stocks to fall, most bankers and industry analysts do not see serious problems unless there is a recession next year. So will there be a recession? Most economists still say no, but with less certainty than a few months ago. In fact, chances of a business contraction appear to be rising, according to two summary statistical guides prepared by economists at Detroit's Comerica Bank. "Our indicators right now are flashing warning signs of a slowdown next year," said Comerica economist James M. Bills. The bank's Recession Watch Index has hovered near the 49% probability level for the last four months, up from 17% at the beginning of the year. The index is a weighted average of three leading indicators: the spread in the treasury yield curve, adjusted bank reserve growth, and the Commerce Department's index of leading indicators. Similarly, Comerica's Advance Economic Barometer since last May has "waffled at levels that suggest a very anemic economic outlook for midyear 1996," said Comerica chief economist David L. Littman. "The signs of a slowdown are there and they are increasing, not decreasing," said Philip Braverman, chief economist at DKB Securities (USA) Corp., New York. Mr. Braverman dismissed recent signs of increased consumer buying activity. "An already highly leveraged consumer is being enticed by the heavy advance holiday sales promotions of worried retailers," he said. The economist sees this as a false sign of renewed economic activity. He warned that sales could suffer significantly in the first quarter and hurt the economy. If consumers are not buying, any pickup in industrial output cannot be sustained, he said. Charles Cranmer, director of equity research at M.A. Schapiro & Co., New York, also cautioned in a report last week that consumer debt problems could engender economic weakness. That could happen if either less confident consumers rein in spending themselves or, more seriously, lenders overreact by cutting the supply of credit and stepping up bad-debt collection efforts. An anxiety attack for lenders is unlikely, but cannot be ruled out, he said, particularly since government regulators also play a role. Mr. Cranmer said it appears "the most likely outcome of the current consumer credit scare is nothing worse than erosion of credit card profitability" at banks. But the veteran industry observer also said he is "not convinced that either analysts or the banks themselves fully understand what is happening in the consumer sector, and may not fully appreciate the risks." Consumer attitudes toward debt have clearly changed in the past 20 years, Mr Cranmer said. Installment debt as a percentage of disposable income has risen to 20% today from 13.5% in 1983. This is not necessarily bad, he said. It could reflect a higher level of sophistication in financial management by consumers. "On the other hand," he said, "it could also mean that consumers have been taking advantage of easy credit to meet their daily living expenses and maintain living standards as high paying jobs were lost and as real incomes languished."

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