying computer equipment.


As part of its annual revisions, in late July the Bureau of Economic Analysis released new NIPA estimates going back to 1998. These revisions provided ammunition for “New Economy” skeptics who doubt that the economy is on a new, higher growth path. The revisions for 2000 were particularly large. GDP growth for the year was revised down from 5% to 4.1%.

Productivity growth, measured as growth in GDP per hour worked, also was revised down from 4.2% to 3.1% for 2000. The larger downward revision in productivity growth than in GDP growth resulted from an upward revision in hours worked, based largely on data available from administrative records for employees covered by unemployment insurance. For 2000 as a whole, hours worked were revised up by about 0.25%.

The revision to business fixed investment also was sizeable. In 1998, its growth was revised down by 0.4 percentage point; in 1999 by 1.9 percentage points; and in 2000 by 2.7 percentage points. Personal income revisions indicate that the last three years were even more of a roller coaster than previous data had suggested. Its growth rate was revised up by 0.6 percentage point in 1998, down by 0.7 percentage point in 1999, and up by 0.6 percentage point in 2000.

COPYRIGHT 2001 Federal Reserve Bank of Cleveland

COPYRIGHT 2004 Gale Group