Encouraging Signs Seen, But Recession Rolls On : Economy: January figures on production, prices and trade clearly show a continuing slide. But some analysts are optimistic about strong export levels.
A bevy of fresh government economic statistics published Friday showed that the recession continues to worsen, though perhaps at a somewhat slower pace.
The Federal Reserve Board said the nation’s industrial production slipped 0.4% in January for its fourth monthly decline in a row, marking the longest string of losses since the last recession in 1982.
At the same time, the Labor Department reported that wholesale prices slid 0.1% during January, partly reflecting a decline in sensitive energy prices. However, the underlying “core” rate of inflation, which excludes volatile food and energy prices, rose 0.5%.
Finally, the Commerce Department disclosed that the nation’s foreign trade balance narrowed sharply in December to $6.3 billion from $9.7 billion in November as imports of oil and a wide range of other products declined--a further sign of a weakening economy.
Some analysts said the figures raised hope that the recession may be hitting bottom.
The trade report, for example, showed exports continuing strong, suggesting that trade may help fuel a possible recovery later this year. “Exports are the engine of economic growth,” Commerce Secretary Robert A. Mosbacher declared in a statement.
And analysts said the statistics could make it easier for the Federal Reserve to push interest rates lower if it wants to do so to help stimulate the economy. The Fed has been easing rates substantially over the past several weeks.
The experts were of two minds about whether there was any comfort to be taken in the industrial output numbers. January’s drop was significantly less than the 1.6% and 1.1% declines for November and December, respectively. But the December decline was originally estimated at just 0.6% and the January number is also subject to revision.
“We’ll be starting the first quarter (of 1991) from a much lower level than we expected,” said David Wyss of DRI/McGraw Hill, a Lexington, Mass., economic forecasting firm, “and (the economy’s) recovery may be slower.”
Allen Sinai, economist for Boston Co., was more optimistic. “The industrial economy continues to decline, but it may be no longer in a free fall, as it was in December, when the industrial side of the economy caved in,” he said.
The Fed’s report Friday was accompanied by new estimates that the nation’s factories are using only 79.9% of their capacity, down from 80.4% the previous month.
The wholesale price numbers were troubling because although the overall producer price index declined, the “core” inflation rate (minus food and energy prices) worsened. The core rate is considered a more accurate barometer of longer-term inflation trends.
But DRI’s Wyss contended that there were “a lot of special factors” to cause the deterioration. He noted that auto prices were recorded as rising, mainly because auto makers forwent the usual January price concessions.
And apparently some manufacturers and distributors took advantage of the new increase in federal excise taxes on alcoholic beverages on Jan. 1 to raise their prices on these products as well.
The Labor Department said the producer price index in January stood at 121.9% of its 1982 average. That means it took $121.90 to buy the same goods at wholesale last month that sold for $100 11 years earlier.
The industrial production report showed declining output in virtually all sectors of the economy, led by a 1.8% decline in construction.
Although the decline in the trade deficit was partly a reflection of the economic slump here, analysts were encouraged by the continued boom in exports.
Although U.S. sales overseas in January fell 2.1% versus December, the total--$33.5 billion--was high by historical standards.
Imports plunged 7.9% over the month to $39.7 billion, reflecting not only the drop in oil prices but reduced demand for a variety of other products.
The December figures brought the trade deficit for 1990 as a whole to $101 billion, down 7.7% from the previous year and the smallest yearly red-ink figure since a $52.4-billion trade gap in 1983.
The deficit hit a peak of $152.1 billion in 1987 and has been declining ever since.
Mosbacher said the trade deficit would have fallen to $91 billion last year except for the increase in prices of imported petroleum after Iraq invaded Kuwait.
Oil imports fell to $5.2 billion.