A moderate recovery

By Dr. A. James Meigs Senior Vice President & Chief Economist First Interstate Bank

THE eco- I nomrc recovery will be well under way in 1983, with continued and stronger expansion in 1984. For 1983 as a whole, real GNP should rise 3.690 with 1984's growth an additional point higher at 4.6s/0.

The construction industry has been the hardest hit sector in many Western states: California construction employment is off l59o in 1982 from low l98l levels. Lumber employment losses since 1979 in the West are significant: 7,000 jobs lost in Idaho, 3,200 in Montana (3090 of the total lumber employment), 25,000 in Oregon andmajor losses in Washington.

Mortgage rates (fixed term) are expected to decline gradually over the next two years, finally going below l29o in the final quarter of 1984, and variable rate mortgages will continue to be offered at lower rates.

The 1983 recovery in the national economy will not provide as much stimulus to the construction and lumber industries as did some of the forced draft recoveries of the past. Even though interest rates will decline gradually, the forecast is for a moderate increase in housing starts. Housing starts will rebound with a 2890 growth in 1983 to a level of just over 1.3 million units. But even in 1984, the level of starts will be just over 1.5 million-significantly less than the boom of the late seventies.

Demand for lumber and wood

Story at I Glance

Real GNP up in '83 & '84 . fixed term mortgages below 12o/" by 4th quarter '84 moderate increase in housing . . demand for lumber and wood products slower than in earlier recoveries.

products will grow more slowly than prior recoveries. Affordability problems will continue to pressure builders to down-size the units that are built and the trend will be for more multiple unit structures-both condominiums and apartments and away from detached single-family homes.

The long sustained non-inflationary economic growth that we expect should result in healthier, more stable construction and lumber industries than were produced by the boom-bust cycle of the last twelve vears.