Resilient U.S. economy should come back strong in 1999
Entering 1998, the U.S. economy has momentum. Job growth is strong, unemployment is low, and inflation is practically nonexistent. The question is, how long this momentum can be sustained? At this time last year, the consensus Blue Chip Economic Indicators called for 2.3% real GDP growth in 1997. It’s now apparent that last year’s growth was closer to 3.7%. Unemployment for 1997 was expected to average 5.4%, consumer inflation was to accelerate, and industrial production growth supposed to wane. Our forecasts were in line with the prevailing consensus. As history now shows, we were all much too pessimistic (even the most optimistic saw 3% GDP growth). In early 1998, the Blue Chip consensus was that real GDP will rise another 2.5% this year. No one foresees an acceleration from the 1997 growth rate, though the U.S economy has proven to be extremely adaptable and resilient. Although we expect that the Asian market turmoil will sap some of our economic strength in 1998, stronger gains will materialize in 1999.
The consensus in the field seems to confirm our sense that the next recession will be held at bay. We recently asked our CBCI survey panel members when they expected the U.S. economy to again experience even a mild downturn. A majority, 54%, said that they didn’t expect the next recession to arrive until the year 2000 or later. Only 16% look for a downturn during 1998, and 30% look for a recession in 1999. More than one in three (36%) aren’t planning for a downturn until 2001 or later. Respondents from the construction sector and from the Midwest region were least likely to expect a downturn this year. If our survey respondents are right, and we make it into the next century without falling into a recession, then the current business expansion will go into the books as the longest in U.S. economic history.
When will the next recession occur?
(% of total respondents)
Source: Cahners Economics