Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, February 16, 1991                   TAG: 9102160261
SECTION: BUSINESS                    PAGE: A8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

RECESSION'S END ESTIMATES DIFFER

The Bush administration said those developments should translate into an early end to the recession.

Private economists, however, said a third report - showing that output at the nation's factories, mines and utilities fell for the fourth straight month in January - indicates manufacturers remain in the grips of a steep downturn.

"The report on industrial production showed a continuing slide with no end in sight," said Allen Sinai, chief economist of the Boston Co. "The bottom line is that we have a deep recession that is entrenched."

Analysts were worried not only by the 0.4 percent drop in January's production level but also by a sharp revision to the December report, showing that output fell by 1.1 percent that month, almost double the original estimate.

"This certainly confirms that the economy is still in a recession," said David Jones, an economist with Aubrey G. Lanston & Co. who forecast that overall economic activity would fall at a faster rate in the January-March quarter than the 2.1 percent drop in the October-December period.

Private analysts saw at least a glimmer of hope in the reports showing further moderation in wholesale prices and a significant narrowing of the trade deficit.

The trade gap fell to $101 billion in 1990, down 7.7 percent from the preceding year, as weak domestic demand dampened Americans' appetite for imports while U.S. exports were climbing to an all-time high. The trade gap in December narrowed to $6.25 billion.

The 0.1 percent decline in wholesale prices, which followed a 0.6 percent drop in December, reflected a big decline in gasoline prices and lower food costs.

Lower inflation should give the Federal Reserve more room to fight the downturn with further interest rate cuts while the continued demand for U.S. exports overseas should be a source of strength in 1991, analysts said.

However, they worried that a prolonged Persian Gulf War, by adding to consumer uncertainty, threatened a deeper and longer recession.

David Wyss, an economist with DRI-McGraw Hill, predicted that the U.S. trade gap would shrink to $78 billion this year.

Private economists also forecast a significant slowdown in U.S. inflation rates based on a belief that oil prices, after surging to nearly $40 per barrel after the invasion, will remain closer to $20 for most of this year.

The good news in Friday's report on wholesale prices was credited to a 10 percent drop in gasoline costs and a 6.2 percent decline in home heating oil costs.

The survey for the Labor Department's Producer Price Index was completed before the Jan. 17 start of the allied air war against Iraq. Since that time, world oil prices have dropped even further and analysts said this development will spell more price reductions in coming months.

The 0.1 percent decline in wholesale prices followed a 0.6 percent drop in December and translated into an annual rate of decrease of 1 percent, far below the 5.6 percent rise in wholesale prices that occurred in 1990.