The already weak economy will deteriorate further in coming months, a prominent economist and the chairman of LTV Corp., one of the largest companies to request federal bankruptcy protection, predicted yesterday.
Their comments precede two important economic events scheduled for this week: the Commerce Department's estimate of the economic growth rate for the second quarter, to be released Tuesday, and Federal Reserve Chairman Paul A. Volcker's semi-annual appearance before Congress to discuss the Fed's forecast for the economy.
Council of Economic Advisers Chairman Beryl Sprinkel offered a more positive assessment of the economy than the other two guests on NBC's "Meet The Press." He predicted that, although there are some "spotty weaknesses" in the economy, falling interest rates, strong consumer spending and a generally rising stock market would help the economy pick up "substantially" in the second half of 1986.
However, Alan Greenspan, president of the forecasting firm Townsend-Greenspan & Co. Inc. and a leading economic adviser in past Republican administrations, drew a gloomier conclusion from the same evidence.
"We have had all of the elements which . . . now should be affecting the American economy in a positive way," Greenspan said. "The fact that they are not raises some very serious questions about whether we are looking at the fundamental forces that are driving the economy. It's too early to say we're on the edge of a recession, but there is no question that the underlying framework is deteriorating."
LTV Chairman Raymond Hay predicted on the news show that more steel companies would go under as a result of broad weaknesses in the economy. LTV, the parent of the second-largest U.S. steel manufacturer and a leading defense company, filed for bankruptcy protection Thursday.
"The major problem is not our company but our markets, our customers," Hay said.
Senate Majority Leader Robert J. Dole (R-Kan.), appearing on CBS' "Face The Nation," urged the Fed to reduce interest rates under its control to stimulate economic growth.
"We could use a little more stimulus from the Fed," Dole said. "Let's face it -- the economy is soft in many parts of the country."
The Fed has reduced the discount rate, the interest rate it charges on loans to financial institutions, three times this year, most recently to 6 percent on July 11. The central bank's most recent report to Congress, submitted last week, implied that the Fed would consider more reductions in interest rates if necessary to stimulate lagging economic growth.