Pace of the economy: current letup means running room for '85

Since midsummer there have been signs of less vigor in the economy. Now the flash report of third-quarter GNP, up at only a 3.6 percent annual rate, and a downward revision in the second-quarter numbers from 7.6 percent to 7.1 percent, seem to confirm what all the subsidiary statistics have been saying.

Now some experts may start telling us that recession is close at hand. In fact, consumer spending, which is two-thirds of the GNP, appears to be barely growing (the growth is in inventories and capital spending). Recessions, however , do not come upon us like dew on the grass while we're sleeping. They are brought on by many signs of overheating, of difficulty in getting deliveries, of interest rates being so high that borrowers are turned away, or gross overspending on inventories and capital investments. None of these things are happening yet, although the downward trend in residential construction, off some 12.8 percent last month, is one such sign and a direct result of the exorbitant mortgage interest rates.

It is ironic that in a year with a record trade and balance-of-payments deficit, foreigners are still exchanging their currencies for US dollars. Those who are wringing their hands too hard over the imbalances that are evident in present economic policy should note this phenomenon. Foreigners seem to be saying, ''Maybe we don't like the way you play your game, but it's still the best game around.'' There is certainly something about the vigor and relative freedom of economic decisionmaking in the US that continues to draw those currencies in, when a lot of the fundamentals would argue in the opposite direction.

But let's return to the state of the economy and what distance it may be from the next recession. Peter Kozel, an economist at the Connecticut National Bank in Hartford, writes in that bank's monthly economic letter about many of the conditions that typify the end of a business expansion. Then he says, ''By each of these measures, there is currently very little evidence that the economic expansion is running into trouble... Some of the best indicators of imbalances in the economy show that the preconditions for a recession are largely absent.''

Sooner or later, of course, there will be a sufficient degree of imbalance or stress in the economy to cause another adjustment. But that adjustment, as long as it is not caused by an international crisis, does not need to be on the order of recent recessions.

A. Gary Shilling, who runs an economic consulting firm bearing his name, said in an interview the other day that he asks businesss client groups he addresses what they think of when he says ''recession.'' The only two responses he gets are 1974, which was sharp and painful, or the early 1980s, when two back-to-back recessions also produced unpleasant memories - memories, incidentally, which are still making business behave cautiously.

What Shilling says he is looking for is a ''confirming recession.'' By this he means a short and mild recession in the next year or two, which would be a major surprise in the sense that it would not be preceded by a run-up in inflation. And with that recession, businessmen and investors would at last believe that inflation is a thing of the past. When that happens, according to the Shilling thesis, there will be a massive bond market rally, as investors try to lock up these historically high real interest rates. Then, with the interest rate structure finally where it should be, the economy will be poised for a long period of sustained growth.

The immediate question, of course, is whether the sharp slowdown from the second to the third quarter augurs a recession starting sooner than the consensus expects. Since there are no obvious imbalances in the economy, it seems rather that a little slowdown now gives the economy running room for 1985.

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