Some say US business revival may not be so quick
The current economic slump -- which could turn out to be the second-worst recession since World Ward II -- is already showing signs of being especially damaging to a hefty portion of US industries.
For some key sectors of the economy a quick rebound from the downturn later this year or early in 1981 is unlikely, some economists now predict. This delayed recovery, they add, could well post long-range problems for such important parts of the economy as lumber and home building, appliances, autos, and the furniture industry.
Moreover, consumer product and retail firms owned by minorities -- particularly blacks -- are assumed to be particularly vulnerable during the downturn.
Dr. Beryl W. Sprinkel, for one, who is chief economist and vice-president of Harris Bank, in Chicago, says he believes the recession will be both lengthy and "severe." He projects that by the end of this year unemployment will be over 9 percent.
Perhaps more disturbing, he says, it does not look as though there will be the more normal V-shape recovery -- i.e., a rapid drop in economic activity followed by a sharp upswing. Rather, he suggests, there will likely be a "moderate policy response" at the federal level, which means that such industries as autos and durable goods will register only "moderate increases" in employment and sales right through 1981 and into 1982.
Chase Econometrics also suggests a sluggish recovery. Lawrence Chimerine, chairman and chief economist at this economic consulting firm, does not believe the recession will be as severe as the 1977-1975 downturn. But at the same time , he sees no evidence for a quick snap-back during the next several years.
The Chase forecast, for example, now projects that gross national product (the value all goods and services produced in the United States) will fall 1.4 percent during 1980. But in 1981, the Chase analysis suggests, GNP will rise only 0.4 percent. For 1982, the rise is projected at 3.3 percent.
Sandra Shaber, a senior economist at Chase Econometrics, sees three main reasons suggesting a sluggish and difficult recovery:
1. The rate of inflation next year will likely not drop below 9 or 10 percent , she says. That means a "modest" growth in real income, which would "obviate" any major upsurge in consumer goods spending.
2. Employment is not expected to rebound quickly. Again, that will dampen consumer spending.
3. Finally, because inventory levels have remained fairly low during the recession -- geared to lessor demand -- there will not be a big burst in inventory replenishment (and hence, a big jump in production of goods) during the next year or so. Business inventories jumped sharply in April -- up 1.3 percent -- according to the US Commerce Department. Still, government analysts do not believe the rise is excessive yet.
One other factor that could definitely affect the duration and impact of the recession, Dr. Shaber says, is the timing of the recession overseas. If major importing nations plunge into the depth of the recession later this year or next year, as the US presumably comes out of recession, that could mean a sharp drop in demand for American exports.
Chase Econometrics is now forecasting that housing starts (which affects sales of appliances and other consumer goods) and autos will show only slow growth in 1981 and 1982:
1980 1981 1982 Housing starts (millions) 1.05 1.41 1.63 New-car sales (millions) 9.1 9.4 10.4
Economic Week, published by Citibank, in New York, is projecting sharp declines during the current recession for key consumer goods industries that will pose difficult long range problems.
For example, Citibank projects a real sales decline of more than 7 percent this year for appliance manufacturers. That would be two percentage points worse than the 1973 downturn.
Household furniture sales will drop 9 to 10 percent, Citibank reckons, about equal to 1973. Clothing and shoe manufacturing will drop 5.5 percent by midyear 1980, it says, worse than the 4.5 percent drop in 1973-1975.