Better News On Economy; Earnings Outlook Still Bad

Much stronger than expected growth in U.S. gross domestic product--probably between 3.5% and 4% -- during 1998's final quarter is causing the economics department at Merrill Lynch, Pierce, Fenner & Smith Inc., New York, to substantially revise its growth-rate predictions for both the first quarter of 1999 and the full year. Merrill Lynch now pegs first-quarter and full-year 1999 growth at 2.5%, half a percentage point higher than its previous estimate. However, on the downside, Merrill Lynch still projects about a 5% decline in corporate earnings in 1999, in part a result of companies' continued difficulty in raising prices.