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The business situation.

According to advance estimates of the national income and product accounts (NIPA'S), real gross domestic product (GDP) increased only 0.3 percent in the fourt quarter of 1991 after increasing 1.8 percent in the third quarter (chart 1). In the fourth quarter, increases in net exports of goods and services, residential invetment, and inventory investment (that is, change in business inventories) were almost offset by decreases in government purchases, personal consumption expenditures, and nonresidential fixed investment.

Real gross domestic purchases, which does not include net exports of goods and services, decreased 1.6 percent in the fourth quarter after increasing 3.4 percent in the third. (Fixed-weighted price indexes for the NIPA'S are not yet available; they will be released next month with the preliminary NIPA estimates for the fourth quarter).

Motor vehicle.--The motor vehicle industry weakened in the fourth quarter after strengthening in the two preceding quarters. Production and inventories declined, and sales were weak.

[TABULAR DATA OMITTED]

Real motor vehicle output declined 9.2 percent in the fourth quarter after increasing 26.9 percent in the third quarter and 48.7 percent in the second. Sales edged up 0.5 percent in the fourth quarter after a similarly small increase in the third quarter and a 12.8 percent increase in the second. (Auto output, sales, and inventories are presented in table 8.3 and 8.4 of the "Selected NIPA Tables," and truck output, sales, and inventories are presented in tables 8.5 and 8.6)

In units, domestic car production decreased 0.2 million, to 5.6 million, in the fourt quarter (seasonally adjusted annual rates). Domestic car sales also decreased 0.2 million, to 6.1 million. Sales of imported cars fell to 2.1 million, the lowest level since the second quarter of 1982, after changing little in the third quarter. Domestic car inventories edged down to 0.9 million at the end of the fourth quarter form 1.0 million at the end of the third. The inventory-sales ratio was unchanged at 1.8.

Truck sales decreased slightly, to 4.3 million units, in the fourt quarter; truck inventories increased for the second consecutive quarter.

Real GDP in 1991.--From 1990 to 1991, real GDP decreased 0.7 percent (table 1). All major components of GDP except net exports of goods and services and government purchases decreased. The weakness in GDP in 1991 was most pronounced in the first quarter. (A first-quarter increase in net exports reflected a sharp curtailment of imports; a first-quarter increase in government purchases reflected Operation Desert Storm.)

Personal consumption expenditures edged down from 1990 to 1991, as consumers curbed their outlays as a result of a rising unemployment rate and weakness in real disposable income.

* The unemployment rate increased from 5.5 percent to 6.7 percent.

* Real disposable personal income decreased 0.1 percent.

Similarly, business cut real fixed investment 6.6 percent in 1991, reflecting weak sales, excess capacity, and anemic profits.

* Real final sales of domestic product decreased 0.4 percent.

* The Federal Reserve Board's index of capacity utilization in manufacturing fell from 82.3 percent to 78.2 percent.

* Corporate profits are not yet available for the fourth quarter of 1991; however, in the first three quarters, they averaged 4.7 percent less than in 1990.

Personal income

Personal income increase $39.8 billion in the fourth quarter after increasing $32.2 billion in the third (table 2 chart 2). The pickup was more than accounted for by farm subsidy payments and transfer payments; the rest of personal income, in total, increased substantially less in the fourth quarter than in the third.

Federal farm subsidy payments increased $8.4 billion in the fourth quarter after decreasing $7.4 billion in the third. The increase reflected increases in Conservation Reserve Program payments and in deficiency payments (that is, payments made because the market price of a crop is, or is projected to be, below the Federal target price). Farm income excluding subsidies decreased in the third and fourth quarters; the decreases were due to lower prices for farm output.

Transfer payments increased $20.4 billion in the fourth quarter after increasing $12.2 billion in the third. Fourth-quarter transfer payments were boosted by several special factors: Restitution payments to Japanese-Americans interned during World War II, an increase in unemployment benefits as a result of the Emergency Unemployment Compensation program, cost-of-living adjustments to benefits under the Federal Food Stamps program, and retroactive payments to recent retirees, which resulted mainly from the recalculation of the earnings base underlying social security benefits.

Wage and salary disbursements increased $14.8 billion in the fourth quarter, $7.0 billion less than in the third. Private-sector wages and salaries were up less in the fourth quarter than in the third, despite $3.5 billion in bonus payments to

[tdo]

employees in the motor vehicle industry; the deceleration was attributable to a downswing in employment. Government wages and salaries were up slightly less in the fourth quarter than in the third.

Nonfarm proprietors' income increased about one-half as much as in the third quarter. Personal interest income decreased for the fourth consecutive quarter; the decreases reflected lower interest rates.

Rental income of persons decreased $1.0 billion in the fourth quarter after decreasing $2.5 billion in the third. In the fourth quarter, rental income was reduced by $2.2 billion in uninsured losses that resulted from the brush fire in Oakland, California, in October; such losses are treated as expenses in calculating rental income.

Personal tax and nontax payments increased $3.2 billion in the fourth quarter after increasing $1.5 billion in the third.

Disposable personal income (DPI) increased $36.5 billion, or 3.5 percent, in the fourth quarter after increasing $30.7 billion, or 3.0 percent, in the third. Real DPI increased to 0.5 percent after increasing 0.3 percent.

Personal outlays--largely personal consumption expenditures--increased less than DPI in the fourth quarter; thus, personal saving increased, by $18.7 billion. The personal saving rate rose 0.4 percentage point to 5.4 percent in the fourth quarter after falling 0.5 percentage point in the third.
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Title Annotation:fourth quarter 1991
Author:Larkins, Daniel; Moran, Larry R.; Morris, Ralph W.
Publication:Survey of Current Business
Date:Jan 1, 1992
Words:1032
Previous Article:U.S. international transactions, third quarter 1991.
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