The consensus forecast is probably closer to 1.5- 1.8 percent growth during the fourth quarter. Both monetary and fiscal policy have also tightened over the past three to six months to a degree largely unnoticed by the financial markets. Most fourth-quarter forecasts have been revised downward over the past several weeks. The negative signs from the chain-store sales were mitigated by December auto sales at a 16.1 million unit annual pace, up from a 14.8 million pace in November and well above the consensus estimate of about 15 million units. First-Quarter Activity Normally, markets and analysts begin during the first month of the new quarter to look for signs of a momentum change relative to the previous quarter in economic activity.
Hard data are completely absent, but most analysts are probably looking for a pickup in activity.
An end to the Boeing strike will give some boost to the manufacturing sector. Most analysts had, of course, expected that the government shutdown would end early in January and that an agreement on the budget would remove some uncertainties overhanging the economy and government contractors whose payments from the government will probably be delayed. A delay in the resolution of the budget issue should, other things being equal, lead to some downward revisions in first-quarter growth forecasts. We doubt that there will be improved momentum in the manufacturing sector going from the fourth quarter of 1995 to the first quarter of 1996. Despite probable economic weakness during the fourth quarter, possibly spilling over into the first quarter, the consensus remains that the risk of a recession is low.