(January 3 – 12:00 ET) – “Economists, practitioners of the so-called dismal science, are anything but gloomy on the prospects for the year-2000 economy. In fact, they are downright euphoric — and that in itself could be a caution sign,” writes Constance Ford in today’s Wall Street Journal.

“Nearly all of the economists in The Wall Street Journal’s semiannual economic-forecasting survey believe that strong consumer spending, rising business productivity and tame inflation will keep the U.S. economy humming through the year 2000 — shattering records for the longest economic expansion in U.S. history.

“The consensus forecast for the 53 economists in the survey calls for annualized growth in inflation-adjusted gross domestic product of 2.6% in the first quarter and 3.1% in the second, third and fourth quarters. Although they expect growth to slow from last year’s torrid pace, mainly because higher interest rates will damp spending on housing and other interest-rate-sensitive sectors, the projections for the year 2000 are nevertheless healthy. (The U.S. economy expanded at an average annual rate of 3.8% for the first three quarters of 1999. The government will release preliminary estimates of fourth-quarter 1999 growth later this month.)

“If the economy continues to grow past this month — which most economists insist is all but certain — the U.S. will have surpassed the previous record for the longest expansion, which occurred during the 1960s, when the economy grew uninterrupted for 106 months.
The economy’s longevity “is like a human living to be 100,” says Nicholas Perna, of Perna Associates in Ridgefield, Conn. “What’s spectacular about this economy is not only its length, but that it’s widespread and broad based geographically and demographically.”

“There are, of course, hurdles in the way of an expansion record. One of those was the much-publicized year-2000 computer glitch. With the new year passing largely uneventfully, most economists dismiss its potential to inflict harm. But a small group of economists, led by Edward Yardeni at Deutsche Bank Securities Corp. in New York, believes the problems could disrupt global commerce and cause the economy to fall into recession. ‘The global supply chains are only as strong as their weakest link,’ he says. Only one other economist, longtime bear A. Gary Shilling of Shilling & Co. in Springfield, N.J., is forecasting a contraction for this year based on his expectation of a stock-market correction.

“Those two bears are in a lonely league. Most of the other economists in the survey echoed the bullish sentiments of Allen Sinai, economist at Primark Corp., a financial-research and economic-research firm in Waltham, Mass.

“‘There is no end in sight to the expansion,’ said Mr. Sinai, who contends the U.S. economy is operating in a “new era” in which a number of structural changes have made it possible for the economy to grow nonstop without triggering inflation — the culprit that has often led to economic downturns in the past.

“But few economists are worried about inflation. The consensus forecast is for the consumer price index, the nation’s most widely watched measure of inflation, to advance at an annual rate of 2.5% during the first half of 2000 and 2.3% during the second half. That is about the same as during 1999. As of November, the CPI was running at an annual rate of 2.6%.

Short-term interest rates will rise, the survey respondents say, as the Federal Reserve continues to tighten monetary policy. But the rate boosts will merely slow economic growth and won’t derail it. The consensus forecast is for yields on 30-year Treasury bonds to ease from current levels to about 6.39% by midyear and 6.27% by year end. The bond-equivalent yield on short-term three-month Treasury bills is expected to be 5.59% by June and 5.58% by the end of 2000, slightly higher than current levels.