Consensus Is for Good 2002 and Better 2003

With the steady accumulation of evidence that the worst of the economic downturn is likely now behind us, attention has turned to trying to gauge the strength of the presumptive economic recovery. There seems to be a consensus developing that growth will be subdued but solidly positive this year, and much stronger, but not as strong as in the late '90s, during 2003.

One consensus group whose opinion is worth noting is the Harvard Industrial Economists (HIE) panel, comprising economic analysts associated with some of the nation's largest manufacturing, service, and financial companies. The latest survey released by the HIE group predicted steadily building momentum in the nation's Gross Domestic Product growth rate throughout 2002, but an accumulation resulting in total annual output that will still be only 1.0% greater (after adjustment for inflation) than in 2001. Further, total GDP is forecast to rise by a solid 3.1% during 2003.

The Harvard panel sees business investment declining again during 2002. However, consumer spending is expected to increase at about twice the rate (2.1%) of overall GDP, while government spending is predicted to rise at a 4.3% annual rate. Overall industrial production is expected to eke out a 0.4% gain this year, following the 3.7% plunge recorded between 2000 and 2001. But corporate profitability is forecast by the HIE panel to be only marginally better (0.7%) in 2002, after post-tax corporate profits swooned by almost 15% last year.