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Overview the present economic recovery is now about nine months old and is likely to continue for the remainder of 1983 and into 1984, although the rate of recovery will slow considerably from recent months. Thus, despite the sharp growth rate during the second quarter of 1983, the recovery is likely to be relatively moderate. The outlook for 1984 and beyond depends principally on interest rates—any significant rebound in rates above present levels would likely slow or stop the recovery within six months despite the fact that most of the other underlying forces remain favorable for continued recovery. In my judgment, preventing higher interest rates, and in fact, encouraging somewhat lower rates, will require further adjustments in the administration's policy mix. This should include additional expenditure cuts and tax increases designed to reduce future deficits as well as a continued accommodative monetary policy.

Proposals to create a formal, comprehensive U.S. industrial policy are now receiving wide attention in Washington and in the press. Moreover, the continued relatively weak performance of many manufacturing industries, along with ongoing rising import penetration into U.S. markets, is likely to make it a topic for presidential electioneering.

The financial decisions of American consumers are swayed by a multitude of forces. Business cycle fluctuations and vagaries in fashion are short‐term influences. Long‐term determinants include changing demographics and structural economic shifts, such as double‐digit inflation, abnormally high borrowing costs and Federal economic policies. Because of their collective effect on consumer spending, saving and borrowing habits, these developments foretell profound strategic implications for American business in the 1980s.