U.S. and Kansas Economic Forecasts for 1991

Abstract

The National Economy The U.S. economy will experience a recession in late 1990 and early 1991. An already weak economy will be shocked into a short period of negative growth as a result of higher imported oil prices that came about because of the crisis in the Persian gulf. The recession is expected to be relatively short and relatively mild; real GNP is expected to decline 1.3% during the fourth quarter of 1990 and another 0.3 percent during the first quarter of 199 l. A weak recovery is expected to begin by as early as the second quarter of 1991, however growth will be less than 1.5 percent at annual rates throughout the rest of the year. The weakness of the recovery is attributable in pan to a somewhat contractionary fiscal policy that is locked as a result of the October budget compromise. as well as a monetary policy that will be guided more by a concern for inflation than any desire to stimulate a weak economy. s a result of the short recession and mild recovery, GNP will grow only about 0.3 percent in 1991.

The main strength of the economy in 1991 will be the export sector, although some growth will also be induced by increased consumer spending on services. Real U.S. exports are expected to grow a healthy 4.7 percent in 1991, stimulated by a weaker dollar and continued economic growth of our major trading partners. Although this growth rate is well below 1989's 11.0 percent rate, it compares favorably with the 5.4 percent growth in real exports in 1990. Consumer spending on services is expected to increase 3.1 percent in 1991. Unfortunately, this growth in consumer spending on services will not be repeated in other areas of consumer spending; real consumer spending on durable goods will decline 3.0 percent, while real consumer spending on nondurable goods will fall 1.1 percent.