Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 1, 1994 TAG: 9412010078
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium
The Commerce Department reported Wednesday that the gross domestic product, measuring the output of all goods and services produced in the United States, rose at a 3.9 percent annual rate in the third quarter.
An upward revision of 0.5 percent from the government's 3.4 percent estimate a month ago was greater than economists predicted. With Christmas sales expected to be strong, the economy is on target for its best yearly performance since it expanded 3.9 percent in 1988.
Financial markets, which have had the jitters over rising inflation and interest rates from an accelerating economy, confounded analysts' expectations.
``Clearly this data does not indicate that higher rates have had any meaningful impact in slowing the economy down,'' said economist Sung Won Sohn of Norwest Corp. in Minneapolis. ``The economy is humming along at a nice pace.''
``The economy was on very solid footing in the third quarter, too strong for its own good,'' said Mark Zandi of Regional Financial Associates, a forecasting firm in West Chester, Pa.
He said, however, that good inflation news eased fears that the economy is accelerating too rapidly.
An inflation gauge tied to GDP rose a mere 1.9 percent at an annual rate. While it was up from a 1.6 percent estimate a month ago, it is still below the 2.9 percent increase in the second quarter.
In another report, the Federal Reserve said new calculations show the nation's industries are not operating quite as close to capacity as previously believed.
The operating rate for factories, mines and utilities in October was 84.6 percent of capacity, the highest since April 1989, when the rate was 84.8 percent, the Fed said. Previously, it put the October rate at 84.9 percent.
Analysts say an operating rate of around 85 percent can signal the start of bottlenecks and rising prices. The Fed also said that industrial production rose 0.6 percent in October, revised from an earlier 0.7 percent estimate.
The Commerce Department also reported that after-tax profits of U.S. corporations rose 2.8 percent in the third quarter, compared with 7.3 percent the previous three months. The second-quarter growth in profits was inflated by a recovery in California from the effects of the Los Angeles-area earthquake in January.
The department said the annual rate of growth for GDP was $50.9 billion in the third quarter, with consumer spending accounting for $28.6 billion, compared with $11.5 billion in the second quarter.
In another sign of economic growth, the Purchasing Management Association of Chicago said its November index of area business activity was 67.4 percent, up from 64.3 percent in October. The group's prices-paid index, a closely watched barometer of inflation, rose to 79.4 percent from 72.5 percent.
by CNB