Americans, shrugging off the economic shadows falling over Asia, seem to be floating in suspended animation. Such worries appear on hold as consumers bask in a state of euphoria. Another gauge, January consumer confidence, comes Tuesday. Chicago economist Diane Swonk looks for the Conference Board measure to show a slight decline, to around 132 from 134.5 a month earlier. But she sees nothing in sight to curb Americans’ free-spending ways. “Confidence continues to nip at record highs–it was phenomenally high in December,” said Swonk, of First Chicago NBD Corp. “The headline effects of Asia are beginning to wear off, while Americans are enjoying benefits that flow from the crisis–cheaper imports and an ability to refinance mortgages at a lower rate.” Swonk looks for confidence to remain high for 1998.
GROSS DOMESTIC PRODUCT
SOONER OR LATER. . .
Analysts generally expect economic activity to slow, although there is no proof just yet. Friday’s report on fourth-quarter gross domestic product is likely to show a robust annual rate of expansion of 3.3 percent, says economist Sung Won Sohn. “The economy benefited last quarter from a boom in capital spending, as well as very strong residential construction,” says Sohn, of Norwest Corp., Minneapolis. But the Asian problems, plus an ongoing correction in the stock market, are bound to take a chomp out of economic activity soon, he adds. “We are expecting Asia to reduce growth this year by 0.7 percentage point,” he said. For the first half of 1998, Sohn said, he sees expansion slowing to a 2 percent rate, “followed by some further weakening after that.”
GREENSPAN APPEARANCE
SPEAKS BEFORE SENATE
The week’s banner event may well occur Thursday, when Federal Reserve Chairman Alan Greenspan makes an appearance before the Senate Budget Committee. Ostensibly, the central bank chief is to talk about the economic outlook. Don’t be surprised, though, if Greenspan is pulled off track by questions about the costly bailout of down-and-out economies on the far side of the Pacific. There is restiveness on both sides of the aisle about where the money will come from. Other events: earnings by General Motors Corp. Monday, Ford Motor Co. Tuesday, the fourth-quarter employment cost index Tuesday and December orders for durable goods Wednesday.
STOCK MARKET
BULLS STILL RUNNING
The economic quakes rocking Asia and the political scandals shaking Washington have done little to soothe investors in the stock market, which remains mired 6 percent below August’s peak. Flossmoor investment adviser Richard Evans says rallies are weakening, as each successive high is lower than the previous market top. But, Evans said, “A bull market remains in effect, in spite of the ongoing volatility.” Under the so-called Dow theory, he says, for a bear to firmly seize Wall Street, the Dow Jones industrial average and the Dow Jones transports would need to drop a further 6 or 7 percent.
