The U.S. economy grew at a 2.1 percent rate in the fourth quarter of 1979 after adjustment for inflation instead of the 1.4 percent rate originally estimated the Commerce Department reported yesterday.
Business investment, federal government purchases and personal consumption spending were all stronger than shown in the preliminary estimates released last month, the department said. Net exports, on the other hand, were weaker.
The estimate of inflation for the quarter, as measured by the GNP deflator, was unchanged at 8.7 percent.
The stronger performance of the economy in the last three months of 1979 has continued into this year even though many forecasters expect a recession, economist Alan Greenspan told the House Budge Committee yesterday.
"Despite the rise in the unemployment rate to 6.2 percent for January, there is still no compelling evidence that the economy has, as yet, moved off the remarkably stable plateau which began in March, 1979," Greenspan declared.
"Since April, the industrial production has ranged within less than one percent of the March peak," he continued. "Moreover, January, 1980, output does not appear to have shown a significant change from December . . . Payroll employment continued to move higher in January and the most recent data from the insured unemployment system indicate little change for the month of February."
Greenspan said the recession "has been expected to begin almost momentarily by at least some forecasters since late 1978," but has not dropped into a recession because of the strength of consumer spending.
While he still expects a "modest recession" to begin "sometime in the early spring and last through at least the rest of this year," Greenspan urged the committee to "be most hesitant to engage in policies whose basic purpose was re-stimulation of the economy."
Greenspan believes consumers have been able to continue to spend as much as they have in the face of a drop in their real income because of large gains in the sale of private homes, which he said were running at a $100 billion annual rate during part of 1979.
But higher mortgage interest rates are cutting down on home sales, he said.
Both Greenspan and Brookings Institution economist Arthur Okun urged the committee to try to cut federal spending this year and next year below the levels proposed in President Carter's budget sent to Congress last month.