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 economy - both by industry sector and geographic region.</br></br>Ironically, definitive signs of a classic recession come just as hopes for peace in the Persian Gulf - which contributed to the earlier anxiety - are significantly better. What that tells us is that the economy was 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Budget Office last week said that economic assumptions made as a basis for the October deficit-reduction package are no longer valid.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 gloomier - leading 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 October - cranking in high oil prices, weak real estate markets and "problems with the balance sheets of many banks and corporations" - the 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.