Economy Grew Solidly, If More Slowly, in Early ’94

WASHINGTON —  Led by surprisingly strong consumer spending, the economy grew solidly during the harsh winter of 1994, but at only about half the booming pace of the end of last year, the Commerce Department said Wednesday in a revised report.

Analysts said the solid but unspectacular growth probably carried over to the current quarter before higher interest rates fully take hold to force a slowdown.

A final revision of quarterly gross domestic product shows economic output expanded at a 3.4% annual rate from January through March, up from estimates of 3% last month and 2.6% originally.

“I’m amazed at how resilient the economy was in the first quarter despite the weather and the California earthquake,” said economist Sung Won Sohn of Norwest Corp. in Minneapolis.

“But the important thing is that the last hurrah for the economy is behind us. We are beginning to see some telltale signs of a slowdown,” he said.

The Clinton Administration welcomed the latest report. “It continues to underscore our belief that we have stable economic growth with low inflation,” White House Press Secretary Dee Dee Myers said.

GDP, which measures the total value of goods and services produced in the United States, rose at a sizzling 7% rate in the final quarter of last year. For all of 1993, growth was 3%.

Although expansion has eased dramatically this year, the latest figures show Americans continuing to spend at a robust pace.

The latest revision in first-quarter GDP was caused by an additional $5.6 billion in consumer spending and $2.3 billion in business investment, more than offsetting declines in government spending and exports.

“It doesn’t fundamentally change my view that the strength of the economy is dissipating somewhat,” said economist Christopher Probyn of DRI-McGraw Hill, a forecasting service in Lexington, Mass.

But he said the data could lead the Federal Reserve Board and Chairman Alan Greenspan to tighten credit further.

The sizzling expansion in the last three months of 1993--the largest in a decade--prompted the Fed to raise short-term interest rates four times this year to head off inflation.