No economic boon seen in fast gulf victory Recession's causes go beyond war, experts warn

February 26, 1991|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- The Persian Gulf war may have precipitated the recession, but economists doubt that even a quick victory by allied forces in the ground war will cause a rapid bounce-back.

An early defeat of Iraq should, however, bring lower oil prices and a revival in consumer confidence to help resuscitate the economy, the experts say.

Oil prices are widely expected to decline to the prewar level of about $18 a barrel or less, adding to consumer purchasing power, a po

tentially powerful engine of economic growth. Prices yesterday settled at $17.94 a barrel after falling sharply earlier in the day.

But some fundamental problems unaffected by the course of the war will remain to thwart an economic revival before summer, the economists say.

The economy is being weighed down by falling personal income, rising unemployment, declining construction, the deep troubles of the banking industry, weak industrial output and a huge buildup of debt. A triumph by the allies on the Middle East battleground, with few casualties, would not overcome these problems immediately, the economists say.

In a strong sign of the continuing economic troubles, figures issued yesterday showed that sales of cars and trucks made in the United States plunged again in mid-February, continuing the auto industry's steep slide. Sales fell 12.9 percent, and nine of the 10 major automakers reporting losses.

Among those who responded to a January consumer-confidence survey of of nearly 5,000 households, 36 percent said they expected job opportunities to decline in coming months, and 9 percent said they expected an improvement in the job market.

That marked the lowest confidence level since the 1981-1982 recession, and the figures are not expected to change when the Conference Board, a business research group in New York, conducts its February survey, which is to be released today. In normal times, those expressing optimism about the job market outnumber the pessimists by a 4-1 ratio.

"The economy is showing all the earmarks of an average, garden-variety recession," said Paul W. Boltz, vice president and financial economist at T. Rowe Price Associates. "The average postwar recession [has] lasted 11 months, so the current downturn -- which began in September or October -- should be over by late summer."

In keeping with this restrained outlook, stock prices, which roared ahead at the outset of the air war last month, turned in a lackluster performance yesterday, the first trading day since the ground war began.

The Dow Jones average of 30 industrials, which rose more than 30 points in early trading, ended the day with a loss of 1.49 at 2,887.87.

The Bush administration and Federal Reserve Chairman Alan Greenspan have largely blamed the recession on Iraq's invasion of Kuwait, which caused oil prices to soar and consumer confidence to crumble.

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