Like a middle-age boxer striving to cinch back his girth, the economy has struggled in recent weeks to avoid overexpansion.
A tough trainer named Alan Greenspan, Federal Reserve Board chairman, is trying to keep it trim by tightening credit, and with some success. But is this discipline enough?
The index of leading indicators, a multi-factored, forward-looking measurement of the economy`s pulse and weight, will offer some clues Friday.
CONTENDER MAY BE TIRING
Late last month, the index offered the first strong harbinger that the summer`s inflation scare was losing steam. The leading indicators for July went down sharply, 0.8 percent, reversing a 1.4 percent jump for June, the biggest increase in 18 months.
This week`s report is likely to please those worrying about inflation, said economist Brian Wesbury of Harris Trust and Savings Bank of Chicago.
STRONG RIGHT AND LEFT
”I`m looking for a rise in the indicators of 0.2 percent, which could be seen as the best of all possible worlds,” he said. ”It says that the economy isn`t in much danger from inflation, but that we shouldn`t worry about a slowdown, either.”
CAUGHT IN THE MIDDLE
The government will signal this week how much leeway it will allow farmers to rebuild feed grain stockpiles decimated by the worst drought in more than 50 years.
Caught in a squeeze is Agriculture Secretary Richard Lyng, who must balance these choices: limiting corn production next year to keep farm prices high, at the cost of losing some overseas grain sales; or allowing excessive planting, which would depress prices and rebuild burdensome surpluses.
Lyng will decide how much land farmers will have to idle to qualify for price-support loans and subsidies. This year the requirement was 20 percent of established acreage. By law, it can be no more than 12 1/2 percent next year, because the corn supply is expected to fall below 2 billion bushels by the time the 1989 harvest begins.
The consensus is that Lyng will order a set-aside requirement of 10 percent.
AN AUTUMN HOPE
The quavering Japanese stock market continues to inspire worldwide concern, being blamed in part for sleepy trading elsewhere, including London and New York.
But now there`s an air of anticipation that a breakout in Tokyo could pull Wall Street out of its summer slumber. That`s because the traditional autumn marketing blitz by Tokyo stockbrokers is getting underway.
”Wednesday could be the biggest trading day of the year in Tokyo, because trades conducted then close on Oct. 1, which is the first day of the fiscal year in Japan,” says Jeffrey Burns, of UBS Securities Inc. in New York.
He looks for a runup in large-capitalization stocks, such as steelmaking companies.
If the mammoth marketing campaign falls short, Burns predicts ”people will become extremely discouraged” over the Japanese market.
