Masonry Magazine January 1966 Page.21
Washington Wire
(Continued from page 16)
ing for new plants will edge up, probably more than investment in inventories will fall. And consumers will spend their larger incomes.
THERE IS NO SIGN THAT TODAY'S MONEY TIGHTNESS IS EASING yet. Many officials at the credit-controlling Federal Reserve still see too much oomph in the economy too much danger of inflation to back away at this time. They want to see a slower increase in total demand for goods and services before they let the money supply expand again. Peace could bring the shift. Or tax hikes could do it. But the Fed isn't yet convinced hikes are coming.
There could well be a switch in weeks ahead if those soft spots now developing should unexpectedly begin to multiply more rapidly. The money managers are not talking about this openly. But they are very alert to the possibility. They do not want to over-stay tightness for even a month or week.
Until policy is reversed, interest rates will not fall very much. Declines in bond yields reflect an end to fears that had pushed them to unrealistic highs. But bank-loan and other rates will not be able to drop until well into 1967.
TIGHT MONEY WILL KEEP HOME-BUILDING DEPRESSED for many months more, despite intensive government efforts to direct more of savings to the field. The new ceilings on rates banks can pay savers may turn funds to mortgage lending, but the trouble continues to be that business borrowers are still getting the lion's share of the supply because they offer the best return. And federal efforts to raise money with which to buy mortgages-by selling U.S. securities in the market-have drawbacks: They push up interest rates.
The supply of mortgage money may increase slightly, but not enough to keep housing starts from falling further. They are now 43% below the peak of three years ago. Yet figures on building permits hint that further slackening is coming.
zinc, rubber, lead, hides, etc. They shot up too far, however, because of strikes and other special factors. Their ebbings-as those flukes clear up-need not signify weakening demand.
Prices of fabricated items will still keep rising because they will feel continued pressure from increasing wage and other costs, as well as heavy demand. Consumer prices will go up steadily, too, during 1967, though at a slower pace.
INDUSTRY'S LATEST PROFITS FIGURES ARE SURPRISING Federal economists. The earnings being reported, though only moderate by past gains, are better than expected. Gains of over 30% above a year ago were made in the third quarter in TV-electronics. Jumps of 10%-plus were common in many key lines. There were losses in chemicals, aerospace, cars-but they were fairly few.
Forecasters still expect to see leveling-even declines-next year, even though they have miscalculated up to now. They suggest these reasons: Sluggish sales climbing wages and steeper income taxes keener price competition.
SUPPOSE THERE IS PEACE IN VIET NAM SOON or talks that mean easing in the intensity of the fighting? What would happen to the economy then? The President's economic advisors are fairly optimistic about the trend of business activity. They can see the possibility of a slowdown-but no jolt... and no recession. There are several reasons for this confident forecast.
Reconstruction in Viet Nam would require several billions.
Spending for the Great Society would be speeded sharply.
Another round of tax cuts would be enacted as stimulants.
Some experts are not this optimistic. They are concerned that there will be a jolt. Big lay-offs could occur. But they admit the dislocation will pass fast-in a few months.
DON'T OVER-STRESS THE LEVELING IN WHOLESALE PRICES of recent months. Government price experts don't yet feel that it proves inflation is abating. Farm commodities account for much of the slackening in the over-all indexes; but they reflect weather, world needs, and federal policy-not U.S. demand. Industrial materials have weakened copper,
MASONRY
Nov./Dec., 1966
THERE'S AN OPTIMISM ON VIET NAM IN WASHINGTON that refuses to die, despite the repeated rebuffs that keep coming from Hanoi and Peking. The hopes rest heavily on the better military situation. And now that the U.S. elections are over, it is felt that the Reds have nothing more to wait for. But the fighting may yet intensify to encourage (Continued on page 34)
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