Economy's Strength Seen Lasting Most of Year --- Analysts' New Optimism Follows Spate of Favorable Reports
The economy is off to an unexpectedly fast start this year, and many economists now see the momentum being maintained through most of 1986. Only late this year or early next year do they see any signs of slowdown.</br></br>Bolstering their optimism are a spate of favorable statistical reports in recent weeks, the sharp slide in oil prices, the seeming pressure toward a cut in the federal budget deficit and a generally easy Federal Reserve credit policy, which many analysts expect to continue.</br></br>"First-quarter real GNP will be solid indeed -- a surprisingly strong 4.5% to 5.0%," says Donald H. Straszheim, chief economist at the brokerage firm of Merrill Lynch, Pierce, Fenner & Smith. For the year as a whole, Merrill Lynch now expects real gross national product, or the value of the nation's output of goods and services adjusted for inflation, to rise by 3.5%, up from a forecast of 3.1% a month ago.</br></br>Lacy H. Hunt, chief economist at CM&M Group, an investment firm, is now looking for real growth of 5.5% this quarter, up from 5.2% a month ago. For the full year, he expects real GNP to rise by 4.5%, compared with a forecast of 3.9% a month ago. "Among other things," Mr. Hunt says, "the drop in oil prices will keep the trade deficit from rising the way it did last year."</br></br>Blue Chip Economic Indicators, a Sedona, Ariz., newsletter, polls four dozen leading economists each month on the outlook. Last month the analysts on the average expected 3.0% real growth this year. The latest report, released today, moved up the average to 3.1%. Two-thirds of the economists who changed their forecasts moved them higher. Most of those who trimmed their predictions already had been quite optimistic: David Bostian, a New York consultant, cut his forecast to 5.0% from 5.1%.