Some Economists See Bleak Months Ahead

Small but significant number forecast that US recession will stretch through spring and perhaps rest of 1992

HOUSING starts in the United States plunged 14.9 percent in 1991 to the lowest level in 46 years. Both industrial production and retail sales have declined for three consecutive months. Private business lost 330,000 jobs in the fourth quarter. Unemployment is the highest since June 1986. Real disposable personal income (after inflation and taxes) stands at the same level as four years ago. About one-fifth of the nation's office space remains vacant.

Such numbers are giving greater credibility to a small group of economists who are making especially gloomy forecasts.

"The recession will persist into the spring and quite possibly through the year," notes Phillip Braverman, chief economist of DKB Securities Corporation in New York. "But if there is a recovery later in the year it is destined to be so feeble as to require additional Fed [Federal Reserve System] easing."

The Fed itself sees little signs of economic liveliness. A survey by its 12 regional banks, released last Wednesday, concluded: "Activity was lackluster as the year [1991] drew to a close."

Lacy Hunt, chief economist for the HongkongBank group in the United States, says the economic recovery will be "sub par" when it does come in the spring or summer. As a result, he adds, the unemployment rate will rise to 8 percent by the end of the year.

This economic situation will "probably" cost President Bush the election, Mr. Hunt says.

Such economic views are more pessimistic than those of the majority of economists. But even the consensus view isn't cheery. The average forecast of 50 economists surveyed by Blue Chip Economic Indicators of Sedona, Ariz., anticipates real growth in national output of 1.6 percent this year. Most economists expect output to be flat or slightly positive until spring, when it should pick up to around a 3 percent after-inflation growth rate. That is much less than the 6 percent or so growth rate usually expe rienced early in a recovery. No-growth trend seen

By contrast, Mr. Hunt talks of the economy dropping at a 1 percent rate in the first half of 1992 and growing at only a 1 percent rate in the second half - on average no growth.

If he's correct, the recession that started in July 1990 will be the longest of the post World War II era.

Mr. Braverman says the recovery will be so weak that a businessman or an individual looking for a job "won't be able to tell the difference from a recession."

These economists are not professional doomsayers who make a living catering to the fears of their customers. Hunt, for example, predicted rightly that the economy would continue to grow after the 1987 stock market crash. Both economists were correct early last year in forecasting the continued weakness in the economy. Most economists were then saying that a recovery would be well under way by now.

One of the most pessimistic of economists today, New York consultant Robert Parks, says gross domestic product (GDP) fell at a 2 percent annual rate last quarter, has continued to do so in this quarter, will plunge at a 3 percent to 4 percent rate in the April-June quarter, and will remain flat for the remainder of the year.

"There is no recovery in sight," he says. Fourth-quarter 1991 GDP estimates are to be released tomorrow.

Consulting economist A. Gary Shilling, expects the "second dip" in the economy to last until the third quarter. Morgan Guaranty Trust Company's chief econo-mist, William Brown, sees only 0.1 percent real growth this year, though Rimmer de Vries, an economist who is now a senior adviser to the bank's chairman, is a bit more optimistic.

Most of these economists charge the Fed with not doing enough to stimulate the economy. Fed policymakers, says Braverman, "are still afraid that if they do too much, inflation will raise its head. But there is no danger at all from an excess of demand."

Mr. Parks argues that the sharp decline in interest rates last year was the result of a declining demand for money, rather than an aggressively stimulative monetary policy. Don't confuse "Fed leadership with Fed 'followship, he says.

Another economist, James Grauer of Omnitrage Economics in Sacramento, Calif., who employs a complex analysis of bank reserves and the various measures of the money supply, maintains: "The Fed isn't really trying hard. We are still sitting on the same money supply as existed in May 1990. We are going to be relegated to slow growth." Slump considered unusual

Several of these economists say the slump is unusual in that it results from financial difficulties rather than a swing in business inventory levels. It stems from "the unprecedented borrowing and lending of the 1980s," says Braverman. "There is no lending or borrowing taking place in the private sector on a net basis. Never before since the depression has the financial system of this country been at such risk."

But not every economist is so blue. Michael Keran, chief economist of Prudential Insurance Company of America, sees real output growing in the 3 percent to 4 percent range this year, well above the consensus view. He maintains that monetary policy started to ease last summer.

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