TOP GURU: THE BEST TEA LEAVES IN TOWN
Sometimes, inhabitants of the ivory tower have a clear view of the real world. That, at least, is the lesson from BUSINESS WEEK's 1996 survey of forecasters. The most accurate predictions came from Donald Ratajczak, director of the Economic Forecasting Center at Georgia State University in Atlanta.
In the December, 1995, survey, most economists were correct in expecting that growth in real gross domestic product would be sluggish in 1996. The consensus called for growth of 1.9%, and Ratajczak expected growth of 1.8%. For the year ended in the third quarter, real GDP was up a lackluster 2.2%.
However, unlike the consensus, which expected unemployment to head higher, to 5.7% at yearend 1996 from 5.6% a year ago, Ratajczak projected that the jobless rate would slip to 5.3%, which is what it averaged in October and November. To explain why he foresaw the tighter labor market, Ratajczak says: ''Unlike most people, who thought the problems would be on the demand side, I thought the restraints would be on the supply side: 'Would there be enough labor talent?' I didn't think there would be.'' Rounding out the top three forecasts were Howard Keen of Conrail Inc., with the second-best overall forecast, and Nicholas S. Perna of Fleet Financial Group Inc., the third-best predictor of 1996's economic climate.
For 1997, Ratajczak expects the economy to grow 2.4%, with little change in the jobless rate. Consumer inflation, though, should edge up from its current 3%, hitting 3.3% in the fourth quarter. ''Higher energy costs and some upward wage pressures will push up consumer prices,'' he believes.
RED FLAG. Even with that upward tilt in inflation, though, Ratajczak does not see any tightening by the Federal Reserve in 1997. Instead, he says, policy restraint will come from the fiscal side as Washington grapples to hold down federal spending. However, if the budget-balancing process falters or if new spending programs surface, Ratajczak warns that ''government bond yields over 7% are possible.''
Ratajczak, who earned his doctorate from Massachusetts Institute of Technology, founded Economic Forecasting Center 24 years ago, when he first arrived at Georgia State. While the corporate-sponsored center collects and analyzes data on the Southeast economy, Ratajczak is primarily recognized by econo-wonks for his broad knowledge of the price indexes. His on-the-mark projections for 1996 show that his knack for forecasting is pretty good, too.
By Kathleen Madigan in New York
Updated June 13, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.