WASHINGTON -- The U.S. economy is moving ahead sluggishly and probably will avoid a double-dip recession, according to a survey released yesterday by a group of business economists.
The survey of the National Association of Business Economists estimated that real U.S. gross national product will rise at an annual rate of about 2% in the current quarter, slightly weaker than the 2.4% gain the third quarter estimated last month by the Commerce Department.
However, Lynn Michaelis, president of the group and chief economist for Weyerhaeuser Co., told reporters that even 2% growth in the current quarter might be too optimistic given recent reports showing sluggish retail sales and flat industrial production. Yesterday, the Labor Department reported that initial jobless claims rose again in the latest reporting period, to 493,000, the highest level since early April.
"The health of the economy is pathetic," said Mr. Michaelis.
Other economic reports yesterday were also negative. A survey by Money Magazine/ABC News found consumer confidence fell again in the week ending Nov. 17, to the lowest level in the pool's six-year history. A separate survey conducted by American Express said small business formation was at a standstill.
Overall, according to the business economists' survey, real GNP in 1992 will rise about 3% with the help of modest increases in personal consumption, housing and business investment. Such a rate would be about half of the usual pace for a postwar recovery.
The economists' group forecast that inflation will continue to improve in the year ahead. They called for consumer prices to rise 3.5%, down from 4.3% in 1991 and 6.1% last year.
Interest rates will not change much and are basically at their cyclical lows, the economists said. They forecast 90-day Treasury bill rates will rise to 5.4% by next December while 30-year bonds will stay flat and bring a yield of 7.9%.
"Unfortunately, the reduction in inflation is not expected to be manifested in lower long-term interest rates," the economists said in a press release.
Mr. Michaelis said Congress is in no position to help spur the economy with tax cuts given projections that the federal budget deficit is headed for $350 billion.
But he said he believes the Federal Reserve still has latitude to ease monetary policy because inflation is down and private demand for credit is weak. Moreover, he added, with growth slowing in Japan and Germany, pressure on global interest rates is likely to moderate over the next year.
Mr. Michaelis said he also believes the Treasury Department could help cut long-term interest rates by scaling back its huge borrowings of notes and bonds with maturities in excess of five years and by relying more on shorter-term securities. Reducing the supply of higher-yielding securities would shift investor demand to short-term debt instruments where rates are lower.
The Treasury has the authority to shift its financing patterns and borrow more in short-term securities if it wishes to do so, Mr. Michaelis said. Earlier this week, Deputy Secretary John Robson said that Treasury would like to see lower long-term rates to help spur the economy.