Beryl Sprinkel, the chairman of the President's Council of Economic Advisers, had reason to gloat a bit last week. For months he had been arguing that the U.S. economy would bounce back strongly from its poor performance during the first half of the year. Many private economists dismissed his forecast as predictable optimism from a White House cheerleader, but now it appears that Sprinkel may have been right. The Government said last week that the gross national product expanded at a 4.3% annual rate during the July-September quarter. That was far better than the 1.1% growth rate in the first six months of 1985. The news helped send the Dow Jones industrial average to a record close on Friday of 1464.33, up 29 points for the week.
Skeptics, though, believe that the growth spurt will be temporary. They point out that much of the GNP rise in August and September came from brisk car sales, which jumped ahead because of special low-interest loans offered by the auto companies. After those deals expired, car sales dropped 14.6% in October. Overall consumer spending fell .9% that month, the sharpest decline in 25 years. Unless retailers have a big Christmas, GNP growth may falter again in the fourth quarter.
COMPANIES Breaking Up Is Harder to DoAs billion-dollar mergers and acquisitions become a commonplace in today's corporate world, many executives are finding that making spinoff deals may be easier than managing behemoth-size businesses. Last week Allied-Signal, the product of a $5 billion merger made just seven months ago, announced that it would be divesting itself of some 30 divisions, whose sales total $3 billion. The slimmed-down company plans to focus on its aerospace, automotive and chemicals groups. As part of the restructuring, Allied-Signal plans to eliminate 3,000 jobs and take other cost-cutting measures that should generate savings of about $250 million a year. The divisions to be spun off include Allied's health and energy subsidiaries.
In another case of corporate indigestion, Pantry Pride, the supermarket chain that acquired Revlon in November, last week announced that it had sold two Revlon units to Beecham Group, a British conglomerate, for $395 million. The two jettisoned Revlon divisions are Norcliff Thayer, maker of Tums antacids and other over-the-counter medications, and Reheis, a chemicals manufacturer.
ENTERTAINMENT Rockin' with Uncle Sam"Welcome to the Club Fed." That is the line rock musicians lay on each other these days when they arrive at the Plant Studios, a rock-'n'-roll recording facility in Sausalito, Calif. The reason for their nervous joke is that the Plant is owned by the U.S. Government. Federal marshals seized the studio in September after its owner was accused of buying the establishment with money from drug manufacturing. The Plant, which has recorded platinum albums for such artists as Stevie Wonder and Fleet-wood Mac, is considered one of the country's ten best studios and rents for about $1,250 a day. After the bust, the Plant stood padlocked for two months. But since the Government intends eventually to sell the property, officials decided that the studio would be worth more if it were a going concern.