The economy grew at a 3.2 percent annual rate so far this quarter, according to preliminary estimates released yesterday. The rate is still far below the official estimates of the Reagan administration.
If the Commerce Department's preliminary estimate for the fourth quarter holds, actual economic growth for 1985 will be 2.4 percent, down sharply from 6.6 percent growth in 1984 and well below the 3.9 percent forecast by the Reagan administration at the beginning of the year.
Many economists expect the gross national product -- the nation's output of goods and services -- to continue to rise at about a 2 percent or 3 percent rate during 1986 after adjustment for inflation.
Slow economic growth in the coming year would make it much more difficult for Congress and the White House to meet the budget targets set by the new Gramm-Rudman-Hollings deficit reduction act. Most of the federal budget deficit projections for the current fiscal year are based on an assumption that the economy will grow at a 4 percent rate. Continued growth no stronger than 2 percent or 3 percent would raise federal deficits above current official projections.
The Commerce Department reported that its first estimate of the gross national product for the fourth quarter of 1985 -- the so-called flash estimate -- shows the economy growing at a moderate 3.2 percent annual rate, with prices rising at a 3.7 percent pace.
The flash estimate, which is compiled before the quarter is over, coupled with a revised 3 percent figure for the third quarter, indicate that real growth is substantially weaker than the 5 percent forecast by Council of Economic Advisers Chairman Beryl Sprinkel.
"There was an upward trend in the last half of 1985 but lower than we anticipated," Sprinkel told reporters. But the CEA chairman also predicted that growth would actually be stronger in the coming year as a result of several factors, including the current stock market surge, a decline in interest rates and low business inventories.
At the same time, Commerce reported that inflation also was lower this year than in 1984 and less than administration expectations. By one GNP measure, inflation is running at a 3.3 percent rate this year, down from 4.1 percent in 1984 and about 0.5 percent lower than Reagan economists had anticipated.
Some private economists disagreed that GNP growth is about to accelerate. Allen Sinai, chief economist of Shearson Lehman Bros., said the 3.2 percent figure for the fourth quarter "overstates the strength of the economy."
Sinai said that much of this quarter's apparent growth stems from large government payments to farmers and a rise in business inventories, neither of which is likely to be a strong source of growth in 1986.
In addition, he said, the latest figures give no indication at all that the nation's trade deficit has begun to turn around.
In a separate report yesterday, the Labor Department said that consumer prices jumped 0.6 percent in November, the largest increase in almost two years, as a result of higher food, gasoline and home heating oil prices.
However, most forecasters do not expect monthly increases to remain so big for long. Details on Page C1.
The Commerce Department yesterday also announced significant revisions in previous estimates of many parts of the gross national product accounts. The revisions, some of which stretch all the way back to 1929, are based on more complete data, better estimating techniques and moving the base year for calculating real output from 1972 to 1982.
The revisions show that GNP in current dollars is slightly higher than previously estimated, having passed the $4 trillion mark in the third quarter of this year.
The Commerce report said that the final sales portion of real GNP will increase moderately this quarter after rising substantially in the third quarter. The remaining portion of GNP, the production of goods that are put into business inventories rather than sold, is increasing this quarter after decreasing sharply in the third quarter, Commerce said.
Prices, as measured by the GNP fixed-weighted price index, are rising at a 3.7 percent rate, up from 2.7 percent in the third quarter. Since the fourth quarter of 1984, real output has risen 2.8 percent and the fixed-weighted price index is up 3.4 percent.