
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, July 28, 1990                   TAG: 9007280104
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

GNP GROWTH ANEMIC

The U.S. economy sputtered at an annual growth rate of 1.2 percent from April through June with virtually every economic sector exhibiting weakness, the government said Friday.

The Commerce Department report on the gross national product - the country's total output of goods and services - renewed recession fears among private economists. The Bush administration insisted that weakness in the first half of the year will be followed by a rebound in late 1990.

The administration said a significant slowdown in inflation would give the Federal Reserve Board room to lower interest rates and thus spark a rebound in consumer and business activity.

Inflation was the one bright spot in the GNP report. A price index tied to the GNP rose at an annual rate of 3.9 percent in the April-June quarter, down from a 6.6 percent spurt in the first three months of the year. Half of the inflation improvement was attributed to a drop in food costs.

But adding to the pessimism of private economists was a significant downward revision in previous GNP estimates which made the economy's performance for the past year look even weaker than previously believed.

GNP growth in the first three months was revised down to a 1.7 percent rate, compared with 1.9 percent previously, while growth from October through December was cut to a barely perceptible 0.3 percent, far below the 1.1 percent previous estimate.

The results of all the changes lowered GNP growth for 1989 from an original estimate of 3 percent down to 2.5 percent, the weakest performance since an outright decline of 2.5 percent in the recession year of 1982.

"The economy looks as close to a recession as it can get without actually being in one," said Allen Sinai, chief economist of the Boston Co. "We have a crummy economy and that presents big problems for policy makers."

"We have an economy that has run out of steam," said Robert Dederick, chief economist of the Northern Trust Co. of Chicago. "It is being kept on a life support system by the Federal Reserve, but there is always a risk that it will just fade away."

However, Commerce Undersecretary Michael Darby, presenting the administration's views on the GNP report, sought to paint a less bleak picture. He said part of the second quarter weakness was a result of warmer winter weather spurring construction activity and consumer spending in the first quarter that would normally have occurred in the spring.

by CNB