`Where the recession?' It's receding into the distance like a mirage
LIKE a mirage on a hot highway, the recession or serious slowdown forecast by many economists keeps moving down the road. ``Where's the recession?'' asks Lacy H. Hunt, an economist with Carroll McEntee & McGinley. After the Oct. 19 market bust, he remained optimistic while most economic forecasters were lowering their predictions for 1988 growth by 1 to 2 percent.
The pessimists have now started moving their forecasts back up again, particularly after the release of statistics showing strong growth in employment during February.
Those numbers ``certainly suggest that the risk of recession is over,'' say Roger Brinner and David Wyss of Data Resource Inc., Lexington, Mass.
Maury N. Harris of PaineWebber Inc. has just boosted his real growth figure for the first quarter by 1.1 points to a 1.9 percent annual rate. He says the second-quarter gross national product in uninflated terms will rise at a 2.3 percent rate, up 0.9 points from his earlier prediction.
Mr. Harris explains his new cheeriness by noting that ``the drop in inventory investment from the high, unsustainable pace at the end of last year is not trimming domestic output as much as appeared possible.''
Other economists are even more chipper. Lawrence A. Kudlow of Bear, Stearns & Co. talks of a 3.1 percent rate in the first quarter, but warns that ``inventory drag'' could make these three months the strongest in the year. H.E. Wainwright & Co.'s David Ranson looks for 4.5 percent real growth this year.
The strong economy has had an impact on the presidential primaries. It gave George Bush, an incumbent and a Republican, a boost on Super Tuesday. It hurt Richard Gephardt.
Wall Street economist Sam Nakagama notes: ``If a recession or marked slowdown had followed the stock market crash as the consensus had predicted, Richard Gephardt might already be far in the lead for the Democratic nomination.''
Instead, reports from Washington say Mr. Gephardt's poor showing has clobbered any prospect for passage of his protectionist amendment to the omnibus trade bill. It has also weakened talk of tough action against foreign trade barriers as a campaign issue.
For investors, the good economic news has been encouraging. Prices in the Japanese stock market have completely recovered from the October plunge. World stock market prices finished February up 5.6 percent, according to Morgan Stanley Capital International Perspective. In Belgium, stock prices were up 25.6 percent; in France, 22 percent; in West Germany, 22 percent; and in the United States, 3.9 percent. This month prices have generally continued upward, except in the US and France.
Moreover, consumer confidence has recovered virtually all the ground lost with the market crash, the Conference Board reports. Prices are behaving reasonably, with producer prices down 0.2 percent in February. Retail sales figures released Friday offered encouragement, rising 0.6 percent in February.
In addition, the dollar has risen a bit and stabilized. Mr. Kudlow of Bear Stearns calculates that the weakened dollar will boost US net exports $60 billion this year, helping maintain the recovery.
With the Federal Reserve System following a fairly relaxed monetary policy, there's no large blockade visible on the economic road ahead. The recession mirage should continue to recede.