Economists Predict Inflation to Increase/manufacturers to Recover

THE JOURNAL RECORD, May 19, 1987 | Go to article overview

Economists Predict Inflation to Increase/manufacturers to Recover


WASHINGTON (AP) - The U.S. economy will see significantly higher inflation this year because of a weaker dollar, but the falling greenback will finally begin to lift the fortunes of American manufacturers, leading economists predicted Monday.

The National Association of Business Economists said its latest survey of member sentiment found more optimism that the country will be able to avoid a recession through 1988.

The economists, who work for some of the nation's largest corporations, forecast stronger growth this year, a lower trade deficit and a declining federal budget deficit. But they said these favorable economic developments would be offset somewhat by a pickup in inflation.

Consumer prices, which rose at a two-decade low rate of 1.1 percent last year, will climb 4.3 percent in 1987, the economists forecast. This prediction was more pessimistic than a survey just three months ago which forecast a 3.8 percent price rise for this year.

Even with the less-favorable inflation prospects, the economists still were optimistic that the recovery from the 1981-82 recession will continue for at least the next two years.

The analysts forecast the economy, as measured by the gross national product, will expand this year and next at annual rates of 2.9 percent, up from the 2.5 percent GNP growth turned in during 1986.

More than half the economists, 57 percent, believe the current expansion will last through 1988, compared with only 48 percent who were that optimistic in the previous survey.

While the Reagan administration is forecasting no downturn through 1991, the private economists are not that optimistic.

"Virtually all of the business analysts look for a downturn to occur within the next five years," said Jerry L. Jordan, president of the association. "Ninety percent of the economists think a recession will begin by the end of 1989."

The Reagan administration, led by Treasury Secretary James A. Baker III, began in 1985 pursuing a policy of pushing the value of the dollar lower in order to limit imports and make American goods more competitive on overseas markets.

The new survey indicated this strategy was finally beginning to pay off, with one-fourth of the economists reporting higher export sales by their companies in the past three months, up from just 8 percent in a November survey. …

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