Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, July 30, 1993 TAG: 9307300157
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The $5.02 trillion gross domestic product - the sum of goods and services produced within U.S. borders - grew at a lackluster 1.6 percent seasonally adjusted annual rate, the Commerce Department said Thursday.
That marked a clear improvement over the 0.7 percent rate of the first quarter, but it fell short of the 2.3 percent rate predicted by private economists and the 2.5 percent to 3 percent rate forecast by Federal Reserve Chairman Alan Greenspan.
Economists stuck by their assertions that growth will improve during the second half of this year. But they said the more optimistic forecasters, who were projecting second-half growth approaching 4 percent, probably will be disappointed.
"These forecasts that things will be better six months from now are starting to have a hollow ring to them," said economist Norman Robertson, an adjunct professor at Carnegie-Mellon University.
"This is a very erratic, sporadic type of economic expansion. . . . It goes in fits and starts, and I suspect that may continue for the balance of the year," he said.
Consumer spending, helped by strong car sales, advanced at a healthy 3.8 percent rate, and businesses spent heavily on computers and other new equipment.
But those gains were largely offset by a decline in housing construction and a sharp reduction in the pace of inventory accumulation by businesses worried about getting stuck with unsold goods.
"The economy continues to underperform and disappoint," said economist Allen Sinai of Economic Advisers Inc. "More and more it becomes clear that the strength of the second half of last year was the aberration and what we're seeing now is the norm."
He said car sales will slacken soon; trade, a modest plus for the economy in the second quarter, will worsen because of business slumps in Europe and Japan; and government spending, which rose at a 0.2 percent rate, will continue to be held back by defense reductions.
Not all analysts were so pessimistic. They said business investment spending, up at a 16.5 percent rate in the second quarter, should continue to increase and housing construction, down at a 9.5 percent rate, should turn around because of low interest rates.
And the decline in inventories could be a good sign for the future. If consumer spending continues at the second-quarter pace, businesses would start to rebuild stockpiles and factory production would pick up.
The economy has been growing for nine consecutive quarters after the recession. However, Commerce noted that the pace has been about half as fast as the average of past recoveries.
Meanwhile, a measure of inflation tied to the GDP rose at a 2.6 percent annual rate in the second quarter, after spiking up at a 4.3 percent rate in the first.
Analysts said that probably postpones any contemplated increase in interest rates by the Federal Reserve. Greenspan warned Congress last week that rates would move up to quell any resurgence of inflation.
by CNB