The U.S. economy has shrugged off the October, 1987, market crash and shows signs of more solid expansion, although inflation remains a high risk, says the Organization of Economic Cooperation and Development.
The world's biggest economy should grow 3.75 percent this year and 3 percent in 1989, said a semi-annual report from the OECD, a Paris-based economic group of 24 wealthy nations.The economy is expected to grow at a relatively brisk pace in 1990, with gross national product expanding 2.5 percent, the group added.
The report gave no sign of an impending recession, which some economists fear will result from weaker consumer demand for goods and services and a buildup in company stocks after the "Black Monday" market crash.
"Although both occurred to some degree, the effect turned out to be relatively limited," the OECD said.
Indeed, the group has become more bullish on the U.S. economy, after the OECD said in June that it would grow by only 2.75 percent this year and 2.5 percent in 1989.
Recent figures on U.S. employment, industrial production and industrial capacity use all indicate that the economy still has substantial momentum in spite of some slowing in the third quarter.
The current unemployment rate of 5.3 percent caused employers to raise salaries to attract staff while industry was working near capacity.
Thus the OECD forecast that U.S. interest rates will rise to pinch inflationary pressures and bring the economy to a more sustainable rate of growth.