WASHINGTON - Loan growth will slow in the coming months and drop significantly next year, a group of bank economists predicted Wednesday.
But members of the American Bankers Association's Economic Advisory Committee don't expect a recession and don't think banks are in danger from bad loans.
"The evidence does suggest the economy is getting a bit tired," said committee chairman Alan M. Gayle. "We do not expect the economy to return to a more average level (of growth) until the first quarter of 1996."
However, he added, "in this forecast there is no recession."
Mr. Gayle, senior vice president of Capitoline Investment Services Inc., a Washington, D.C., subsidiary of Crestar Bank, said a majority of the 12 economists on the committee felt it was "likely and appropriate" that the Federal Reserve would lower short-term interest rates as early as next week.
"We believe the economy has slowed significantly; it has reduced the prospects of a resurgence of inflation over the short term," he said. "If we wait to see the whites of the recession's eyes, the Fed will have waited too long.
The economists met with the Federal Reserve Board on Tuesday but had nothing to say about that encounter. "We can't answer questions about what they said or asked or what they did with their eyebrows or anything else," said James Chessen, the ABA's chief economist and director of economic and policy research.
The bank economists predicted that the nation's real gross domestic product would grow 1.9% this year and 2.4% in 1996. Last year's growth rate was 4.1%.
Inflation, they said, would increase to 3.4% this year from 2.6% in 1994, then hold steady next year at 3.3%.
The economists projected that consumer installment credit would grow 11.6% this year and 7.8% next year - down from 14.8% growth in 1994.
Bank commercial and industrial loans were expected to grow 10.5% this year and 6.4% next year. Last year's growth rate was 9.3% and as recently as 1993 there was a 1.9% drop in such loans.
Regulators have warned bankers about a slippage in credit quality as economic growth slows, but Mr. Chessen said he didn't see much cause for concern.
"The regulators in Washington are paid to worry, and I think they do a very good job of it and they have made their message clear," he said. "Banks are well positioned currently, with very strong credit quality ... The banks are going to be making good business decisions, knowing that it's extremely competitive out there and it's their business to make loans."