First Security Bank believes 1989 will be a reasonable year for the national economy and a great year for Utah's economy.

After exhibiting new vitality in the second half of 1988, the local economy should show "solid economic progress," First Security economist Kelly K. Matthews told Utah business leaders Tuesday.Matthews spoke at the bank holding company's 1989 Business Outlook Symposium at the Marriott Hotel.

"Contrary to misinformed `street talk,' we are convinced that Utah's best years still lie ahead," Matthews told the gathering.

Utah's Index of Leading Indicators turned in solid gains in 1988, showing an inflation-adjusted increase of 3.9 percent as of November, he said.

The cost of living along the Wasatch Front fell 1.2 percent locally last year, he said, compared to a 3.5 percent increase nationally. Local housing costs were down 3.3 percent and a third-quarter survey by the American Chamber of Commerce Researchers Association showed Salt Lake-area consumer prices to be 97 percent of the national average and housing costs only 90 percent.

This lower cost of living, he said, partially offsets the state's wage rates, which are 12 percent below the national average.

Matthews said First Security doesn't expect the deflationary trend in the local cost index to continue throughout this year, but he believes local price hikes will be minimal.

Terming "educational excellence" the key to Utah's prosperity in the 1990s, Matthews said Utah can use it to unlock the opportunities and wealth potential necessary to create good jobs for the expanding population. If successful, he said, Utah could become the "Japan of the American West."

First Security Corp. Chairman Spencer F. Eccles, also addressing the company's 21st annual symposium, assured Utah business leaders that the national economy will come in for a "soft landing" this year.

The national economy will be buffered by gradual Federal Reserve tightening of credit and higher short-term interest rates that will contain inflation, stabilize the dollar and bring about slower, but not recessionary, growth, Eccles predicted.

His scenario is possible if inflation is held under 5.5 percent, the dollar-to-yen exchange rate doesn't fall below 115, short-term interest rates don't rise more than 1 percent above current levels, and economic growth slows to 2 percent in the second half of the year, Eccles said.

The First Security chairman declared that scenario "entirely do-able and reasonable . . . with a little luck."