The Outlook: An Economic Slowdown Brings Its Problems
NEW YORK -- The financial markets for weeks have been hoping for an economic slowdown. The economy has been roaring along at a pace that makes analysts worry about a future upsurge of inflation. Some of the statistics suggest that a slowdown of sorts may be under way, but this slowdown is likely to create more problems than it solves.</br></br>To begin with, it isn't much of a slowdown. The Commerce Department in its flash report last week estimated that the inflation-adjusted gross national product will rise by 5.7% in the quarter ending June 30. At the same time the department revised upward its figure for the first quarter from 8.8% to 9.7%. Going from 9.7% to 5.7% is a slowdown but not an impressive one.</br></br>The big first-quarter number stemmed largely from inventory-building by businessmen, who had been slow to recognize that an old-fashioned boom was under way. Purchases for inventory apparently have been lower in the current quarter, but little else is slowing down.</br></br>As usual, high interest rates are beginning to bite into housing. Sales of new homes have declined, and last week the Commerce Department reported that new housing starts declined 10.5% in May. Industrial production rose more slowly in May.</br></br>Otherwise, a boom seems to be rolling. Edward S. Hyman Jr., an economist at the brokerage firm of Cyrus J. Lawrence, watches a "revisions index." Government statistical agencies are constantly revising their numbers on the basis of late information. When the numbers steadily head upward, Mr. Hyman sees a trend toward strength. The numbers on the first-quarter gross national product, in order, were 7.2%, 8.3%, 8.8% and now 9.7%.