National Outlook - 1979

by Belinda K. Pearson Vice President & Asst. Economist Seattle-First National Bank

HE nation's economycontinued to grow 1978,through but the pace slipped in the second half and the increased aggres-siveness of credit tightening late in the year virtually assures a pause or mild downturn earlv in 1979.

Beyond that, the outlook depends heavily upon the responsiveness of prices and wages to the administration's latest anti-inflation initiatives. Failure of the current experiment could lead to mandatory controls and/or a prolonged, policy-induced recessionl modest progress in unwinding inflation, however, would set the stage for a renewed business uptrend in late 1979 and 1980.

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increase their particle- board through greater understanding of the product. instances should be the product recommended. Often it isn't and (Please turn to page 108) dollar will check the rise in costs of imported goods; OPEC price increases should not exceed l0o/o; and most analysts anticipate some moderation in food price gains given current supply trends.

Expectations of cooling inflation have been confounded all too often in recent years by extraordinary shocks such as sudden-and unpredictable-food and energy supply disruptions. Barring untoward calamities. however. there is good reason to hope for a slowing of price increases in 1979.

Every postwar recession, however mild, has been accompanied by decelerating inflation. Further, at the fall meeting of the Business Council, top executives of the nation's largest corporations indicated willingness to cooperate with "voluntary" price standards. Top labor has indeed said nay to a 7o/o wage standard, but some individual unions will likely go along, and pay increases for unorganized workers should moderate as slack develops in labor markets and unemployment rises. Meanwhile, the recent arrest of the slide in the exchange value of the

Finally, the administration is moving quickly from words to deeds in setting in motion machinery for removing some inflationary government regulations and in rejecting inflationary special interest legislation.

It also appears that the promise to curb federal spending growth is a serious commitment.

Taken together, these various factors should permit inflation to (Please turn to page 106)

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