Economy Grows Scant 0.6% in Quarter, Worst in 4 Years : Annual Inflation Rate of 1.8% Is Best Since 1967

Associated Press

The U.S. economy grew at a minuscule annual rate of 0.6% from April through June, the worst performance since the end of the last recession nearly four years ago, the government said today.

The Commerce Department's latest overall calculation of the gross national product--the total output of goods and services--emphasized how weak economic performance has been this year.

The news on inflation, however, continued to be superb. A measure of prices tied to the GNP advanced at a 1.8% annual rate, the slowest increase in almost two decades.

The 1.8% annual rate of increase in the GNP deflator, a price index that measures a changing selection of goods, was the best performance since the spring of 1967 and was credited to the dramatic plunge in energy prices this year. This price index rose at a rate of 3.7% for all of 1985.

Estimate Unchanged

Today's estimate of GNP growth for the spring quarter was unchanged from a month ago.

Many economists had expected the 0.6% growth rate would be revised upward to at least 1%, reflecting some improvement in trade and less of a deterioration in business inventories.

The fact that the report was unchanged emphasized how close to a standstill the economy was in the second quarter. The weakness has led a few economists to predict an impending recession.

But most analysts believe growth will strengthen somewhat in the second half of the year, keeping the current 45-month-old recovery alive.

At the White House today, presidential spokesman Larry Speakes discounted the lack of improvement in the second quarter growth rate and said the Reagan Administration remained confident the economy was picking up steam.

Rebound Predicted

The Administration is predicting a dramatic rebound to growth at over a 4% annual rate, basing this hope on a belief that the country's disastrous trade deficit will finally begin to show improvement.

Most private economists, however, contend that the 4% estimate is far too optimistic, with many of them forecasting growth of around 2.5% in the second half of the year.

This would be a significant rebound from second-quarter growth, but essentially the same sluggish rate the country has endured since mid-1984.

The Commerce Department two months ago first estimated GNP growth of 1.1% in the April-June quarter, lowering that to 0.6% last month. It is a rare occurrence when new data do not force a revision in the overall GNP figure. Government economists said the last unchanged GNP report they could find was in the third quarter of 1978.

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