The nation's economy nearly came to a standstill in the second quarter, edging up a feeble annual rate of 0.4 percent, the government said Tuesday. Many of the nation's top economists believe a recession is imminent - if not under way already. While White House spokesman Marlin Fitzwater said ``we don't believe we are in a recession right now,'' he acknowledged the latest Commerce Department report on the gross national product ``is certainly cause for concern. It's not good news.'' The department's revised report on the GNP - the nation's total output of goods and services - was the lowest since a 0.3 percent rate during the last quarter of 1989 and showed the economy weakening even before the Persian Gulf crisis. ``The economy was headed toward a recession before Iraq, and Iraq was just the nail in the coffin,'' said Allen Sinai, chief economist for the Boston Co. A recession ``seems inescapable,'' he said. Surveys following Iraq's Aug. 2 invasion of Kuwait - and the subsequent oil-price spiral - showed many top economists forecasting an imminent recession. The National Association of Business Economists reported Tuesday that more than half of the 71 professional forecasters responding to its survey in late August and early September said a recession already has begun or will begin in the fourth quarter of 1990 or the first quarter of 1991. And half of the top economists surveyed each month by Blue Chip Economic Indicators now believe the economy will enter a recession this year. ``In a sharp revision of earlier views, 50 percent of the 50 panel members replying ... now think the long-delayed recession will start this year,'' wrote R.J. Eggert, the newsletter's editor. ``Of those expecting the recession to begin this year, three believe it actually began in the second quarter, six expect the downturn to begin in the current quarter and 16 have pegged the fourth quarter of this year as the starting date.'' Sinai pointed to negative economic data already available for July and August and said, ``It looks like the recession started in the third quarter.'' ``The economy ground to a halt in the second quarter and is in the process of contracting right now,'' added Richard W. Rahn, chief economist for the U.S. Chamber of Commerce. A price index tied to the GNP was unchanged at an annual rate of 3.9 percent in the second quarter. But with the surge in oil prices, inflation as measured in the Consumer Price Index jumped 0.8 percent in August alone. The higher prices will be reflected in the third-quarter GNP report. The price of oil before the Iraqi invasion was less than $20 a barrel. It reached a record $38 a barrel at one point on Monday. Since oil is used in producing so many consumer goods as well as for heating and transportation, any price increase not only slashes available funds needed to feed economic growth but also feeds inflation. The department originally had estimated the economy grew at a 1.2 percent rate from April through June, after advances of 1.7 percent in the first quarter and 2.5 percent in 1989 and 4.5 percent in 1988. But it said Tuesday that more complete data showed weaker net exports and lower inventory accumulation than first thought. The new data showed net exports declining by $9.2 billion rather than $4.5 billion, and inventories totaling $19.8 billion rather than $22.4 billion. ``But there really were no areas of strength,'' Sinai said. Consumer spending, which represents two-thirds of the nation's economic activity, rose just 0.2 percent, down from 1.1 percent in the first quarter. Business investment fell 4.7 percent after a 5 percent gain from January through March. Housing construction plunged 11.2 percent after advancing 15.1 percent in the first quarter. Government spending rose 6.2 percent but most of that was by the federal government. State and local spending was down 0.6 percent. If the economy were in a recession - generally described as two consecutive quarters of negative growth - it would end the nearly eight years of expansion that began after the 1981-82 downturn. The Commerce Department also reported today that after-tax corporate profits fell a revised 0.6 percent, worse than the 0.2 percent drop first reported and their poorest showing since a 5.9 percent decline in the third quarter of 1989. They had risen 0.5 percent in the first quarter and 1.7 percent in the final quarter of 1989. The various changes left the GNP growing by $4.5 billion in the second quarter. After removing the effects of inflation, the GNP totaled an annual rate of $4.16 trillion.
