Magazine article American Banker

Economists Talking Recession as Indicators Shift

Magazine article American Banker

Economists Talking Recession as Indicators Shift

Article excerpt

The dreaded R-word is out in the open as more economists suggest that chances of a recession next year are rising.

The monthly Recession Watch Index at Detroit's Comerica Bank, which forecasts the likelihood of a national recession during the succeeding 12 months, currently hovers at 40%, up from 28% last spring.

"Recession risks have climbed rapidly in recent months, following dramatic deterioration in credit conditions since August and stock market declines," according to James Glassman, chief economist at Chase Securities Inc., a unit of Chase Manhattan Corp. in New York.

Chase economists think the probability of a mild recession next year is nearing 50%, though they still think a sharp slowdown without an actual downturn in economic growth is still more likely.

Economists at Credit Suisse First Boston in New York said they think chances of a mild "growth recession" are 45% and of a more severe slide, 25%. Their most realistic scenario is that the Federal Reserve "wakes up and slashes interest rates."

Nicholas S. Perna, chief economist at Fleet Financial Group, Boston, said he thinks a recession next year is a 3-in-10 shot. "While not the most likely outcome, the odds are high enough that the risk must be considered," he said.

Other economists see no recession on the horizon-but acknowledge they are making a close call.

"Pro-growth forces for the U.S. economy still outweigh the negative factors but by a much narrower margin," said Stuart G. Hoffman, chief economist at PNC Bank Corp. in Pittsburgh.

He said he thinks the nation will remain recession-free through 1999, "but noticeably slower growth in jobs, income, industrial production, and retail sales lies immediately ahead. …

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