Some on Wall Street See Slower Growth --- Asian Turmoil, Concern On Consumer Spending Cited
A number of prominent Wall Street economists are cutting their estimates for U.S. economic growth in 1998, in part because of the turmoil in Southeast Asia but also due to some domestic concerns.</br></br>The new estimates -- most still predicting moderate growth, yet trimming the growth rate by 0.5 percentage point or even more -- are based on a growing belief that U.S. exports to Asia will decline as economic growth there slows. In addition, there's a concern that U.S. consumer spending is weakening even as corporations and retailers continue to expand. Most of the revisions have come in the past week, following a sharp decline in many world markets, and despite a sharp rebound on Wall Street and elsewhere.</br></br>The downward revisions to gross domestic product-the government's primary barometer of economic growthcame from economists at Chase Manhattan Bank Corp., Donaldson, Lufkin & Jenrette Securities Corp., Aubrey G. Lanston & Co., Merrill Lynch & Co., ISI Group and several others. The size of their revisions were unusually large, even for market-oriented economists who react quickly to changing economic news.</br></br>Chase Manhattan, the nation's largest banking concern, raised eyebrows when it told clients Tuesday that it revised its 1998 forecast to between 1% and 1.5% from 1.5% to 2%. The bank's chief economist, John Lipsky, began his special report, "Reassessing Risks to the 1998 Outlook," by saying even though "relative calm has returned to global financial markets," he felt it would be "premature to presume that this chapter is closed."</br></br>Although Mr. Lipsky's sentiments were echoed by many other economists on Wall Street, academic and corporate economists are taking a more sanguine view of the economy. The monthly consensus forecast due next week from Blue Chip Economic Indicators, an Alexandria, Va., firm that collects the forecasts of about 50 economists and calculates a consensus, is not likely to show much change, if any, from its early October consensus. The Blue Chip consensus forecast published last month called for growth of 2.5% in 1998, down from an expected 3.6% in 1997. Mr. Lipsky, ISI Group, DLJ and many other Wall Street firms don't participate in the Blue Chip survey.