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50 Economists, 50 Scenarios50 Economists, 50 Scenarios
Gail D. Fosler
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not?
Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Fed will raise rates in 1998. Watch the bond market. When it changes, Fed will be forced into action. Return to Economic Forecast table
Kathleen M. Camilli
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospect for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not?
Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share:
S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.72 12.22 12.23 12.48 12.773. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? The "New Economy" is in full bloom. We will continue to see above-trend real growth in the U.S. in 1998 with continued low inflation, a falling unemployment rate, and select rising labor costs with no Fed tightening. Return to Economic Forecast table
M. Kathryn Eickhoff
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not?
Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: WE DO NOT DO S&P 500, BUT AFTERTAX NIA PROFITS ARE: -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 9.8% 7.3% 4.9% 5.7% 9.3%3. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? For several years (since '93) I have expected this to be a long expansion. I do not yet see the imbalances which produce a recession. The Asian financial markets crisis could slow the economy enough to postpone the recession beyond the end of 1999. However this is not a "new economy." The business cycle is alive and well. The laws of economics have not been repealed. Return to Economic Forecast table
Joseph Liro
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.20 12.30 12.40 12.50 12.603. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? We have not been, nor are we now, "New Economy" believers. If the roles are so different, why is the U.K. experiencing an "Old Economy" pickup on inflation, why are wages starting to accelerate in the U.S.? We will concede that the parameters of growth are somewhat higher than in past cycles, largely due to PDE spending, but there still are limits. Return to Economic Forecast table
James F. Smith
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? No reply. Return to Economic Forecast table
M. Cary Leahey
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Rate hike delayed by Asian flu and inconsistent pace of consumer spending. But with wage gains accelerating, Fed will hike rates 0.25% in '98Q1 and 0.25% in 98Q2, to 6%. Return to Economic Forecast table
Paul W. Boltz
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.50 11.50 12.00 11.75 12.503. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Continued declines in the unemployment rate -- Greenspan's "unsustainable track" -- may force the Fed to move. However, more likely is that a worsening trade deficit, slower fixed investment, and subdued inflation will keep the Fed from tightening at all. Return to Economic Forecast table
Jim Coons
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.73 11.98 12.24 12.51 12.783. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Monetary policy is hostage to Fedlock. Concerned about perceived inflationary effects of tight labor markets, policymakers will not lower the Fed funds rate target soon. However an aggressive tightening of monetary conditions is out of the question as long as inflation remains low. I expect no increase in the funds rate in 1998. In fact, I expect the next big shift to be down, but not until either the economy sinks or policymakers become comfortable that low inflation can coexist with a strong economy. Return to Economic Forecast table
Ray C. Fair
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Bill rate to 5.6% by the end of 1998, so only slight tightening. See the site http://fairmodel.econ.yale.edu for more information. Return to Economic Forecast table
Stephen Gallagher
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -----------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.00 11.90 12.40 12.30 12.703. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? The "New Paradigm" made its mark in 1997, and what has been achieved for growth and inflation cannot be fully explained by temporary factors. Something more permanent has taken hold, and this is reducing the inflation forecast for 1998. Rising wages and increased HMO premiums will not raise inflation significantly. Return to Economic Forecast table
Nancy Kimelman
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? The Fed is caught in a bind between the cyclical and the structural. Cyclically the economy is very strong, too strong by most accounts. But structurally the economy is in the midst of a once-in-a-century rebuilding that is lowering costs of production across the board. The Fed knows it shouldn't raise rates too much, because the structural backdrop doesn't support such action. But if the Fed doesn't act to slow the economy's pace a tad, wage, if not price, inflation could accelerate, and the markets could lose confidence in the Fed's anti-inflation bias. With this the risk, I expect the central bank will grudgingly raise rates, if not this month, then in early February when the FOMC meets next. Timing is a question of market stability. Return to Economic Forecast table
Bernard Markstein
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- --------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? No. There has been structural change, though. No toehold on my thinking. Return to Economic Forecast table
Suzanne Rizzo
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? 1) Foreign competition has played an important role in keeping U.S. price and wage growth subdued in this cycle, and the Asia crisis will keep this force alive next year. 2) The "natural" rate of unemployment has clearly shifted downward in the 1990s, perhaps a result of the aging labor force. These are both very "old" paradigms but seem to fit the facts. Arguments that business cycles and/or business-cycle inflation are "dead" are nonsense. Return to Economic Forecast table
Michael Englund
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.83 11.96 12.69 12.75 12.883. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Our productivity forecasts have been raised and our inflation forecasts have been lowered. But we attribute these adjustments to a new paradigm. We still expect inflation to accelerate as the cycle approaches its close, though this will likely occur later than we previously expected. Return to Economic Forecast table
Maury N. Harris
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 $11.67 $11.50 $12.20 $12.05 $12.753. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? No. Above-normal productivity gains and capacity expansion will raise "speed limit" for acceptable noninflationary growth. Return to Economic Forecast table
Thomas W. Synnott
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12 12.20 12.30 12.40 12.303. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Not really, although I believe there is more room for noninflationary growth than previously believed -- probably this is the 2-1/2%-to-3% range for growth in "potential" GDP. Strong dollar is a big help. Return to Economic Forecast table
John R. Williams
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Two tightenings up to 6%. Return to Economic Forecast table
Mark Zandi
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- --------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.85 12.70 12.82 13.70 13.763. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? The Fed will raise the funds rate twice in 25-basis-point increments in late spring or summer. Domestic concerns over a strong economy, tightening labor market and accelerating labor costs will overwhelm international concerns with Asia next year. Return to Economic Forecast table
Robert A. Brusca
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 13.183. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Didn't believe in it last year. Don't this year either. We are getting wage pressure. Productivity has been poor in this cycle, good last year. Proves nothing. Nondurable goods output is up, productivity better, but has been DOWNSIZING! No miracle there. Factor: expansion of effective world labor force! Pacific Rim! Pushed wages down! Nothing up my sleeve! Return to Economic Forecast table
Charles Reeder
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? No. Contraction of growth is the principal reason, along with absence of inflation. Return to Economic Forecast table
Robert H. Chandross
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 Sorry, I do not forecast S&P earnings.3. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? With regard to the so-called New Economy issue, it is much too early to believe there has been a fundamental shift in the way that the economy operates. It is very unclear if the trend of productivity growth has increased on a sustained basis. Return to Economic Forecast table
David Orr
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth? Deflation is already here, in that the price of non-oil imports is down 2.3% over the 12 months ended in October. From Japan, the decline is 5.0% and from Southeast Asia 3.8%. So long as deflation is gradual and mild, it does more good than harm for the U.S. economy. Deflation becomes ominous when there are rapid and large declines in the prices of assets that are the collateral for a significant amount of the loans in the banking system. That was the lesson of Texas with oil in 1986 and California/Boston/NYC/and Florida in 1989-92. The Asian countries will feel the hurt of that kind of deflation, but there is little reason to fear its spread to the U.S.
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.82 12.05 12.25 12.15 12.703. Will the Fed raise rates in 1998? Why or why not? What, if anything, will force its hand, and how much tightening do you foresee? I don't know, and neither does anyone else, including the Fed members themselves -- there are just too many cross-currents that are still in too much flux. Right now, my best guess is that they will not have to move rates at all. But more importantly, if they do, it will be a very small move (1/4 to 1/2 point up or down) that won't make much difference to the real economy. If they move up, it will be due to a slowdown in productivity and/or too rapid growth of monetary aggregates of commercial real estate credit. If they move down, it will be due to a too rapid decline in prices of "goods" and/or inventory liquidation. Return to Economic Forecast table
Michael E. Paslawskyj
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.50 12.40 12.50 12.05 11.603. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? No Fed tightening foreseen in 1998. Slower growth, falling import prices, and a benign inflation outlook will stay in the Fed's hand next year. In fact, the Fed may very well be easing by yearend 1998. Return to Economic Forecast table
Bruce Steinberg
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.54 12.30 12.45 12.35 12.903. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? The 1990s mark a sea change in the economic process. World capitalism has entered a new phase of its development characterized by an intensification of competitive pressures. Call it a "New Economy" or New Paradigm, but in some ways it's a return to the original paradigm of competitive capitalism. Return to Economic Forecast table
Rajeev Dhawan
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy view. Looking toward 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? No, our belief is that the "New Economy" paradigm is an interesting viewpoint, but doing calculations (as we have done) cannot explain this year's performance. We calculate if (new growth ideas) can contribute at most 0.2% to U.S. GDP growth -- the rest is fundamentals. Return to Economic Forecast table
Robert H. Shrouds
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ---------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.00 11.90 12.30 12.35 12.653. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Will (should) not raise rates. Inflation not a threat and economic growth to slow in 1998. Short-term rates very high in real terms. No need to tighten, in fact should be lowering rates. Return to Economic Forecast table
Kurt E. Karl
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Though we may get one more year of the "New Economy," the rising wage inflation will choke growth in 1999 at the latest. Return to Economic Forecast table
Anthony Chan
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point to GDP growth? In other words, with a surge in imported products that cost anywhere from 30% to 60% cheaper due to currency considerations, I project that the underlying consumer pricing growth path should settle down to 1.9% growth pace through the end of 1998. Moreover, I believe that risks to this forecast are to the downside. Perhaps, the only factor that should prevent the U.S. from slipping into an outright deflationary path will be due to the continuing effects of a tight labor market which should keep wages relatively high and sticky. Therefore, if these developments played out, one should expect that the Asian economic crisis should have a non-trivial negative impact on U.S. economic growth. At present, we estimate that weaker exports and increased imports form the Southeastern Asian countries along with similar effects from countries such as Japan and China could slice off as much 0.8% off U.S. economic growth in 1997. Similarly, with the expectation that other Latin American economies such as Brazil and other neighboring countries are also vulnerable to the wrath of currency speculators, the possibility of additional weakness for U.S. exports could not be ruled out. To be sure, the U.S. sends close to 20% of its exports to Latin America, which would indicate that any further currency weakness in this part of the world could also weaken the demand for U.S. exports to this part of the world and hence have a further negative impact on U.S. economic growth. As a result, we can not rule [out] the possibility that an additional 0.4% could be reduced from U.S. economic growth in 1997 arising from these potential aftershocks. Nonetheless, we must admit that since the problems in Asia and in Latin America were still evolving at the time of this writing, it would be naive to think that anyone had an exact idea of the total potential reduction to U.S. economic growth in 1997. Consequently, our best available projection at this time is that the U.S. economy will grow at the moderate 2.0% growth pace during 1997.
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 $11.64 $11.70 $ 11.75 $11.95 $12.15 $12.20 $12.253. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and rising productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Fed policy is poised to remain on hold in light of worldwide financial market instability while reversing their current restrictive stance towards the downside as clear signs of weaker U.S. economic growth becomes evident. Specifically, we expect that the central bank might move to reduce interest rates by 25 basis points at least once during the second half of 1998 to combat the effects of contracting economic growth. However, evidence of Fed's current reluctance to raise short-term rates even in the wake of tight labor markets was best observed in March, 1997, when the Fed raised short-term rates after average hourly earnings rose 4.1% on a year-over-year basis. In contrast, they kept rates unchanged during their November, 1997, meeting despite the fact that the yearly change in average hourly earnings matched that growth pace during both October and November, 1997 (after recent data revisions are incorporated). Nonetheless, the effects of increased imports from the Southeastern Asian region at lower prices is likely to improve the inflation outlook and cause long-term Treasury interest rates to decline by approximately 25 to 35 basis points over the course of 1998 from levels attained at the end of 1997. Return to Economic Forecast table
Robert H. Parks
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998---------- I II III IV I II III IV $10.97 11.64 11.70 12.00 12.20 12.40 12.60 12.60 +5% IVQ to IVQ3. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Each of the last nine recessions was preceded by Federal Reserve monetary overkill, but not this time. Given the economic and financial depressants abroad, the Fed will probably ease in 1998. Yes, eventually even the Fed learns from its mistakes. Return to Economic Forecast table
David Resler
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- --------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Meaning of "New Economy" paradigm is not clear. The economy is better described in a Neo-Classical framework with flexible wages and prices, which means "NAIRU" means little. Say's Law lives. Return to Economic Forecast table
Maureen F. Allyn
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.34 11.48 11.52 11.39 11.223. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Don't think so anymore. Growth will slow, financial market will continue to be turbulent. Inflation acceleration but don't think it will happen. No tightening. Return to Economic Forecast table
James Barkocy
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.45 11.50 12.50 12.50 13.503. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? The large inflows into business investment over the past five years, especially into computers and other new information technologies, are apparently beginning to be felt in higher productivity. Whether or not this investment in high tech represents a quantum leap forward, like the introduction of electric power into the industrial workplace in the late nineteenth and early twentieth centuries, is still too soon to determine. So while we evaluate the sustainability of productivity gains and their beneficial effect on the economy and inflation, we continue to look for the traditional types of cyclical imbalances that could affect growth and inflation. We are not quite ready to sound the death knell for the business cycle. Return to Economic Forecast table
William A. Brown
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.00 12.07 12.00 11.25 11.403. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Yes, by 50 basis points, in response to further declines in unemployment, rising wage rates, and the start of a general rise in inflation. Return to Economic Forecast table
Gary L. Ciminero
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth? The crisis and its fallout should account for nearly a half percentage point of the real slowdown in GDP we expect for next year. Via its various "deflationary" effects (see reply to question 3 below), the crisis also curtails the inflationary rise next year, blunting it to a mere 0.2 percentage-point acceleration in the GDP-chain deflator: from a 2% annual average rise this year to 2.2% in 1998.
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not?
Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ----------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.65 12.10 11.87 12.09 12.233. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? I expect no rate rise next year. Prospects for a tightening move have essentially been forestalled by the "deflation" effects of the Southeast Asian crisis, especially as it presently spreads to Northeast Asia. These effects will work to retard U.S. growth, both directly and indirectly: -- The Real Trade Drag--due to fallen-currency prices that increase real import demand, and fallen-economy demand that reduces U.S. real exports; -- "Imported Deflation"--due to the fallen currencies of our key trading partners; -- "Supply-Side Drag"--that cuts U.S. employment and output as U.S firms cut domestic production and mothball capacity here and move production overseas (e.g., Hasbro, etc.), even in the face of fairly strong U.S. demand. These factors, acting to retard U.S. growth and inflation, accomplish the Fed's dirty work. Besides, the last thing a high-flying dollar and careening overseas financial/forex markets needs is a stingier Fed that raises short-term U.S. interest rates. A Fed tightening move would also frustrate efforts to bail out the sinking currencies and their economies since it would mop up liquidity that the IMF and various central banks are trying to provide to cope with the crisis. Return to Economic Forecast table
Stuart G. Hoffman
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.30 11.50 12.40 12.40 13.30 1997: 11.65 1998: 12.40 = +6.5%3. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? If the Fed does raise the funds rate in the opening quarter of 1998, as we expect, it will not be by much (25 bp) or for very long. By yearend 1998, we expect the Fed funds and prime bank rates to be down near 5% and 8%, respectively. Return to Economic Forecast table
Philip Braverman
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.75 12.00 12.25 12.50 12.753. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? No, though there is a moderate risk of a tightening in February, because the economy is taking time to slow. It will slow significantly by mid year, causing the Fed to ease in the third and fourth quarters. That easing would be in response to low or even lower inflation, strong dollar, economic weakness abroad, a recession in Asia, and slowing U.S. economic growth. Return to Economic Forecast table
Howard Keen
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.35 12.20 12.25 111.75 11.503. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? My forecast for 1998 assumes no change in the Fed funds rate. This is the result of approximately balanced risks for tightening and easing. Compensation pressures that won't be fully offset by productivity gains could force the Fed to raise the funds rate 25 basis points in 1998 Q2 or Q3. On the other hand, a more deflationary spillover from Southeast Asia could cause the Fed to ease by 25-50 basis points within the same time frame. Return to Economic Forecast table
J. Prakken/C. Varvares
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- -------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Last year we asked you if you subscribed to the "New Economy" view. Looking forward to 1998, does this year's surprising combination of strong growth, falling inflation, and surging productivity alter the way you analyze the outlook for 1998? Why or why not? Is the "New Economy" paradigm gaining a toehold on your thinking? Nope! See last 2-3 monthly reports & Jim Cooper's commentary! Return to Economic Forecast table
David M. Blitzer
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ---------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.00 12.00 11.80 11.40 11.303. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Yes, probably in May '98. Economy very strong now, and wage pressures rising. Impact of weaker exports will be delayed. Return to Economic Forecast table
Edward Yardeni
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.47 12.05 12.60 11.60 12.003. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? The drop in the price of goods and numerous other commodities suggests the Fed needs to ease credit conditions. I expect the Fed to lower the Fed funds rate by 50 basis points in 1998, to 5%. I expect to see a 3% Fed funds rate by 2000. Return to Economic Forecast table
Sung Won Sohn
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 12.00 11.63 12.34 12.40 12.723. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? Tightening labor markets will cause the Fed to raise interest rates twice (25/25) next spring. Return to Economic Forecast table
A. Gary Shilling
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.70 11.90 11.60 11.40 11.20 11.003. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? If deflation does not materialize in six months, it's back to waiting for tight labor markets and fear of inflation to force the Fed to tighten. Fed will overdo as usual and precipitate a recession. Deflation, on the other hand, will lead to Fed cuts in rates. Return to Economic Forecast table
Ronald R. Reuss
1. How does the Asian crisis factor into your U.S. outlook for 1998? Any deflation in your crystal ball? And can you give us a ballpark percentage-point hit to GDP growth?
2. What are your prospects for profits next year? Amid such tight labor markets, and with wage growth picking up, do you foresee a cost squeeze developing for 1998 that could affect the profits outlook? Why or why not? Also, could we get your quarterly forecast for the 1997 and 1998 S&P 500 operating earnings per share: S&P 500 Operating EPS -----------1997----------------- ------------------1998-------------- I II III IV I II III IV $10.97 11.64 11.703. Will the Fed raise rates in 1998? Why or why not? What, if anything will force its hand, and how much tightening do you foresee? I doubt that the Federal Reserve Board will raise interest rates in 1998 because monetary policy is tightening as inflation falls. The Fed must drain reserves to keep Fed funds at 5.50. Once the economy slows to a 2% growth rate or under, the Federal Reserve will lower the federal funds rate to offset the contracting economy. Return to Economic Forecast table
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