Consensus Forecasts of Financial Institutions

Article excerpt

Based on a recent survey of financial forecasters the economy will show modest improvement. Look for strong consumer spending--and weak business fixed investment. Money supply growth remains at the low end of the growth statistics. Low inflation remains as a bright spot. Short-term rates are on the rise, while long rates move sideways. National unemployment trends downward.

ECONOMIC RECOVERY CONTINUES

The latest economic survey of financial forecasters suggests that the current economic recovery will continue. "At the moment business optimism is high and a real recovery is underway," so states Dr. Kenneth T. Mayland, economist for Society National Bank. The current consensus forecast is for a normal recovery. Real Gross Domestic Product is forecasted to grow at an annual rate of 2.9 percent out through 1993-3. Robert H. Vatter states, "the economy continues to improve at a moderate pace. In fact, in the second quarter, real gross domestic product should have surpassed its previous cyclical peak." The Metropolitan Life Insurance Company economist continues, "leadership in the economy will be shifting from housing and exports to consumption and investment in inventories and equipment. Investment in nonresidential fixed investment will remain a weak spot throughout 1992-3, especially commercial construction."

Indeed, the recent survey predicts a surge in current dollar personal consumption expenditures. From 1992-4 through 1993-3, consumer spending should grow at an annual rate of 6.08 percent. The forecast is for business fixed investment to show a steady movement upwards. Business investments, in constant dollars, should grow by 5.2 percent from late 1992 through 1993-3. The latest survey suggests that there will be an upward trend in personal disposable income. Hong Kong Bank economist, Dr. Lacy H. Hunt, does add a word of caution. He states, "the election adds to the uncertainty, but the consumer is still the key to a better outlook."

SLOW MONEY SUPPLY GROWTH

Dr. Joel Naroff of First Fidelity Bancorporation feels that there will be "no additional Fed easing." The consensus forecast appears to agree--narrowly defined money is expected to grow by an annual rate of 6.0 percent over the upcoming four quarters. Dr. Kenneth T. Mayland notes that, "M2 actually declined during the Spring months, however, and 1992 is beginning to eerily look like a replay of 1991. …