The consensus forecast for the increase in Gross National Product is approximately three percent for the remainder of 1988. A majority of analysts do not predict a recession in the near future. To the contrary, the most common fear expressed at this juncture in the 68-month-old business cycle, is the possibility of an overheated economy, which will result in a return to rampant inflation. Domestic demand and foreign demand for U.S. goods and services has pushed factory utilization to over 83 percent. The lower dollar and consumer buying patterns are playing the major roles. Economists are concerned that resource prices, such as labor and raw materials, will be bid up in the process. The unusually dry spring and early summer have caused drought conditions throughout much of the nation's agricultural belt. The drought's impact on the economy is already estimated to have caused a $5.5 billion reduction in GNP during the spring quarter. Furthermore, economists are predicting the drought will add one-half percent to one percent to the overall inflation rate. In this context, the Federal Reserve Board Chairman has stated on several occasions that if inflation becomes rampant, he will further tighten the money supply. This will cause an increase in interest rates, which will slow credit creation and thus decrease the pace of economic activity.

     Finally, the trade deficit is narrowing, but a persistant gap exists between what America imports and what it exports. Even though the dollar has declined against the currencies of other major industrialized countries, the dollar has not fallen to any great degree with regard to the currencies of other nations. The result being that American consumers have shifted away from buying Japanese and German goods and have subsituted imports from other parts of the world, e.g. Singapore and Korea.