Newspaper article The Christian Science Monitor

No Recession Yet, Says One Economist

Newspaper article The Christian Science Monitor

No Recession Yet, Says One Economist

Article excerpt

MICHAEL KERAN says he's not ready "to throw in the towel yet" on a recession.

The chief economist for the Prudential Insurance Company of America is decidedly in the minority among economic forecasters. Blue Chip Economic Indicators, based in Sedona, Ariz., just changed the banner on its newsletter from orange to red, meaning that the prevailing opinion among the 50 economists surveyed each month by editor Robert Eggert now holds that the economy has already, or is about to, slip into recession. Their average forecast sees real national output contracting at an annualized rate of 0.8 percent in the fourth quarter of this year and 0.6 percent in the first quarter of 1991.

"That the economy is in recession is difficult to deny," state Roger Brinner and David Wyss, two economists with DRI/McGraw-Hill, an economic consulting firm.

Well, Mr. Keran does deny it. Whereas the DRI economists say a recession may have begun as early as August, when oil prices jumped, or as late as October, when consumer spending plunged, Keran doesn't anticipate a real recession until mid-1991.

In that long Blue Chip list of forecasters, Keran is the most optimistic of all for this year. "The numbers out there now certainly don't support my view," he admits.

Keran refers to such statistics as those released this week for industrial production (down 0.8 percent in October) or retail sales (up only 0.1 percent in October, not accounting for inflation). The numbers prompted somber comments from economists. Gordon Richards, National Association of Manufacturers, was quoted as saying: "The evidence of a recession is now unambiguous."

So is Keran whistling past the graveyard?

One factor giving him confidence is a remarkably accurate forecasting record over the past few years. Using an econometric model which relies heavily on oil prices and interest rates, he keeps cranking out predictions which prove - eventually - right.

The second is the unreliability of monthly and even quarterly statistics. They are constantly being revised. Keran's forecasts of 1989 and 1990 real gross national product (GNP), the output of goods and services, looked mediocre until the government's numbers were revised in July. …

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