The consensus view of the business economists who attended the Fourth District Economists Round Table meeting held at the Bank on October 6 was that few signs of maturity are apparent in the current business expansion. There was general agreement among the Roundtable participants that there is sufficient upward momentum in the economy to sustain a real growth rate in GNP in the area of 6 percent or more through the first quarter of 1973. Thereafter, the pace of the economic expansion is expected to slow somewhat and move back toward the economy's potential rate of growth and more sharply below that by year end. Most of the economists expected a generally accommodative credit environment next year, but with some edging-up of interest rates.

The median forecast of the group of about 40 business economists calls for a $110 billion increase in GNP for 1973, with real growth of 5.8 percent and a price increase of 3.6 percent. According to this forecast, unemployment is expected to register only slight improvement during 1973, with the rate forecast at 5.2 percent for the first quarter and 5.0 percent for the fourth quarter. The pace of the economic expansion is projected to moderate beginning with the second quarter, primarily reflecting smaller gains in consumer spending and diminishing stimulus from business fixed investment and inventory building. The change in business inventories is expected to be about $10 billion per quarter in 1973. One bank economist noted that the forecasters have consistently been expecting inventory growth to accelerate because of low inventory-sales ratios. He believes the secular trend toward lower inventory-sales ratios is still with us, and, accordingly, he cautioned against overly optimistic forecasts of inventory accumulation for next year.

By the fourth quarter of 1973, the group projects real GNP to be rising at a rate of 3.1 percent and prices rising at a rate of 4.3 percent. Most of the economists assume that some form of wage-price controls will be maintained after April. Indeed, the sentiment of the group was that Tier I firms want controls to continue in view of the heavy schedule of labor negotiations for next year. One economist with a major retailing firm said management was nervous about the prospects for consumer spending in the second half of 1973 if the rate of inflation accelerates.

Among other reports submitted by the business economists, the median forecast of nine economists whose firms depend heavily on the auto market calls for new car sales of 10.8 million units in 1973, with imports of 1,575,000 units. One auto economist predicted a price increase for new cars in January, "probably not more than 3 percent." The effect of the current price freeze is estimated to add about 100,000 units to sales during the remainder of this year.

An economist from a major steel company predicted a price increase in his industry when the current self-imposed price freeze ends in January. The steel industry is expected to have a better year in 1973, with shipments estimated to rise from 92 million tons this year to a range of 94 to 100 million tons next year (depending on the intensity of the capital goods upswing).

An economist from the Federal Home Loan Bank reported that housing in at least a dozen major metropolitan areas is now overbuilt or is heading toward an overbuilt situation. An increase in multi-family vacancy rates next year is expected to trigger a decline in total new housing units, from an estimated 2.8 million in 1972 (including mobile homes) to 2.3 million in 1973.

There was considerable discussion by the business economists about their expectations with respect to monetary and financial conditions in 1973. Emphasis was on the concern being raised by some financial economists that credit conditions are likely to be considerably tighter and interest rates sharply higher in 1973. The Roundtable group, however, generally expects a better credit environment in 1973 than what was thought to be the commonly held view. As one economist put it, "we are not likely to experience a credit crunch in an underemployed economy in 1973." Another added that, "the probability of even a mini credit crunch in 1973 is extremely low." Although the Fed is expected to accommodate a substantial portion of the demand for funds in 1973, the economists still anticipate some edging up of interest rates.