How Different People Use the GNP. Statistic Is Used to Plan Investments, Labor Contracts, City Budgets, and Capital Spending. ECONOMY
Ron Scherer, writer of The Christian Science Monitor, The Christian Science Monitor
THE gross national product.
Released every quarter, it is widely considered the broadest gauge of economic activity, measuring the nation's output of goods and services. It is quoted on the nightly newscast and followed closely by Wall Street. However, it is also used widely by business, labor, and government.
This is how a businessman, union official, government official, investor, and Wall Street economist use the GNP numbers.
When Stanley Gault, chairman of Rubbermaid Inc., plans his budget every September, he uses GNP growth estimates as the primary input.
"We follow the GNP trend very closely," Mr. Gault says, "because we have such an extensive product line." Rubbermaid, based in Wooster, Ohio, produces consumer products, and sells to business and farmers.
Thus, the general health of the economy does effect Rubbermaid's operational and short-term planning. Last year as Gault watched the GNP decline each quarter, he became more pessimistic for 1989 and projected an annual GNP growth of no more than 2 to 2 percent. By the fourth quarter of 1989, he expects there will be no economic growth. As a result of this projection, the company's capital expenditures were held at $85 million, down slightly from the year before.
Gault keeps his eye on Rubbermaid's incoming order rate. "It's a pretty good indicator of the pulse of the economy at the moment," he says. Currently, he finds retail sales sporadic with lackluster growth in many product lines. He believes the late spring has kept consumers from spending.
Thus, he was not surprised on Wednesday when the US Commerce Department in its first estimate said the GNP grew 5.5 percent. Subtracting the farm sector, which rebounded from the impact of the drought, the GNP grew by 3 percent. This is slightly below Gault's forecast from last September, but fits right into what the company is currently experiencing.
The union official
Twice a year, research director Tom Balanoff writes an economic summary that goes to the local leaders of the 850,000-member Services Employees International Union, part of the AFL-CIO.
The GNP numbers help Mr. Balanoff with the report, as well as various verbal assessments he makes to the union's board. On the basis of those reports, the union's board has to make decisions on what types of items it wants to negotiate for in new contracts. "If it looks like we are going into a recession or slowing down, we might be more concerned with job security," explains Balanoff. If the economy is bubbling right along, higher wages or longer vacations might be the chief topic.
Because services make up such a large part of the economy, Balanoff figures his union experiences the same growth as the GNP. His gut feeling is that the economy is heading for a recession. What does that mean for negotiations? "We would stress job security and health care costs," he says.
As far as the latest numbers are concerned, he fears the 3 percent growth rate might be too high for the Federal Reserve Board. "The key question is how will it be interpreted by the Fed," he says.
The government official
As the general economy goes, so goes New York City. …