The U.S. economy, propelled by hardy consumer
spending, surged ahead at a breakneck 6.9 percent annual rate
during the final three months of 1999 the strongest pace in more
than three years.
The Commerce Department reported Friday that the big advance in
the gross domestic product the total output of goods and services
was even stronger than the sizzling 5.8 percent fourth-quarter
rate the government previously estimated one month ago.
Friday's revised estimate matched a 6.9 percent growth spurt
posted in the second quarter of 1996 and has not been exceeded
since a 7.2 percent rate of increase in the fourth quarter of 1987.
The revised fourth-quarter estimate shows the economy growing at
a more robust pace than many analysts were predicting. They
estimated that the economy could grow at rates anywhere from 6.3
percent to 6.8 percent.
With investors expecting supercharged growth, the bond market
showed little reaction after the report's release. Bond prices were
largely unchanged as the yields on 30-year Treasurys nudged up to
6.14 percent in early trading from 6.13 percent late Thursday.
The economy's fourth quarter growth sprinted past the 5.7
percent rate of increase recorded in the third quarter of 1999.
A number of factors contributed to the fourth-quarter's
performance: robust consumer and government spending and a strong
buildup in inventories held by businesses added to growth, while
the swelling U.S. trade deficit continued to subtract from it.
The Federal Reserve has bumped up interest rates four times
since June to slow the red-hot economy and keep inflation under
Many economists widely expect the central bank will boost rates
again on March 21 given that the economy continues to grow faster
than the Fed's preferred speed limit in the 3 percent range. That's
believed to be the growth rate that can be sustained without
An inflation gauge tied to GDP rose at an annual rate of 2.5
percent in the fourth quarter, the same as previously estimated and
slightly higher than the 1.8 percent rate in the third quarter.
Fed Chairman Alan Greenspan told Congress last week that the
central bank favors this gauge, called the personal consumption
expenditure chain-type price index.
The booming U.S. economy has been powered by consumer spending,
which accounts for two-thirds of all economic activity.
The government said Friday that consumer spending rose at an
annual rate of 5.9 percent in the fourth quarter, stronger than
previously thought and more brisk than the 4.9 percent rate posted
in the previous quarter.
Plentiful jobs, stock market gains and rising incomes have made
Americans feel wealthy and put them in the mood to spend.
All that spending pulled the nation's savings rate savings as
a percentage of disposable income to a record quarterly low of
1.8 percent in the fourth quarter, slightly lower than previously
estimated and a worse showing on savings than the 2.1 percent rate
in the third quarter.
Businesses, confident that consumers will keep spending,
increased their stockpiles to $68.7 billion, higher than originally
estimated and up from $38 billion in the third quarter.
And, business investment spending on new equipment and plants
rose at an annual rate of 2.5 percent, the same as previously
thought, but down from the 10.9 percent rate in the third quarter.
Government spending grew by a brisk 9.2 percent in the fourth
quarter, slightly larger than first estimated and higher than the
4.5 percent rate in the third quarter.
The U.S. trade deficit continued to be a drag on economic
growth. Imports grew at a 10 percent rate in the fourth quarter,
down from a 14.9 percent rate in the third quarter. Exports rose at
a 8.7 percent rate, stronger than previously estimated, but down
from a 11.5 percent rate posted in the third quarter.
Even though overseas' demand for U.S. products is picking up,
U.S. manufacturers continue to feel the lingering effects of the
global financial crisis that struck in 1997 and severely depressed
foreign demand for U.S. goods.
All the changes show the economy growing at an annual rate of
$150.3 billion in the fourth quarter of 1999, pushing the country's
total output of goods and services to $9.05 trillion, after
adjusting for inflation.