Business Economists See No Recession Until 1993 : Economy: A surprisingly large consensus feels that consumer spending will fuel growth. But profits may fall.

A panel of business economists representing the nation’s major corporations predicted Wednesday that the economy will continue to grow slowly but steadily without falling into recession until 1993.

A surprisingly high 62% of the National Assn. of Business Economists’ 55-member panel forecast no economic slump for another three years, and 67% said a recession will not occur within the next two years.

It was the most optimistic forecast by the group since 1982, when the panel’s rosy predictions failed to foresee that year’s unusually severe recession. At the time, none of the panel members anticipated a slowdown in 1982.

Wednesday’s report was characterized as “extraordinary . . . , a sea change in attitude” by James F. Smith, president of the organization.

“We never before have had, not just a majority, but an overwhelming majority forecasting growth for at least three more years,” said Smith, a finance professor at the University of North Carolina.

Ever since the 1982 slump, the organization’s quarterly poll of forecasters has tended to produce a consensus projection of a recession either during the coming year or the year after that.

With the nation’s economic recovery now entering its eighth year, the economists are in effect predicting the longest period of expansion in American economic history.

If it does not expire before the end of 1992, as the association predicts, the expansion will have lasted 10 years, a benchmark reached only by Japan in the post-World War II period. The longest U.S. expansion to date, which benefited from Vietnam War spending, lasted 107 months, ending in the late 1960s.

But the association’s cheery consensus masks persistent worries about slowing growth and a period of rough sledding for manufacturing industries, especially autos.

A total of 38% of the surveyed economists dissented from the prediction of no recession within the next three years, and 22% said a slump is likely either this year or next.

Even the consensus forecast calls for real growth in the gross national product to decline to an anemic 1.8% next year, with export growth slowing to a crawl and business investment rising only 2.4% after last year’s booming 8.9% gain.

Consumer spending is expected to be the primary engine of growth. But business profits are expected to decline, as manufacturers of autos and other products slash prices to clear inventory and maintain market share against imports.

After-tax corporate profits, which rose 18.9% in 1988, will decline 3.3% this year and another 1% in 1990, the group predicted.

Indeed, Smith predicted that auto makers, which account for 14% of the nation’s economic activity, would deal with the problem of unsold cars by clearing inventory off dealer lots with “fire-sale” prices early next year.

The auto manufacturers, Smith said, have concluded that in the long run it costs less to take a quick hit on profits than to scale down production, which would antagonize labor unions and risk loss of market share to the Japanese.

“The Big Three have noted that the last time they made big production cuts, the Japanese moved in to sell one and a half cars for every car taken out of U.S. production,” he said.

The association projected that consumer price inflation will subside next year to a relatively moderate 4.2%. It said interest rates are likely to ease at a steady but slow pace as the Federal Reserve Board tries to strike a balance between inflationary expansion and recession-inducing austerity.

“If (Fed Chairman Alan) Greenspan wants to be reappointed in 1991, he knows that won’t happen if we are in a recession then,” Smith said.

A GROWING OPTIMISM

How economists answered the question: “When will the next recession (business cycle downturn) begin?”

Year of survey (September unless otherwise noted)

Choices ’82 ’83 ’84 ’85 ’86 ’87 ’88 ’89 ’89 (Dec.) This year 0% 1% 8% 10% 8% 4% 0% 10% 5% Next year 10 8 44 42 30 30 47 21 17 Year after that 17 41 43 35 32 56 42 17 11 More than 2 years 73 50 4 13 30 10 11 52 67

Source: National Assn. of Business Economists