Business: No Crash of '79 Coming Up

The Crash of 79? Forget it. Oh, sure, there will be a quarter or two of very slow growth next year, but the odds are against anything that could even be called a recession. And if a recession does strike, it will be shallow and short.

That is the forecast of TIME'S Board of Economists, who gathered in Manhattan for their quarterly assessment of the outlook, and in the context of recent grim economic tidings, it is rather reassuring. Last week, for example, the Commerce Department reported that the annual rate of inflation in the second quarter was 11%, even worse than first estimated. President Carter huddled with his economic advisers to plan a Stage Two anti-inflation program and warned in a speech to the steelworkers that it will be "tough" and require "some sacrifice from all." The Federal Reserve made some additional moves to tighten credit, the dollar sank to a new low against the Swiss franc, and prices worried down again on the stock exchanges.

True, the Government also reported that in the second quarter real gross national product—the nation's output of goods and services, adjusted for inflation —rose at an annual rate of 8.7%. That rate is obviously unsustainable, however, and a slowdown has already begun. Though no one—not even Author Paul Erdman—really believes the apocalyptic prophecies in his bestselling novel The Crash of 79, some serious forecasters fear a genuine slump next year.

The only member of the Board of Economists to predict a recession next year is Beryl Sprinkel, executive vice president of Chicago's Harris Bank, and he foresees a mild and brief one. His forecast: real G.N.P. will drop 2.4% in the third quarter next year and 3.2% in the fourth quarter, but start back up in early 1980. Alan Greenspan, formerly President Ford's chief economic adviser, also sees a recession—but not until 1980, and then so gentle that it will just about meet the technical definition: two successive quarters of declines in real G.N.P.

The other economists expect only a kind of pause. Otto Eckstein, president of Data Resources Inc., a forecasting firm, offers a precise computerized prediction: the growth of real G.N.P. will slow from 3.9% in the current quarter to 3.2% in late 1978, 1.9% in the first quarter of 1979 and 1.1% from April through June next year. But then it will pick up enough to produce a growth rate of 3.1% for all of 1979; that would not be far below the 3.9% expected this year, and is probably about as much as the economy can afford without generating even worse inflation. Eckstein's colleagues differ somewhat on the exact timing and shape of the slowdown, but they accept his general outline.