Increased Growth Signals Rebound For US Economy
ECONOMISTS may begin to ratchet up their forecasts for the United States economy in 1993.
The upward revisions are expected because the economy ended the year 1992 at its best pace in the last five years. On Friday, the Commerce Department revised upwards its estimate of fourth-quarter gross domestic product (GDP), the sum of all goods and services. Commerce now reports the economy grew at a 4.8 percent annual rate, up from an earlier estimate of 3.8 percent.
"Forecasts will be revised upward if for nothing else than the fact the economy is starting off the year at a higher level," says Bob Dederick, chief economist at Northern Trust Company. Mr. Dederick has recently revised his estimate of 1993 growth from 3 percent to 3.5 percent.
Bob Eggert, editor of Blue Chip Economic Indicators, says the stronger numbers will cause him to raise his personal estimate of 1993 economic growth from 3.1 to 3.2 percent. "We're showing a bit more optimism," Mr. Eggert says. Blue Chip will poll its 50 economists this week and will release that poll on March 10.
The Commerce Department numbers paint a picture of an economy buoyed in the last quarter by much more confident consumers, increasing US exports, and surging housing starts.
Whether the consumer will continue spending at that rate remains open. "The consumer will continue to spend but not at that pace - the income is not there," predicts Cynthia Latta, senior financial analyst at DRI-McGraw Hill. DRI recently increased its estimate of first-quarter economic growth by 0.5 percent.
But there are signs the momentum from the fourth quarter is continuing. Retail sales in January rose 3 percent. Reflecting healthier consumer buying, auto and truck production is 20 percent higher so far this year compared with last year.