Business: Consensus: Mild Recession

The U.S. is now in a mild recession that should end in the second half of 1961. This was the consensus of 200 business economists attending the convention of the National Association of Business Economists last week in Manhattan. If the economists needed any more figures to support their view, they got them next day from the President's Council of Economic Advisers. The council announced—as had been expected (TIME, Oct. 17)—that the gross national product fell $2 billion in the third quarter to an annual rate of $503 billion—the first drop (except for the steel strike) in two years.

For the most part, the business economists expressing an opinion—their job is forecasting the ups and downs of the economy for corporations and financial institutions—believe that the current down turn became pronounced in August. They also believe that the drop will be milder than in the last recession. Their idea of the course of the current recession is that the gross national product will drop only about 1%—a fall of about $5 billion v. a $16.8 billion fall in 1957-58. What they foresee is a bigger drop in industrial production while gross national product remains strong, buoyed up by the increasing role of services in the economy (see The Service Economy).

The kind of platinum-plated recession many economists see was well described by Dexter Keezer of McGraw-Hill. He expects that 1961 will actually show a healthy increase in overall economic activity as measured by the gross national product; he estimates that G.N.P. will drop to $502 billion in 1961's first quarter, then turn around to $507 billion in the second quarter, rise to $522 billion in the third. He looks for a drop in the Federal Reserve Board's index of industrial production from its present 107 to about 100 in 1961's second quarter — with improvement after that. "Talk about G.N.P., and we are not headed for a recession," he says. 'Talk about production, and we are."

High-level Stagnation. In the face of this, even the overwhelming majority of pessimists were cautiously aware that a slide so mild could be quickly arrested. W. T. Diebold of the Bell Telephone Co. of Ohio liked the term ''high-level stagnation" to describe what is happening to the economy. Myron Silbert of Federated Department Stores called the drop "a mild thing'' that will not approach previous downturns. But whatever they called it, almost all of the other business econo mists contended that the current slide will get worse before it gets better.

William Butler, economist for the Chase Manhattan Bank, who has been predicting a 1961 recession for several weeks, revised his prediction only to add that "it now looks as though the recession is beginning in 1960. It came earlier than I expected." Butler expects no upturn to take place until mid-1961. Robert Adams of Standard Oil Co. (N.J.) assumes "a continued recession in 1961," with the low point to occur next year.

Lower-Level Production. What is braking business? Chief drag is that businessmen, who had been adding to inventories at a rate of $11 billion a year, have stopped adding at all. They are not expected to increase buying in the near future, and, until they do, business will continue to drag along.

Other individual forecasts by the business economists: