US Economy Has Trouble Shaking Lethargy

WITH only seven weeks before the election, George Bush's legs are sinking into soft economic sands.

Economists now believe the president will be hard pressed to point to improvement in the economy between now and Nov. 3. Instead, the economy will continue its weak churning.

"There is no report out there that will be unquestionably good, where President Bush will be able to say: `Yes, the economy made its turn, and this is the beginning of the next four years,' " says Donald Ratajczak, chief economist at the Georgia State University Economic Forecasting Service.

Rather, it is likely that the economy in October and early November will look the same as it does this week. Government statistics show weary consumers (retail sales in August were down 0.5 percent), doubting business managers (industrial production was down 0.1 percent in August), and wary investors (a whipsawing stock market).

"There is no opportunity to change that between now and election day," says Brian Fabbri, chief economist at Midland Montagu Economics, a Wall Street brokerage firm.

Because the short-term economic statistics show little bounce, economists have been scaling down their forecasts for the third quarter's gross domestic product, which will be reported on Oct. 27. Currently, the consensus forecast, according to Globescope Publications, of Glen Carbon, Ill., is for 1.8 percent growth in the third quarter. Many economists, however, now believe it could be even weaker. "There's just not a lot of oomph in it," Mr. Ratajczak says.

The soft economic news will make it difficult for the president during any coming debates to convince voters that the economy is not in as bad shape as Democratic challenger Gov. Bill Clinton of Arkansas claims. Governor Clinton, for example, will be able to show that per-capita income has barely risen over the past 2-1/2 years. An individual making $13,996 (in 1987 dollars) in the fourth quarter of 1988 is now making $14,006. "Wage in-creases have been held to very small proportions," says Bob Dederick,

chief economist at Northern Trust Company, a Chicago bank. This wage stagnation is a theme running through most Clinton speeches. Campaign slows economy

Some businessmen believe the campaign itself is contributing to the slowdown. "A lot of people don't want to commit themselves to orders until they see who gets elected," says Roger Hannay, president of Hannay Reels, a Westerlo, N.Y., firm that manufactures industrial reels used for hoses and cables. Mr. Hannay compares the political uncertainty to "closing the shutters for a hurricane."

Hurricane Andrew, in fact, is likely to have an impact on next month's statistics. Economists, for example, expected the September payroll-employment numbers released in early October to show that workers are putting in longer hours, a trend that has been going on for the last several months. However, it is likely the business disruption caused by Andrew in south Florida will adversely affect these statistics. The rebuilding resulting from the hurricane will not be reflected in the economy until after th e election.

Unfortunately for California, the rebuilding activity tied to the Los Angeles riots has not begun to boost that state's economy either. "The area where the riots took place was already a depressed area," says Fred Cannon, a senior economist at the Bank of America, "and strong areas tend to rebound faster than weak areas."

Mr. Cannon says he expects that some California businesses, particularly tourism and the apparel industry, will benefit from the currently weak dollar. When the dollar is weak, it allows United States exporters to price their goods more competitively. A significant amount of California's exports, however, flows to Japan, which is in an economic trough as well. Nationally, exporters are also hard pressed since few overseas economies are growing. (See story on page 8.) Free trade could help

If Congress approves the proposed free-trade agreement with Mexico and Canada, California businessmen may also reap some new orders. Trade with Mexico is already growing 20 percent a year. "This has been an offset to other problem areas in the state," says Cannon.

But unless there is some dramatic improvement in the US economy, Cannon says he expects that the California economy will continue to shrink until mid-1993. Last month, California lost 34,000 jobs, mainly in the defense and construction industries.

The decline is sapping business confidence. As a result, Cannon says, California businessmen are cutting out capital expenditures and "just trying to hang in there to see if things get better." Businesses cautious

Such caution is spreading nationally, especially among small businessmen. At Kiva Container, a cardboard-box manufacturer, orders are "soft," reflecting "no great growth in any of our customers," says Ruth Stafford, secretary-treasurer of the Phoenix company.

Mrs. Stafford, however, says that small businesses are also having trouble getting credit, despite the fact that the Federal Reserve Board recently relaxed reserve requirements so that banks would start to make more loans. "The message has not filtered down to the regulators because the banks are still telling us, `Our hands are tied,' " says Stafford, who wants to get a loan to modernize Kiva's equipment.