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GNP Grows a Weak 0.6%; Budget Billions Over Goal : Gain Least Since 1983 Recession

August 19, 1986|Associated Press

WASHINGTON — The economy, held back by a worsening trade performance, grew at a barely perceptible annual rate of 0.6% from April through June, the weakest advance since the last recession, the government reported today.

The Commerce Department said the rate of growth in the gross national product, the broadest measure of economic health, was the smallest since GNP had fallen at a 3.2% rate in the July-September quarter of 1982, during the depths of the last recession.

The second-quarter advance matches a 0.6% rise in the fourth quarter of 1982 as the country began to pull out of the recession.

The 0.6% performance marked a sharp downward revision from an initial estimate made last month, when the government projected that the economy had expanded at a 1.1% annual rate from April through June.

Gloomier Picture

The revision painted an even gloomier picture of an economy pulled down by a disastrous trading performance and a steep slump in the oil and gas industry.

The 0.6% increase from April through June was less than one-sixth the 3.8% rate turned in from January through March.

While the rate of growth was dropping dramatically, the news on inflation remained upbeat. The government said an inflation index tied to the GNP rose at a 1.9% annual rate in the second quarter, the slowest advance since the spring of 1972. The good showing was attributed to the big plunge in energy prices.

For the first six months of the year, the economy grew at an annual rate of 2.2%, far below the Reagan Administration's original prediction of 4% growth for all of 1986.

Earlier this month, the Administration trimmed its forecast for this year to show growth of just 3.2%. But even to achieve the Administration's scaled-back growth estimate, the economy will have to expand at a 4.2% annual rate in the final six months of the year, a pace far higher than most private economists expect.

'We Are Optimistic'

White House spokesman Larry Speakes, in California with the vacationing President Reagan, tried to strike a positive note despite the weak GNP figures.

"With inflation remaining under control and key economic indicators strengthening, we are optimistic about the prospects for a strong showing the second half of 1986," Speakes said in a statement.

Many private analysts believe the country will be lucky to reach growth of 3% in the final six months of the year. Their pessimism is based in part on a belief that the country's poor trade performance is so far showing no signs of improving.

This was a major factor in the downward revision in second-quarter growth. The GNP report said that the country's trade deficit has swelled to an annual level of $150.5 billion, subtracting $24.6 billion from domestic growth. A month ago, the government had estimated that the trade deficit had subtracted $4.2 billion less from total output.

In a separate report, the government said after-tax profits of American corporations rose 4.1% in the April-June quarter, reversing a 3% decline in the first quarter.

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