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To: Les H who wrote (38386)	1/28/2000 3:16:00 PM
From: Les H	Read Replies (3) \| Respond to of 99985

US 4Q REAL GDP SURPRISES AT +5.8%,CONSPTN & FED GOV SPDG JUMP --Real Final Sales +4.6% vs +4.5% in 3Q; Economy Still Strong --Inventories +$65.4 Bln; Computer Spending Slows --Main Assumptions: Higher Dec Trade Gap, More Aircraft Shipments --Prices Rise, With GDP Deflator +2.0% vs +1.1%; PCE Deflator +2.5% By Joseph Plocek WASHINGTON (MktNews) - Capping a year of stellar performance for which President Clinton took credit in Thursday's annual State of the Union address, U.S. real GDP posted a huge 5.8% gain in 4Q, exceeding most private estimates which centered on +5.3%. The 4Q growth rate was above the +5.7% posted in 3Q, showing the economy is still robust. For the full year 1999, real GDP was up 4.2% on a 4Q to 4Q basis. This is only slightly below the +4.6% in 1998. Robust growth came at the cost of slightly higher inflation. The price deflators all moved higher in 4Q, showing the effects of oil price hikes and higher consumer prices elsewhere. The GDP deflator was up 2.0%, compared with +1.1% in 3Q, and the PCE deflator --recently mentioned by Federal Reserve Chairman Greenspan as his favored comprehensive inflation measure -- was up 2.5% compared with +1.8% in 3Q. Real final sales jumped 4.6% in 4Q, versus +4.5% in 3Q, reflecting higher consumer and federal government spending. Real personal consumption was up 5.3% in 4Q and federal government consumption and investment was up 16.0%. The rise in private consumption reflected higher spending on autos and furnishings. The gain in federal government expenditures was due to defense. Nothing in the report shows how much of the robust economy is due to Y2K, which is a main concern to policy makers. But with consumption up 5.3% it is likely a lot of the 4Q strength is due to underlying momentum. Inventories were up $65.4 billion in 4Q after rising $38.0 billion in 3Q. The change in business inventories added 1.18 percentage points to 4Q real GDP after adding 1.09 points to 3Q. It is possible that rising inventories simply reflect the high level of demand. But real nonresidential fixed investment slowed as Y2K approached, reflecting slower spending on computer fixes. Nonresidential fixed investment was up 2.5% after rising 10.9% in 3Q. Equipment and software spending rose 4.9%, down from a 15.7% gain in 3Q. The Commerce Department assumed higher aircraft shipments, smaller nonauto inventories, less construction, and a larger trade gap in December. The average revision from the advance estimate to the second estimate of GDP is 0.6 point without regard to sign.