The nation's gross national product rose at a startling 8.3 percent annual rate in the first quarter with no speedup in inflation, the Commerce Department reported yesterday.
Forecasters were surprised by the size of the expansion, but were unanimous in predicting that the gain, which is adjusted for inflation, would not be repeated during the remainder of this year. Martin S. Feldstein, chairman of the Council of Economic Advisers, said he expects an increase "toward the low end" of a 3 percent to 5 percent range for the current quarter.
Recent government statistics for housing starts, retail sales and industrial production in March indicate the pace of economic expansion already has begun to slow down.
Output grew at a 5 percent rate in the fourth quarter of 1983, and initially many economists believed the first quarter would about match that pace. However, big increases in consumer spending in January and February, a spurt in housing construction and a rapid rise in business inventory rebuilding combined to produce the much higher figure. The nation's deepening trade deficit was the only big negative during the quarter, officials said.
Over the last four quarters, real output has risen 7.4 percent to reach an annual rate of $3.541 trillion in the first quarter.
Some analysts have been concerned that the economy is growing so rapidly that inflation will accelerate later this year. But Feldstein and Sidney Jones, undersecretary of Commerce for economic affairs, said that so far there is no sign of that happening.
As measured by the GNP deflator, inflation was running at 4.1 percent in the first quarter, hardly changed from 3.9 percent in the fourth quarter. A separate GNP price index that is not affected by changes in the composition of output from one quarter to the next rose at a 4.7 percent rate, compared with 4.2 percent in the fourth quarter. However, that index also rose at a 4.7 percent rate in the third quarter of last year.
White House spokesman Larry Speakes, flying with President Reagan to the West Coast onboard Air Force One, said that, despite the unexpectedly strong first-quarter gain, "We expect a moderation of the GNP growth in the second quarter . . . . It's obvious the economy will remain strong with low levels of inflation."
At Commerce, Jones called the 8.3 percent growth rate only "a temporary acceleration in the pace of the economic expansion. I expect the economy to settle back to a slower and more sustainable rate of growth in the second quarter," he told reporters at a briefing.
Jones predicted GNP growth at a 4 percent rate in the second quarter, and said that the administration saw no reason to change its recent estimate of 5 percent real growth between the fourth quarter of 1983 and the fourth quarter of this year.
Some private economists' assessment of the first-quarter figures was similar to that of the administration officials.
"The very strong GNP increase reflects primarily the rapid inventory rebuilding we had expected," said Jerry Jasinowski, chief economist of the National Association of Manufacturers. "Although the economy is strong currently, these numbers exaggerate the strength of the economy, which is probably growing at a 5 or 6 percent rate."
Jasinowski believes growth this quarter will come in at about a 5 1/2 percent rate, and that there will be "a much slower second half" for 1984.
Economist Jack Carlson of the National Association of Realtors discounted the importance of the increase in inventories. "While the large net change in this investment category certainly reflects increased production, creation of jobs and real economic activity, it is a fairly transitory and volatile indicator" that is likely to be lower this quarter, Carlson said.
Real final sales--that is, GNP less the change in business inventories--rose at only 3.7 percent and 3.6 percent rates in the fourth and first quarters, respectively. Feldstein said that, if an adjustment is made for the effect of the Agriculture Department's payment-in-kind farm subsidy program, which statistically adds to inventories and reduces federal government purchases, then the rates of increases in real final sales were 4.9 percent and 4.7 percent in the two quarters.
"The most important question is what is the overall pace of the expansion," Feldstein said, indicating that he believes the final sales figures provide a more accurate measure at this point.
Personal consumption spending rose at a 5.8 percent rate during the quarter, somewhat less than in the previous three months, primarily on the strength of a 17.2 percent rate of increase in durable goods purchases.
Nonresidential fixed investment increased at a 12.1 percent rate, down significantly from the 27.2 percent pace of the fourth quarter. The slowdown came entirely in purchases of business equipment, which Jones said may have been due in part to the AT&T breakup on Jan. 1.
Housing construction, which had declined at a 6.9 percent rate in the fourth quarter, bounced back to rise at a 31.3 percent clip.
Exports rose at a 9.7 percent rate, but imports shot up at a 41.7 percent rate, leaving the nation with an even deeper trade deficit in goods and services. Feldstein said the merchandise trade deficit could reach $110 billion this year.
As reported, federal government purchases declined, but that was the result of the way the PIK subsidy payments are handled statistically. With those payments completed, federal purchases are sure to rise this quarter, officials said.