Federal Reserve Chairman G. William Miller predicted yesterday that the economy will grow by only about one and a half percent this year while inflation will be in the "8 percent-plus range."
A mini-boom in sales to industry has caused some Carter administration officials, including Treasury Secretary W. Michael Blumenthal, to fear that the economy will not slow down as much as they had predicted, or as much as is needed to combat inflation. Blumenthal has urged President Carter to pot for more stringent budget and monetary policies to insure a slowdown.
In contrast, Miller, who earlier thought real output would rise by at least 2 percent this year, thinks the strength in industry will itself lead to more of an economic drop, but still not a recession.
Part of current industrial demand, Miller noted, is to build up inventories. That could be "troublesome later" when business has to reduce inventories in the face of softer sales.
The administration so far has not changed its January forecast of real growth of two and a quarter percent during 1979, and an inflation rate of 7.4 percent.
Miller, acknowledging that he and some administration officials, are interpreting the same economic statistics differently, said that there is no need to tighten monetary policy further at the present time.
The Fed chairman said he expects the increase in output in the first quarter of the year to be at a 2 percent or so annual rate, compared to the boomy 6.9 percent rate of the fourth quarter of 1978.
"Those who predict a sharp snapback in April could be right," Miller said. But he expressed strong doubts that housing starts will recover all the ground lost since December when they fell from an annual rate of 2.1 million units to only 1.4 million in February.
Nor given recent high rates of inflation for food and energy does he expect retail sales to surge upward again soon.
But should those two sectors of the economy pick up again and the industrial boom continue, "we'll have trouble," Miller declared.
Earlier in the day, Miller told a breakfast meeting of the National Association of Manufacturers that in real terms, corporate profits are moderate. He said that profits should be viewed as a plus, and that his discussions with administration officials indicate they have a "pro profit" attitude.
Miller and the real criteria to gauge profits ought to be return on equity. That return last year, he said, was very modest and was lower than during years when inflation was lower.