The consensus among economic forecasters is that the national economy will grow at a rate of approximately 2-3 percent during 1989. The lower dollar is having and will continue to have a positive impact on export demand and GNP. Furthermore, capital expenditures by business will rise in an attempt to expand already strained capacity, currently standing at 84.4 percent. If the weather cooperates, 1989 should see the overall economy improve due, in part, to a rebound in agricultural output.

     The inflation rate is not forecasted to change significantly and should remain in the 4-5 percent range. If the economy shows signs of overheating, look for the Federal Reserve System, under the direction of Alan Greenspan, to tighten money and credit conditions. This would result in higher interest rates and a slowing of activity. If the Federal Reserve overreacts and tightens too much, the danger of pushing the country into a recession exists.

     Another problem, the perceived failure to address the federal budget deficit, could disrupt economic prospects for 1989. This might cause a sharp drop in the value of the dollar creating additional pressure on domestic capacity as foreign demand expands and leading to additional inflationary pressures. Moreover, the rising price of imports would exacerbate the situation. Given the anti-inflation position of the Federal Reserve, such a development could provoke a very strong reaction in order to suppress the economy.