The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Economic Forums Title: Current Economic Conditions and the Economic Outlook for the u.s. In brief--U.S. economy currently performing well In spite of significant imbalances--private and public and internationally With exception of agricultural situation Prospects for balance of this year and next good GNP Broadest measure-define "real" Continued to reach records 1st qtr - 3,915 billion Doubles every 23 years (1942-1; 1965-2) Surpassed pre-recession peak of 1981 by 1983 Vigorous upturn 1 82- 1 84 From 1 84 approx. 3% pace Now at or above long term pace 5-1/2 years and being maintained QIII 4.3; QIV 4.8; QI 3.6; QII(e) 3%+ Industrial Production Accompanied by strong industrial output De-industrialization concerns misplaced; significantly above 1981 high Initial surge-usual recovery-leveling, 1986 on surge-as exports took off Strength continuing--6% above year ago Payroll employment New records; 105,848 in June Gains average 300,000 per mo in 1st half of 1988 U.R. at 5.3%--best since 1974 https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 2 - Disposal personal income Define Inexorable gain Per capita in 1 82 $s doubled since early 1960s Export and import activity Strength driven by external/international Imports continue increase but at more modest pace Dollar peaked in early 1985, took awhile Exports since 1986 growing more rapidly Net exports smaller negative; about $100 billion at first qtr rate Relative trade improvement See more dramatically--indexed to (change from) dollar peak Exports fell than rose in 1986, now much more rapidly Gains in imports reflect$ value not physical volume Consumer goods imports Depreciation has impact. Changed relative prices So$ value increasing but physical volume leveled off Durable goods exports Dramatic export gains Electrical machinery and office equipment up 60% Industrial machinery up 35% Total up 45% Nondurable goods exports And strong gains in nondurables Paper and paperboard, chemicals and pharmaceuticals (lagged until this year) All important in District https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 3 - Personal consumption expenditures With strength in exports concern about meeting both domestic and foreign demand Fortunately PCE growing less rapidly Part of major story--producing more than consuming Nations, like individuals, only do so by borrowing Requires repayment--producing more than consuming Resource utilization Approaching capacity Lower than 1978-1979 but different demand composition Paper, chemicals, steel Also human resources In zone of "full employment"--5 to 5-1/2% Are we therefore approaching problems for 1989 Price performance In pressing would show up in prices Volatile but no major impact CPI about 4% yr/yr PPI on average 1% PPI components, crude and intermediate large gains Finished still to come Manufacturing growth Part for no price pressures improved productivity Rough measure--widening spread Looking ahead How long continue? Approaching capacity Old - 5 1/2 years https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 4 - Time for a "fix?" No basis internally I/S; speculation, interest rate and prices rapid increases, new orders, vendors, commitments for plt and equip. etc. What do traditional demand sectors suggest Personal consumption expenditures PCE in 1988 a little sdtronger Both 1988 and 1989 around 2% Still positive on sector with 2/3 of GNP Supported by Modest DPI growth High confidence Consumer debt high but low delinquency rates Investment Positibe 1988 and 1989 1988 in "bag" at 11.5% gain 1989 in equipment not structures Residential a little weaker (Can't keep up earlier 1.5+ years; slip below in 1989 Export and import activity Expert further improvement Good performance abroad Can't expect 60% gains to continue--Capacity constraints No major risk to$ falling precipitously Get improvement on net exports of approx. 30 billion (as much as consumer) Government purchases Goods and services 40% of budget Only about 1% gain overall Federal down slightly (-1.2 and -.4%) State and local up about 2%--Federal Gov't activity earlier https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis - 5 - GNP Add up 4 sectors (PC, I, Foreign, Gov't) This year (3-1/4) better than last, next year 2-1/2% Prices Prices under pressure Perhaps more so because of food prices 1/3 farm into food Food 16-18% CPI Food 5-7% so 1-1 1/2% points on CPI https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis