The economy contracted at a steep 2.0 percent annual rate during the final quarter of 1990, the government said Wednesday. Economists viewed the decline as confirmation the first recession in eight years was under way.
The Commerce Department said the decline in the gross national product - the nation's total output of goods and services and its broadest measure of economic health - was the deepest since a 3.2 percent drop in the third quarter of 1982 during the depths of the last recession.It was the first quarterly decline since the economy sank 1.8 percent from April through June in 1986. But that downturn did not extend into a second quarter and thus did not qualify as the beginning of a recession, generally defined as two consecutive quarters of negative growth.
The current decline, however, was widespread, including a $19.9 billion drop in consumer spending on virtually all items ranging from cars to clothing. And most economists, including those in the Bush administration, say the economy continues to fall during the current quarter, although at a slower pace.
Many of the nation's top business economists say the failure of consumers to resume spending is the biggest threat to economic recovery. But they say even if consumers return to shopping malls and automobile showrooms, large debt burdens and a lack of pent-up demand will moderate any growth in the economy.
Still, administration officials and private economists say the recession will be milder and shorter than the average recession since World War II, which lasted 11 months and resulted in an 2.5 percent decline in economic growth.
The department also reported that a GNP measure of inflation rose at a revised annual rate of 4.7 percent, up from its original estimate of 4.1 percent last month.
The decline in the GNP reported Wednesday also was revised slightly from last month's initial estimate of a 2.1 percent drop. The department updates its report twice each quarter as new information becomes available. The final details will be reported next month.
`The decrease in real GNP in the fourth quarter was centered in output of motor vehicles," the report said. "The decrease . . . was reflected in both consumer and business purchases of autos and trucks and in inventory investment."
Excluding the motor vehicle component, the GNP inched up 0.6 percent.