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

DATE: FRIDAY, April 29, 1994                   TAG: 9404290149
SECTION: BUSINESS                    PAGE: A-13   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

ECONOMY'S GROWTH RATE SLOWS

Economic expansion slowed dramatically in the first three months this year, welcome news to those worried that an overheating economy would bring inflatio Still, financial markets retreated after the Commerce Department reported Thursday that the gross domestic product, the total of goods and services produced in the United States, advanced at a moderate 2.6 percent annual rate in the first quarter of 1994.

Private economists said the report is fresh evidence that growth is healthy and inflation is in check.

Much of the slowdown was due to a huge drop in exports, along with weather-related slackening in home building and a decline in business construction.

Analysts attributed the market reaction to profit taking - noting stock and bond prices already had rallied in anticipation of the latest figures.

``The rule is buy on the rumor and sell on the good news,'' said Allen Sinai, chief economist for Lehman Brothers in New York City.

An inflation index tied to the GDP rose at an annual rate of 2.6 percent in the first quarter of this year, the Commerce Department said. Although it was the biggest increase since the first quarter of 1993 when it was up 3.6 percent, analysts said there was no cause for alarm.

The economy boomed in the final three months of 1993, growing at a 7 percent annual rate, the highest since the start of 1984. For all of last year, the GDP rose 3 percent.

The latest GDP report showed even slower growth than most economists predicted.

But some said the numbers may be misleading because of the impact of the severe winter weather and the Los Angeles earthquake in January.

Economist David Orr of First Union Corp. in Charlotte, N.C., predicted the GDP will rise at a 5 percent rate this quarter.

If accurate, that would portend additional increases in short-term interest rates by the Federal Reserve. beyond a boost to 4 percent next month that most economists expect. The Fed this year already has pushed the rate from 3 percent to 3.75 percent.

The Commerce Department also reported Thursday that factory orders for big-ticket goods rose 0.4 percent in March, after a sharp weather-related decline in February.

It was the seventh increase in the last eight months.

by CNB