THE LATEST ROUND of economic statistics casts a certain chill on the atmosphere. It shows that the inflation rate is lower than most people had expected--but so is the economy's growth rate. The growth figures are a reminder of the price at which that good performance on inflation is being achieved. The recovery is coming along, but it is a good deal less robust than recently seemed probable.
It's been clear for some time that this recovery is not going to follow the conventional pattern. Last week the Commerce Department published the gross national product data for the first quarter of this year, showing the economy expanding at the modest rate of 3.1 percent annually. But the composition of this rate gives substance to a warning offered several weeks ago by economist Alan S. Blinder of Princeton. He pointed out that the GNP can be misleading around the end of a recession because of the behavior of business inventories. As it turns out, GNP rose as much as it did only because businesses last winter were drawing down their inventories less rapidly than in the fall. But final sales hardly rose at all--and, as Mr. Blinder observes, it's final sales that count over the longer haul.
Final sales had been going up briskly last autumn, seeming to signal that the recession was at last coming to its end. But over the winter they rose at an annual rate of less than 1 percent. That sudden slackening is not a particularly good sign. It suggests that there is not yet much momentum to the expansion for which the country is now anxiously looking.
One consequence of these numbers is a diminished inclination in Congress to cancel the tax cut scheduled for July. Fewer people there are now willing to take smooth and steady growth for granted over the remainder of the year. More of them suspect that another tax cut to stimulate retail sales may be very useful--although they generally add, in the same breath, that last year's tax cut certainly didn't seem to have much effect.
These GNP numbers say that it's a time for great caution in policy. The economy has been through a long and harsh process of deflation, and it is not going to bounce briskly back as it did after shorter recessions. But above all the present figures reflect the enormous strain imposed by high interest rates. For the American economy, it continues to be true that the first priority is to find ways of inducing the interest rates to fall.