Economic Growth Expected to Slow Dramatically

THE JOURNAL RECORD, May 24, 1989 | Go to article overview

Economic Growth Expected to Slow Dramatically


WASHINGTON (AP) - Top business economists Thursday predicted that economic growth will slow dramatically this year but the nation should be able to forestall a recession until at least 1990.

The consensus of 54 forecasting experts surveyed by the National Association of Business Economists was that America will experience a ``growth recession,'' in which the economy continues to expand but at a very slow pace.

The slowdown is expected to be accompanied by a moderate increase in unemployment and higher inflation due to an emerging upturn in food and energy prices, according to the association's latest quarterly survey.

1990 continues to be the year economists predict a recession will arrive. Forty-three percent predict a downturn then, while 20 percent expect record peacetime expansion to end this year.

That projection is slightly more optimistic than the group's last quarterly forecast, issued in February, when 75 percent of those surveyed expected a recession this year or next.

In Thursday's survey, 17 percent forecast a recession for 1991 and 20 percent said it would be 1992 or beyond before a downturn occurs.

Recent government reports measuring the economy's performance so far this year have suggested that growth is slowing in response to a Federal Reserve campaign to engineer a so-called ``soft landing,'' in which the economy slows enough to cool inflation without slipping into a recession.

But the forecasters warned that ``the real trick from an economic policy perspective is preventing the forces that are responsible for a major slowdown from degenerating into a fullblown recession.''

``Soft landings have often appeared possible ... but inflation has invariably worsened,'' the group said in a summary of its findings. ``With the run-up in prices, government policy has been forced to squeeze still harder and soft landings are lost in the process.''

The analysts' median forecast was that the gross national product, the broadest measure of the economy's health, would grow at an sluggish annual rate of 1.3 percent during the final three quarters of 1989.

For the year overall, the GNP was forecast to grow 2.8 percent, down from 3.9 percent in 1988. Growth was expected to slow even further in 1990, dropping to 1.8 percent.

That prognosis is considerably more pessimistic than the Bush administration, which is pinning its budget and deficit-reduction plans on GNP growth of 3.2 percent this year and next.

The government reported Thursday that the GNP grew at a 4.3 percent annual rate in the first three months of 1989, much slower than previously thought. …

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