Economy Up at 4.4% for First Quarter; Experts Unimpressed

The U.S. economy, powered by strong auto production and an improving trade deficit, grew at a 4.4% annual rate from January through March, up 0.1% from an earlier estimate, the Commerce Department reported today.

The advance in the gross national product, which followed a lackluster 1.1% rise in the final quarter of 1986, left many economists unimpressed, however, because the strength came almost entirely from an unwanted buildup in business inventories.

“Inventories went up and consumption went down (in the first quarter),” said Michael Evans of Evans Econometrics. “It’s the wrong way to move if you want to show improvement in the economy.”

Lawrence Chimerine of Wharton Econometric Forecasting agreed.

“Final demand in the economy is sluggish,” he said. “The report was consistent with an economy that’s just barely growing.”

There were few major changes in the GNP report from the earlier 4.3% estimate, released April 23.

The 4.4% increase was the highest since the second quarter of 1984, when the GNP rose 5%.

The report showed that inflation accelerated at a faster rate than reflected in the preliminary report.

The GNP implicit price deflator rose 4.2% during the first three months of this year, compared with the 3.5% previously reported.