U.S. views differ

Press, 27 January 1988, Page 36

U.S. views differ

NZPA-AAP New York Rising inventories are expected to boost fourth quarter U.S. real economic growth, but economists differ on what this means for future expansion. A gain of about 3.5 per cent in first quarter real gross national product is expected when the data are released tomorrow (N.Z. time), with the GNP deflator seen at 3.4 per cent. Third quarter GNP rose 4.3 per cent, with a 2.8 per cent deflator gain. Some say that the fourth quarter inventory build-up will be followed by a first quarter inventory drawdown that will detract markedly from first quarter GNP growth. Carol Stone, senior economist- at Nomura Securities International, expected a 3.7 per cent rise in fourth quarter GNP accompanied by a 3.6 per cent price deflator, followed by first quarter growth of less than zero and a deflator of 3 per cent. She had expected fourth quarter GNP of only 2.8 per

cent, but revised it higher after November business inventories were reported at a higher-than-expected 0.8 per cent and October’s figure was revised to 1.1 per cent from 0.7 per cent. But Joseph Carson, senior economist at chemical bank, said that the inventories have piled up mostly on retailers’ shelves, and that rising manufacturing inventories will not be a drag on the economy. He pointed out that real manufacturing inventories at the end of the third quarter of 1987 were no higher than at the end of the second quarter of 1984.