The government says revised revision shows economy shrank ahead of recession starting in 2001. Savings were pushed sharply lower beginning in 1987 because personal spending was higher than previously thought and personal income was revised down.
December 10, 2003: 9:47 AM EST
WASHINGTON (Reuters) - The U.S. economy shrank in the third quarter of 2000, the government said Wednesday in revisions to official figures that showed America was on the brink of recession months earlier than previously thought.
The sweeping changes by the Commerce Department also downgraded the expansion that followed the 2001 slump, albeit only slightly.
However, the revisions were not applied to third-quarter 2003 data -- leaving the most recent measure of growth unchanged at a swift annual clip of 8.2 percent. The next reading of third-quarter growth is scheduled for later in December.
Until now, statisticians at Commerce's Bureau of Economic Analysis believed the economy did not start shrinking until early 2001. But extensive revisions dating back to 1929, incorporating both improved statistics and changes to definitions, revealed a contraction in gross domestic product, or GDP, in the July-to-September quarter of 2000.
Instead of inching ahead at the first reported 0.6 percent annual rate in that quarter, GDP shrank 0.5 percent, the Commerce Department said. The weaker estimate is mostly due to a larger drop in private inventories than previously reported.
President Bush and his economic team have long insisted he inherited a recession from the former Clinton administration, and the White House may seize on these new numbers to back that claim.
The economy bounced back smartly in the fourth quarter but the revisions show the economy weakened just before hitting the top of the business cycle late in 2000.
"The cyclical peak is still the fourth quarter of 2000, but this does indicate that there was perhaps more slowing before the downturn than the estimates had previously shown," said Brent Moulton, who is in charge of compiling the GDP report for the Bureau of Economic Analysis.
The National Bureau of Economic Research, a private firm deemed the official arbiter of U.S. business cycles, officially dated the slump from March to November 2001.
The revisions alter how Commerce measures key parts of the economy, including insurance and banking, and incorporate new source data from tax returns and the Census Bureau.
Many of the shifts cancel each other out, leaving the overall history of economic growth largely unchanged. For example, annual inflation as measured by the GDP report remains a muted 1.8 percent for the 1992-2002 decade.
But the adjustments pushed down the pace of the expansion since the recession's end to the second quarter of this year to a 2.6 percent annual rate, from an originally reported 2.7 percent pace.
They also make the recession milder than first thought, with the economy shrinking 0.5 percent during the downturn rather than the previously estimated 0.6 percent contraction.
Corporate profits were revised up substantially for 2002 due to a change in the treatment of stock options. Profits of domestic industries as a percentage of gross domestic income were 7.1 percent compared with 6.3 percent previously.
Savings, however, were pushed sharply lower beginning in 1987 because personal spending was higher than previously thought and personal income was revised down, the Commerce Department said.
While Americans have for years put progressively less money aside for rainy days, the erosion now seems worse than first thought.
Savings hit just 2.3 cents out of each dollar of disposable personal income in 2002, compared to a previously estimated 3.7 cents. That declined to 1.9 cents in the first quarter of 2003 and 2.3 cents in the second quarter -- down from the originally reported 3.5 cents and 3.2 cents, respectively.
The effect of the revisions on data from the third quarter of 2003 -- including corporate profits and a final measure of overall GDP -- will be released Dec. 23, the Commerce Department said.
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