Economy Expands at Slow 1.3%--Lowest Quarter Since 1982

The economy grew at an anemic annual rate of 1.3% in the first three months of the year, the government said today. The expansion, even more sluggish than first thought, was the slowest in more than two years.

The Commerce Department’s new estimate of growth so far this year compared to an initial projection of 2.1% made a month ago, before the first quarter had ended.

Not since the last three months of 1982, when the economy was beginning its climb out of the 1981-82 recession, has the gross national product, the broadest measure of economic health, grown so slowly.

Commerce Secretary Malcolm Baldrige conceded that “we did have a weaker economy in the first quarter.” He said, however, that the Administration’s goal of 3.9% growth for the whole year, while now “more difficult” to achieve, is still possible if Congress acts promptly on the Administration’s deficit reduction program.

Economists Mistaken

When the initial first-quarter forecast was made, many economists said they believed the government was overstating the weakness in the economy and predicted the growth calculation would be revised upward, possibly to 4%.

Since that time, however, a string of other business barometers has confirmed that the economy performed very sluggishly in the first three months of the year.

The 1.3% growth pace compared to a 4.3% rate turned in during the final three months of 1984 and was the meekest since the 0.5% annual rate registered for the last quarter of 1982.

For all of last year, the GNP grew 6.8%, the best performance in more than three decades.

Corporate Profits Fall

The government also reported today that corporate profits were weaker in the fourth quarter of last year than originally thought. The Commerce Department said that after-tax corporate profits fell 0.5% in the final three months of the year. This compared to an original estimate showing after-tax profits rising 0.4% in the fourth quarter.

The consequence of the slower growth could well be rising unemployment and a so-called “growth recession,” some economists are predicting. A growth recession occurs when the economy is expanding at such a sluggish pace that it is not creating enough new jobs to take care of a growing labor force.

Bigger Deficit Possible

For the Reagan Administration, slower growth could also translate into bigger budget deficits than the record $213.3 billion already anticipated for the current fiscal year.

The Commerce Department report showed that inflation also picked up in the first three months of the year. A GNP price index which takes into account the changes in the types of goods being purchased rose at an annual rate of 5.3% in the first quarter, almost double the 2.8% pace turned in during the final three months of 1984.

However, government analysts said this index overstated the inflation pace because it was skewed by a big shift to purchases of energy products in the first three months of the year.