                                ROANOKE TIMES 
                      Copyright (c) 1996, Roanoke Times

DATE: Saturday, December 21, 1996            TAG: 9612230033
SECTION: BUSINESS                 PAGE: A-8  EDITION: METRO 
DATELINE: WASHINGTON
SOURCE: Associated Press

ECONOMIC GROWTH RATE SLOWS SHARPLY ANALYSTS EXPECT SAME GROWTH RATE OF 2.1% FOR 1997

The economy has slowed sharply, growing at a rate of only 2.1 percent in the third quarter, a modest pace that many analysts believe will continue through 1997.

The 2.1 percent GDP growth rate in the July-September quarter represented a small upward revision from a 2 percent estimate the government made just a month ago. The small new-found strength was concentrated primarily in a bigger buildup of business inventories.

Many economists believe the GDP is growing around the 2 percent level in the fourth quarter and is likely to remain in a 2 percent to 2.5 percent range for all of 1997.

That range would match the target set by the Federal Reserve, which is aiming for moderate growth as way of prolonging an expansion that is already in its in its sixth year. Analysts believe as long as growth stays at these levels the Fed will continue to delay boosting interest rates.

The government's final look at third-quarter GDP showed that inflation has remained well-behaved. A price measure tied to the GDP was rising at an annual rate of just 1.7 percent, the best showing in four years.

The government also reported a revised estimate for after-tax profits, showing they fell by 1.4 percent in the third quarter, the biggest decline since early 1994.

The slowdown in the third quarter economic activity reflected a big drop-off in consumer spending, which rose at a barely perceptible 0.5 percent rate, the weakest performance in nearly five years.

Consumer spending accounts for two-thirds of economic activity, and this sector will have to rebound in the current quarter for the forecast of 2 percent growth to become a reality.

With less than a week to go, reports on retail sales activity have been generally upbeat, in sharp contrast to the dismal Christmas performance a year ago.

The country's trade deficit, which has worsened considerably this year, subtracted $22.7 billion from growth in the third quarter, but analysts said a sharp narrowing in the October deficit reported Tuesday was making them redraw their fourth-quarter GDP forecasts.

LENGTH: Short :   50 lines
ILLUSTRATION: GRAPHIC:  Map by AP.

by CNB