PULLMAN, Wash. — Asia’s economic flu isn’t over yet. Although it will contribute to a slower U.S. economy in 1999, we should avoid recession for the 15th year in the past 17.
That is the assessment of the coming year published in the 1999 Pacific Northwest Agricultural Situation and Outlook Report, released Wednesday (Dec. 30) by Washington State University, University of Idaho and Oregon State University.
In separate, but related reports, Paul Warner, Oregon’s state economist, and Neil Meyer, University of Idaho economist, examined the Asian economy and its impact on the United States and Pacific Northwest.
Warner said 1998 is shaping up to be a better year than most forecasters anticipated with growth of about 3.5 percent in the inflation- adjusted gross domestic product.
“This is truly remarkable growth for the eighth year of an economic expansion,” Warner said. “Unemployment is well below 5 percent. With commodity prices falling, there is very little overall inflation.”
The strength of the U.S. economy in 1998 has been consumer spending, which has been bolstered by a high rate of employment. The primary weakness has been the Asian recession.
Warner believes the annual growth rate in the U.S. inflation-adjusted gross domestic product will be less than 1.5 percent in the first half of 1999 and the consumer price index will rise 2.3 percent.
After a robust 1998, the housing market is expected to level out.
Warner said the Federal Reserve appears determined to continue an aggressive anti-recession policy and is expected to lower short-term interest rates one or two more times in 1999.
The economist also outlines two other possible scenarios. One would be for a weaker economy, the other for a stronger one.
Meyer examined Asia’s economic flu, which is dragging down the world economy and holding a brake on the U.S. economy.
So far, Meyer said, symptoms of the Asian economic flu in the U.S. economy consists of declining demand for U.S. products and a flood of competing imports.
Western states are more vulnerable than the rest of the nation to the downturn in U.S. exports. This is because western states exports to Asia are considerably higher than from other regions of the United States.
Meyer advises northwest businesses to plan their survival strategy around U.S. employment and income figures and what’s happening in the Japanese economy.
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