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

DATE: SATURDAY, October 29, 1994                   TAG: 9410310025
SECTION: BUSINESS                    PAGE: A6   EDITION: METRO 
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON                                 LENGTH: Medium

ECONOMIC GROWTH SPURT CONTINUES

Barely slowed by a pile of interest rate increases, the national economy is still bubbling - making it more likely that 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' expectations.

``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.''

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 that it is not losing the battle to keep inflation at bay.

Most of the expansion in the quarter that ended Sept. 30 resulted from accelerated consumer spending, which advanced at a 3 percent rate - more than double the gain in the previous quarter.

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.

Sales of U.S. goods and services rose at a 3.1 percent rate in the third quarter, the biggest increase since a 6.4 percent jump in the fourth quarter last year. The economy boomed at a 6.3 percent rate in that quarter.

GDP slowed to a 3.3 percent rate in the first quarter before gaining new momentum in the spring. Federal Reserve Chairman Alan Greenspan has suggested that the optimum growth rate is 2.5 percent. ``Rather than restrain business borrowing, higher rates are actually the result of increased borrowing,'' said David Orr of First Union Corp. in Charlotte, N.C. ``It's simply a matter of supply and demand.''

Consumer spending was higher across the board - with Americans buying more big-ticket goods such as cars and appliances as well as spending more for food, fuel and services. But net exports and construction decreased.

by CNB