US growth from 2003 through 2005 revised down

WASHINGTON - The US economy grew a little less briskly in each year from 2003 through 2005 than previously thought, the Commerce Department said on Friday, though inflation did not appear to be surging during the period.

By (Reuters)

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Published: Fri 28 Jul 2006, 10:18 PM

Last updated: Sat 4 Apr 2015, 1:11 PM

Still, annual revisions to US gross domestic product issued by the Commerce Department confirmed some pickup in prices over the period, likely enough to justify the Federal Reserve’s continuing concern about price pressures.

The revised data for the three years, reflecting more complete source data, showed that gross domestic product grew at an average annual rate of 3.2 percent over the period, about 0.3 percentage point less than the government previously calculated.

GDP measures the value of all goods and services produced within US borders and is compiled by the department’s Bureau of Economic Analysis.

Specifically, GDP grew 3.2 percent in 2005 instead of 3.5 percent, 3.9 percent in 2004 rather than 4.2 percent and 2.5 percent instead of 2.7 percent in 2003. Commerce said updated data preserved the picture of an economy that was growing steadily after emerging from recession in the third quarter of 2001.

Before the revisions were published, financial market participants speculated they might show a substantial acceleration in prices since the prior year’s revisions had done so. The Fed especially watches a measure known as the core personal consumption expenditures (PCE) index, which excludes food and energy, that is part of the report.

But the price revisions were small.

The revised core PCE rose 2.1 percent instead of 2 percent in 2005, was left unchanged at 2 percent in 2004 and gained 1.4 percent instead of 1.3 percent in 2003.

The US central bank has boosted interest rates 17 times since mid-2004 to ward off potential inflation, but Fed Chairman Ben Bernanke told Congress last week that he expected slower economic growth to reduce price pressures over time.

Betting is about even that Fed policy-makers will lift rates again at the next policy session on Aug. 8 but that they might pause in the rate-rise cycle afterward.

The main reason that the government cited for revising down GDP growth was that nonresidential investment spending -- especially on computers and software -- was over-estimated.

The Commerce Department is amending how it measures spending on computers, using some data from the Fed along with its own collection methods, after finding that its gauges of spending on computers have been out of kilter in recent years, an official said.

A trend toward strong corporate profits remained intact, even after revisions. Profits after tax with inventory valuation were up 5.5 percent in 2005 rather than 9.4 percent, ahead 17.7 percent instead of 11.3 percent in 2004.

Consumers, meanwhile, were pinched for savings, according to the personal savings rate that measures how much of each after-tax dollar they were able to set aside, or how deeply they had to reach into savings to keep spending.

In 2005, savings were -0.4 percent rather than -0.5 percent -- meaning that consumers were drawing down savings. In 2004, savings were 2 percent rather than 1.8 previously reported and in 2003 savings were left unchanged at 2.1 percent.

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