Macroeconomic outlook for 1998 remains guardedly optimistic
The U.S. economy continues its long period of growth, unprecedented in its staying power.
By Daryl Delano -- Modern Materials Handling, 6/1/1998
The economic climate remains healthy, continuing the longest period of growth in U.S. history. In March, we entered the eighth year of an extraordinary economic expansion, extraordinary not so much because of its length or its strength but for its continued vigor after 84 months. Indeed, government estimates show that GDP grew at a 4.2% annualized rate during January-March 1998.Some possible signs of mortality, though, include: a decline in corporate profits during the final quarter of last year, an acceleration in the core (excluding energy and food) consumer price index inflation rate, and a drop in manufacturers' orders for non-defense capital goods. Add to this the still-evolving and multi-faceted 'Asian crisis,' and there are plenty of reasons not to throw caution to the wind.
Government statisticians made downward revisions in their estimates of consumer spending for both nondurable goods and services, and in government spending. In addition, both exports and imports are now estimated to have increased at a much slower rate than previously thought in the final quarter of last year.
At the same time, however, upward revisions were made in the estimates regarding business investment spending. Capital spending was still weak during the fourth quarter of last year, but not quite as weak as previously estimated. Total business fixed investment declined at only a 0.8% annualized rate in the October-December period, an improvement over an earlier estimate of a 3.5% decline. Data for the first quarter of this year also show a decline in investment although spending for new equipment surged to a 2.8% annualized gain.
The Commerce Department also recently released estimates of corporate profits for the fourth quarter of last year. The general consensus had been that profit growth would slow from the heady 4% gain registered during the third quarter, but that corporate earnings would still be up by a percentage point or two.
Instead, the government reported that after-tax profits fell by 2.3% during the second half of last year. This was only the fourth time during the current economic expansion that profits declined between one quarter and the next. For the year as a whole, however, after-tax corporate profits rose a solid 7.3% above the 1996 level.
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