Economic Growth Rate Hits 2.5%

Article excerpt

WASHINGTON (AP) - The U.S. economy grew at a moderate annual rate of 2.5 percent from July through September despite the poorest trade performance in six years and a $4 billion income loss from Hurricane Hugo, the government reported Thursday.

The Commerce Department said the increase in the gross national product (GNP), the broadest measure of conomic health, matched a 2.5 percent rise in the April-June quarter. Third-quarter growth was aided primarily by a boom in consumer spending that resulted from heavy car sales.

Inflation showed a marked improvement in the third quarter, with a price index tied to the GNP climbing at an annual rate of just 2.9 percent, down significantly from a 4.9 percent annual advance in the first half of the year.

Through the first nine months of 1989, the economy has grown at an annual rate of 2.9 percent, exactly on target with the Bush administration's forecast for the whole year.

But many analysts are predicting that growth will slump dramatically in the final three months of this year in the absence of the auto sales boom that spurred consumer spending from July through September.

Many economists predict the country will flirt with a possible recession over the next 12 months because of expected weakness in such areas as trade and business investment.

Signs of deterioration were evident in the third quarter as the U.S. trade deficit, as measured by the GNP, surged by $22.9 billion. It was the worst trade figure since the second quarter of 1983.

Trade had been one of the economy's brightest spots as a boom in export sales had spurred a rebound in U.S. manufacturing. However, economists have warned for some time that hefty increases in the value of the dollar threatened to derail the trade improvement by making American goods more expensive on overseas markets.

In the third quarter, imports shot up at an annual rate of 15.1 percent while exports did not grow at all, the poorest showing for exports since early 1986.

The economy was also held back in the third quarter by a $4 billion loss in personal incomes attributed to the devastation from Hurricane Hugo, which hit the Southeast in September. …

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