
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, January 29, 1994                   TAG: 9401290064
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: The Washington Post
DATELINE: WASHINGTON                                LENGTH: Medium

ECONOMY SURGES BY 5.9%

Confirming earlier signs of surging growth, the Commerce Department reported Friday that the U.S. economy grew at a 5.9 percent annual rate in the final three months of last year.

Consumer spending, business investment and new housing construction all scored strong gains.

It was the most rapid growth for a quarter in seven years, but most economists cautioned that such a torrid pace could not and should not be sustained.

Robert E. Rubin, director of President Clinton's National Economic Council, told reporters the quarter was "aberrational for all kinds of reasons" and noted that administration economists expect growth to be about 3 percent this year.

G. Mustafa Mohatarem, general director of economics for General Motors Corp., said the figures improve the chances that growth will remain healthy in 1994.

"This is a bootstrap recovery," Mohatarem said, contrasting its self-generating nature with that of many past recoveries energized by tax cuts and large increases in federal spending.

"As each sector [of the economy] works out its own problems there is growth. . . . This is the type of recovery economists have long preached about."

The Commerce report was notable not just for the rapid rise in the gross national product, after adjustment for inflation, but for the fact that the growth was accompanied by equally good news on price levels. The gross national product price index, a broader measure of inflation than the consumer price index, rose at a 2.1 percent rate for the quarter and was up only 2.5 percent for the year.

The report that growth doubled from the third quarter's 2.9 percent rate helped fuel a stock market rally that pushed the Dow Jones average of 30 industrial stocks to a record 3,945.43, up 19.13 points from the previous high set the day before.

Meanwhile, the news that inflation remained so low despite the growth surge encouraged inflation-wary investors to buy bonds.

As a result, long-term interest rates fell, with yields on 30-year U.S. Treasury bonds dipping to 6.21 percent from 6.26 percent a day earlier.

Many analysts credit the low level of interest rates, which most believe was aided by the prospect of falling federal budget deficits, for the strong economic growth.

by CNB