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Economy Posts Slowest Growth Figure in Year

July 24, 1987|Associated Press

WASHINGTON — The U.S. economy grew at a modest annual rate of 2.6% in the April-June quarter, the slowest performance in a year, the government reported today.

The Commerce Department said the change in the gross national product, the broadest measure of economic health, was down sharply from a 4.4% rate in the first three months of the year.

While growth slowed substantially, economists said the mix of economic activity was actually healthier than in the January-March quarter.

A drop in the trade deficit, which added $7.4 billion to growth, propelled the spring growth.

The Administration is pinning much of its hopes for better growth this year on a further big decline in the country's huge trade deficit.

Personal Spending Up

In addition to trade, the GNP was boosted by a 2.1% rise in personal consumption spending, a substantial improvement after a 0.7% decline in the first quarter.

Business investment spending climbed at a rate of 7.9% in the second quarter, after a sharp drop of 14.6% in the first three months.

The Reagan Administration is predicting that the economy will expand at a 3.1% annual rate this year, contrasted with 2.9% in 1986.

To reach this forecast, the economy will need to grow at a rate of 2.9% in the last half of the year, a target that many private economists believe is attainable.

Commerce Secretary Malcolm Baldrige said today that he is confident that the 3.1% growth estimate can be achieved this year.

"Nothing is ever in the bag, but I feel confident we can (achieve the Adminstration's growth projection)," he said.

Economists Encouraged

Many private economists viewed today's report in a positive light.

"This is a very positive report which shows a much brighter picture of the economy than I had anticipated," said Michael Evans, head of a Washington consulting firm.

Evans, who had been forecasting that the economy would expand at a lackluster 1% annual rate in the second half of the year, said he is boosting that estimate to 2.5%.

Growth was held back in the spring by a giant decline in business inventories.

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