THE ANNUAL BUSINESS FORECAST LUNCHEON on December 2 was characterized by cautious optimism as veteran forecasters John Huizinga, Joel Stern, and Marvin Zonis predicted slow recovery in Asia and gradually increasing inflation in the UFore.S. Stern, ’64, managing partner of Stern Stewart & Company, forecast a year of strong growth, gradually increasing inflation, and a stable unemployment rate with increasing job growth. As Asia begins its recovery, he said, U.S. corporate profits will be up 12 percent in 1999; consumer, business, and government spending will rise; and the real GDP will be up 3.4 percent. “1999 will be the year that the Dow passes through 10,000,” Stern told the 1,400 alumni and friends who attended this year’s forecast. “It’s going to be a fabulous year.”

The big potential problem, according to Stern, is inflation. “The Federal Reserve is throwing high-powered money into the system at horrendously high rates,” he said. “That means the real gross domestic product is going to increase far faster than is healthy for prolonged low inflation.” Huizinga agreed that inflation is a concern, predicting that in 1999 the overall inflation rate will rise for the first time since 1991. “I fear the Fed’s run of good luck may be coming to an end,” said Huizinga, Walter David “Bud” Fackler Professor of Economics and deputy dean for the faculty. “In light of the continued decline in inflation through the 1990s, the Fed will be reluctant to tighten until actual inflation increases.”

Huizinga said U.S. exports will decline while imports rise. “Spending growth in the U.S. will outstrip growth in production. We will increase imports to make up the difference and rely on foreigners to lend the necessary funds,” Huizinga said, noting that they will be willing to lend because of poor investment opportunities at home and an uncertain future. While Huizinga predicted increases in government, business, and consumer spending, he called the anticipated 3.4 percent rise in consumer spending “steady, solid, and unspectacular growth” that is down significantly from the 4.8 percent growth of 1998. “I don’t expect a repeat of 1998’s stock market rise in 1999,” he explained, “nor do I expect any other change that could keep consumption growing at the current, unsustainable rate.” Zonis’s outlook was more somber than his colleagues’ prognostications. Zonis, professor of business administration, said 1999 will find more than half the world’s economies in recession. The economic crises of many Asian states will continue throughout the coming year, Zonis predicted, noting that “these countries will not rapidly nor painlessly emerge from their dilemmas.” Nevertheless, he indicated that most Asian nations have hit bottom, and a full recovery in the region could occur within five years.

The good news is that the U.S. will continue to escape recession. “The U.S. growth rate will slow, but the American economy will ride out the Asian turmoil,” he said. Zonis said his biggest concern for the future is that countries will learn the wrong lessons from the crises of the past two years. “Rather than understanding that globalization is the path to prosperity, many countries–including, astoundingly, the United States–seem to be concluding that protecting themselves from the global economy is a wiser course,” he said. “The global economy will remain under stress in 1999, but the long, slow, painful path back to economic growth is underway.”

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