For 1988, most economists forecast a happy new year

THE Reagan Administration last week cut its forecast for economic growth in 1988 to 2.4 percent. That's not much above the average prediction. Here's what the consensus says: US National output: The real gross national product (GNP) - the output of goods and services, inflation removed - should grow 2 percent next year, according to an average of 51 economists compiled by Blue Chip Economic Indicators.

This would mean a sixth year of economic expansion. Growth would be slightly slower than the 2.7 percent in 1987 estimated by these economists at the start of the month. Since then the GNP for the third quarter has been revised up from a 4.1 percent annual rate to 4.3 percent. And the fourth quarter shows signs of handsome growth. So the growth rate for all of 1987 actually could exceed 3 percent.

Since the recession of 1981-82, real GNP has averaged around 4.2 percent growth per year. That's not bad at all.

The forecast range for 1988 runs from plus 3.7 percent (Bostlan Research Associates) to minus 2 percent (Business Economics Inc.). Some economists figure the stock market bust will hit consumer spending hard. Others expect faster growth in exports and good business investment to keep the economy growing nicely.

Industrial nations output: The Organization for Economic Cooperation and Development figures Western industrial nations will grow in real terms 2.25 percent in 1988, down from 2.75 percent in 1987. The Japanese economy in the coming year will grow 4 percent and West German 1.5 percent, the Paris-based organization predicts.

Inflation: Consumer prices will rise 4.3 percent next year, according to the Blue Chip consensus. That's more than the 3.8 percent estimated for 1987.

Depression: It won't happen in the five years ahead, the Blue Chip economists say.

Budget deficit: The Conference Board last week said the deficit for the fiscal year ending next Sept. 30 ``appears likely'' to jump to $186 billion, from $148.1 billion in fiscal 1987. But other analysts are less gloomy. One forecaster puts the deficit at $130 billion. That forecast depends on higher-than-consensus growth in 1988 resulting in higher revenues.

Interest rates: The consensus says interest rates will not change much, with three-month Treasury bills averaging 6 percent and top-rated corporate bonds 9.7 percent.

Some economists figure that 1988 being an election year, Federal Reserve policymakers will attempt to keep credit loose. Others suspect the new Fed chairman, Alan Greenspan, will want to show his anti-inflation credentials regardless of the politics by keeping considerable restraint on money growth.

Unemployment: The consensus calls for unemployment at 6.2 percent of the civilian labor force in 1988. That average would mean an increase from the 5.9 percent rate in November. The number of new jobs will not keep up with growth in the labor force.

Stock market: Looking at the return on money invested in stocks, the Morgan Guaranty Quarterly concludes that stocks ``seem to be priced toward the high end of what seems reasonable on the basis of history - not conspicuously so, however.'' But the New York bank economists do not go beyond that to predict whether prices will actually be higher or lower at the end of 1988.

All in all, barring surpises, 1988 promises to be another relatively happy economic year.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK