2 top economists sweeten forecast -- with a caution
The US economy will grow faster in 1983 than previously predicted, two top economists say, but large federal budget deficits still cloud longer-term prospects.
On the basis of bullish economic signals in the first weeks of 1983, Otto Eckstein, chairman of Data Resources Inc., an economics consulting firm, has increased his forecast for real economic growth this year from 3.5 percent to ''just under 4 percent.''
And Alan Greenspan, president of Townsend-Greenspan Inc., adds that ''in the months ahead we will see a fairly dramatic recovery in new orders (for manufactured goods) and a surprising pickup in industrial production.'' He added , ''the decline in employment is over.''
Fueling Mr. Greenspan's assessment was this week's report of a 0.6 percent drop in business inventories during December. Because companies are reducing the amount of goods they have on hand, it is likely that new orders will require a boost in production.
But in testimony before the Congressional Joint Economic Committee, both forecasters cautioned that a recent spate of promising statistics does not necessarily mean the recovery will be robust. Some economic statistics, like retail sales, were aided by favorable weather in January.
''It would be a mistake to interpret the weather-aided favorable January economic data as an indication of a dramatic change in outlook,'' Mr. Eckstein said. ''The case for an abnormally weak recovery, with continued high unemployment rates, remains convincing.''
While there are other factors at work, high interest rates are a key reason that only a mild recovery is in prospect, the forecasters said.
''Interest rates are far higher than they should be,'' said Mr. Greenspan. ''They are an inhibiting factor that will create problems as the (economy) moves beyond the initial and rapid recovery stage.'' Current rates are ''too high to sustain normal'' rates of recovery, he adds.