Economists, waxing rhapsodic about dwindling inflation and a soaring job market, have taken to describing 1997 as a golden age. But will the nation’s string of uncommon good fortune hold into 1998? Much depends on the American consumer, that beast of burden for the credit card industry. If the penchant to purchase on plastic continues unabated, an economic slowdown becomes less likely. A fresh test of Americans’ buying willpower occurs Tuesday, with December consumer confidence. Economist A. Gary Shilling says it will hold near its near 30-year high. But Shilling, who heads an economic consulting firm in Springfield, N.J., says it is likely confidence will fall appreciably within six months. “Events in Asia are likely to flood this country with imports, while weak overseas currencies hurt exports,” he says. “That will squeeze corporate profits, leading to a sharp break in the stock market.” Shilling says Wall Street hasn’t experienced a devastating bear market in over two decades, “but a sell-off in stocks would prove to be the Achilles’ heel for the confidence of the nation’s consumers.”
ECONOMIC DATA
THE HOLIDAY GLOW
A holiday spirit hangs over the land, so don’t look for many gloomsayers to offer dark interpretations of this week’s economic data. The list begins Monday, with November existing home sales. Slight slippage is likely from the 4.4 million unit annual pace in October. On Wednesday, the Conference Board reports November leading economic indicators; Friday brings the monthly index from the National Association of Purchasing Management, which could show modest movement from the 54.5 percent reported in November. Anything above 50 percent means the manufacturing sector continues to grow.
NEW YEAR’S DAY CLOSINGS
A WORKING FRIDAY
Only a few brief days of merriment remain before the holidays pass into the history books along with calendar year 1997. Banks, government offices, many businesses, brokerages, stock, bond, commodity, futures and options markets will close Thursday for New Year’s Day. On Friday, employers will be in a somewhat sober, perhaps even dour mood: only about 10 percent are telling workers to take the day off with pay; according to the Bureau of National Affairs, a Washington research group. That’s down sharply from 22 percent in 1986, the last time the New Year began on a Thursday.
STOCK MARKET
BONDS OUT OF STEP
Investors in the stock market have one area of concern as the clock winds down on 1997, says Chicago investment manager Marshall Front. “For the first time in several years when interest rates are falling, stock prices are, too,” he says. Until now, it has largely been taken for granted that bonds, which control interest rates, would march higher in tandem with stocks. But Front, of Trees Front Associates Inc., says the disconnect between the two “indicates market worries about a potential weakening of the economy and slippage in corporate profits.” He believes there could be several quarters of choppiness ahead for stock prices, “but, longer-term, investors have very little to fear.”
