Area index falls to lowest level in 4 1/2 years. Drop in U.S. GNP revised to 2.8%


WASHINGTON -- The U.S. economy contracted in the first quarter at a revised seasonally adjusted annual rate of 2.8 percent, a larger decline than was last reported, the Commerce Department said yesterday.

The downward revision comes just as analysts and government officials see signs of an economic recovery at hand.

The department said that a downward revision in personal spending and larger-than-previously reported inventory cuts accounted for its new tabulation of U.S. growth.

Economists expect an increased consumer appetite and a restocking of business inventories to be two key contributors to an economic turnaround in the coming months.

Yesterday's final revision to the first-quarter GNP brought the number back to the Commerce Department's original estimate of growth. In May the agency had revised the decline in first-quarter GNP to 2.6 percent from 2.8 percent.

The drop in the economy's output compared with the 1.6 percent fall in last year's fourth quarter and a 1.4 percent increase the quarter before.

While the economy was shrinking, the annual first-quarter inflation rate, as measured by the fixed-weight price index, was a revised 5.2 percent, previously reported as 5.1 percent. That rate compares with a 4.7 percent rate in last year's fourth quarter and a 4.2 percent rate in the third quarter.

A Commerce Department official said that U.S. consumers spent $1.2 billion less in the first quarter than was last reported. That figure accounted for a large chunk of the overall revision.

Non-farm business inventories also were depleted more rapidly in the first quarter, falling by $28.1 billion instead of the $26.8 billion originally reported.

Commerce also said the United States exported more and imported more in the first three months of 1991 than was previously reported.

In the department's consumer measures, personal savings as a percentage of disposable income was revised up to 4.2 percent in the first quarter, previously reported 4.1 percent.

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