WASHINGTON _ Barely slowed by a pile of interest-rate
increases, the national economy is still bubbling _ making it
more likely even higher rates are on the way.
But strong growth figures for the third quarter reported
Friday by the Commerce Department were balanced by benign
inflation data that helped buoy financial markets.
Led by higher consumer spending, business investment and
government purchases, the gross domestic product _ the total
output of goods and services produced in the United States _ grew
at a 3.4 percent annual rate in the summer. That was slower than
the 4.1 percent rate in the spring, but easily exceeded analysts'
"The economy is still humming along, but not so fast as to
generate an immediate worsening of inflation," said economist
Robert Dederick of the Northern Trust Co. in Chicago. "The pace
is one that does suggest if it continues, inflation pressures
will emerge later."
The economy is "probably a bit too spry for the Federal
Reserve's liking," said Robert Barr of the U.S. Chamber of
The Dow Jones industrial average was up more than 50 points by
early afternoon, rising along with bond prices and the dollar on
international currency markets.
Analysts said the Federal Reserve is almost certain to raise
short-term interest rates a sixth time this year when its
policy-making Federal Open Market Committee meets Nov. 15 _ after
the congressional elections. They said the only question is how
much, as the Fed tries to convince financial markets it is not
losing the battle to keep inflation at bay.
"The debate will start at a half percentage point," predicted
economist Eugene Sherman of M.A. Schapiro Co. in New York City.
"The real debate is whether it will be three-quarters or a full
percentage point. I think they'll go 1 point."
Most of the expansion in the quarter that ended Sept. 30 was
due to accelerated consumer spending, which advanced at a 3
percent rate _ more than double the gain in the previous
But inventory buildup, which surged in the second quarter,
increased as well. Analysts called it a clear sign that
businesses are brimming with confidence and stocking up in
anticipation of higher prices down the road.
The fourth quarter could mean even brisker growth, they said,
if Christmas sales prove as strong as many expect.
The Clinton administration welcomed the GDP report. …