Economists expect slow growth for '98

Bright with few clouds is the forecast for 1998.

A conference, led by economists from the Research Seminar in Quantitative Economics, gathered last week at Rackham for the 45th straight year to discuss the national and state economic outlook.

University economist Joan Crary said 1997 was a solid year statewide, one that saw progress from many aspects of the economy, but overall was growing slower than 1994 or 1995.

Crary said 1998 will be a year of growth in Michigan, but will see smaller and more incremental gains than the previous year.

"The Michigan economy has settled down to a moderate pace," Crary said. "Average growth rate will slow a bit."

Crary wrote the annual state forecast with George Fulton, another University economist, and RSQE Director Saul Hymans. Crary said the next few years will continue to see the advent of growth for Michigan's economy, but at an even slower pace than the current one.

Detroit's involvement with casinos and the new Lions' stadium will play a part in the growth, Crary said.

"Whether or not the casinos are a success is dependent upon the casinos bringing in money from outside of the city," Crary said. "If people just decide to spend their money on casinos rather than going to the Fox Theatre, then there will be no economic gain."

The two-day meeting was attended not only by University economists, but also by professors from other universities and private business executives.

Richard Verdha, a private consultant from Ann Arbor, said last week was his second time attending the conference.

"I've heard what these guys say, and usually they're a bit on the conservative side," Verdha said. "They're usually right about what they predict, because oftentimes they don't predict anything drastic."

As it turns out, the analysts' predictions did prove truthful, as last year's Michigan personal income forecast was within .5 percent and the forecast of the U.S. vehicle production rate was also precise.

Hymans opened the conference Thursday morning and spoke on the national economic outlook.

Hymans reported in the forecast that the American household purchasing power, or real disposable income, will increase 3.3 percent in 1998 and enjoy a smaller but noticeable rise in 1999.

"The U.S. economy is growing at a rate in excess of its capacity, or potential, growth rate," Hymans said.

Hymans, along with Crary and Janet Wolfe, another University economist, added that the American economy as a whole should remain relatively sunny, in spite of higher interest rates and incremental rises in inflation.

The two-day conference was sponsored by the Department of Economics.

11-26-97