WASHINGTON - The U.S. economy's output in the fourth quarter was more impressive than previously thought, but a sharp upward revision to gross domestic product did not trigger a similar jump in a key inflation measure.
The Commerce Department said Friday that gross domestic product raced ahead at its fastest pace since mid-1996, surging 6.9% in the final three months of 1999. The gain is up from the government's advance estimate of 5.8% and the 5.7% growth rate recorded in the third quarter.
According to the revised estimate, 1999 GDP growth slipped to 4.1% from a 4.3% rate in 1998.
Buoyed by sizzling consumption and robust government spending, the fourth-quarter figure, which substantially exceeded the 6.3% advance expected on Wall Street, may not roil financial markets. That's because analysts are looking for new first-quarter economic data rather than confirmation of late-1999 strength.
But the numbers should help persuade the Federal Reserve to keep raising interest rates incrementally.
Fed Chairman Alan Greenspan told Congress this week that he is worried about the "wealth effect" of stock market gains on consumer spending, and he hinted the central bank is ready to tap the brakes on the economy by raising rates by 25 basis points on March 21.
If the economy doesn't slow, Mr. Greenspan said, strength in consumption could exaggerate current imbalances between supply and demand, prompting an outbreak of inflationary pressures. So far, however, those pressures have remained faint.
A primary price gauge in the Commerce report, one highlighted by the Fed in its semi-annual report to Congress, was left unrevised in the government's preliminary look at GDP.
The chain-weighted price index for personal consumption expenditures, which replaced the consumer price index as the inflation measure used in the Fed's economic outlook, rose 2.5% in the fourth quarter and 1.8% in the third quarter. Excluding food and energy prices, the index rose 2.0% in the fourth quarter and 1.2% in the third.