P.M. BRIEFING : Fourth Quarter Sluggish but GNP Grows 3.8% in ‘88; Best Since ’84

WASHINGTON —  The economy grew at a sluggish annual rate of 2% in the final three months of 1988 as the worst deterioration in the trade deficit in more than two years offset unexpected strength in consumer spending, the government reported today.

The Commerce Department said the gross national product, the broadest measure of economic health, advanced at its slowest pace since the final three months of 1986. It grew 3.8% in all of 1988, the best annual performance since a 6.8% rise in 1984. The slowdown in growth was accompanied by a pickup in one inflation measure.

The GNP deflator, which measures a changing market basket of goods, rose at an annual rate of 5.3% in the last quarter of the year. That contrasted to an increase for all of 1988 of just 3.4%.

The GNP estimate of 2% for the fourth quarter was unchanged from a report issued one month ago. The fourth-quarter figure was depressed by the lingering effects of last summer’s severe drought. Without the drought effects, the economy would have expanded at a faster 3.1% rate, the Commerce Department said.