WASHINGTON - The Commerce Department yesterday reported that real gross domestic product in the third quarter grew at a revised annual rate of 3.4%, down 0.5-point from a previously revised estimate that showed a 3.9% gain.
"It's a little unusual to have a second revision of this magnitude," said Daryl Delano, senior economist of Cahners Economics Inc., in Newton, Mass. "However, there's really nothing new that's discouraging in this report. There are no red flags regarding the future."
Previously, the 3.9% gain resulted from a surprisingly large upward revision from the Commerce Department's original estimate in late October of 2.7% GDP growth in the third quarter.
Yesterday's downward revision does not diminish prospects for growth in the current quarter and next year, economists said yesterday.
In general, economists say the 3.4% growth rate in the third quarter will not continue into the fourth quarter. Many economists expect growth at or slightly below 2% in the fourth quarter and a slowly improving picture next year.
Commerce officials said the modified third-quarter GDP estimate is primarily the result of a revision in how much business inventories grew during the quarter.
The department said that inventories grew $7.2 billion, rather than the $12.4 billion previously reported, the Commerce Department said.
Lower inventories imply a greater chance for future growth because businesses eventually will have to produce more to restock their shelves. The downward revision in inventories "bodes well for future quarters," Delano said.
Jim O'Sullivan, an economist with J.P. Morgan and Co., agreed, but said the current growth rate is "unsustainable" because increases in inventories still account for too much of the overall gain in GDP, about 1% in the last two quarters. "I'm still left with the impression that inventories are adding too much to growth," he said.
The Commerce Department also reported yesterday that U.S. businesses plan to increase spending on new facilities and equipment in 1993 by 5.3% over this year. This estimate, which is based on a recent survey of businesses, puts total planned capital spending in 1993 at $576.6 billion, up from 547.4 billion this year.
Economists said that expected 5.3% gain could easily become a double digit increase if the federal government enacts an investment tax credit next year. "That figure is good news that could get a lot better," Delano said.
In addition, the estimated capital spending of businesses this year is up 3.6% over last year, the Commerce Department reported.
Separately, the International Monetary Fund announced yesterday that it has trimmed its expectations for growth in the industrialized countries both this year and next.
IMF economists now expect 1.5% growth in the industrialized nations in 1992, down 0.5-point from their previous estimate in October, and 2% growth in 1993, off 1.0-point from their previous estimate. Notably, the IMF left its forecast for U.S. growth essentially unchanged at 3% next year.
Michael Mussa, director of research at IMF, said prospects for U.S. exports dwindle as the near-term prospects for world growth decline. However, he said the IMF did not lower the forecast for U.S. growth next year because demand within the U.S. seems to be picking up and probably would offset lost sales in the export market.
The IMF's forecasts were presented in a special "interim assessment" of the world economy. IMF officials said the recent European currency crisis prompted them to produce the unscheduled view of the world economy.