Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, October 6, 1993 TAG: 9310060069
SECTION: BUSINESS PAGE: C6 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: WASHINGTON LENGTH: Medium
The economy appears to be in a rebound from sluggish first-half growth, but economists polled by Knight-Ridder Financial News aren't seeing the same surge in activity that last year brought 3.4 percent growth in the third quarter and 5.7 percent by year's end.
This year the analysts think the economy registered 2.5 percent GDP growth in the quarter just ended on Sept. 30; they predict 3 percent in this year's final three months. Both quarters will be up from first-half growth of 1.3 percent, economists said.
That should help boost the inflation rate slightly in the fourth quarter. But it will leave both long- and short-term interest rates almost unchanged, they said.
The economy also won't be strong enough to move the unemployment rate down any further.
"Modest growth prevails," said William Sullivan of Dean Witter.
Robert Dederick, chief economist with The Northern Trust Co., said he expected the second half of 1993 to be "an echo" of last year's strong second-half growth. And he is among the most optimistic of forecasters, projecting 3.5 percent growth rate in the fourth quarter.
Charles Lieberman of Chemical Bank, had the highest projection for fourth-quarter growth, forecasting 4 percent GDP.
At the other end of the range was Fleet Financial Group's Gary Ciminero, who projected 0.7 percent growth rate in the fourth quarter.
Ciminero said the expansion will suffer under the pain of tax increases and ongoing defense cuts. Questions about health-care reform will exacerbate the situation, undercut consumer confidence and increase layoff risks, he said.
Most economists agree that consumer spending in the months leading up to Christmas will not match the spurt registered last year, when personal spending jumped 5.6 percent.
But consumers appear to be back on more solid footing, posting a 3.4 percent increase in spending in the second quarter after an 0.8 percent rise in the first quarter. Retail sales have risen for five straight months and are likely to continue to climb through year-end, most of the economists said.
The consumer price index, the most closely watched measure of U.S. inflation, also should rise slightly. Economists said, on average, the index should climb at a 3.1 percent rate in the fourth quarter, up from the 2.9 percent rate posted in the first 8 months of 1993.
Richard Stuckey, chief economist with DuPont Co., said he thought the new 4.3-cents-a-gallon federal gasoline tax would boost the consumer price index in the fourth quarter, but most economists thought the economy lacked the momentum needed to spur new inflationary pressures.
That, in turn, is expected to keep the Federal Reserve quiet on short-term interest rates, and long-term rates are expected to stay near their recent lows.
Analysts said the housing and auto sectors were likely to benefit from low rates and a slowly improving economy.
"We expect the fourth quarter to be the strongest of the year for the housing market," said Federal National Mortgage Association economist David Berson.
Berson said housing starts should rise to an annual rate of 1.35 million units in the fourth quarter, compared to an average annual rate of 1.20 in the first half of 1993.
Economists expect automakers to crank up production in the final months of the year. Auto sales began rising in the spring, but, to the surprise of many analysts, output failed to rise in the third quarter. Many expect it to happen now.
Overall industrial output is expected to rise 3.6 percent in the fourth quarter.
by CNB