The national economy in 1994 expanded by approximately 4.1 percent. This rate of growth can indeed be characterized as very robust. However, economic evidence in the First Quarter 1995 suggests the economy is starting to slow down. Higher interest rates are now causing consumers and businesses to rethink the situation surrounding the purchase of big ticket items. One must remember that the robust economic expansion during last year was primarily fueled by increased spending on consumer durables, goods that will last more than three years, and by business investment. To elaborate further, because of increased business profits firms took the opportunity to expand their investment in plant, equipment, and inventories in 1994. The activity described in the household and business sectors are highly sensitive to interest rate movements. Simply stated, these activities often times require financing and with the prospect of higher interest rates this year than last comes the specter of higher financing costs. 

     Since the economy appears to be slowing, this assertion is based on Gross Domestic Product figures for First Quarter 1995 and the behavior of the index of leading economic indicators over the past several quarters, it seems that the Federal Reserve System may have engineered a soft landing for the economy. A soft landing refers to a situation of reducing economic growth and thus inflationary pressures in the economy without pushing the nation into recession. As a matter of record most forecasters are saying the economy will not experience a recession and will continue to advance for the remainder of the year at about 2.5 percent, give or take a few tenths of a percent. 

     Inflation is expected to remain under control and probably will come in about 3 percent or less according to analysts. Competition both domestic and foreign and consumer resistance to price increases will keep firms from dramatically raising prices. Further, the downswing in corporate America and the resultant layoffs have created an atmosphere in which workers are unlikely to receive large wage and benefit increases. The effect of course is that prices of goods and services will not rise significantly because of wage and benefit increases. 

     Wisconsin's economy is forecasted to continue its advancement during the remainder of 1995, albeit at a slower pace than in 1994. Wisconsin has out performed the United States economy over the past number of years. For example, Wisconsin has generated a higher rate of job growth and has achieved a lower unemployment rate than the nation. As a matter of fact due to the growth, many areas in the state are alleged to be experiencing tight labor market conditions. 

     The reasons that the state has performed and it forecasted to perform so well are as follows. The state economy is still greatly influenced by cyclically sensitive industries and if the overall national economy is not in recession Wisconsin tends to do even better. Further, the decline in the value of the dollar has helped our ability to export goods and services to the rest of the world. Government statistics suggest that Wisconsin as a state is a net exporter. Gains in productivity, especially in manufacturing activities which are very important to Wisconsin, have helped to make the state very competitive. Further, the state is a net importer of energy related products. Energy prices adjusted for inflation are as low as we have seen for many decades; thus, this favorable situation has been a boom for the state. Finally, long term interest rates while high appear to be trending downward as inflationary expectations wane. This again will help the economic mix of industries that we have in the state and region.