Newspaper article THE JOURNAL RECORD

Sequel: `Another Soft Landing'

Newspaper article THE JOURNAL RECORD

Sequel: `Another Soft Landing'

Article excerpt

NEW YORK -- Veterans of the great bull market for stocks will recognize a familiar phrase as talk begins to stir on Wall Street of a "soft landing" for the economy in 1998.

The term embodies an important principle that has helped stock prices to soar all through the 1980s and `90s. Instead of a recession or credit crunch every three or four years, the U.S. economy seems to have found a way to smooth out the bottom part of the economic cycle.

There was, by official measurements, a recession that lasted two or three quarters in 1990-91. Otherwise, every time the pace of business activity has slowed over the past 15 years, the economy has managed to pause and recover its strength without any serious upsurges in unemployment, inflation or interest rates. The expansion of gross domestic product, or the total output of goods and services, has slowed, but not stopped or turned negative, as the economy has weathered such jolts as a precautionary tightening of credit conditions by the Federal Reserve Board. Hence the description "soft landing," for a maneuver that gets a high-flying economy back to earth without damaging the equipment or shaking up the passengers very much. Now, a new source of turbulence looms in the form of the Asian financial crisis, which has already begun to dampen demand for U.S. exports and to chill the expansion plans of a good many international businesses. That has set economists to lowering their predictions of U.S. GDP and corporate profits this year, and to debating the chances for a painful spell of deflation spreading outward from commodity prices to incomes, profits and maybe the values of financial assets like stocks. "The Asian crisis has converted deflation from a theoretical risk into a clear and present danger, in my opinion," says Edward Yardeni, chief economist at Deutsche Morgan Grenfell in New York. …

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