Beyond all the rosy statistics
REMARKABLE. That's about the only way to describe fairly the continuing United States economic expansion now in its 57th month - the second-longest recovery since World War II, and, later this year, expected to become the longest in the postwar period. For the moment, it is hard to find any real economic storm clouds, what with all the statistical sunshine. The White House, in its upbeat midsession economic review, sees the expansion continuing on into next year, although it forecasts a brief rise in inflation, before moderating. This is not to overlook that the current slow but steady economic progress is not shared by all regions, industries, and segments of the population. But some analysts are now talking about a 3,000-point Dow Jones industrial average. Overseas investors continue to pour money into Wall Street. Unemployment is low, by 1970s and '80s standards. US exports are once again on the rise, although the overall trade deficit is at historic levels.
Indeed, the 0.8 percent jump in the index of leading indicators for June, announced last week, suggests that the recovery could stay on track right up to election time 1988, if not beyond then.
Sometimes, however, in the midst of a long spell of fair weather, it is wise to keep an umbrella nearby, if not tucked under the arm each day. And, for the moment, there are a number of clouds on the horizon:
Most important is what effect, if any, the continuing turmoil within the Gulf could have on the international economic system. As of this writing, investor jitters regarding the Gulf have eased. Oil prices have edged slightly downward. Still, Europe and Japan remain vulnerable to a disruption of Mideast oil. Any major downturn in either the Japanese or West German economies could have negative global consequences.
The ability of third-world nations to repay their huge overseas debt is directly related to the ability of those nations to sell their goods and services to the US. Yet, Congress is determined to pass a new trade law that, in the opinion of some economists, could throw up roadblocks to world trade.
The US, although stepping up its level of exports, is still losing the overall ``export competition.'' According to new figures compiled by the International Monetary Fund, West Germany has now overtaken the US as the world's leading exporter.
Part of the reason is statistical - the drop in the value of the dollar. Still, when one recalls that West Germany has a far smaller population than the US, the manufacturing and trading achievement of that nation becomes all the more impressive.
US leaders would seem best served in exploring ways of bolstering the expansion. That means encouraging exports, ensuring that the US market remains open to imports, and reducing the federal budget deficit. Taking such actions is important, not just to Americans, but to the world economy, since the huge US economy remains the linchpin of the world trading system.