GNP Estimate Cut to 1.3% Rate For 4th Quarter --- Economy's Weak Growth Reflects Less Investment In Business Inventories
WASHINGTON -- The Commerce Department trimmed its estimate of the economy's fourth-quarter growth rate to a sluggish 1.3% annual rate from the 1.7% reported earlier.</br></br>The weak fourth-quarter expansion in the real gross national product -- the inflation-adjusted value of the nation's output of goods and services -- followed growth at a 2.8% rate in the third quarter. For all of 1986, the economy grew at a 2.5% rate.</br></br>Several economists asserted that the new report suggests the economy is poised for a pick-up in growth. The revision occurred largely because the department found that nonfarm inventory investment was lower in the fourth quarter than originally reported.</br></br>"The story is the big decline in inventories and what that implies for the first quarter," said David Berson, senior economist at Wharton Econometric Forecasting Associates in Philadelphia, who predicted that businesses will rebuild inventories in the first quarter. He said Wharton is likely to boost its estimate of first-quarter growth to 3.2% from 3% as a result of the GNP revision.</br></br>Robert Dederick, chief economist at Northern Trust Co. in Chicago, said, "It seems to me that while the fourth quarter was less than expected we were better positioned as we headed into 1987." In addition to the inventory revision, he said, the new report showed that demand was stronger than indicated earlier.