US Economic News Improves With 6 Days Left
Last report before balloting shows GDP growing at a 2.7-percent annual rate. ELECTION COUNTDOWN
NEW YORK — THE United States economy may be showing signs of more vigor.
In the last major economic report before the election, the Commerce Department reports the nation's gross domestic product (GDP) rose by 2.7 percent in the third quarter. This was somewhat higher than most econo-mists had expected. The main boost to the economy came from stepped-up government spending - perhaps because of the election - and some inventory accumulation.
In addition, sales of durable goods were stronger, probably reflecting lower prices for such items as computer equipment.
"From President Bush's point of view, this is an extremely attractive set of numbers," says Robert Dederick, chief economist at Northern Trust Company in Chicago.
It is also likely that Gov. Bill Clinton will look at the numbers as proof that the economy still needs a new manager. Disposable personal income was unchanged, housing hardly budged, and net exports were down.
A separate report from the Labor Department said that American workers' wages rose 3.5 percent in the year ended Sept. 30, the smallest increase in five years.
Some economists believe the actual GDP numbers are overstating the strength of the economy. "When one looks at the other data from the quarter, this does not really coincide. There are lots of other reports that say we did not have such a strong quarter. This is just one of the peculiarities of GDP," says Ian Borsook, an economist at Merrill Lynch & Co. in New York.
Analysts were not surprised that the economy is bumpy. "Total industrial production has been down three out of the last four months," says Richard Stuckey, chief economist for E.I. Du Pont De Nemours & Co. in Wilmington, Del.
Some of the main turbines that power the US economy are sputtering. Defense and aerospace orders, for example, are down 20 percent from last year. Pratt & Whitney and Boeing have both announced layoffs. Mr. Stuckey says Du Pont is experiencing some extra demand for its polymers used in carpeting. This would reflect improvement in housing, which has been buoyed by declining mortgage rates. Yet "the wild card is consumer apprehension," Stuckey adds.
Some elements of the consumer economy (which accounts for two-thirds of the GDP) are showing signs of improvement. The Association of Home Appliance Manufacturers, for example, reports total shipments are up 6 percent year-to-date and 8.8 percent in the third quarter. It was the best September ever for refrigerators, gas dryers, and dehumidifiers.
However, Mary Gillespie, a spokes-woman for the association, says there is no discernible trend. Since last year was so dismal, she says, comparisons do not tell the whole story. "There is no indication of clawing back," she says.
Consumers have also been cautious about spending money to eat out. This trend is hurting a lot of restaurant chains. "Basically we feel the recession and the pinch at the retail level. People are not dining out as much and it is difficult to pass cost increases on," says Ken Henderson, president of Caffe Classico, a European sidewalk cafe chain owned by Baskin Robbins Inc. To help counter the downturn, the chain is offering coupons and discounts. "It has been pretty effective," says Mr. Henderson.
At Blimpie International Inc., which sells subs, consumers are trading down - that is buying lower-priced food.
However, the recession is also helping Blimpie, which is now selling a new franchise every three days. "There are many people losing their jobs or who will be losing their jobs and they are arriving in greater numbers to discuss franchises," says David Siegel, executive vice president and general counsel of the New York-based chain.
SOME economists are hoping that the consumer may feel better about buying after Nov. 3 - and after a lot of the negative advertising is off television. "Maybe having a new president might give a spark - the sheer act of change will give retailers a strong Christmas," says David Hale, chief economist at Kemper Financial Services in Chicago.
He notes that consumer surveys show that potential buyers feel it is a good time to buy a new car or a new home. However, because they feel insecure in their jobs, consumers are reluctant to actually purchase products.
Economists also hope the United States's trading partners move out of their slump. A rebound abroad will help America's exports. "I think by late 1993, Europe will be out of recession and we will come out when Europe does," says Gordon Richards, an economist at the National Association of Manufacturers in Washington.
If Europe does rebound, Mr. Hale anticipates that Britain will lead the recovery, followed by France, Germany, and Italy. Hale notes that US firms are profiting from a buying surge from East Asia and South America. But he does not expect the Japanese economy to respond to fiscal stimulus until the second half of 1993.