The nation last year turned in its best economic performance since the start of the Korean War, the Commerce Department reported yesterday.
The department reported that the fourth-quarter gross national product rose at a 4.9 percent annual rate. That was a full percentage point higher than the preliminary inflation-adjusted figure of 3.9 percent released last month and more than 2 percentage points above the so-called flash estimate made in December before the quarter ended.
Economic growth for the year, as measured by the GNP, was 6.9 percent.
President Reagan, in a statement issued by the White House, said the GNP report was a sign that "the great American expansion is rolling forward. . . ."
He said "the United States economy grew by 6.9 percent in 1984, exceeding by better than half the consensus of leading blue chip forecasters. This strength, together with inflation, as measured by the price deflator, of only 3.8 percent, gave us our best economic performance since 1951."
The latest upward revisions were attributable primarily to a better trade performance and a smaller drop in business inventories than was estimated earlier. However, some of the gains in those areas were partly offset by a downward revision in the level of business investment in equipment, the department said.
After a sharp and unexpected slowing of the economic expansion in the summer and early fall held the increase in real output to only a 1.6 percent rate in the third quarter, growth has accelerated again and done so more rapidly than many forecasters had expected. Many now believe real GNP will be up again this quarter at a 4 percent to 5 percent rate.
Commerce also revised upward its estimate for inflation in the fourth quarter. The GNP implicit price deflator rose at a 2.8 percent rate for the quarter, rather than the 2.4 percent rate estimated last month. Similarly, the GNP fixed-weighted price index -- a measure that is not affected by changes in the mix of actual goods and services produced -- rose at a 3.4 percent rate, 0.1 percentage point more than the preliminary figure.
With the revisions, the economy is now estimated to have grown at a 3.3 percent rate in the second half of 1984, down from the 8.6 percent rate of the first half.
Both the level of net exports and the change in business inventories had markedly different impacts on the overall GNP figures in the third and fourth quarters. Real business inventories rose $16.8 billion in the fourth quarter, as measured in 1972 dollars, only a little more than half as much as the $30.6 billion increase in the third quarter and $20.3 billion in the second.
"Thus, the change in inventory investment, which added $10.3 billion to the third-quarter change in real GNP, subtracted $13.8 billion from the fourth-quarter change," the department said.
The swing in net exports was even greater, but in the opposite direction. In the third quarter, a deterioration in the U.S. trade balance reduced real GNP by $12.5 billion. An improvement in the fourth quarter added $32.4 billion.
Every major component of GNP rose in the fourth quarter except investment in residences, which fell at a 5.3 percent rate. Purchases of nondurable goods also fell, but that decline was more than offset by a substantial increase in purchases of durable goods, particularly autos.
The downward revision of purchases of business equipment meant that total nonresident fixed investment rose at only a 6.3 percent rate, the smallest gain since the fourth quarter of 1982, as the recession was ending.
The steady stream of better economic statistics in recent months, including the upward revisions in GNP, have convinced virtually all forecasters that any danger of recession this year has all but vanished. After the unexpected pause in the expansion during the summer, a number of economists had warned that a recession, or at least a period of near zero growth, was at hand.
Now, the forecasts generally show solid growth for the rest of the year. For instance, a recent forecast from Townsend-Greenspan & Co., a New York consulting firm headed by economist Alan Greenspan, calls for real output to rise at a 4 percent rate or better in the first three quarters of the year and at a 3.4 percent rate in the fourth quarter. However, the forecast also shows rising interest rates contributing to a recession that would begin late in 1986.