The government's estimate of how fast the U.S. economy grew in the second quarter was revised downward sharply yesterday to only a 0.4 percent annual rate. Most of the change was due to lower earnings on American investments abroad rather than weaker production at home.
Earlier, the Commerce Department had reported that the gross national product, adjusted for inflation, had risen at a 1.2 percent rate for the April-June period following a 1.8 percent rate of increase in the first quarter. The GNP is a measure of total production of goods and services, which includes net earnings on foreign investment.
Michael Boskin, chairman of the Council of Economic Advisers, said the revision does not indicate that the economy is or is about to be in a recession. "Certainly we believe the economy is on a weaker growth path than in the summer" as a result of soaring oil prices, Boskin told economists meeting here. But the Bush administration forecast is for a period of slow growth rather than a recession, he indicated.
A quarterly survey of forecasts of the association's members, released yesterday, found that the oil price shock had caused virtually all of them to revise the predictions for real GNP downward for this year and next. The economists were equally divided over whether there would be enough of a downturn to be labeled a recession.