Pre-’Black Monday’ GNP Grew at Robust 4.1% Rate

The U.S. economy expanded at a robust annual rate of 4.1% last summer, even better than previously thought, the government reported today.

The Commerce Department said the gross national product, the broadest measure of economic health, was climbing sharply in the three months before the stock market collapse, led by strong increases in consumer spending and business investment.

But most analysts are saying that in the wake of Black Monday, consumer spending will be sharply lower.

The new figure on overall growth from July through September was revised from last month’s estimate of a 3.8% summer growth rate.

Inflation, however, was a bit worse than initially thought. The GNP inflation index rose at an annual rate of 3.3%, contrasted with the previously calculated 2.7%.

The 3.3% inflation rate was still an improvement from the first half of the year, when prices were rising at an annual rate of 4.3%. A moderation of energy and food costs along with decreases in clothing prices were key factors in the change.

Consumers Jittery

The 4.1% GNP growth rate contrasted with growth of 2.5% in the April-June quarter and 4.4% in the first three months of the year.

The economy will need to expand at a rate of just 1.8% in the current quarter to meet the Administration’s forecast for growth of 3.2% for all of 1987.

But with the collapse of the stock market in October, some economists think even this growth level may be unobtainable.

They maintain that the record 508-point drop in the Dow Jones industrial average Oct. 19, which wiped out $500 billion of wealth in one day, has made consumers jittery and less likely to purchase big-ticket items.

Some analysts are predicting that the recovery from the 1981-82 recession, which turned 5 years old this month, will not last through next year.

A survey of 49 top economists taken after the market crash found that 22% of them are now looking for a recession to begin in 1988, a prediction unlikely to cheer Republicans who hope to hold on to the White House in next year’s election.

Trade Deficit Widened

In a separate report today, the Commerce Department said the nation’s trade deficit widened to a record $39.8 billion from July through September as a rise in exports was more than offset by a surge in imports. The increase in the trade gap followed a $39.6-billion shortfall in the April-June quarter.

The new report confirmed parallel figures released earlier that put the third-quarter merchandise trade deficit at about $46.3 billion. Today’s deficit figure is lower because it reflects trade on a “balance-of-payments” basis, omitting such factors as the costs of shipping and insurance.

Analysts saw the report as further evidence that the massive trade deficit had still shown little sign of abating through last summer, even though exports in recent months have been rising steadily.