Also, in yesterday's editions, an article on the latest report on the gross national product erroneously stated that the dollar value of GNP rose by 13.7 per cent during the third quarter. The correct figure is 9.2 per cent.
The nation's economy slowed markedly in the third quarter from its [WORD ILLEGIBLE] rate of expansion earlier this year, the government reported yesterday.
Prelimary [WORD ILLEGIBLE] by the Committee Department showed that the real Gross National Product or economic output after allowing for inflation rose at an annual rate of only 3.8 per cent in July through September. That was only three fifths of the economy's previous pace and was below the 4 per cent growth rate that is needed to keep unemployment from rising.
Although the third quarter figures were not a surprise to economists, they were disappointing. In one disturbing note consumer spending, which accounts for about two-third of GNP fell off [WORLD ILLEGIBLE] sharply than anticapted.
The new hatch of statistics served to heighten the split within the Carter administration over whether the economy needs a quick tax cut.
Secretary of the Treasury W. Michael Blumenthal discounted the impact of yesterday's figures, telling a bankers' group in Dallas that the slump "should be short-lived" and that the economy would return soon to a more respectable 5 per cent rate of growth.
But Juanita Kreps, the Secretary of Commerce, called immediately for further stimulus to the economy. In a statement accompanying the GNP figures, Kreps said the new statistics "strongly suggest the need for further tax reduction."
Analysts at one point had figured the economy would slow even more than it did in the third quarter, but a pickup in some key indicators in recent weeks had led to predictions that the growth rate would be in the 3 to 4 per cent range.
Nevertheless, Courtenay M. Slater, the Commerce Department's chief economist, conceded that the third-quarter pace was "obviously . . . below the 5 per cent . . . necessary to achieve a rapid reduction in unemployment." She acknowledged that yesterday's figures "did not quite measure up to" administration targets.
The latest White House forecasts show the economy is likely to speed up in the current quarter and grow at a 5 per cent rate until mid-1978. However, after that the outlook is more uncertain. The projections show a slump to a 3.5 per cent pace.
But Slater warned yesterday that the unexpected fall-off in consumer spending "raises a rather big question mark as to what's going to happen in the fourth quarter." She termed it "just one more piece of evidence" that the Carter administration will have to turn to tax cut in order to meet its targets in 1978.
The President is considering a Treasury proposal to speed up the tax cuts he is planning as part of his tax-revision package and urge Congress to enact them next year instead of in 1979. The White House had no comment on that yesterday, but Jody Powell, the President's press secretary, conceded it's "possible the economy will need some additional action."
The falloff in consumer spending was marked. Real final sales, the braodest measure of buying activity, rose at a disppointing 3.9 per cent rate, compared with 5.1 per cent the previous quarter. Personal comsumption was up at a scant 1.8 per cent annual rate.