Saturday, January 30, 1999
Go-go growth ends wild '98
BY SYLVIA NASAR
The New York Times
NEW YORK — A year of pleasant surprises ended with the biggest one of all: a last-minute burst of growth that surpassed even the most bullish predictions.
America's gross domestic product — the total of goods and services produced — surged at a 5.6 percent annual rate in the final quarter of 1998. It was the fastest pace in two years and made 1998 the third consecutive year the economy expanded at a pace of nearly 4 percent. For 1998, the GDP increased 3.9 percent.
Despite the go-go growth, inflation was somnolent. After running about 1 percent earlier in the year, it slipped to eight-tenths of a percent — the lowest in 40 years.
“We keep getting stronger growth and less inflation pressure,” said John Williams, chief economist at Bankers Trust Corp. “At the moment there seems to be nothing to get in the way.”
As usual, American consumers accounted for most of the growth. Consumer spending rose at a strong 4.4 percent in the fourth quarter and 4.8 percent for the year. Purchases for cars and other big-ticket items soared at an annual rate of 21 percent.
Such trends have consumers feeling good. The University of Michigan reported Friday that its consumer confidence index rose to a lofty 103.9 at the end of January from 100.5 in December. Any reading over 100 is great news for retailers.
Less expected was the big bounce in business spending for new equipment, especially high-tech products. Capital goods spending, which had leveled out last summer, soared at a 21 percent annual rate.
That may be the best news for Ohio and Cincinnati since durable goods is a larger component of the Tristate's economy than the national average, said George Vredeveld, a University of Cincinnati economist.
“That kind of activity would tend to benefit Cincinnati more than the nation as a whole,” he said.
A sharp rise in exports also aided Ohio, said James Coons, chief economist for Huntington National Bank in Columbus.
Staff Writer John Byczkowski contributed to this report.
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