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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 1.4 percent in the second quarter of 1992 after increasing 2.9 percent in the first quarter (chart 1). Much of the slowdown was accounted for by structures (table 1). About two-fifths of the second-quarter increase was accounted for by motor vehicles. [TABULAR DATA OMITTED]

Real gross domestic purchases increased 2.6 percent in the second quarter after increasing 3.0 percent in the first, and real final sales to domestic purchasers increased 1.5 percent after increasing 4.7 percent. The differences between the changes in these two series are accounted for by changes in inventory investment (that is, change in business inventories), which increased sharply in the second quarter after decreasing sharply in the first. Most of the second-quarter increase in final sales to domestic purchasers was accounted for by nonresidential producers' durable equipment; most of the first-quarter increase had been accounted for by personal consumption expenditures.

The fixed-weighted price index for gross domestic purchases increased 2.8 percent in the second quarter after increasing 3.1 percent in the first.

Motor vehicles.--Motor vehicle production and sales increased again in the second quarter, and inventories remained low. Real output of motor vehicles increased 15.6 percent in the second quarter after increasing 14.1 percent in the first, and real final sales of motor vehicles increased 15.3 percent after increasing 20.2 percent. In the second quarter, both autos and trucks contributed to the increase in output, but trucks alone accounted for the increase in final sales. Auto inventories increased slightly, and truck inventories edged down. (Auto and truck output, sales, and inventories are shown in tables 8.3-8.6 of the "Selected NIPA Tables.")

In units, domestic car production increased in the second quarter to a seasonally adjusted annual rate of 5.9 million--the highest level in nearly 2 years--from 5.5 million in the first. Sales of domestic cars increased to 6.3 million from 6.1 million; sales of imported cars were unchanged at 2.2 million. Inventories of domestic cars were 1.3 million at the end of the second quarter, the same as at the end of the first, and the inventory-sales ratio was unchanged at 2.5, which is about the industry target.

The second-quarter increase in new car sales was more than accounted for by sales to business, which jumped to 3.8 million from 3.5 million. Sales to consumers fell to 4.5 million from 4.8 million, and sales to government changed little at 0.1 million.

The second-quarter decline in car sales to consumers was consistent with a sharp slowdown in consumer income, a jump in unemployment, and weakness in consumer confidence. Real disposable personal income increased only 0.7 percent after increasing 4.0 percent. The unemployment rate jumped to 7.5 percent--the highest rate since the first quarter of 1984--from 7.2 percent. The Index of Consumer Sentiment (prepared by the University of Michigan's Survey Research Center) increased but remained below its third-quarter 1991 level. In addition, manufacturers' sales-incentive programs were modest throughout the second quarter.

Sales of new trucks jumped to 4.8 million units in the second quarter from 4.3 million in the first. The increase was accounted for by sales of domestic light trucks, which jumped to 4.3 million from 3.8 million. Sales of imported light trucks declined slightly to 0.2 million, and sales of other trucks changed little at 0.3 million.

Prices

The fixed-weighted price index for gross domestic purchases increased 2.8 percent in the second quarter after increasing 3.1 percent in the first (table 2). The first-quarter increase had reflected a 4.2-percent pay raise for Federal military and civilian personnel; without the pay raise, the price index would have increased about 2.7 percent in the first quarter. (Increases in Federal employee compensation are treated in the NIPA'S as an increase in the price of employee services purchased by the Federal Government.) Prices of gross domestic purchases less food and energy, which may be viewed as a measure of the underlying inflation rate in the U.S. economy, increased 2.8 percent, down from a 3.6-percent increase (chart 2). Prices of personal consumption expenditures (PCE) increased 3.3 percent in the second quarter after increasing 3.5 percent in the first. Prices of food and of "other" components of PCE increased less in the second quarter than in the first; prices of the energy components of PCE increased in the second quarter after decreasing in the first. [TABULAR DATA OMITTED]

Prices of nonresidential structures increased 0.7 percent in the second quarter after decreasing 1.3 percent in the first; nonresidential buildings and "other" structures accounted for the turnaround. Prices of producers' durable equipment increased 0.9 percent after increasing 1.6 percent.

Prices of residential structures increased 1.8 percent in the second quarter after decreasing 0.7 percent in the first. Both single-family and multifamily structures contributed to the turnaround.

Prices of government purchases increased 2.4 percent in the second quarter after increasing 3.0 percent in the first. Prices paid by the Federal Government increased 2.1 percent after increasing 6.0 percent. Prices paid by State and local governments increased 2.6 percent after increasing 0.8 percent.

The price index for GDP, which measures the prices paid for goods and services produced in the United States, increased 1.6 percent in the second quarter after increasing 3.6 percent in the first. This index, unlike the index for gross domestic purchases, includes prices of exports and excludes prices of imports. Prices of exports increased a little more in the second quarter than in the first. Prices of imports increased after a decrease; the upswing was largely accounted for by a sharp turnaround in petroleum prices.

Personal income

Real disposable personal income (DPI) increased 0.7 percent in the second quarter after increasing 4.0 percent in the first (chart 3). The deceleration mainly reflected a slowdown in current-dollar DPI from a 7.3-percent increase to a 4.2-percent increase. In the second quarter, current-dollar personal outlays--largely PCE--increased less than current-dollar DPI; thus, personal saving increased 0.3 percentage point to 5.2 percent.

Personal income increased $40.5 billion in the second quarter after increasing $73.3 billion in the first (table 3). The deceleration was mostly accounted for by a slowdown in transfer payments, but wage and salary disbursements and proprietors' income also contributed. [TABULAR DATA OMITTED]

Transfer payments increased $16.8 billion in the second quarter after increasing $42.9 billion in the first. First-quarter transfer payments had been boosted $27.6 billion by the following special factors: Cost-of-living adjustments to benefits paid under social security and several other Federal employee retirement and income and support programs; an increase in unemployment benefits as a result of the Emergency Unemployment Compensation program; a speedup of life insurance dividend payments to veterans; and an increase in Earned Income Tax Credit payments.

Wage and salary disbursements increased $19.9 billion in the second quarter after increasing $32.6 billion in the first. The slowdown reflected a deceleration in wages and salaries both in private industry and in Government. In private industry, the deceleration was in services and in distribution. In government, the deceleration reflected the boost to the first-quarter increase by the pay raise for Federal personnel.

Proprietors' income increased $3.6 billion in the second quarter after increasing $15.7 billion in the first. Farm proprietors' income decreased $2.3 billion after increasing $2.2 billion; the downswing reflected livestock production and crop prices. Farm subsidy payments increased slightly after a small decrease. Nonfarm proprietors' income increased less in the second quarter than in the first, reflecting slowdowns in services and in wholesale and retail trade.

Among the remaining components of personal income, personal interest income decreased $11.6 billion in the second quarter after decreasing $18.5 billion in the first; the decreases in both quarters reflected lower interest rates. Rental income increased $7.5 billion after increasing $2.1 billion. In both quarters, lower interest rates resulted in reduced mortgage interest payments, which are deducted as expenses in deriving rental income; in the first-quarter, rental income was held down by an increase in the expenses associated with mortgage refinancing, mainly points and related fees. Personal dividend income increased $2.7 billion after several quarters of decline.

Personal contributions for social insurance, which are subtracted in deriving the personal income total, increased less in the second quarter than in the first. The first-quarter increase was boosted by $2.8 billion as a result of several changes in the social security program and changes in the medicare and supplementary medical insurance programs.

Personal tax and nontax payments decreased $4.7 billion in the second quarter after decreasing $2.7 billion in the first. A reduction in personal income tax withholding that was implemented by executive action in March reduced Federal income tax payments in both quarters.

Looking Ahead...

* Revision of Annual State Personal Income. The results of a comprehensive, or benchmark, revision of the annual estimates of State personal income for 1969--91 will be presented in the August Survey.

* Business Statistics, 1963-91. The 27th edition of this biennial volume is now available from the U.S. Government Printing Office. It contains historical data for the series that appear in the "S" (or blue) pages of the Survey and for selected series from BEA'S national income and product accounts and U.S. international transactions accounts. (For order information, see the inside back cover of this issue.)

Recruitment...

* Deputy Director. BEA is recruiting for the position of Deputy Director. This is a career reserved position in the Senior Executive Service, salary range: $90,000-$112,000. Application deadline: October 7, 1992. Applicants must meet all requirements of the Senior Executive Service and technical qualifications, including but not limited to (1) experience in leadership and management of economic research and analysis programs; (2) thorough knowledge of national, international, and regional economic accounting, of econometrics, business cycle indicators, and economic surveys, and of the structure of economic policymaking in the Federal Government; and (3) ability to deal effectively at the highest levels and to write clearly for technical and nontechnical audiences. For more information, contact the BEA Administrative Office, (202) 523-0508. BEA is an Equal Opportunity Employer.

Note.--Quarterly estimates in the national income and product accounts are expressed at seasonally adjusted annual rates, and quarterly changes are differences between these rates. Quarter-to-quarter percent changes are annualized. Real, or constant-dollar, estimates are expressed in 1987 dollars. The advance GDP estimate for the second quarter is based on the following major source data, some of which are subject to revision. (The number of months for which data were available is shown in parentheses.)

Personal consumption expenditures: Sales of retail stores (3) and unit auto and truck sales (3);

Nonresidential fixed investment: Unit auto and truck sales (3), construction put in place (2), manufacturers' shipments of machinery and equipment (3), and exports and imports of machinery and equipment (2);

Residential investment: Construction put in place (2) and housing starts (3);

Change in business inventories: Manufacturing and trade inventories (2) and unit auto inventories (3);

Net exports of goods and services: Merchandise exports and merchandise imports (2);

Government purchases: Federal outlays (2) and State and local construction put in place (2);

GDP prices: Consumer Price Index (3), Producer Price Index (3), nonpetroleum merchandise export and import price indexes (3), and values and quantities of petroleum imports (2).
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Title Annotation:second quarter, 1992
Author:Larkins, Daniel; Moran, Larry R.; Morris, Ralph W.
Publication:Survey of Current Business
Date:Jul 1, 1992
Words:1946
Previous Article:U.S. international transactions.
Next Article:Annual revision of the U.S. national income and product accounts.
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