Economy Rises a Sluggish 2.4%, Weakest Since 1982

The U.S. economy grew a sluggish 2.4% in 1985, the weakest rate since the recession year of 1982, the government reported today.

The Commerce Department said growth in the gross national product, the broadest measure of the nation’s economic health, was down substantially from the 6.6% increase posted in 1984.

For the last three months of this year, the economy is growing at an estimated annual rate of 3.2%, according to an initial “flash” calculation released today.

A GNP-linked inflation index showed prices rising 3.5% in 1985, the lowest since a 3% gain in 1967.

The estimate of GNP growth for the entire year of 2.4%, the slowest since a 2.5% decline in growth during the 1982 recession, was below the Reagan Administration’s prediction of 2.7% growth in 1985.

The GNP figures reported today reflect a substantial revision in the way this key economic statistic is calculated, a revision the government does every five years.

The overhaul did a variety of things aimed at making the statistic a better reflection of the real economy. The base year for price comparisons was moved from 1972 to 1982.

The new GNP figures also reflect a substantial boost in Americans’ personal income aimed at capturing more of the so-called “underground economy,” the amount of money Americans earn but fail to report on their income tax returns.

The government estimated that this income loss amounted to $101.2 billion in 1984.

For the first six months of this year, the economy was growing at a 2.4% annual rate but this has picked up to a 3.1% rate in the final six months.

However, the Reagan Administration had forecast that growth would rebound to an even sharper 5% rate.

But many private analysts are not looking for much improvement over where the economy is now until mid-1986.

This view is based on a belief that the country’s disastrous trade deficit will continue holding back overall economic growth for several more months until recent declines in the dollar begin working to lower imports and boost U.S. exports.

While the Reagan Administration is forecasting that the economy will grow 4% in 1986, many private analysts are forecasting a growth rate of 3% next year.