Forecasting model predicts new growth

December 10, 1991|By David Conn

Economists at Towson State University have entered the fray of regional economic forecasting with a new model that predicts negligible growth in the fourth quarter but a healthier increase in the Baltimore-area economy during the first half of next year.

The new model, to be discussed today at a meeting of local economists, is based on growth in income. It predicts the area's economy will grow by 1.5 percent through 1992, as measured by personal earned income.

The Towson State forecast is substantially more optimistic than most other predictions of the area's economy. It shows almost all private sectors of the economy will grow at more than a 2 percent annual rate during the first half of next year, after growing less than 1 percent in the last quarter of this year.

Through the second half of next year, the economy will grow about 1.2 percent, according to the Towson State model, developed by Chang M. Kong, an associate professor of economics. Among private industry, only the agriculture, forestry, fisheries and mining industries will show slower income growth throughout the year.

Personal income in the government sector will decline by 0.06 percent in the current quarter, Dr. Kong's model predicts, with about 0.3 percent income growth through next year.

Dr. Kong said that the university's Center for Area Resource Development used to forecast economic activity based on U.S. Department of Commerce data on regional economic output.

But now that data is unavailable, so the university switched to an income-based forecast. He said the model worked well when tested on past economic performance.

In a report issued at the beginning of October, the University of Maryland at College Park's economics department said that "the state will not exhibit any meaningful economic recovery until the first half of 1992." But Dr. Mahlon Straszheim, chairman of the department and one of the report's authors, said "the outlook has really turned much worse" since then.

Douglas Kinney, an economist at Baltimore Gas and Electric Co., warned not to look for "noticeable growth" until next spring. He expects a rate of job growth only half that of the mid-1980s.

And Michael Conte, a University of Baltimore economist whose Center for Business and Economic Studies is working on a model of the region's total economic output, said the Towson State methodology is valid but outdated.

"It's sort of like using the B-1 [bomber]," he said. "It works -- send it into battle.

"But the B-2 is better."

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