Economic Report of the President

THE MAJOR SECTORS OF AGGREGATE DEMANDThe decline of the economy during 1980 as a whole was dominatedby drops in expenditures on real consumer durable goods (down7.7 percent over the 4 quarters), residential structures (down 18.0percent), and real business fixed investment (down 6.0 percent)(Table 14). The sectors of real demand that grew during the yearwere personal consumption of services, Federal Government purchases,and net exports. Service consumption grew 2.8 percent overthe 4 quarters of 1980. Federal Government purchases were up 4.7percent. Real net exports grew from $42.2 billion in the fourth quarterof 1979 to $55.7 billion in the fourth quarter of 1980. A 6.7 percentreduction in imports combined with a 3.9 percent rise in exportsto produce this result.TABLE 14.—Growth in major components of real gross national product, 1976-80[Change, fourth quarter to fourth quarter]Component,1976197719781979Percent change:Real gross national product4.45.85.31.7-0.3Personal consumption expendituresBusiness fixed investmentResidential fixed investment . ...Government purchases of goods and servicesFederal.State and localReal domestic final sales 2577.819.8-1.3-.8-1.74.95013.512.53.65.02.75.9489.0-.01.6-1.33.34.4202.9-6.11.9211.71.7=6.0-17.61.54.7-.3-1.3Change as a percent of GNP:Inventory accumulation ... .Net exports of goods and services.4-.7.4.4.2.9-.8.8.0.91 Preliminary.2 GNP excluding change in business inventories and net exports of goods and services.Source: Department of Commerce, Bureau of Economic Analysis.Personal Consumption ExpendituresThe year 1980 began with the personal saving rate at a 28-yearlow, with consumer debt burdens near record highs, and with attitudesurveys showing consumer pessimism about the outlook. Themodest strength in consumption that had been evident in 1979 despitethe deceleration in real incomes had worsened the budget positionof households. This, together with high interest rates and theimposition of credit controls, produced a retrenchment in consumeroutlays. Real personal consumption expenditures fell in 1980 for thefirst time in 6 years. The 0.3 percent decline in consumption over theyear, combined with the modest 0.5 percent increase in disposableincome, helped to increase the saving rate from 4.7 percent in thefourth quarter of 1979 to 5.7 percent in the fourth quarter of 1980(Chart 8).138