U.S. Economy Grew at 2.4% Annual Rate During First Quarter

WASHINGTON —  The economy from January to March grew at the fastest pace since the early months of the Bush Administration, but the rebound remained lackluster by historical standards.

The gross domestic product, the broadest measure of economic health, grew at a 2.4% annual rate, adjusted for seasonal variations and inflation, the Commerce Department said Friday.

A month earlier, it had estimated growth in the nation’s output of goods and services at a somewhat smaller 2% rate.

In an accompanying report, the department said after-tax corporate profit surged at an 8% annual rate in the first quarter, the biggest gain in four years. Also, bank officers told the Federal Reserve that loan demand is picking up from consumers and small- and medium-size businesses.

“The GDP report is good news, further demonstrating the return to a pattern of more solid economic growth since the start of the year,” said Michael Boskin, President Bush’s chief economic adviser.

Private economists agreed, but noted that the rebound is still the mildest in half a century.

“This is a very positive set of signs that recovery is really here,” said economist Allen Sinai of the Boston Co. “But by historical comparison, it’s about one-third of a typical upturn. . . . It’s nowhere near the post World War II recovery.”

President Bush is counting on economic gains to boost his chances of reelection. Economists predicted that the economy will have improved further by November, although not enough to appreciably reduce the unemployment rate from April’s 7.2%, just a tenth of a percentage point below a 6 1/2-year high.

“There’s a great deal of disenchantment out there and it won’t go away immediately . . . but clearly the economy is moving in the right direction for incumbents,” said economist Mark Zandi of Regional Financial Associates in West Chester, Pa.

Boskin joined other Administration officials in pressuring the Federal Reserve to lower interest rates if needed to stimulate growth, saying, “Concerns remain about the slow pace of money growth and credit availability.”

According to published reports, the central bank last week shifted away from a policy biased in favor of lower interest rates.

The first quarter GDP performance was the best since growth hit 2.5% in the first quarter of 1989.

However, the latest revision was not as positive as it first appeared. Most of the added strength came from greater production of manufactured goods for inventories.

Because the stock of goods held on shelves and back lots was not as lean as first believed, there is somewhat less pressure on factories to step up production during the current quarter.

As in last month’s advance report, the American consumer was the star performer in the economy during the first quarter. Consumer spending, representing two-thirds of the entire economy, grew at a 5.4% annual rate, slightly better than the initial estimate of 5.3%.

Spending rose an especially strong 18.4% for durable goods such as automobiles, home furnishings and appliances.

Gross Domestic Product

The GDP measures all the goods and services produced by workers and capital located in the United States, regardless of ownership.

‘92:

1st quarter: +2.4%(revised)

Source: Commerce Department