Numbers Confirm Recession's Arrival
For the first time, recession is not merely threatened by a decline in business and consumer confidence, it is being confirmed by actual events: Real economic indicators portray a weakness spreading through the economyÛÓboth by industry sector and geographic region:</br></br>Ironically, definitive signs of a classic recession come just as hopes for peace in the Persian GulfÛÓwhich contributed to the earlier anxietyÛÓare significantly better. What that tells us is that the economy wa3 on the brink of recession even before Saddam Hussein invaded Kuwait.</br></br>Peace, if it comes, will lower oil prices and relieve war anxieties, including financial-market jitters. But peace is not an elixir that will solve all the pressing problems of the economy.</br></br>The Congressional Budget Office last week said that economic assumptions made as a basis for the October deficit-reduction package are no longer valid. Moreover, the CBO expects that when revisions are made again late in January, the economic numbers will be even gloomierÛÓleading to projections of even bigger budget deficits.</br></br>In July, the CBO had guessed the 1991 real growth rate at a sluggish but respectable 2.5 percent, year over year. By OctoberÛÓcranking in high oil prices, weak real estate markets and ÛÏproblems with the balance sheets of many banks and corporations"ÛÓthe CBO marked its estimate down to 0.6 percent. Thus, the CBO was tipping us off that its January forecast for 1991 will be negative or close to negative.