GNP growth called cosmetic. Rise based on expanding inventories; some say figure will decline

Much like a circus mirror, the government's first look at the economy reveals a distorted business image. In a preliminary report on the first quarter gross national product, the Commerce Department said Thursday that the nation's output of goods and services swelled by a strong 4.3 percent, the fastest growth in three years.

The White House said it regarded the first quarter figure ``with enthusiasm,'' because it exceeded the administration's forecast for 1987 growth by more than a full percentage point.

But economists cautioned that this preliminary number did not accurately represent the economy. The numbers are ``cosmetic,'' says Edward Yardeni, director of economics at Prudential-Bache Securities Inc., a Wall Street brokerage.

``Virtually all the increase in the economy,'' explains Mr. Yardeni, ``was in inventory growth.''

According to the Commerce Department, inventories swelled by $59.5 billion, in large measure because the Detroit automobile companies are having trouble selling new cars. Robert Ortner, undersecretary for economic affairs at Commerce, called the inventory build-up ``unusual but concentrated.''

Mr. Ortner noted that if the build-up continues, it could indicate near-term economic weakness as business tried to cut back production to better match sales.

But Jerry Jasinowski, chief economist for the National Association of Manufacturers, says March auto sales, which were not included in this early number, were stronger. He anticipates the first quarter GNP numbers will be revised down on May 22.

Included in the Commerce report was good news on trade. The trade deficit shrank by $13.8 billion in large measure because of an 11 percent decrease in imports. ``We're beginning to see the effects of the dollar's decline,'' says Stacy Kottman, an economist at the Georgia State University economic forecasting center in Atlanta. Exports, however, fell by 1 percent, reflecting the lower value of the currency. As US companies sell more overseas, they get fewer dollars back when the US currency is weak.

Economists do not believe the economic numbers will influence the Federal Reserve Board. Yardeni says, ``It would be dumb to raise the discount rate [the rate the Fed charges member banks to borrow] right here. I don't think the economy could stand the pressure.''

Yardeni points to other elements of the GNP report as indicating a weak economy. Consumer spending, representing two-thirds of GNP activity, fell 0.4 percent while housing investment dropped 7.2 percent. Reflecting the change in the tax laws, business investment plunged 12.8 percent. But the inflation rate climbed to 3.6 percent, up from 2.4 percent for all of 1986. This reflected a rise in the price oil.