Instead, the economy displayed considerable strength wholly aside from Y2K effects. As a consequence, near term economic forecasts have been marked up. For example, the Blue Chip forecast of October 10, made in advance of the fourth quarter, projected a 2 percent growth rate for the first quarter of this year and 2.6 percent growth across all four quarters. That is quite a sizable upward move for this average of 50-some forecasts at major businesses, financial institutions and academic research organizations. The general picture was one of strong real growth combined with good inflation performance.
Some special features deserve comment.
Consumer outlays are reflecting continuing gains in employment and income, along with sharp increases in consumer net worth from rising equity values. Business fixed investment increased less rapidly in the fourth quarter, possibly because of some Y2K effects in the equipment and software areas. Software corrections were largely completed earlier in the year, while some purchasers of computer equipment later in the year may have deferred their purchases into 2000 to insure that they were Y2K compliant. This rising trend reflects some Y2K preparation, but it is difficult to separate from the normal accumulation stimulated by rising sales. Inventory-sales ratios are still very low and there probably is no sizable inventory overhang that needs to be worked off.