In another sign that the expansion is becoming a senior citizen, consumer spending growth no longer is soaring as it did a few years ago. And that suggests that many American households have completed a lot of their buying plans for the time being. Thus companies dependent on household purchases are in a slightly more uncertain position than those serving other businesses, a factor that could have implications for investors.
If the expansion is to continue, analysts agree, manufacturing and exports must play an important role in propelling it. On the positive side, government surveys have found that companies still plan investment increases next year.
Yet there are growing doubts about how much more can be expected of U.S. industry. In the third quarter of this year, business investment and exports seemed to sputter, although more recent data has been encouraging.
In the complex U.S. economic equation--where one variable inevitably affects others--a slowdown in business investment could mean bad news for the trade deficit. The trade gap shrunk this year because of strong export growth, but the limited capacity left in American factories means that "The big gains in improving the trade deficit are probably over," maintains Wells Fargo's Nathan.
What is more, a decline in the nation's trade balance tends to push down the dollar. And downward pressure on the dollar, such as that seen recently, triggers upward pressure on interest rates, because the United States must continue to lure foreign investors to finance its debts.
Nathan, for example, describes the trade deficit as "this visible, ugly inheritance from the Reagan years which is likely to drag the dollar lower."
Bush will get a different sort of inheritance from Reagan in the form of a Federal Reserve Board that appears committed to fighting inflation and protecting the dollar, even at the cost of restraining U.S. economic growth.
Thus, some analysts see possible tension between Bush, who will want to keep the expansion on track, and a Fed with its own set of priorities. "You could have a much more activist Federal Reserve in the next four years than you had in the last four years," said Norman E. Mains, chief economist at the Bateman Eichler, Hill Richards investment firm in Los Angeles.
The new President also may find a restive Congress, strengthened in its Democratic majority and unwilling to concede him a mandate in light of the relatively close popular vote. Some observers argue that--despite the limits on a new President--Bush must figure a way to put his imprint on U.S. spending policies swiftly, or risk the consequences.
"If the new Administration does not show quick and decisive leadership on the deficit, there could be another sharp downward correction of the dollar," predict economists at the WEFA Group, a consulting firm in Bala-Cynwyd, Pa. "This would be accompanied by sharply higher inflation and interest rates. The net result of these events would likely be a recession in the United States."
Does that sound like a lot to worry about? Don't forget the imponderables of war, drought and crisis--political and financial--that nobody can foresee. But if the post-Reagan economy seems clouded by potential troubles, it's worth remembering that many experts were a lot gloomier at the end of 1987 than they are today.
Just a year ago, the experts worried that the October, 1987, stock market crash would drag the United States into a recession. But the economy proved too resilient, proving the doom sayers wrong.
"If the economy can shake off that one, I'm not sure what can push it into a recession," said Mains.
THE OUTLOOK FOR NEXT YEAR In late October, a survey of 51 economists resulted in a forecast of slower GNP growth, faster inflation, higher short-term Treasury bill rates and no change in unemployment. Source: Blue Chip Economic Indicators of Sedona, Ariz.