Share this article

print logo

ECONOMY SLOWS AFTER 4TH-QUARTER SURGE

The economy surged ahead in the closing months of 1994 at a faster clip than first realized, the Commerce Department said Friday, but apparently lost much of its steam at the beginning of this year.

The nation's gross domestic product expanded at a 5.1 percent annual rate in the three months from October through December, well ahead of the 4.6 percent rate estimated a month ago. Vigorous consumer spending and more inventory-building contributed to the revision.

For the full year GDP grew 4.1 percent, the strongest in a decade since a 6.2 percent burst of growth in 1984.

"It's a surprising fourth-quarter figure, underscoring the boomy U.S. economy throughout 1994," said economist Allen Sinai of Lehman Brothers in New York. "But it's also suggesting a hesitation of growth in the first quarter of some significance."

Sinai predicted first-quarter GDP growth will fall to a rate between 2.0 percent and 2.5 percent, less than half the fourth quarter's heated pace.

"A lot of pent-up demand for goods has been satisfied, a tremendous capital spending boom could not continue at the same pace and housing construction's prospects look at best flat," he said. Those are all factors arguing for softer growth this year of about 3.1 percent for the full year, he said.

Other reports Friday confirmed slowing in the economy during this year's first quarter.

The Commerce Department said factory orders fell for the first time in four months during February, down 0.2 percent after a 0.7 percent January increase.

The Purchasing Management Association of Chicago said its barometer of regional business activity fell sharply in March to a seasonally adjusted 55.0 from 62.7 in February as new orders plummeted. A reading below 50 percent indicates weaker manufacturing activity while above 50 percent shows expansion.

The quarterly expansion in GDP during last year's closing three months was the strongest since a 6.3 percent rate in the fourth quarter of 1993 and was well ahead of the third quarter's 4.0 percent rate.

GDP measures the value of all goods and services produced by workers and capital in the United States.

It was the second and final revision of the fourth-quarter GDP, which first was reported growing 4.5 percent, then raised to 4.6 percent and finally to 5.1 percent. A look at first quarter GDP will not be available for another month.

The Commerce Department also reported that after-tax profits of U.S. companies rose 2.5 percent in the fourth quarter, same as in the third quarter. Profits jumped 7.3 percent in the second quarter.

There are no comments - be the first to comment