Business Economists Split On Double-Dip Recession

WASHINGTON -- Economists are increasingly divided on whether the economy is sliding back into recession.

A survey released last week by the National Association of Business Economists showed the group felt more troubled about the economy than during its last survey, in August.

But only about 10% saw the economy turning south again, in what would be seen as the second part of a "double dip" recession. The vast majority expected a "subdued" recovery.

Belief in Recovery

"Despite recent disappointing economic news, most NABE forecasters still feel that a recovery is under way," the association stated, but "will prove less robust than usual."

In a slow economy and with a presidential election approaching in 1992, analysts said, finger-pointing is becoming a national political pastime. Democrats blame President Bush; the president blames Congress; and each blames the Federal Reserve Board.

The Fed, in turn, blames tight-fisted banks, while bankers point fingers at overzealous regulators and examiners.

Particularly disturbing to the public and financial markets is a growing sense that little can be done in the short run to stimulate the recovery.

"The government has painted itself into a nasty box," said Lynn Michaelis, NABE president.

The mountain of debt and deficits left over from the 1980s precludes big spending plans or tax cuts, while consumers lack the confidence -- and often the income -- to loosen their pursestrings.

Some analysts argue that the current malaise is milder than in past recessions, though this one is more evenly spread across the economy to include white-collar and service workers who were relatively immune during other downturns.

President Bush met Friday with a group of private economists. Said White House spokesman Marlin Fitzwater, "There's a range of views, but there was a fair amount of consistency about the seriousness of the current situation, the need for more help from the Federal Reserve."

More Easing Expected

Donald Straszheim, chief economist at Merrill Lynch & Co., said he expects additional easing by the Federal Reserve this year "if the economy remains on its present course." This easing could be another half-point cut in the discount rate, to 4%. And he predicted a tax cut in 1992 because "the state of the economy is often important in election years."

But despite any easing, Mr. Straszheim said, he looks for the yield curve to steepen, with long-term Treasury bonds remaining in the 7.75% to 8.25% range.

"The yield curve is unusually steep and may well steepen further in the first part of 1992," added Merrill Lynch senior economist Martin Mauro. "Longer-term rates are likely to be propped up by a large amount of Treasury borrowing and reduced purchases from abroad."

Mr. Mauro's advice to investors was to "strike a balance between the extra yield that comes from extending maturity and the price risk that longer maturities entail. In the Treasury market, for example, we recommend intermediate issues such as the seven-year, while in municipals we like essential-service revenue bonds in the 15-year range."

Mr. Mauro also recommended an "overweight" position in mortgage securities.

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