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ECONOMY ENTERS EXPANSION PHASE; MARKET VULNERABLE, PNC ANALYSTS TELL INSTITUTIONAL INVESTORS MEETING IN PHILADELPHIA

 ECONOMY ENTERS EXPANSION PHASE; MARKET VULNERABLE,
 PNC ANALYSTS TELL INSTITUTIONAL INVESTORS MEETING IN PHILADELPHIA
 PHILADELPHIA, June 10 /PRNewswire/ -- The recovery has moved into a true expansion phase but the stock market could be shaken by several events, including the candidacy of maverick presidential candidate Ross Perot, PNC Financial Corp analysts said today.
 "The economic recovery has begun and we've now entered the expansion phase. By expansion, I mean the economy has now reached the level of production that it had obtained at its prior peak," J. Patrick Bradley, vice president and director of economic research for PNC Investment Management and Research, told the mid-year investment briefing of PNC Institutional Investment Service clients in Philadelphia.
 Bradley told the gathering that real gross domestic product would increase by 2 percent in 1992 and by 3 percent in 1993. He also said that consumer spending would grow at 2.3 percent in 1992 and 2.9 percent in 1993.
 "The recovery will be led by consumer spending, just like it always is," Bradley said. He also said that inventory liquidation will help lift the economy. He said that $20 billion worth of inventory has been liquidated over the last three to four quarters. "Replacing that inventory will set the pace for the economy to recover," he said.
 Bradley also predicted that:
 -- Inflation, as measured by the Consumer Price Index, would be 3.3 percent in 1992 and 3.7 percent in 1993. Those figures are down from the 4.2 percent rate in 1991.
 -- Housing starts would total 1.3 million in 1992, a 30 percent increase from 1991, but will remain at that same level next year. He also said new car sales would reach 8.7 million in 1992 and would grow to 9.5 million in 1993. New car sales totaled 8.4 million units in 1991.
 -- The 2 percent projected growth in the economy for this year "makes the economic environment conducive to the creation of 50,000 to 100,000 jobs per month across the country."
 Bradley said this recovery would not match the kind of growth rates that the nation has experienced in previous recoveries since World War II. Bradley said there were several reasons for this moderate but not spectacular growth:
 -- The aging of Americans, which means that savings will increase and spending growth will slow.
 -- Less debt by consumers to make purchases.
 -- The slower real rate of growth in federal government spending on goods and services in recent years.
 Lucinda S. Mezey, vice president and director of investment research for PNC Investment Management and Research, predicted that the stock market, as measured by the Dow Jones Industrial Average, would remain at its current level for the next six months and fluctuate between 3,000 and 4,000 over the next 18 months.
 Mezey said the current level of the market leaves it vulnerable to a 10 percent correction. Mezey said the market is vulnerable to shocks that could cause that correction, such as a major bankruptcy, corporate earnings disappointments and the presidential candidacy of Ross Perot. Perot's candidacy could have that effect on the market because he's a virtual unknown and he's new to the political system.
 Mezey said PNC's recommended asset allocation is 65 percent stocks and 35 percent bonds for a balanced portfolio. Because of the outlook for the market remaining flat over the next several months, "stock selection is the way to navigate," she said, urging investors to look for companies that can grow faster than the average firm.
 PNC Investment Management and Research is affiliated with Provident National Bank in Philadelphia. PNC Financial Corp (NYSE: PNC), headquartered in Pittsburgh, is the nation's 14th-largest bank holding company with assets of $43.8 billion. It operates approximately 500 community banking offices in Pennsylvania, Kentucky, Ohio, Indiana and Delaware and conducts business through additional offices in 16 states.
 PNC's principal banking affiliates include: Pittsburgh National Bank, Pittsburgh; Provident National Bank, Philadelphia; Citizens Fidelity Bank, Louisville, Ky.; Central Trust, Cincinnati; Bank of Delaware, Wilmington, Del.; Northeastern Bank, Scranton, Pa.; Marine Bank, Erie, Pa.; PNC National Bank, Wilmington, Del.; Hershey Bank, Hershey, Pa.; and The First Bank and Trust Company, Mechanicsburg, Pa.
 /delval/
 -0- 6/10/92
 /CONTACT: Linda Wolohan of Provident National Bank, 215-585-5453/
 (PNC) CO: PNC Financial Corp ST: Pennsylvania IN: FIN SU: ECO


CC-JS -- PH031 -- 9008 06/10/92 17:50 EDT
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Publication:PR Newswire
Date:Jun 10, 1992
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