The gross national product fell at a 0.6 percent annual rate in the third quarter, confirming that the economy is in recession. At the same time, the Commerce Department yesterday reported a sharp rise in inflation during the quarter.
Commerce Department economists said later revisions of the preliminary estimates, which will include more information from September when the economy was weakening, probably will show a larger drop, perhaps as much as a 3 percent rate, in GNP, which is the nation's output of goods and services.
Inflation, as measured by the GNP price deflator, surged to a 9.4 percent rate from a 6.4 percent rate in the second quarter, the department reported. A department spokesman said the surge in third-quarter inflation was primarily the result of price increases in food and services.
Most forecasters, including those in the Reagan administration, now expect the economy to continue to decline in the fourth quarter. But the economists are divided over whether the slump will hit bottom this winter or next spring. Most predictions call for a mild economic decline.
However, George L. Perry of the Brookings Institution warned the Joint Economic Committee yesterday that "the economy is entering a serious recession." Perry predicted that the slump will continue for the next three quarters, with unemployment rising to 8 1/2 percent and corporate profits becoming depressed. And he added that "1982 as a whole will be the third year in a row of disappointing business investment, rising unemployment, and near-depression in the housing and automobile industries."
In contrast, Lawrence Chimerine of Chase Econometrics told the committee he expects the economy to begin growing again in the first quarter. "A sharp recession is not likely," he said. "In my view, the weakness we are currently experiencing . . . represents another stop period in the stop-and-go pattern of recent years rather than a traditional recession."
After adjustment for inflation, every major sector of GNP fell in the third quarter except for personal consumption expenditures, the department said. Consumer spending rose in part because of a jump in auto sales in August. But in September and October new-car sales fell once more, indicating personal outlays will drop in the fourth quarter, analysts said.
To step up their buying, consumers lowered their savings rate. Personal saving as a percentage of disposable personal income fell from 5.4 percent in the second quarter to 4.9 percent in the third.
The most significant drop reported by the Commerce Department occurred in net exports, as the U.S. trade position continued to worsen during the quarter. Business investment in plant and equipment declined, as did investment in housing. Spending for housing construction was at a level 20 percent below that of the first quarter.
Federal government purchases of goods and services rose slightly because of increases in defense spending. Outlays for nondefense items were unchanged from the second quarter and virtually unchanged from the third quarter of last year. However, declines in spending by state and local governments more than offset the rise in defense purchases, so that overall government spending was down. Government transfer payments, as opposed to purchases of goods and services, are not included in the GNP figures.
Administration officials said they have no intention of proposing new policies to combat the recession. In remarks Tuesday to a group of business leaders, Murray L. Weidenbaum, chairman of the Council of Economic Advisers, said that "in past administrations, the tendency about this time has been to go for the panic button" by pressing for emergency spending increases and looser Federal Reserve Board control of the money supply.
"Those misguided policies are precisely the type of actions that lie at the root of today's deep-seated, long-run economic problems," he said.
Most forecasters pin their hopes for a recovery on a decline of interest rates, the high levels of which are blamed for the present slump. "Provided that steps are taken to bring down interest rates, a moderate expansion should begin some time in 1982," Chimerine told the Joint Economic Committee.
Allen Sinai of Data Resources Inc., another economic consulting firm, agreed. "A turnaround in the first half of 1982 would be conditional on sufficient declines of interest rates during the fourth quarter to provide stimulus to housing, consumption and business investment," Sinai said.