Economic growth and 1988: no need for a recession
SEASONED basketball and football players know that when it comes down to a tough game, sideline distractions must be ignored - they must keep their eye on the ball. The sports analogy is fitting at this time of the year, when football winds up its season with big bowl games in the days ahead, and basketball competition becomes more earnest.
The analogy is also appropriate for thinking about the United States and global economies at the year end. Especially just after the important Christmas shopping period, economic attention is focusing more intently on statistics: sales figures; earnings reports; import and export ratios; the number of part-time workers who may or may not have to be furloughed during the winter months.
This preoccupation with economic data numbers has been intensified by concerns about a possible recession growing out of the Oct. 19 stock market crash.
That is why it is important to keep the eye on the ball - which, in the matter at hand, is economic growth. Recession, as presidential candidate Jack Kemp reminded us in a meeting with Monitor editors and reporters last week, is not inevitable. There is no ``law'' stating that there has to be a recession in 1988. Mr. Kemp, who tends to weigh in on the upbeat side of events, as befits a former football quarterback, sees growth ahead - even a decade of growth. He is not alone in optimism. Mainstream US economists continue to see signs of expansion ahead for much of 1988, although at a reduced rate from last year.
On the statistical front, evidence has been steadily mounting that the US and global economies are continuing their advance, not trailing off toward recession. Year-end retail sales, although perhaps not as good as some business leaders might have preferred, were still on the plus side of the ledger. A moderation in consumer purchasing is not in itself bad. More Americans have been putting money into savings. And by trimming back slightly, consumers are forcing merchandisers into discounting and specials - which help to moderate inflation.
The point is that the economies in the US and abroad have continued to expand, despite the Oct. 19 stock market collapse. Other important US statistics come out this week, particularly the index of leading indicators, manufacturing shipments and orders, and new home sales figures. But whatever they may say for the short run, the end-of-the-year momentum has been on the side of expansion.
The US economy is expected to grow by at least 2 percent or more during 1988. The Reagan administration, for its part, has cut its growth projection to 2.4 percent. But that would still represent a sixth year of expansion for the US.
Western Europe's economy also is expected to expand, probably in the 2 percent range. As for the Japanese, well - think big. Their growth could come in between 3 percent and 4 percent.
Obviously, economic leadership has become more of an issue since the Oct. 19 crash. Some movement is occurring. In the US, the White House and Congress finally agreed on a new multiyear deficit-reduction package. They should continue their efforts to bring the deficit under control, early next year. European leaders now call for action to stem the dollar's continuing slide. Joint action is preferable to go-it-alone steps by nations. It would be unfortunate if the dollar stabilization program fell only to the US Federal Reserve Board to maintain. Recent dollar supply numbers are down. That's worrisome. The Fed should err on the side of expansion. That means that dollar stabilization has to be a joint action: Europe should stimulate its own economy; the Fed, ever so gradually, should help bring the dollar under control.