U.S. Revises GNP Estimate Downward, to Sluggish 3% : Outside Experts Doubt Economy Can Hit Figure

The Reagan Administration, admitting that the economy has not been growing as fast as expected, today cut back its estimate of the gross national product for 1985 from 3.9% to 3%.

The trimming of the Administration’s optimistic projection followed a sluggish growth rate of only 1.7% in the second quarter of this year. But some outside economic experts said that even the new prediction is unrealistically rosy.

For the first six months, the GNP grew at an annual rate of just 1% as U.S. manufacturing was being battered anew by foreign competition, resulting in a drop in sales both at home and abroad.

But to achieve even the reduced 3% growth now predicted for 1985, the economy will have to accelerate in the second half of the year at an annual rate of 5%--five times the pace of the first six months.

Slower Rebound Expected

Few analysts are predicting such a sharp turnaround, with most forecasting a rebound in growth of around 3% in the second half of the year.

“The Administration has moved in the right direction, but they haven’t quite found the courage to say that we are going to stay in a growth recession for the whole year,” said Roger Brinner, economist at Data Resources Inc., a private forecasting firm.

In a statement by Beryl W. Sprinkel, chairman of the Council of Economic Advisers, the Administration also projected a steady decline in the unemployment rate, which has been stuck in recent months at about its current level of 7.3%.

Sprinkel’s long-range forecast of continued healthy growth for the U.S. economy was not altered by today’s revisions.

Drop in Inventory

“Real GNP growth is projected to accelerate in the second half of 1985,” Sprinkel said. “In the second quarter real GNP grew at an annual rate of 1.7%, while real final sales grew 5.1%. The slowdown in the growth of real GNP relative to final sales was due to a sharp drop in inventory accumulation.”

But Sprinkel added: “We expect a resumption of normal growth in inventories and continued strength in final sales. Under these conditions we should see a rebound in real GNP growth.”

He said the rate of inflation for 1985 is projected to be 4%. “This projection reflects the favorable price performance in the first half of 1985 and our expectation that it will continue,” he said.

“The inflation forecast over the period of 1986-90 has not changed.”