Overview

Fourth quarter 2002

Economic activity slowed in the fourth quarter of 2002 as real GDP advanced 0.4%, less that one-half of the pace set in the previous quarter. A drop in exports during the quarter, was only partly offset by sustained strength in personal expenditures. The economy lost steam over the course of the quarter, with GDP up a modest 0.1% in both November and December.

The slower rate of growth in the fourth quarter resulted from decreased output in manufacturing and agriculture as well as lower activity levels in the finance sector. The economy was buoyed by the services sector, in particular wholesale and retail trade, public administration, health care, real estate and business services.

The 2.1% drop in exports in the fourth quarter, which was concentrated in automotive products, came on the heels of three consecutive quarterly gains. Domestic demand picked up somewhat in the fourth quarter. Consumer spending, especially on durable goods such as furniture and automobiles, provided the main source of strength. Investment in residential construction, though slower in the quarter, advanced a healthy 2.6%. Household borrowing also picked up in line with these developments. Business investment in plant and equipment declined in the quarter, despite the continued growth in profits.

Despite the fact that economic growth decelerated over the quarters of 2002, the economy grew 3.4% for the year, more than double the rate for 2001. Prices, as measured by the implicit chain price index for GDP, advanced 1.2% in 2002.

The decline in receipts on exports of goods coupled with larger dividends paid to foreign direct investors, were the main factors in the reduced surplus on current transactions with non-residents in the fourth quarter. The surplus, which narrowed in each quarter of the year, declined over 40% in 2002.

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