Consensus Forecasts of Financial Institutions

Article excerpt

Look for modest economic improvement in the rest of 1993 --according to a recent survey of financial forecasters. Price increases will be in line with those of 1992. The forecast is for a small uptick in short-term rates, and long-term rates to remain level. The consensus is for little in the way for fiscal stimulus. Both auto sales and the unemployment rate should improve.

SLOW GROWTH

The next four quarters will see the economy push forward at a rate only slightly better than that of 1992. The latest survey of financial economists predicts inflation adjusted Gross Domestic Product to grow at an annual rate of 2.9 percent over the upcoming four quarters --1993-2 through 1994-1. Robert H. Vatter, economist for Metropolitan Life Insurance company states that, "during the fourth quarter the economy clearly shifted gears and started showing a faster pace of improvement. Moreover, most of the monthly data have recorded upward revisions following their preliminary release--a positive beginning for the future."

Dr. Lacy Hunt feels that the "economic recovery will be slow." The Hong Kong Bank economist adds, "debt is the most important dampening factor." The consensus call for Personal Disposable Income to move up--by an annual rate of 4.8 percent.

Current dollar Personal Consumption Expenditures will show increases in line with disposable income. Over the next four quarters consumer spending will grow at an annual rate of almost 6 percent.

MODERATE INFLATION

Financial forecasters see little change in the rate of price increases. The Consumer Price Index should grow by 3.4 percent, on an annual basis, and the GDP Deflator by 2.9 percent. "Inflation should not be a problem in the year ahead," according to Robert H. Vatter. He continues, "under these conditions any rise in interest rates should tend to be moderate and result in some flattening of the yield curve."

Indeed, the consensus forecast is for a small increase in short-term interest rates. …