clock menu more-arrow no yes

Filed under:

NO RECESSION ON HORIZON UNTIL AFTER '96 ELECTION

The nation's economy probably will escape another recession for at least two more years, economic forecasters predict.

If so, the latest monthly forecast by Blue Chip Economic Indicators would be good news for President Clinton, whose expected second-term bid in 1996 would be boosted by a still-growing economy.Most of the economists hazarding a prediction in the early September poll contended the next recession will not arrive until after the ballots are counted.

"Of the panel members willing to make a guess, about six out of 10 felt the ax would fall in 1997 - the year after the next presidential election," said Robert J. Eggert Sr., an economist who conducts the monthly surveys and edits the Sedona, Ariz., newsletter.

"None expected a recession to begin next year, and only one in five now believes a recession will begin in 1996," Eggert added. "However, it should be noted that four out of 10 panel members said the next recession `was too early to call.' "

The most recent recession lasted eight months, ending in March 1991.

The consensus of the 51 panelists predicts the gross domestic product will grow 3.6 percent this year and 2.7 percent in 1995, unchanged from the results of the August poll. The 1995 growth rate would approximate the average annual advances in the last 10 years, Eggert said.

The GDP, the total output of goods and services produced in the United States, expanded by 3 percent in 1993.

The Blue Chip forecasters represent banks, businesses, forecasting services, universities and Wall Street firms.

Although the consensus calls for 3.6 percent expansion for the entire year, it foresees economic growth slowing to a 2.2 percent annual rate during the quarter ending Sept. 30 and 2.8 percent from October through December.

The GDP grew at a 3.8 percent rate in the second quarter and 3.3 percent in the first.

Much of the slowdown was attributed to five interest-rate increases engineered this year by the Federal Reserve to keep inflation from accelerating, and to improvements in productivity.

Indeed, panel members are forecasting relatively benign inflation this year and next.

"The consensus forecast of the year-over-year percent change in the Consumer Price Index in 1994 was unchanged (from the August survey) at 2.7 percent," Eggert said. "In 1995, the CPI is now expected to increase 3.3 percent, up a tenth of a percentage point from a month ago."

Consumer prices rose 2.7 percent in 1993, the smallest increase since inching up 1.1 percent in 1986. They had risen 6.1 percent as recently as 1990.

But the survey found the forecasters keeping a wary eye on several factors they fear could cause an inflationary flare-up.

They included rising raw materials prices that could make finished goods more expensive, factories nearing full capacity that could cause bottlenecks and inability to meet demand, and skilled labor shortages that could drive up wage costs.