Economy Expands at 2.8% but Inflation Rate Doubles

WASHINGTON — The U.S. economy, bolstered by a surge in car sales, expanded at an annual rate of 2.8% from July through September, the government reported today.

The Commerce Department said the revived performance of the gross national product, the broadest measure of economic health, was accompanied by a substantial pickup in inflation as well.

An inflation index tied to the GNP was rising at an annual rate of 3.6% in the third quarter, double the pace from April through June.

The GNP implicit price deflator, which measures price changes and changes in purchasing patterns, had risen just 1.8% in the second quarter, the lowest inflation rate since the spring of 1967.

Analysts blamed a rise in food prices for much of the upward spurt in prices.

The 2.8% rise in the GNP represented a revision from a slightly higher government estimate last month that put third-quarter growth at 2.9%.

Analysts believe the 2.8% third-quarter growth will be repeated in the October-December quarter, but they have expressed fear that growth could weaken substantially in the early part of 1987 because of the adverse impact of major changes in the tax law.

For the first nine months of 1986, the economy expanded at an annual rate of 2.4%, far below the Administration’s hopes at the beginning of 1986 for growth of 4%.

In 1985 the economy expanded at an annual rate of 2.7%, and some analysts believe that growth this year will fail to match even that lackluster performance.

The third-quarter GNP report showed that much of the strength came in a boom in auto sales as consumers responded to cut-rate financing offers. Final sales jumped $40.4 billion, 4.5%, in the summer with half of that increase accounted for by auto sales.

In a separate report, the government said corporations’ after-tax profits rose 5.5% in the third quarter, the biggest increase since an 11.3% advance in the third quarter of 1983.