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1971: Economic Outlook and Uncertainties


THE ECONOMETRIC MODEL FORECASTS of 1971 that have descended upon a suspecting public appear to be in general agreement that real gross national product (GNP) will increase by about 3 percent for the year as a whole and that the overall rate of inflation (GNP deflator) will fall into the 3.5-4 percent range. The latter would represent a substantial reduction from the 5.2 percent rate of inflation that is now generally expected for 1970. Table 1 contains summary data relating to three of the 1971 econometric forecasts--those produced by Michael K. Evans of Philadelphia Research Associates (Evans), the Research Seminar in Quantitative Economics of the University of Michigan (Michigan), and the Wharton Econometric Forecasting Unit at the University of Pennsylvania (Wharton). The three models forecast increases in real GNP for the year 1971 ranging from $20 billion to $26 billion; all foresee substantial increases in real expenditures on homebuilding, ranging from $3.1 billion in the Michigan forecast to $4.7 billion in the Wharton forecast. The outlook for spending for business fixed investment is weak in all models, with forecasts ranging from no change in real terms in Wharton to a $2.9 billion decline in Evans. There is remarkable agreement on a consumer saving rate of 7.1 percent for 1971, compared with about 7.4 percent in 1970.


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