Sector Contributions to Recession

Through the fall of 1979, a surprisingly resilient economy time-and-again forestalled an announcement that a recession was upon us. While a large number of economic forecasts fixed the fourth quarter of 1979 as the initial period of recession, preliminary information indicates that the economy, after adjusting for inflation, continued to expand, albeit at a lower rate than in the third quarter. As in previous quarters, the strength exhibited in the fourth quarter was due primarily to unanticipated growth in the consumer sector. Real (inflation-adjusted) consumer spending rose in the fourth quarter of 1979 (offsetting declines in business investment and housing), as personal savings as a percent of disposable income fell to 3.3%, the lowest quarterly savings rate since 1950.