Analysts See Greater Risk Of Recession; Fall in Durable Goods Orders Stirs Concern
A large, unexpected drop in orders placed with manufacturers last month caused many economists to conclude yesterday that economic growth is slowing more than had been predicted and that the risk of a recession has increased.</br></br>While none of those economists said they are forecasting a recession, several said the Federal Reserve may need to begin cutting interest rates in the next few months to head one off.</br></br>"Will there be a recession? I still don't think so, but it will take Fed easing to avoid it," said Mickey Levy, chief financial economist at NationsBank Corp. in New York.</br></br>The reevaluation of the economy was triggered by the Commerce Department's report that new orders for long-lasting items, such as cars, defense equipment, machinery and appliances, tumbled 4 percent last month. The decrease was the third consecutive monthly decline, the largest drop since December 1991 and far more than analysts had anticipated.</br></br>The report was "a bit of a shocker," said Ray Stone of Stone & McCarthy Research Associates, a financial markets research firm in Princeton, N.J. "Our view of the world has changed a little bit today as a result. The downside risk to the economy is greater" and the likelihood that the Fed will lower interest rates is greater, he said.