Current GNP figures suggest a period of sustained US growth

LAST week's flash report of second-quarter GNP gives the US economy a reprieve. The estimate showed the economy growing at a 3.1 percent annual rate during the present quarter. This isn't enough to reduce unemployment, but it probably keeps it from rising. At the same time, first-quarter growth was marked down for the third time, now to only a 0.3 percent annual rate. Given the difficulty of making razor-edged measurements of something as vast as the US economy, we can settle for saying that the first quarter saw the US verging on recession.

With the second quarter improving and interest rates going lower throughout the quarter, the stage seems set for growth at least for the rest of 1985. Interest rate changes are not immediately reflected in economic activity, so even if rates don't fall further, things should improve during the next quarter.

This pattern of slow growth and constraints to keep policymakers from pushing for higher growth resembles two periods of recent economic history -- one in the United States, one in Britain.

After the 1960 recession, the US entered a period of slow growth. In 1962, there was considerable concern that the economy was already entering a recession. It was one of those times that the stock market signaled a recession which didn't occur.

Then, the Kennedy-inspired tax cut provided fiscal stimulus, and the economy began to grow more strongly. The Vietnam war provided further stimulus. Eventually the combination of the war and the Johnson administration's Great Society launched the nation on an inflationary spiral. This was not really checked until Paul Volcker became chairman of the Federal Reserve Board and later got full support for the difficult actions he had to take from the newly elected President Reagan.

The point here is that the economy seemed to waffle in the early 1960s. Yet those years were the start of the longest postwar expansion to date. Without a major cause for a downturn, such as excess demand on industrial capacity or a credit crunch, the economy was able to continue moving ahead. We could be in that situation again right now.

The other point of reference is the British experience with so-called stop-go policies in the late 1960s. At that time the British government was trying to hold the value of the pound at $2.40. Every time it revved up the engines of economic growth too fast, there were pressures on the pound from foreign holders. To support the pound, the engines would be slowed and the economy would drop back.

The United States does not yet need to support the dollar in that same sense. The dollar has a preeminence in world trade that the pound did not have back in the late '60s.

But this year the US will slip into the position of being a net debtor nation, as the result of its heavy domestic deficits the last five years -- deficits that either directly or indirectly have been financed by the flow of foreign funds into dollar markets.

Without going into the intricacies here, suffice it to say that there is an international element to the management of US fiscal and monetary policy that was not present to the same degree a few years ago.

The Fed could not, even if it wanted to, push interest rates down aggressively without thinking of what this would do to dollar flows and the financing of US debt. This restriction, as it were, on the Fed's freedom to act may keep the economy in a low-growth mode for several more quarters. But it also may just be the factor that allows growth to continue uninterrupted long enough for many of the needed adjustments to occur, both in the domestic economy and in the evolving global economy -- in short, to make this period resemble the 1960s.