CISA Meeting Examines Nation's Economy, Politics.

With a program titled, "The Winds of Change," more than 80 people attended the Casting Industry Suppliers Assn. (CISA) Summer Meeting, held July 21-24 in Chicago.

Making his regular economic address was David Littmann, chief economist for Comerica, Inc., Detroit. Included in his talk was humorous and insightful commentary on topics such as tax burdens, government spending, Social Security, the European Union and the "dead hand" of the government. The main thrust of his address, however, was the one main unknown on everyone's mind--the economic outlook in the U.S.

Noting that this was the first year in a decade in which the economy has slipped badly, Littmann is forecasting a healthy and lengthy economic expansion immediately ahead. "We've had an hourglass economy," he said. "Last year was like the upper half of an hourglass, with the fat part at the beginning of the year and the lean part at the bottom or choke point. This year, we're looking at the bottom half--the leanest part at the beginning of this year with the better, more expansive part in the second half."

Preempting inflation before it became an even greater distortionary force in the economy largely avoided the sharp and ubiquitous inventory and employment corrections associated with prior recessions, said Littmann, "Similarly, by avoiding rampant inflation, mortgage delinquencies and auto repossessions, the business and personal bankruptcy cycle have been dampened."

While some economists are yet to share his optimism, he said that the cumulative effects of the central bank's injection of liquidity and lower interest rates, the prospects of stimulation from tax relief and lower gasoline/natural gas prices should reverse the factors most responsible for the current slowdown.

He said that U.S. GDP should rise by 1.7% and inflation should fall below 2%. While auto sales are likely to be down 3% from last year's record setting production pace, he pointed out that Comerica's "Auto Affordability Index" is at its best level in 22 years. From a bottom-line stand point, such an auto sales rate would still qualify as the second-best year in history, he said.

"Actually, the auto industry is looking at some mighty impressive fundamentals, if it can just get by this year," he said.

Littmann also described his firm's important forward-looking predictive indicator, known as the "Recession Watch Index." It showed the probability of a U.S. recession occurring over the next 12 months had dropped to 17%, the best level in nearly 1.5 years. This figure is down from 39% in the first quarter and down from 45% in the last half of last year, he said.

Littmann contends the economy is capable of even greater long-term growth than seen in the last decade. "I believe we're poised for blockbuster growth," he said, noting burgeoning global markets for U.S. output, favorable U.S. demographics and the effects of accelerating technology and productivity. "I think this glorious economic expansion will transcend the profound slowing of the year's first half."

Michael Flannery, political editor for CBS News, Chicago, provided a look at voters' perceptions of President George W. Bush's first 180 days in office and the challenges he faces following last year's election mess. Noting that Bush has a 62% favorable rating, he pointed out that "this is a moderate balance on the razor's edge," as every president during the past 50 years with the exception of Clinton exceeded 60% after six months in office.

Citing a Gallup study in which voters were asked who they most trusted to handle seven specific topics, Flannery noted the Republicans scored better on only inflation and taxes. "Bush is modeled after Reagan, but he lacks the superhero quality of the 'Great Communicator' to reach through the TV screen to the masses. He has to lead public opinion. He's passed up the opportunity to sell his politics and himself."

Asked about the economy and its impact on the 2002 congressional elections, Flannery said that "it must be strong by next spring for it to percolate through public discussion before election time."

In addition, the meeting's program also examined lean manufacturing issues and a CISA International program on the basics of exporting.