Masonry Magazine September 1966 Page. 15
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THE FIRST BUSINESS FORECASTS FOR 1967 ARE OPTIMISTIC on the whole-but cautiously so. Most economists expect continued gains next year at a slower rate. Their conclusions are still very tentative, to be sure. The analysts are a lot less confident of their forecasts these days than at any time since the current expansion began more than five years ago. There are still too many uncertainties in the picture-too many important unknowns.
The biggest unknown is Viet Nam. Defense spending can now make the difference between rapid expansion, slower growth, a leveling, even a slide. No one expects spending to flatten out, of course. But just how fast will it climb? The economists are assuming that the build-up is going to keep rolling along. The word in Washington is 400,000 men by year end and maybe 500,000 before 1967 is over. If this is true, spending should go up at a $2 to $3 billion a year rate each quarter in 1967 and be very stimulative.
But the analysts also expect that the higher spending will be accompanied by tax increases-perhaps this year or to be tied to the supplementary money request the President will send to Congress in January. They will offset some of the spur that the spending provides, a much-needed damper.
OTHER SOURCES OF THIS YEAR'S ZIP MAY BE LOSING some of their oomph, as well. Consumer spending is one example. It tends to rise with incomes, and incomes are going up. But prices are rising almost as fast, meaning that real purchasing power may be growing slowly. Higher prices may offset the appeal of safety items in the new cars. Even color TV sales could slow.
Some of the other potential soft spots include:
-Home-building: Tight credit could cut it back some more. Demand for furniture and appliances would be curbed, too.
-State-local spending: Interest rates are too high for many government units. Numerous projects will be postponed.
-Plant expansion: Scattered early reports contain a hint of leveling off at the record rate to be reached this fall.
Net, defense spending will outweigh all these soft spots.
THE CONSENSUS HOLDS THAT REAL OUTPUT WILL CLIMB 32% or 4% in 1967. That's the rise in value of goods and services, not counting higher prices. By contrast, the gain shaping up for the current year should run about 52%. Actual dollar increases will turn out larger because of the price inflation. Gross National Product-total output-will go up 6% to about $780 billion, an increase of $40 billion. This year's gain will be $65 billion or 8%.
Some experts, a minority, are not this optimistic. They lay more emphasis on the bearish items. Autos, housing and plant expansion could hit the lower limit of expectations. Viet Nam, though rising, couldn't carry the expansion alone.
Economists fear that a rash of strikes will check momentum. Shut-downs can slow related lines, cut incomes, make folks nervous. Result: Little or no real growth during 1967.
THE PRESENT EXPANSION IS BOUND TO END IN A RECESSION-later, if not sooner. That's the feeling of more and more forecasters even many who are basically bullish for next year. The idea that the upsurge will continue for many years with occasional slowdowns but no slumps-is losing support. It dominated thinking for awhile before Viet Nam touched off inflation. The economists were impressed with the beautiful balance of the expansion. Sales and output meshed. Union demands were moderate. Prices held stable.
Now, though, the beautiful balance has been wrecked. Costs and prices are out of line. Excesses are developing. Few now see an indefinite