01-25-1988 - Agenda Packet City Council - regular meeting

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122487.1 CITY OF ORONO 1987 CORPORATE REPORT DRAFT OUTLINE INTRODUCTION - 1987 was the fifth year of a growing national economy which continued strong through the fourth quarter of 1967 despite "Black Monday" on October 19th. That one day 500 point loss in the Dow Jones Industrial Average represented the most significant portion of the 35% decline in the value of stocks experienced from the high of 2722 in mid -summer. This rapid decl isle however, had followed an unprecedented rise since the first of 198-1 in stock prices. The Dow Jones Industrial Average at the end of the year was on par with what it was at the beginning -E the year. Current economic indicators continue to indicate growth in the economy however, the predicting indicators show a slowing that should be expected to become a downturn possibly in mid to late 188. Tne United States dollar, which had been slowly weakening during the first three quarters of the year, began to slide after "Black Monday". Events triggering both "Black Monday" and the Substantial slide in the dollar were attributed to the increasing foreign trade and budget deficits. Over. a period of five years the Un.,ed States has turned from a nation with the greatest trade surplus into one with the greatest deficit. Substantial blame for the trade deficit was the rapidly escalating federal deficit. By October there seemed to be no progress by the Federal Government it trying to resolve the issue. Following "Black Monday" and the automat.i^ reductions of the Gramm/Rudman Law in November the Federal government was able to negotiate a reduction package which was translated in December into budget reductions and tax increases for fiscal 1988. At this point the Federal government has not taken the typical. action to try t- bolster the dollar by raising intorest rates. It is apparently hcping that other economic factcrs will stop the Aide. TLe weakening dollar does make U.S. exports --elativeiy 1