The Economy: A Sluggish Start to the Year

After ringing out 1984 with an ebullient growth spurt, the U.S. economy seems to have sobered up considerably at the start of 1985. The Commerce Department projected last week that the gross national product in the first quarter of the year will grow at a sluggish annual rate of 2.1%, less than half the 4.3% clip of the previous three months. The news about inflation, however, was less discouraging. Consumer prices rose in February at an annual rate of 4.2%, about the same moderate pace as in 1984.

A prime cause of the economic slowdown was the continuing flood of imports. Because the high value of the dollar makes imports less costly, American consumers are favoring foreign products over those made at home. Figures released last week revealed that the current account, which measures trade in goods and services, showed a record deficit of $101.6 billion last year, topping the previous peak of $41.6 billion in 1983. Foreigners have helped finance the trade deficit by investing heavily in the U.S. Because the inflow of foreign money far exceeds American investments abroad, the U.S. may have become a debtor nation in the first quarter of 1985 for the first time since World War I.