BUSINESS SITUATION.

Larkins, Daniel ; Morris, Ralph W. ; Argueta, Jennifer S. 等

THE pace of economic activity slowed a little more in the fourth quarter of 2000 than had previously been estimated. According to the "preliminary" estimates of the national income and product accounts (NIPA's),

* Real gross domestic product (GDP)--a measure of domestic production of goods and services--increased 1.1 percent in the fourth quarter, 0.3 percentage point less than was shown in last month's "advance" estimate. GDP had increased 2.2 percent in the third quarter and 5.6 percent in the second (chart 1 and table 1).(1)

[GRAPH OMITTED]

Table 1.--Real Gross Domestic Product, Real Gross Domestic Purchases,
and Real Final Sales to Domestic Purchasers

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from preceding
 Level quarter

 2000 2000

 IV I II III IV

Gross domestic product 9,394.2 107.7 127.1 50.6 24.7

Less: Exports of goods
 and services 1,140.7 16.4 37.0 37.0 -18.1
Plus: Imports of goods
 and services 1,583.6 40.8 63.5 61.2 -2.8

Equals: Gross domestic
purchases 9,804.9 129.5 150.7 71.7 38.9

Less: Change in private
 inventories 59.5 -44.3 42.0 -6.1 -13.0
 Nonfarm 54.4 -40.0 39.3 -4.9 -13.0
 Farm 5.2 -4.3 2.6 -1.2 .2

Equals: Final sales to
domestic purchasers 9,737.0 169.5 110.6 76.8 49.7

 Personal consumption
 expenditures 6,373.7 112.5 47.1 69.2 43.9
 Durable goods 896.7 46.4 -11.5 16.5 -6.5
 Nondurable goods 1,886.4 26.7 16.3 21.5 3.8
 Services 3,603.3 44.2 39.5 32.6 44.0
 Private fixed
 investment 1,785.5 64.3 46.7 13.7 -5.8
 Nonresidential 1,436.5 63.5 47.2 26.3 -2.3
 Structures 292.7 13.4 3.0 9.6 6.1
 Equipment and
 software 1,152.1 50.3 46.2 15.8 -10.3
 Residential 359.1 2.9 1.2 -10.3 -3.2
 Government consumption
 expenditures and
 gross investment 1,588.9 -4.4 18.6 -5.5 10.7
 Federal 550.8 -21.0 21.7 -13.0 5.0
 National defense 353.6 -19.4 13.6 -8.9 7.4
 Nondefense 197.1 -1.7 8.2 -4.2 -2.3
 State and local 1,037.5 16.2 -2.8 7.3 5.6

Addendum: Final sales
of domestic product 9,326.6 147.5 87.3 55.6 35.7

 Percent change from
 preceding quarter

 2000

 I II III IV

Gross domestic product 4.8 5.6 2.2 1.1

Less: Exports of goods
 and services 6.3 14.3 13.9 -6.1
Plus: Imports of goods
 and services 12.0 18.6 17.0 -.7

Equals: Gross domestic
purchases 5.6 6.5 3.0 1.6

Less: Change in private
 inventories ..... ..... ..... .....
 Nonfarm ..... ..... ..... .....
 Farm ..... ..... ..... .....

Equals: Final sales to
domestic purchasers 7.5 4.7 3.2 2.1

 Personal consumption
 expenditures 7.6 3.1 4.5 2.8
 Durable goods 23.6 -5.0 7.6 -2.8
 Nondurable goods 6.0 3.6 4.7 .8
 Services 5.2 4.6 3.7 5.0
 Private fixed
 investment 16.4 11.2 3.1 -1.3
 Nonresidential 21.0 14.6 7.7 -.6
 Structures 22.3 4.4 14.1 8.8
 Equipment and
 software 20.6 17.9 5.6 -3.5
 Residential 3.2 1.3 -10.6 -3.4
 Government consumption
 expenditures and
 gross investment -1.1 4.8 -1.4 2.7
 Federal -14.2 17.2 -9.0 3.7
 National defense -19.8 16.9 -9.7 8.8
 Nondefense -3.3 17.8 -7.9 -4.6
 State and local 6.6 -1.1 2.9 2.2

Addendum: Final sales
of domestic product 6.7 3.9 2.4 1.5

NOTE.--Chained (1996) dollar series are calculated as the product of
the chain-type quantity index and the 1996 current-dollar value of
the corresponding series, divided by 100. Because the formula for the
chain-type quantity indexes uses weights of more than one period, the
corresponding chained-dollar estimates usually are not additive.
Chained (1996) dollar levels and residuals, which measure the extent
of nonadditivily in each table, are shown in NIPA tables 1.2, 1.4,
and 1.6. Percent changes are calculated from unfounded data. Percent
changes in major aggregates are shown in NIPA table S.1. (See
"Selected NIPA Tables," which begins on page D-2 in this issue.)

* Gross domestic purchases--a measure of domestic demand for goods and services regardless of where they were produced--was also revised down 0.3 percentage point, to 1.6 percent. Gross domestic purchases had increased 3.0 percent in the third quarter and 6.5 percent in the second.

As discussed at the end of this article, these revisions reflect the incorporation of revised and newly available source data.

Because the NIPA revisions were relatively small, the overall picture of the economy in the preliminary estimates is quite similar to that in the advance estimates:

* Fourth-quarter GDP growth was the lowest since the second quarter of 1995, when growth was 0.8 percent. On average over the current expansion, which began in the second quarter of 1991, GDP has increased at an annual rate of 3.6 percent.

* The major contributors to the fourth-quarter increase in real GDP were consumer spending and government spending (table 2).(2) The major contributors to the third-quarter increase were consumer spending, exports, and nonresidential fixed investment.

Table 2.--Contributions to Percent Change in Real Gross
Domestic Product

[Seasonally adjusted at annual rates]

 2000

 I II III IV
Percent change at annual rate:
 Gross domestic product 4.8 5.6 2.2 1.1

Percentage points at annual rates:
 Personal consumption expenditures 5.03 2.14 2.99 1.88
 Durable goods 1.79 -.42 .61 -.23
 Nondurable goods 1.19 .74 .93 .16
 Services 2.04 1.83 1.46 1.95
 Gross private domestic
 investment .92 3.66 .33 -.69
 Fixed investment 2.68 1.93 .55 -.23
 Nonresidential 2.54 1.87 1.02 -.09
 Structures .63 .14 .44 .28
 Equipment and software 1.91 1.73 .58 -.37
 Residential .14 .06 -.47 -.14
 Change in private inventories -1.76 1.73 -.22 -.46
 Net exports of goods and
 services -.94 -1.00 -.90 -.59
 Exports .67 1.48 1.45 -.70
 Goods .46 1.37 1.54 -.71
 Services .21 .11 -.09 .01
 Imports -1.61 -2.48 -2.35 .11
 Goods -1.28 -2.26 -1.90 .21
 Services -.33 -.22 -.44 -.10
 Government consumption
 expenditures and gross
 investment -.18 .85 -.24 .47
 Federal -.93 .97 -.57 .22
 National defense -.86 .60 -.38 .32
 Nondefense -.07 .37 -.18 -.10
 State and local .75 -.12 .33 .25

NOTE.--More detailed contributions to percent change in real gross
domestic product are shown in NIPA table 8.2. Contributions to
percent change in major components of real gross domestic product
are shown in tables 8.3 through 8.6.

* The production of goods decreased 2.8 percent in the fourth quarter, while production of services and structures increased 3.8 percent and 2.0 percent, respectively (table 3). The drop in goods production was the first decrease in 2 1/2 years and the largest of its five decreases during the current expansion. (Over the expansion, goods production has increased at an average annual rate of 5.1 percent.)

Table 3.--Real Gross Domestic Product by Type of Product

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Level Change from preceding quarter

 2000 2000

 IV I II III IV

Gross domestic product 9,394.2 107.7 127.1 50.6 24.7

 Goods 3,830.6 57.5 76.9 39.0 -27.2
 Services 4,777.6 28.3 59.5 14.8 44.0
 Structures 801.6 23.0 -6.1 -1.2 4.0

Addenda:
 Motor vehicle output 319.9 .3 -4.1 -16.1 -19.2
 Gross domestic product
 less motor vehicle
 output 9,072.9 107.2 130.6 65.5 43.1

 Final sales of computers ..... ..... ..... ..... .....
 Gross domestic product
 less final sales of
 computers ..... ..... ..... ..... .....

 Percent change from preceding
 quarter

 2000

 I II III IV

Gross domestic product 4.8 5.6 2.2 1.1

 Goods 6.4 6.5 4.1 -2.8
 Services 2.5 5.2 1.3 3.8
 Structures 12.3 -3.0 -.6 2.0

Addenda:
 Motor vehicle output .3 -4.5 -16.9 -20.8
 Gross domestic product
 less motor vehicle
 output 5.0 6.0 3.0 1.9

 Final sales of computers 76.2 55.4 40.6 18.6
 Gross domestic product
 less final sales of
 computers 4.3 5.2 1.8 .9

NOTE.--See note to table 1 for an explanation of chained (1996) dollar
series. Chained (1996) dollar levels and residuals for most items are
shown in NIPA table 1.4.

* The fourth-quarter deceleration in GDP growth reflected downturns in exports and nonresidential fixed investment and a slowdown in consumer spending. The third-quarter deceleration had reflected downturns in inventory investment and government spending and a slowdown in nonresidential fixed investment.(3)

* Real motor vehicle output decreased sharply in the third and fourth quarters, and real final sales of computers slowed sharply in the fourth quarter after slowing moderately in the third (table 3). However, GDP decelerated in both quarters even if these components are excluded.

* Gross domestic purchases decelerated a little more than GDP.(4) (In the last 8 quarters and in 15 of the last 16 quarters, gross domestic purchases increased more than GDP.)

* Real disposable personal income increased 0.6 percent in the fourth quarter after increasing 2.6 percent in the third and 3.7 percent in the second. The slowdown in the fourth quarter largely reflected the pattern of Federal farm subsidy payments (see last month's "Business Situation").

* The personal saving rate fell to -0.8 percent, the lowest since 1946 (the first year for which quarterly estimates were prepared).(5) The third-quarter rate was -0.2 percent. A negative saving rate indicates that outlays are being financed by the sale of assets, by borrowing, or by using savings from previous periods. As pointed out in last month's "Business Situation," the negative saving is not surprising in light of the large gains in household wealth and the increased willingness of consumers to finance outlays with debt.

Personal Consumption Expenditures

Consumer spending slowed in the fourth quarter Real personal consumption expenditures (PCE) increased 2.8 percent after increasing 4.5 percent in the third quarter (table 4 and chart 2). Over the current expansion, PCE has increased at an average annual rate of 3.8 percent. The fourth-quarter slowdown reflected a downturn in durable goods and a deceleration in nondurable goods. In contrast, services stepped up.

[GRAPH OMITTED]

Table 4.--Real Personal Consumption Expenditures

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from preceding
 Level quarter

 2000 2000

 IV I II III IV

Personal consumption
expenditures 6,373.7 112.5 47.1 69.2 43.9

 Durable goods 896.7 46.4 -11.5 16.5 -6.5
 Motor vehicles
 and parts 332.3 20.9 -15.9 8.1 -9.7
 Of which:
 New autos 98.1 5.6 -3.7 -4.0 -3.2
 New light
 trucks 103.9 10.3 -7.8 7.0 -3.7
 Furniture and
 household
 equipment 390.8 15.9 5.2 7.9 3.6
 Other 178.6 9.1 1.0 2.6 1.0

 Nondurable goods 1,886.4 26.7 18.3 21.5 3.8
 Food 881.3 6.2 4.3 2.6 2.2
 Clothing and
 shoes 349.9 15.6 4.6 7.9 -.3
 Gasoline, fuel
 oil, and other
 energy goods 149.2 -5.7 1.7 2.0 -.3
 Other 508.1 11.9 5.9 9.4 2.2

 Services 3,603.3 44.2 39.5 32.6 44.0
 Housing 856.8 4.9 5.6 4.7 5.1
 Household
 operation 380.4 5.4 10.1 .4 5.2
 Electricity
 and gas 138.6 2.3 6.5 -2.6 4.7
 Other household
 operation 241.4 3.2 3.7 3.0 .3
 Transportation 252.4 2.5 2.4 .9 1.6
 Medical care 916.5 4.8 6.4 5.3 7.4
 Recreation 242.4 5.1 4.9 4.5 5.7
 Other 953.2 21.3 10.6 16.3 18.9

 Percent change from preceding
 quarter

 2000

 I II III IV

Personal consumption
expenditures 7.6 3.1 4.5 2.8

 Durable goods 23.6 -5.0 7.6 -2.8
 Motor vehicles
 and parts 27.7 -18.9 7.5 -10.9
 Of which:
 New autos 23.6 -13.0 -14.4 -11.9
 New light
 trucks 49.2 -25.7 30.7 -13.1
 Furniture and
 household
 equipment 19.1 5.6 8.6 3.7
 Other 24.1 2.3 6.1 2.3

 Nondurable goods 6.0 3.6 4.7 .8
 Food 2.9 2.0 1.2 1.0
 Clothing and
 shoes 20.9 5.6 9.5 -.4
 Gasoline, fuel
 oil, and other
 energy goods -14.0 4.5 5.7 -.7
 Other 10.3 4.9 7.8 1.7

 Services 5.2 4.6 3.7 5.0
 Housing 2.4 2.7 2.3 2.4
 Household
 operation 6.1 11.6 .4 5.7
 Electricity
 and gas 7.2 21.4 -7.4 14.9
 Other household
 operation 5.6 6.4 5.2 .5
 Transportation 4.2 3.9 1.5 2.5
 Medical care 2.1 2.9 2.4 3.3
 Recreation 9.6 9.0 7.9 10.1
 Other 9.9 4.8 7.3 8.3

NOTE.--See note to table 1 for an explanation of chained (1996) dollar
series. Chained (1996) dollar levels and residuals are shown in NIPA
tables 2.3 and 8.9B (motor vehicles). Percent changes in major
aggregates are shown in NIPA table S.1.

Expenditures for durable goods decreased 2.8 percent after increasing 7.6 percent. Motor vehicles and parts turned down, primarily reflecting a downturn in light trucks. Furniture and household equipment and "other" durable goods increased substantially less than in the third quarter.(6)

Expenditures for nondurable goods slowed to a 0.8-percent increase after a 4.7-percent increase. Clothing and shoes turned down, and "other" nondurable goods increased much less than in the third quarter.(7)

Expenditures for services increased 5.0 percent after increasing 3.7 percent. Electricity and gas turned up, reflecting a colder-than-usual fourth quarter after a milder-than-usual third quarter. Each of the other categories of services increased more than in the third quarter.

Factors frequently considered in analyses of consumer spending have turned somewhat less favorable in recent quarters (chart 3). Real disposable personal income slowed in both the third and fourth quarters. The Index of Consumer Sentiment (prepared by the University of Michigan's Survey Research Center) decelerated for the third consecutive quarter. Household wealth was adversely affected by the recent decline in equity prices. The unemployment rate remained flat in the fourth quarter, at 4.0 percent.

[GRAPH OMITTED]

Private Fixed Investment

In the fourth quarter, fixed investment fell for the first time in 5 1/2 years. Real private fixed investment decreased 1.3 percent after increasing 3.1 percent in the third quarter (table 5 and chart 4). Nonresidential investment decreased a little after increasing; residential investment decreased less than in the third quarter.

[GRAPH OMITTED]

Table 5.--Real Private Fixed Investment

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from preceding
 Level quarter

 2000 2000

 IV I II III IV

Private fixed investment 1,785.5 64.3 46.7 13.7 -5.8

 Nonresidential 1,436.5 63.5 47.2 26.3 -2.3
 Structures 292.7 13.4 3.0 9.6 6.1
 Nonresidential
 buildings,
 including farm 205.7 11.4 3.0 3.2 3.0
 Utilities 47.5 .9 -2.1 2.8 1.9
 Mining exploration,
 shafts, and wells 31.9 1.5 2.3 2.1 1.4
 Other structures 7.9 -.6 -.4 1.6 -.2

 Equipment and software 1,152.1 50.3 46.2 15.8 -10.3
 Information
 processing
 equipment and
 software 713.4 41.5 39.7 26.5 17.8
 Computers and
 peripheral
 equipment(1) 331.0 20.3 33.2 27.0 6.7
 Software(2) 241.1 9.7 9.5 9.8 6.8
 Other 202.3 15.7 9.3 .9 4.8
 Industrial equipment 166.4 6.1 5.1 3.4 -1.0
 Transportation
 equipment 171.1 1.4 1.9 -8.6 -19.5
 Of which: Motor
 vehicles 135.7 4.4 -8.0 -4.4 -18.7
 Other 137.9 5.2 3.4 -1.1 -2.4

 Residential 359.1 2.9 1.2 -10.3 -3.2
 Structures 349.4 2.6 1.1 -10.3 -3.2
 Single-family 183.9 7.0 -2.3 -8.6 -1.0
 Multifamily 22.1 .8 -.2 -1.8 .3
 Other structures(3) 143.4 -5.5 3.7 .3 -2.6
 Equipment 9.9 .4 0 .1 .1

 Percent change from preceding
 quarter

 2000

 I II III IV

Private fixed investment 16.4 11.2 3.1 -1.3

 Nonresidential 21.0 14.6 7.7 -.6
 Structures 22.3 4.4 14.6 8.8
 Nonresidential
 buildings,
 including farm 27.1 6.2 6.6 6.0
 Utilities 8.6 -17.4 28.6 17.8
 Mining exploration,
 shafts, and wells 27.0 40.9 33.3 19.7
 Other structures -27.2 -24.3 147.1 -8.0
 Equipment and software 20.6 17.9 5.6 -3.5
 Information
 processing
 equipment and
 software 31.4 27.7 16.8 10.7
 Computers and
 peripheral
 equipment(1) 37.8 60.5 41.6 8.6
 Software(2) 20.3 18.9 18.6 12.2
 Other 41.9 21.4 1.7 10.1
 Industrial equipment 16.9 13.5 8.5 -2.3
 Transportation
 equipment 2.9 3.9 -16.1 -35.1
 Of which: Motor
 vehicles 11.4 -17.8 -10.6 -40.4
 Other 16.6 10.2 -3.3 -6.7
 Residential 3.2 1.3 -10.6 -3.4
 Structures 2.9 1.3 -10.9 -3.6
 Single-family 15.6 -4.5 -16.7 -2.2
 Multifamily 14.7 -2.5 -27.7 7.1
 Other structures(3) -13.9 10.6 .9 -7.0
 Equipment 16.4 1.9 1.2 4.6

(1.) Includes new computers and peripheral equipment only.

(2.) Excludes software "embedded," or bundled, in computers
and other equipment.

(3.) Other structures includes home improvements, new manufactured
home sales, brokers' commissions on home sales, net purchases of used
structures, and other residential structures (which consists primarily
of dormitories and of fraternity and sorority houses).

NOTE.--See note to table 1 for an explanation of chained (1996) dollar
series. Chained (1996) dollar levels and residuals are shown in NIPA
tables 5.5 and 8.9B (motor vehicles). Percent changes in major
aggregates are shown in NIPA table S.1.

Nonresidential fixed investment.--Real private nonresidential fixed investment decreased 0.6 percent after increasing 7.7 percent; the decrease was the first since the first quarter of 1992. Equipment and software turned down, and structures decelerated. All the components of equipment and software weakened. Computers slowed sharply, registering its smallest percentage increase in 7 years. Transportation equipment decreased twice as much as in the third quarter; the last time transportation equipment decreased a comparable amount was in the second quarter of 1995.

Several aspects of the investment climate have become less favorable in recent quarters. Real final sales of domestic product slowed in each of the past three quarters. Domestic corporate profits slowed in the first two quarters of 2000 and decreased in the third.(8) The capacity utilization rate edged down in the third quarter and dropped further in the fourth. One of the few bright spots was a decrease in long-term interest rates; for example, the yield on high-grade corporate bonds decreased from 7.85 percent in May to 7.21 percent in December (chart 5).

[GRAPH OMITTED]

Residential investment.--Real private residential investment decreased 3.4 percent after decreasing 10.6 percent. Single-family structures decreased much less than in the third quarter, and multifamily structures turned up. In contrast, "other" residential structures decreased after a small increase, largely reflecting a downturn in brokers' commissions on home sales.(9)

Inventory Investment

Inventories grew at a slower pace in the fourth quarter. Inventory accumulation stepped down to $59.5 billion from $72.5 billion (table 6 and chart 6).

[GRAPH OMITTED]

Table 6.--Real Change in Private Inventories

[Billions of chained (1996) dollars;
seasonally adjusted at annual rates]

 Level

 1999 2000

 IV I II III IV

Change in private inventories 80.9 36.6 78.6 72.5 59.5

 Farm 7.9 3.6 6.2 5.0 5.2

 Nonfarm 73.0 33.0 72.3 67.4 54.4
 Manufacturing 7.6 10.3 17.6 22.6 14.9
 Durable goods 3.3 6.5 11.3 15.4 19.0
 Nondurable goods 4.2 3.8 6.4 7.2 -3.4
 Wholesale trade 18.5 21.5 32.5 22.3 12.3
 Durable goods 15.2 17.3 23.8 10.6 7.7
 Nondurable goods 3.4 4.4 8.9 11.4 4.6
 Retail trade 41.7 -4.4 21.5 20.0 24.3
 Durable goods 27.7 -3.6 16.0 13.9 15.7
 Of which: Motor vehicle
 dealers 14.7 -6.4 9.7 10.5 8.2
 Nondurable goods 14.2 -.8 5.7 6.2 8.7
 Other 4.2 6.1 .9 2.8 2.8
 Durable goods 1.9 1.3 -1.5 .2 1.0
 Nondurable goods 2.2 4.8 2.5 2.6 1.8

Addenda:
 Motor vehicles 14.4 -2.0 14.7 6.4 9.7
 Autos 4.7 .4 2.3 8.9 5.7
 Trucks 9.1 -2.1 11.2 -1.8 4.0

 Change from preceding quarter

 2000

 I II III IV

Change in private inventories -44.3 42.0 -6.1 -13.0

 Farm -4.3 2.6 -1.2 .2

 Nonfarm -40.0 39.3 -4.9 -13.0
 Manufacturing 2.7 7.3 5.0 -7.7
 Durable goods 3.2 4.8 4.1 3.6
 Nondurable goods -.4 2.6 .8 -10.6
 Wholesale trade 3.0 11.0 -10.2 -10.0
 Durable goods 2.1 6.5 -13.2 -2.9
 Nondurable goods 1.0 4.5 2.5 -6.8
 Retail trade -46.1 25.9 -1.5 4.3
 Durable goods -31.3 19.6 -2.1 1.8
 Of which: Motor vehicle
 dealers -21.1 16.1 .8 -2.3
 Nondurable goods -15.0 6.5 .5 2.5
 Other 1.9 -5.2 1.9 0
 Durable goods -.6 -2.8 1.7 .8
 Nondurable goods 2.6 -2.3 .1 -.8

Addenda:
 Motor vehicles -16.4 16.7 -6.3 3.3
 Autos -4.3 1.9 6.6 -3.2
 Trucks -11.2 13.3 -13.0 5.8

NOTE. See note to table 1 for an explanation of chained (1996) dollar
series. Chained (1996) dollar levels and residuals are shown in NIPA
tables 5.11 and 8.9B (motor vehicles).

Real inventory investment--that is, change in private inventories--decreased $13.0 billion in the fourth quarter after decreasing $6.1 billion in the third. The fourth-quarter decrease in inventory investment was accounted for by wholesale trade and manufacturing. Inventory investment in retail trade increased.

Wholesale trade inventories increased $12.3 billion, about half as much as in the third quarter. Inventories of merchant wholesalers increased $9.4 billion after increasing $15.8 billion. The slowdown reflected downturns in inventories of professional and commercial equipment and of farm products that were only partly offset by an upturn in inventories of motor vehicles. Inventories of nonmerchant wholesalers increased $2.8 billion after increasing $6.3 billion; inventories of both durable and nondurable goods contributed to the slowdown.

Manufacturing inventories increased $14.9 billion after increasing $22.6 billion. The slowdown was more than accounted for by a downturn in inventories of nondurable-goods manufacturers: Inventories of chemical and allied products increased substantially less than in the third quarter, and inventories of printing and publishing, of paper, and of tobacco turned down.

Retail trade inventories increased $24.3 billion after increasing $20.0 billion; the step-up was partly accounted for by an upturn in inventories of furniture and furnishings.

Farm inventories increased $5.2 billion, about the same as in the third quarter. Crop inventories accounted for the increase in both quarters.

The ratio of real private nonfarm inventories to final sales of goods and structures increased to 3.66 from 3.61 (see NIPA table 5.13); despite the jump, the ratio remained low relative to its level over the current expansion. An inventory-sales ratio that includes all final sales of domestic businesses in its denominator presents a somewhat different picture; this ratio, which increased to 2.09 from 2.08, was a little below the middle of the range in which it has moved during the expansion.(10)

Exports and Imports

In the fourth quarter, exports decreased for the first time in almost 2 years, and imports decreased for the first time in almost 10 years. Real exports decreased 6.1 percent after increasing 13.9 percent in the third quarter (table 7 and chart 7). Real imports decreased 0.7 percent after increasing 17.0 percent (chart 8).

[GRAPHS OMITTED]

Table 7.--Real Exports and Imports of Goods and Services

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Change from preceding
 Level quarter

 2000 2000

 IV I II III IV

Exports of goods and services 1,140.7 16.4 37.0 37.0 -18.1
 Exports of goods(1) 855.1 11.6 35.4 40.7 -19.1
 Foods, feeds, and beverages 60.5 1.0 -.5 5.8 -4.2
 Industrial supplies and
 materials 173.3 1.3 3.7 8.1 -.2
 Capital goods, except
 automotive 406.4 2.8 34.3 20.8 -9.9
 Automotive vehicles,
 engines, and parts 76.4 2.6 -.4 .6 -2.4
 Consumer goods, except
 automotive 88.5 3.5 1.2 3.0 -2.3
 Other 51.5 .1 -1.7 3.2 -.7
 Exports of services(1) 289.3 4.8 2.5 -2.1 .4

Imports of goods and services 1,583.6 40.8 63.5 61.2 -2.8
 Imports of goods(1) 1,358.4 32.8 58.6 50.1 -5.6
 Foods, feeds, and beverages 50.6 -.1 1.5 2.3 -.5
 Industrial supplies and
 materials, except
 petroleum and products 166.4 2.0 -1.3 4.6 -3.6
 Petroleum and products 86.6 5.2 6.5 -1.1 -.5
 Capital goods, except
 automotive 485.9 13.9 33.7 27.4 4.9
 Automotive vehicles,
 engines, and parts 190.1 4.9 1.4 6.8 -8.7
 Consumer goods, except
 automotive 298.6 8.7 17.7 4.2 6.2
 Other 91.0 -2.0 2.0 10.0 -1.2
 Imports of services(1) 227.4 7.8 5.3 11.1 2.6

 Percent change from preceding
 quarter

 2000

 I II III IV

Exports of goods and services 6.3 14.3 13.9 -6.1
 Exports of goods(1) 6.0 19.0 21.0 -8.5
 Foods, feeds, and beverages 6.4 -3.3 45.7 -23.3
 Industrial supplies and
 materials 3.5 9.4 21.0 -.5
 Capital goods, except
 automotive 3.2 43.6 22.9 -9.2
 Automotive vehicles,
 engines, and parts 14.3 -2.1 3.2 -11.6
 Consumer goods, except
 automotive 17.9 5.7 14.8 -9.9
 Other .7 -12.5 28.2 -5.3
 Exports of services(1) 6.9 3.5 -2.8 .4

Imports of goods and services 12.0 18.6 17.0 -.7
 Imports of goods(1) 11.2 20.0 16.2 -1.6
 Foods, feeds, and beverages -.3 13.0 20.0 -4.0
 Industrial supplies and
 materials, except
 petroleum and products 4.9 -3.0 11.6 -8.3
 Petroleum and products 30.3 35.3 -4.9 -2.0
 Capital goods, except
 automotive 14.4 36.2 26.5 4.2
 Automotive vehicles,
 engines, and parts 11.1 3.1 14.9 -16.4
 Consumer goods, except
 automotive 13.9 28.9 5.9 8.8
 Other -9.2 10.0 56.7 -5.2
 Imports of services(1) 16.6 10.6 22.3 4.7

(1.) Exports and imports of certain goods, primarily military
equipment purchased and sold by the Federal Government, are
included in services.

NOTE.--See note to table 1 for an explanation of chained (1996)
dollar series. Chained (1996) dollar levels and residuals are
shown in NIPA table 4.4. Percent changes in major aggregates
are shown in NIPA table S.1.

The downturn in exports was more than accounted for by goods. All major end-use categories decreased in the fourth quarter after increasing in the third. The sharpest downturns were in nonautomotive capital goods, in foods, feeds, and beverages, and in industrial supplies and materials.

Exports of services increased a little after decreasing. Royalties and license fees turned up, and "other" private services decreased less than in the third quarter.(11)

Imports of goods decreased 1.6 percent. All major end-use categories contributed to the decrease except nonautomotive capital goods and nonautomotive consumer goods. The largest decreases were in autos and in industrial supplies and materials.

Imports of services increased 4.7 percent after jumping 22.3 percent. A downturn in royalties and license fees partly accounted for the deceleration; in the third quarter, license fees had been boosted by payments for the rights to broadcast the 2000 Summer Olympic Games.

Government Spending

Government spending continued its up-and-down pattern of recent quarters. Real spending increased 2.7 percent after decreasing 1.4 percent in the third quarter (table 8 and chart 9). Federal Government spending more than accounted for the upturn; State and local government spending slowed.

[GRAPH OMITTED]

Table 8.--Real Government Consumption Expenditures and Gross
Investment

[Seasonally adjusted at annual rates]

 Billions of chained (1996) dollars

 Level Change from preceding
 Level quarter

 2000 2000

 IV I II III IV

Government consumption
expenditures and gross
Investment(1) 1,588.9 -4.4 18.6 -5.5 10.7

 Federal 550.8 -21.0 21.7 -13.0 5.0
 National defense 353.6 -19.4 13.6 -8.9 7.4
 Consumption expenditures 291.9 -18.3 12.7 -7.9 1.4
 Gross investment 62.6 -.9 .7 -1.0 6.6
 Nondefense 197.1 -1.7 8.2 -4.2 -2.3
 Consumption expenditures 148.1 1.1 5.4 -3.5 -3.8
 Gross investment 50.1 -3.1 3.0 -.7 1.8

 State and local 1,037.5 16.2 -2.8 7.3 5.6
 Consumption expenditures 824.1 6.1 5.3 5.7 3.3
 Gross investment 213.7 10.3 -8.4 1.5 2.4

 Percent change from preceding
 quarter

 2000

 I II III IV

Government consumption
expenditures and gross
Investment(1) -1.1 4.8 -1.4 2.7

 Federal -14.2 17.2 -9.0 3.7
 National defense -19.8 16.9 -9.7 8.8
 Consumption expenditures -22.0 19.0 -10.1 1.9
 Gross investment -6.1 5.4 -7.0 55.7
 Nondefense -3.3 17.8 -7.9 -4.6
 Consumption expenditures 3.0 15.1 -8.6 -9.9
 Gross investment -22.4 27.7 -5.4 15.7

 State and local 6.6 -1.1 2.9 2.2
 Consumption expenditures 3.1 2.6 2.9 1.6
 Gross investment 21.3 -14.5 2.9 4.6

(1.) Gross government investment consist of general government and
government enterprise expenditures for fixed assets; inventory
investment is included in government consumption expenditures.

NOTE.--See note to table 1 for an explanation of chained (1996) dollar
series. Chained (1996) dollar levels and residuals are shown in NIPA
table 3.8. Percent changes in major aggregates are shown in NIPA
table S.1.

Federal defense spending increased 8.8 percent after decreasing 9.7 percent. Investment increased sharply after decreasing, reflecting an upturn in equipment and software. Consumption spending also increased after decreasing, reflecting an upturn in "other services."(12)

Federal nondefense spending decreased less than in the third quarter, reflecting an upturn in investment spending, primarily for equipment and software.

State and local government spending increased 2.2 percent after increasing 2.9 percent, reflecting a slowdown in consumption spending. A pickup in investment spending was attributable to structures.

Prices

Inflation remained moderate in the fourth quarter, as the prices of gross domestic purchases increased 1.8 percent, a little less than in the preceding two quarters (table 9 and chart 10). The small deceleration was accounted for by food and energy prices; excluding these items, prices of gross domestic purchases increased 1.5 percent, the same as in the third quarter.

[GRAPH OMITTED]

Table 9.--Percent Changes in Prices

[Annual rates; based on seasonally
adjusted index numbers (1996=100)]

 2000

 I II III IV

Gross domestic product 3.3 2.4 1.6 1.9

Less: Exports of goods and services 1.9 1.9 .7 .6
Plus: Imports of goods and services 5.6 .2 3.8 .3

Equals: Gross domestic purchases 3.8 2.1 2.0 1.8

Less: Change in private inventories ..... ..... ..... .....

Equals: Final sales to domestic
purchasers 3.8 2.1 2.0 1.8

 Personal consumption expenditures 3.5 2.1 1.8 1.9
 Durable goods -2.0 -.6 -2.3 -1.1
 Nondurable goods 5.4 3.3 2.2 2.0
 Services 3.7 2.0 2.5 2.5
 Private fixed investment 2.6 1.9 2.0 .7
 Nonresidential 1.8 1.6 1.8 -.1
 Structures 4.7 3.7 5.0 4.9
 Equipment and software .9 1.0 .8 -1.7
 Residential 5.2 2.6 2.7 3.7
 Government consumption expenditures
 and gross investment 6.4 2.7 2.9 2.7
 Federal 7.7 .6 2.6 1.4
 National defense 7.1 .8 2.9 1.3
 Nondefense 8.9 .4 2.1 1.7
 State and local 5.7 3.8 3.1 3.4

Addenda:
 Gross domestic purchases:
 Food 2.3 2.3 3.5 1.8
 Energy 37.7 11.2 11.1 10.2
 Less food and energy 2.8 1.7 1.5 1.5
 Personal consumption expenditures:
 Food 2.4 2.3 3.7 1.6
 Energy goods and services(1) 35.1 13.0 8.6 8.9
 Less food and energy 2.2 1.4 1.1 1.6

(1.) Consists of gasoline, fuel oil, and other energy goods and
of electricity and gas.

NOTE.--Percent changes in major aggregates are shown in NIPA table
8.1. Index numbers are shown in tables 7.1, 7.2, and 7.4.

Prices of PCE and of government spending increased about as much as in the third quarter. Prices of nonresidential fixed investment decreased slightly after three consecutive quarterly increases; the downturn was partly accounted for by software prices.

Revisions

In general, the revisions to the fourth-quarter estimates were small. The preliminary estimate of a 1.1-percent increase in real GDP in the fourth quarter is 0.3 percentage point lower than the advance estimate (table 10); for 1981-2000, the average revision, without regard to sign, from the advance estimate to the preliminary estimate was 0.5 percentage point.

Table 10.--Revisions to Change in Real Gross Domestic
Product and Prices, Fourth Quarter 2000

[Seasonally adjusted at annual rates]

 Percent change
 from preceding
 quarter

 Advance Preliminary
 estimate estimate

Gross domestic product 1.4 1.1

Less: Exports -4.3 -6.1
 Goods -6.0 -8.5
 Services .5 .4

Plus: Imports .5 -.7
 Goods -.4 -1.6
 Services 5.8 4.7

Equals: Gross domestic
purchases 1.9 1.6

Less: Change in private
 inventories ..... .....
 Farm ..... .....
 Nonfarm ..... .....

Equals: Final sales to
domestic purchasers 2.1 2.1

 Personal consumption
 expenditures 2.9 2.8
 Durable goods -3.4 -2.8
 Nondurable goods .8 .8
 Services 5.3 5.0

 Fixed investment -1.7 -1.3
 Nonresidential -1.5 -.6
 Structures 9.3 8.8
 Equipment and software -4.7 -3.5
 Residential -2.5 -3.4

 Government consumption
 expenditures and gross
 investment 2.9 2.7
 Federal 4.6 3.7
 National defense 10.2 8.8
 Nondefense -4.5 -4.6
 State and local 2.1 2.2

Addenda:
 Final sales of domestic
 product 1.6 1.5
 Gross domestic purchases
 price index 1.9 1.8
 GDP price index 2.1 1.9

 Preliminary estimate
 minus advance
 estimate

 Billions
 of chained
 Percentage (1996)
 points dollars

Gross domestic product -0.3 -7.3

Less: Exports -1.8 -5.5
 Goods -2.5 -5.7
 Services -.1 0

Plus: Imports -1.2 -4.8
 Goods -1.2 -4.2
 Services -1.1 -.5

Equals: Gross domestic
purchases -.3 -6.5

Less: Change in private
 inventories ..... -7.6
 Farm ..... .5
 Nonfarm ..... -8.0

Equals: Final sales to
domestic purchasers 0 0

 Personal consumption
 expenditures -.1 -.9
 Durable goods .6 1.2
 Nondurable goods 0 .1
 Services -.3 -2.0

 Fixed investment .4 1.8
 Nonresidential .9 2.9
 Structures -.5 -.4
 Equipment and software 1.2 3.5
 Residential -.9 -.9

 Government consumption
 expenditures and gross
 investment -.2 -.7
 Federal -.9 -1.1
 National defense -1.4 -1.1
 Nondefense -.1 0
 State and local .1 -.4

Addenda:
 Final sales of domestic
 product -.1 -.7
 Gross domestic purchases
 price index -.1 .....
 GDP price index -.2 .....

NOTE.--The preliminary estimates for the fourth quarter of 2000
incorporate the following revised or additional major source data
that were not available when the advance estimates were prepared.

Personal consumption expenditures: Retail sales for November and
December (revised), consumers' share of new-car purchases for
December, average unit value for domestic new autos for December
(revised), and consumers' share of new-track purchases for December.

Nonresidential fixed investment: Construction put-in-place for October
and November (revised) and December, manufacturers' shipments of
machinery and equipment for November and December (revised),
manufacturers' shipments or complete civilian aircraft for November
(revised) and December, and exports and imports of machinery and
equipment for November (revised) and December.

Residential fixed investment: Construction put-in-place for October
and November (revised) and December.

Change in private inventories: Manufacturing and trade inventories for
November (revised) and December.

Exports and Imports of goods and services: Exports and imports of goods
for November (revised) and December.

Government consumption expenditures and gross investment: Monthly
Treasury Statement detailed data for December, Department of Defense
detailed financial reports for the fourth quarter, and State and local
government construction put-in-place for October and November (revised)
and December.

Wages and salaries: Employment, average hourly earnings, and average
weekly hours for November and December (revised).

GDP prices: Detailed merchandise export and import price indexes for
October through December (revised), unit-value index for petroleum
imports for November (revised) and December, and housing prices for
the fourth quarter.

The major contributors to the 0.3-percentage point downward revision were change in private nonfarm inventories (which contributed -0.30 percentage point), exports (-0.21 percentage point), and PCE for services (-0.09 percentage point). The negative contributions of those components were partly offset by positive contributions from imports (0.18 percentage point) and from private nonresidential investment in equipment and software (0.13 percentage point).

The downward revision to private nonfarm inventory investment was mostly attributable to inventories of merchant wholesalers and primarily reflected the incorporation of newly available Census Bureau data on inventories for December and revised data for November.

The downward revisions to exports and imports mainly reflected the incorporation of newly available Census Bureau data on trade in goods for December and revised data for November.

The downward revision to PCE for services was more than accounted for by local and long-distance telephone services and reflected the incorporation of newly available data from company reports for the quarter.

The upward revision to private nonresidential investment in equipment and software reflected the incorporation of newly available Census Bureau data on aircraft shipments for December and revised data for November. It also reflected the incorporation of newly available data on imports of aircraft for December.

The preliminary estimate of a 0.7-percent increase in real disposable personal income (DPI) is 0.1 percentage point more than the advance estimate. The upward revision reflected a downward revision to the implicit price deflator for PCE, which is used to deflate current-dollar DPI. The increase in current-dollar DPI was revised down 0.1 percentage point, largely reflecting a small downward revision to personal income. The personal saving rate of -0.8 percent was unrevised.

(1.) Quarterly estimates in the NIPA's are expressed at seasonally adjusted annual rates. Quarter-to-quarter dollar changes are the differences between the published estimates. Quarter-to-quarter percent changes are annualized and are calculated from unrounded data unless otherwise specified.

Real estimates are calculated using a chain-type Fisher formula with annual weights for all years and quarterly weights for all quarters; real estimates are expressed both as index numbers (1996=100) and as chained (1996) dollars. Price indexes (1996=100) are also calculated using a chain-type Fisher formula.

(2.) In the NIPA's, consumer spending is shown as personal consumption expenditures, and government spending is shown as government consumption expenditures and gross investment.

(3.) In the NIPA's, inventory investment is measured as change in private inventories.

(4.) Gross domestic purchases is calculated as the sum of personal consumption expenditures, gross private domestic investment, and government consumption expenditures and gross investment; thus, gross domestic purchases includes imports of goods and services, which are subtracted in the calculation of GDP, and does not include exports of goods and services, which are added in the calculation of GDP.

(5.) The personal saving rate is measured as personal saving as a percentage of current-dollar DPI. The fourth-quarter estimate of the national saving rate (which is measured as gross saving as a percentage of gross national product) will be released at the end of March with the "final" estimate of fourth-quarter GDP.

(6.) "Other" durable goods includes jewelry and watches, ophthalmic products and orthopedic equipment, books and maps, bicycles and motorcycles, guns and sporting equipment, photographic equipment, boats, and pleasure aircraft.

(7.) "Other" nondurable goods includes tobacco, toilet articles, drug preparations and sundries, stationery and writing supplies, toys, film, flowers, cleaning preparations and paper products, semidurable house furnishings, and magazines and newspapers.

(8.) Fourth-quarter corporate profits will be released along with "final" estimates of fourth-quarter GDP at the end of March.

(9.) "Other" residential structures includes home improvements, new manufactured home sales, brokers' commissions on home sales, and other residential structures (which consists primarily of dormitories and of fraternity and sorority houses).

(10.) The ratio that includes all final sales of domestic businesses in the denominator suggests that the production of services results in a demand for inventories similar to that generated in the production of goods and structures. In contrast, the "goods and structures" ratio suggests that the production of services does not generate any demand for inventories. Both suggestions are extreme. In actuality, the production of some services may require substantial inventories, while production of other services may not.

(11.) "Other" private services includes education; financial services; telecommunications; insurance; and business, professional, and technical services.

(12.) "Other services" includes contractual research and development, installation support, weapons support, personnel support, transportation of material, and travel of persons.