U.S. recovering, but world still slumped

Press, 20 September 1980, Page 25

U.S. recovering, but world still slumped

NZPA Washington Although some economists are prepared to say that the recession in the United States is over, there is little sign of recovery spreading to the rest of the world. When one of the United States administration’s top economists announced 'last week that “the low point of the recession had been reached,” the International Monetary Fund’s annual report was talking of “an extremely difficult world economic situation.” A senior official from the I.M.F. went further when briefing reporters on the report recently. “ The picture is essentially grim,” he said. Although the Carter administration, with an eye on the coming presidential election, is quick to had any-good economic signal, the world situation is colouring American delight. The I.M.F. picture, putting growth in the industrial world at 1 per cent this year and in 1981, indicates the continuation of a slump elsewhere and a halt in the expansion of international trade. That could mean a world recession, which would set back any progress the United States has made.

Even if the 1980 United States recession is over — after a record short period of six months — few in Washington are prepared to bet that it will not return next year, or that the bugbear of inflation has been beaten. Inflation “remained a serious problem,” said Mrs Courtenay Slater, chief economist of the Commerce Department, who formally hailed the end of the recession last Friday. Private analysts are looking for an over-all increase in the consumers price index of about 13 per cent by the end of the year. But wholesale food prices rose 4.4 per cent in August, the biggest monthlv rise in seven years, and this has yet to be reflected in the supermarkets.

The most optimistic are talking about a. 10 per cent annual rate in 1981. But recovery signs are there, led by "the American consumer, who put away his credit cards early in the year when the Government put a squeeze on spending. Retail sales rose 1.5 per cent in August, the third consecutive monthly increase- Consumers are again using their credit cards; borrowing rose 18.4 per cent in July; and new factory orders rose in July

for the first time since January. Another cheering sign was that employment rose by 200,000 in August, though the jobless rate is still a high 7.6 per cent. In spite of these indicators, the recovery is sure to be slow and there is much talk of the “double dip scenario” — the recovery being followed by another mini-recession next vear.

Observers also say that the basic economic problems of inflation, low productivity, and an unacceptable level of unemployment remain, and seem unlikely to go away.