The economy has slowed, but forecasters, buoyed by low inflation, falling interest rates, and still soaring consumer confidence, are not predicting recession, at least in the near future. The Blue Chip consensus of 50 economic forecasters predicts economic growth of about 2.4 percent annual rate for the second half of the year, and about the same for next year. A growth rate of this magnitude should keep unemployment from rising and not exert enough inflationary pressure to attract the attention and intervention of the Federal Reserve. The operative word is probably caution. While Asia's troubles have worsened our trade deficit, a stronger dollar, lower interest rates, and cheaper raw materials have raised the real incomes of consumers as well as the profits of many companies, especially in the finance, transportation, and consumer goods sectors.
Consumers show no sign of deserting the stock market in the face of the recent downturn.
Business investment is slowing and corporate profits have flattened somewhat, but overall, profit margins remain at historical highs. Productivity rose by 2-percent last year and wage costs, while rising, are not considered to be at levels that will add to inflationary pressures. Inventories, retail sales, business cash flow, all seem to be healthy. Questions Using aggregate demand, aggregate supply curves, show an economy as a full- employment macroeconomic equilibrium. A decline in US exports.