Level of Economic Activity Spreads Doubt among Forecasters

Article excerpt

Individuals have easy access to credit and business has big profits to use, so the 76-month-old economic expansion - an old-timer by most standards - is springing forward like an upstart.

The economy's strength, which might even be growing, continues in spite of efforts by the Federal Reserve to restrain economic activity through higher interest rates and in defiance of repeated forecasts of an imminent slowdown.

The level of activity has spread doubt among forecasters.

``Forecasts of a slower economy are just that, forecasts,'' says J. Patrick Bradley of PNC Financial Corp. ``We must admit, few signs of a slower economy can be found.''

Among the latest reports of economic strength is an updated survey by the National Federation of Independent Business that shows small business optimism in February was the highest for that month in four years.

The survey, based on an opinion sampling of the federation's 500,000-plus business members, shows companies are able withstand higher interest rates by financing internally through profits rather than by borrowing from banks.

``Remarkable profit gains continue to keep regular borrowing activity at near-record low levels,'' said survey founder William Dunkelberg, economist and dean of Temple University's school of business.

Dunkelberg points out that smaller businesses are aware of rising interest rates and clearly expect financing to become more difficult and expensive, but for the time being have been shielded from credit-restraint efforts.

A vaguely similar thesis has been offered to explain the continued use of increasingly costly credit by consumers. Credit is so available, according to the thesis, that the temptation to borrow is much stronger than a decade ago. …