Newspaper article The Christian Science Monitor

Small Gains in GDP May Finally Be Spurring Some Hiring

Newspaper article The Christian Science Monitor

Small Gains in GDP May Finally Be Spurring Some Hiring

Article excerpt

CONSUMERS dug their wallets out in the second quarter of 1993.

As a result of the buying, the government reported the second quarter gross domestic product (GDP) grew by 1.6 percent, up from 0.7 percent in the first quarter.

Although the improvement is good news for the economy, the rate of increase was lower than expected by Wall Street economists and the Federal Reserve Board. Last week, Federal Reserve Board Chairman Alan Greenspan told Congress that he expected the second quarter growth rate to be 2.5 to 3 percent. The numbers may yet be revised upward when the government gets more precise information.

"The numbers point to the fact the economy is growing at a moderate pace," says Ian Borsook, senior economist at Merrill Lynch & Co. Mr. Borsook says the main surprise in the report is the drop in inventories, particularly in the auto sector. "Sales look very robust compared to production. The auto companies will have to increase production if the current sales rate continues," Borsook says.

If the sales trends continue, the momentum could carry over to the third and fourth quarters as well.

Economist Robert Brusca of Nikko Securities Company International Inc. is predicting that third quarter real GDP will grow by 3.5 percent and the fourth quarter by 3 percent. He says consumer spending will keep the economy moving.

Economists expected some improvement in the second quarter. Business spending on plant and equipment remains strong. The capital spending spurt is in large part due to firms' desire to improve productivity, says economist Martin Regalia of the US Chamber of Commerce in Washington. "That's a reason employment growth has not been there," he explains.

There has also been an uptick in orders for durable goods, such as automobiles and commercial jets. On Wednesday, the government reported durable goods orders in June edged up 3.8 percent, following three months of decline.

Order books are looking positive in Detroit in part, auto executives say, because consumer mortgage refinancing is running at a record level. …

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