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UNITED STATES DEPARTMENT OF OFFICE OF THE SECRETARY FOR RELEASE WEDNESDAY, O C T O B E R 21, 1981 S T A T E M E N T BY SECRETARY OF C O MMERCE M A L C O L M BALDRIGE ON P R E L I M I N A R Y THIRD Q U A R T E R GROSS NATION A L PRODUCT The statistics on Gross National Product show very clearly that the economy has been soft for the past two quarters. w e a kness This is due primarily to the r e s t raint of sustained high int e r e s t rates on a few major sectors such as housing and m o t o r vehicles. I do not see an immed i a t e end to the pattern for s l u g g i s h n e s s that has prevailed since the early spring. As the third quar t e r ended, we saw very little e v i d e n c e of strength. S e p t e m b e r was marked by w e a kness in key e c o n o m i c indicators -- payroll c o n sumer spending, housing starts, and industrial v The economy is not ready to resume strong, Real employment, production steady growth. GNP in the fourth q u a r t e r is likely to show a n o t h e r decline. On the plus side, recessions in the past inventory e x cesses which help e d cause seve r e are m o d e r a t e today. trending down and should con t i n u e to do so;add some strength to the economy. tax cut will Interest rates are Defense spending should The first phase of the personal tend to support c o n s u m e r income. The vigor of the cons u m e r sector should be t e mpered by a rise in the personal saving rate and by some decline f o l l owing the heavy sales promo t i o n s of the progress of sales, in n ew car buying, in the third quarter. the a u t o m o t i v e Regardless sector p robably will be a drag on the economy in the fourth quar t e r as a siz e a b l e cutback______ in auto assemblies already has been scheduled. will be some further decline in total larly in housing, and cutbacks will There probably private investment, parti cu- in non-defense G overnment purchases continue. So we don't have a great deal At the same time, to cheer about at the moment. I'd like to emphasize that we are going through a corrective phase, and, u n f o r t u n a t e l y , there is no way to achieve our long-range goal of a healthy growing economy wit h o u t going through some withdrawal symptoms from past excesses. This A dministration has cut the budget and reduced taxes, and we intend to cut the budget some more. Reductions are scheduled for next y e a r and the year after that. in taxes And, the best kept secret in the press this year is that the CPI inflation index has been running 25% less than last y e a r and will continue to go down next year. During the first half of 1982, By that time, interest rates will As rates come down, such as housing, have been reduced substantially. the c r e d i t - s e n s i t i v e home furnishings, begin to recover. renewed growth should be apparent. Small autos, sectors of the economy, and farm equipment should businesses and state and local governments should be among the major beneficiaries. The Administration has taken the l o n g -term view -- and I hope the private sector will for the strong markets do the same. that will Businesses should plan now start emerging next year. businesses to take advantage of liberalized I urge investment provisions. 3 A larger and more efficient capital stock will be needed in the future to meet the demands of a growing economy and to improve our nation's productivity and real income. I also urge business and labor to formulate their price and wage decisions with a l o n g term perspective. Those decisions should be based on a moderating, rather than an accelerating, trend in inflation. "kick
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