A downward revision in State Essay

REVISED (45-day) estimates show that real GNP increased at an
annual rate of 5 percent in the fourth quarter of 1984. Preliminary
(15-day) estimates, published a month ago, had shown a 4-percent
increase. Inflation, as measured by the GNP fixed-weighted price index,
remained virtually unrevised at a 3-1/2-percent annual rate of increase
(table 1).

The $3-1/2 billion upward revision in real GNP can be traced to
large, but partly offsetting, revisions in some of the major components.
The upward revisions were in net exports and change in business
inventories. Net exports were revised up $5 billion, mainly due to an
upward revision in merchandise exports and a downward revision in
merchandise imports. Inventory investment was revised up $2-1/2
billion, largely due to upward revisions in manufacturing, wholesale
trade, and retail trade. The downward revision of $2-1/2 billion in
nonresidential fixed investment was in producers’ durable
equipment, mainly computers. In personal consumption expenditures
(PCE), a downward revision in nondurables more than offset upward
revisions in services and durables. In residential investment, the
downward revision was mainly in multifamily structures. In government,
a downward revision in State and local purchases (construction) a little
more than offset an upward revision in Federal purchases (largely

Overall, the picture of the economy, as described in the last
month’s “Business Situation,” did not alter much. The
fourth-quarter increase in real GNP was accounted for by a sharp
increase in final sales that more than offset a decline in business
inventory investment. Within final sales, all major components
increased except residential construction. Net exports accounted for
one-half of the increase in final sales, and PCE a little more than


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