MUNCIE, Ind. -- The consumer is still king in the American economy and the surprisingly strong figures on economic growth in the first quarter of 1998 underscore that fact, says a Ball State University economic researcher.

Even though the export sector nosedived and government continued to shrink, spending by consumers was strong enough to push overall growth even higher than last year's torrid pace, said Patrick Barkey, director of the Bureau of Business Research.

"The acceleration of the U.S. economy was mild, but it gives credence to the reports that the Federal Reserve will soon begin braking the economy," he said.

The 4.2 percent annual rate of increase in Gross Domestic Product (GDP) in the first quarter of 1998 was higher than the 3.7 percent rate of growth recorded at the close of 1997, and higher than many analysts' predictions.

As the first comprehensive accounting of the state of the economy in the new year, it signals loudly that the Asian economic meltdown has not been enough to derail a growth surge that is now 18 months old, Barkey said.

The GDP report released by the Bureau of Economic Analysis (BEA) clearly shows the effects of the weaker currencies of the emerging Asian economies of the Pacific Rim. For the first time in four years, exports did not increase during the first three months of 1998, shrinking at a 3.4 percent rate. Compared to the 12.3 percent rise in exports over 1997, this is a significant turnaround, he said.

But while the export plunge hurt domestic producers, consumers were too busy buying things with their growing horde of cash to take much notice. Preliminary BEA estimates show that consumer spending grew at a stunning 5.7 percent annual rate during the first quarter.

"You have to go all the way back to 1992, on the heels of the 1991 recession, to find faster growth in spending than this, Barkey said.

He pointed out that consumers are spending all of this money on durable goods. Although durable manufacturing output rose at a 2.5 percent annual rate during the first three months of 1998, consumer spending on the same category of goods galloped at an 18.4 percent rate of growth during the same period. The difference was made up by inventories and imports, especially the latter. Imports of all goods and services rose at an 11.6 percent rate during the beginning of 1998, after rising at a relatively tame 5.3 percent rate at the end of 1997.

Barkey said business spending also was impressive. Fixed investment grew at a torrid 17.5 percent clip, led by even faster growth in purchases of durable equipment. These preliminary estimates are heartening, as they raise hope that the above-average productivity gains that have made inflation-free growth a real possibility have a good chance of being sustained, he said.

"It is fitting that inflation news be placed at the end of this summary, as evidence of meaningful price increases in the overall economy was nowhere to be found in the BEA report, Barkey said.

The overall GDP price deflator rose at a minuscule 0.9 percent annual rate, while the deflator for consumer spending was even lower, at 0.3 percent. The Fed's concern has to do with the synchronization of spending and production as evidenced in the GDP figures.

"With spending now ahead of production, another round of attempts to boost the latter in the coming months seems assured," Barkey said. "With labor markets already tight, it will be yet another test of nerves for the central bank to see if the economy can run even hotter without risking inflation."