Jitters! Unsettling Economic Signs Have Americans on Edge

At the start of 1987, the US economy was expected to grow modestly through the year, but recent statistics have changed the economic outlook, and rising interest rates make even mediocre growth hard to attain. Factors contributing to a nervous public attitude include: 1. the devalued dollar, 2. a surge in bond yields, 3. fluctuating commodities prices, and 4. a continued high trade deficit. Higher interest rates will hurt growth, possibly pushing the economy into a recession, while the alternative may be higher inflation. Inflation is expected to average 4%-5% in 1987, but there are signs that the Federal Reserve Board is moving toward a modest tightening of interest rates to stabilize the dollar. The stock markets experienced some sharp downturns in April, considered corrections by some, and the general consensus is for a continued bull market. Congress and the Reagan Administration are trying to work out a new US trade policy, amid calls for protectionism, and the result is expected to be a tougher stand against trading partners with large trade surpluses.