Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 30, 1992 TAG: 9201300097
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
ECONOMY STILL HASN'T FOUND THE GAS PEDAL
The economy virtually stood still in last year's fourth quarter, the government reported Wednesday, prompting economists to say that any meaningful recovery is months away.The Commerce Department said Wednesday the minuscule growth - at an annual rate of 0.3 percent - in the gross domestic product was due mainly to a spurt in exports and a modest revival in the housing sector. And some experts contend those gains will prove short-lived.
The gross domestic product is the nation's total domestic output of goods and services.
For the year, the GDP sank 0.7 percent, the first annual decline since a 2.2 percent drop in 1982, the final year of the previous recession.
"Basically, it says the economy is stalled," said Sung Won Sohn, an economist with the Norwest Corp. in Minneapolis.
"The economy was treading water at the end of the year," concurred Mark Zandi of Regional Financial Associates in West Chester, Pa.
Acting Commerce Secretary Rockwell Schnabel called the sluggishness "clear and convincing evidence" of the need for quick congressional enactment of measures to prompt economic growth.
Even with the growth package and the impact of lower interest rates, a sustained recovery will not begin before spring, cautioned Commerce chief economist Antonio Villamil.
Zandi agreed, saying, "We should begin to see more signs of growth by summer and maybe as late as fall in response to the significant drop in interest rates and perhaps as a result of any fiscal stimulus."
But any growth this year is likely to be sub par, compared to other post-World War II recoveries, many economists agreed.
Sohn, for instance, predicted the GDP will grow about 2 percent this year, just a third of the 6 percent average growth during the first year of recent recoveries.
The economy sank into recession in July 1990 and, after declining at a 3.9 percent annual rate in the fourth quarter and 2.5 percent in the first three months of 1991, showed signs of a weak revival.
But it stalled again in late summer, prompting concerns it might be headed for the fifth double-dip recession since World War II.
Analysts said the most troubling aspect of the GDP report was a 1.1 percent annual rate of decline in consumer spending. Personal consumption had jumped 2.3 percent from July through September and helped boost third-quarter GDP by a 1.8 percent annual rate.
"There is no sign that consumers are ready to forge ahead," said Kermit Baker of Cahners Economics in Newton, Mass.
Business investment in plants and equipment fell for the fifth straight quarter, at a 2.4 percent annual rate. Government spending was down 5.9 percent, its third consecutive decline.
Exports soared at a 15.4 percent rate in the October-December quarter, but many economists expressed concern that this source of strength would dissipate as the economies of America's trading partners continue to weaken.
Without the export component, the GDP would have been negative, Villamil said.
Another bright spot in the report was a 10.6 percent jump in housing construction, which is coming out of its worst year since World War II. But even with the lowest mortgage rates in nearly 20 years, analysts say growth in this industry this year will be modest at best.
The various changes boosted the GDP at an annual rate of $3.6 billion, putting it at $4.866 trillion in the fourth quarter after adjustment for inflation.
In early December, the GDP replaced the gross national product as the nation's broadest measure of economic health. The difference is that the GDP measures output within the United States, while the GNP included profits earned by U.S. companies on their overseas operations.