Economy on the Move Again

The U.S. economy seemed to rejuvenate itself during the third quarter. The Commerce Department reported last week that the gross national product grew at the respectable annual rate of 2.4% for the three months ending with September. The sharp improvement over the all but lifeless .6% growth in GNP that was posted during the second quarter at least momentarily quieted fears of a downturn. Says Walter Heller, a professor of economics at the University of Minnesota: “There is no recession in sight.”

The comeback was fueled by a $42 billion increase in consumer spending, largely as a result of a surge in auto sales. But that boom may prove to be short-lived. Many consumers raced into car showrooms in response to a barrage of cut-rate financing deals, which will soon expire. Others are deciding that it makes sense to buy a car this year so they can write off the entire sales tax, which will not be possible in 1987 under the new tax law.

Another factor causing uncertainty is the ever growing federal budget deficit. Last week the Administration reported that the deficit for the fiscal year that ended Sept. 30 will hit a record $220.7 billion, which is some $8 billion above last year’s level. Efforts to reduce the deficit next year by curbing federal spending could stunt economic growth in the short run.