`Doldrums' cloud economic outlook

The United States economy is sauntering along on a lazy summer stroll rather than jogging briskly into the second half of 1985 as the White House had forecast. The economy is ``in the summer doldrums,'' says Jerry Jasinowski, chief economist at the National Association of Manufacturers.

White House economists say the economy will roar back at an inflation-adjusted 5 percent pace in the second half of the year. Many private forecasters have been predicting a rebound, though of less robust proportions.

But recent downbeat data on retail sales, business inventories, and industrial production, among other figures, are prompting some analysts to trim their predictions for the second half, notes Robert Gough, a vice-president of Data Resources Inc.

There is ``nothing in any of the numbers'' to indicate a speed-up in the economy, Mr. Jasinowski says. ``The jury is out on a rebound later this year.'' The theme of economic uncertainty was highlighted Thursday as the nonpartisan Congressional Budget Office (CBO) released its midyear update on economic performance and the budget.

The report warned that ``the economic outlook remains very uncertain. So far there are few clear signs that the projected pickup in growth has begun.''

Although it still expects the economy to pick up during the second half, the CBO lowered its growth forecast for the year, after taking the economy's sluggish first-half performance into account. Based on that reduced forecast, the CBO also predicted that federal deficits would be higher than the recently passed congressional budget resolution has estimated. Slower economic growth tends to reduce federal tax revenues.

CBO economists said they expected ``a speedup in output growth in the second half of this year, followed by moderate growth in 1986.'' Moderate inflation, lower interest rates, and recent declines in the dollar's value on foreign-exchange markets have enhanced prospects for accelerated second-half growth, the CBO said.

The CBO lowered its estimate of inflation-adjusted growth in 1985 to 2.6 percent from 3.4 percent in February, on a fourth-quarter-to-fourth-quarter basis. The real GNP estimate for '86 was raised from 3.1 percent to 3.4 percent. The current White House forecast is for 3 percent growth in '85 and 4 percent in '86.

The CBO used lower real-growth estimates and higher interest-rate assumptions than congressional budget writers. So the CBO predicts that deficits will be higher than the recently passed congressional budget resolution, even if Congress cuts spending as deeply as it promised. The CBO predicts a deficit of $175 billion in 1986, $163 billion in '87, and $143 billion in '88. By contrast, the budget resolution sees deficits of $172 billion, $155 billion, and $113 billion, respectively.

If the CBO deficit projections are correct and Congress meets its spending targets, however, deficits would ``reach the lowest levels relative to GNP experienced since fiscal year 1979,'' the CBO said.

While ``much work remains to be done'' in reducing the deficits, the latest congressional budget resolution makes ``dramatic progress in attacking the deficit problem,'' says CBO chief Rudolph G. Penner.

Still, the ongoing deficits will add to the rapidly mounting federal debt, which by Oct. 1 is expected to be at or near the existing $1.823 trillion limit. When the Senate returns to Washington after the dog days of August are over, it will be forced to engage in the controversial task of boosting the nation's debt ceiling. The House has in effect already passed a new debt limit in its budget resolution.

If the current economic sluggishness persists, unemployment is likely to remain stuck at its current 7 percent-plus level. But the slowdown could also reduce the rate of deterioration in the US trade picture and might prolong the expansion by letting consumers lighten their current heavy debt load a bit, Mr. Gough says.

Despite signs the economy is in bit of a summer slump, most private economists do not expect a recession next year.

``We are not looking for a recession, mainly because we don't see the Fed [Federal Reserve Board] or anyone else wants to have one,'' says Paul Boltz, vice-president of T. Rowe Price Associates Inc.

But forecasts for the pace of growth in 1986 vary by an especially wide margin, and range from 1.5 to 4.4 percent, according to an August survey of 50 top economists by the newsletter Blue Chip Economic Indicators of Sedona, Ariz.

Recent statistics that have caused forecasters to trim their predictions for the rest of 1985 include a modest 0.2 percent rise in industrial production in July, leaving the output of the nation's factories only 1.4 percent above year-earlier levels. GRAPH: US industrial production

Percent

change 80 - 1.9% 81 2.2 82 - 7.1 83 5.9 84 11.5 85* *Through July Source: Federal Reserve Board 30{et

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