U.S. Economy Posts Robust 4.3% Growth : Consumer Spending Helps Offset Further Trade Balance Decline

The U.S. economy grew at a robust 4.3% annual rate over the summer, as higher-than-expected consumer spending helped offset a deteriorating trade performance, the government reported today.

The Commerce Department’s latest look at the gross national product showed that the economy was expanding at an even faster pace immediately before the October stock crash than had been believed.

A month ago, the department had put growth in the GNP from July through September at an annual rate of 4.1%.

Many economists had been looking for that figure to be revised downward today based on a belief that the country’s trade deficit was worse than had been estimated.

The government did revise the trade shortfall to show it worsening at a faster rate, but this was offset by a faster pace of consumer spending and bigger government outlays.

Inflation, as measured by the GNP, moderated in the third quarter, reflecting slower increases for petroleum and food. Prices were rising at an annual rate of 3.4%, down from a 4.1% rate in the second quarter.

The 4.3% GNP growth rate was the fastest since a 4.4% increase in the first quarter. The economy expanded at a 2.5% rate in the April-June quarter.

Annual Goal in Sight

For the first nine months of the year, the economy was growing at an annual rate of 3.7%. To reach the Administration’s forecast of 3.2% growth for all of 1987, the economy will need to expand at an annual rate of just 1.6% in the current quarter.

From all indications, the economy is expanding at least at this pace. Many economists believe growth in the final three months of the year will average 2.5% or better.

However, there is great uncertainty about next year. Analysts are fearful that if consumers cut back sharply on spending because of uncertainty generated by the market turmoil then the economy could tip into a recession early next year.

In a second report today, the government said that corporate after-tax profits rose a healthy 5.5% in the third quarter, the best showing since a 6.5% increase in the third quarter last year. Today’s report represented a revision from a month ago, when corporate profits were put at 5.2%.