Masonry Magazine June 1966 Page. 11
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OFFICIALS IN WASHINGTON SEE NO END TO TODAY'S BOOM any time soon, despite the recent, less vigorous showing of some key business indicators. There has been a definite slowing in the upsurge- there's no doubt of that. But economists feel that powerful expansionary forces are still operating and still pose a threat to inflation the rest of this year... and in 1967. You will see some steps to slow things up- mainly somewhat tighter money.
The signs of a slowing in business are now too numerous to ignore. Auto sales are one... stock-market easing a second. Then, there is the decline in new orders for durable goods and the smaller rises in income and industrial production.
Some of the easing may reflect flukes. Durables orders jump about. Income and output were influenced by strikes in coal. And auto sales may have been affected by the talk of safety. But, certainly, some of the easing is real and stems from a drop in demand from the hectic pace of the last six months.
BUT THERE IS STILL PLENTY OF OOMPH REMAINING
by ordinary standards. Some of the strongest lift-factors of the past nine months are still vital. Business spending for inventory and new plant is still climbing rapidly; the President's request for a go-slow won't show in the figures for months. The government's outlays for Viet Nam have not yet reached their peak level. And consumer buying isn't flagging-in color TV... appliances... soft goods, despite that reduced interest in autos. Incomes are still rising solidly.
YOU'LL SEE $12-$14 BILLION-A-QUARTER GAINS
in Gross National Product-total output of goods and services-against the first quarter's $17 billion. That would be a big drop... but no surprise. The recent rate couldn't last. But, net, even the slower pace would impose too much strain on the economy, say many analysts especially the credit-controllers at the Federal Reserve. We have virtually reached the limits of our labor, plant and money resources. To a very large degree, smaller gains may reflect inability to produce more.
There's still worry about price rises, which are NOT slowing down at retail. The pause in industrial prices may be only temporary, too. The war in Viet Nam could require a jump in spending-and a bigger load on the economy. And a rash of union bargaining will give a big push to labor costs in 1967.
THE ODDS AGAINST A TAX RISE HAVE NOW RISEN
to the point where many officials in Washington say that increases are virtually dead for this year. The slower pace of expansion during April and May is the reason, of course. It was all the President and his advisers needed to confirm their decision not to ask Congress for action. But now the White House has the support of most private economists as well. They, too, now prefer to "wait and see" whether the economy speeds up again and whether the costs of Viet Nam zoom.
Corporate taxes will jump sharply this year, even without a tax increase. It's estimated that payments will shoot up by $6 billion-or 23%-to $32 billion. Higher profits in 1965 are one reason. The speed-up in payments to put business more fully on a pay-as-you-go basis explains a lot, too. This also helps explain why many firms are short of cash.
FEDERAL ECONOMISTS AREN'T AS GLOOMY
OVER PROFITS as the stock market appeared to be earlier this spring. They discern no terrible squeeze coming. As noted, they do not see any recession ahead. The experts doubt that sales volume is going to level out. And they do not assume that industry is at or near plant capacity limits and thus, cannot turn out goods any faster.
Government analysts point out that capacity is still growing rapidly extending the limits of output. And the betting is that spending for Viet Nam will keep rising and stimulating business. In addition, the new plant... being more efficient... helps keep productivity growing. Net-the forecasters look for solid gains... though at a slower rate than in 1965.
VIET NAM PERSPECTIVE:
Sooner or later, all efforts to project the trend of business come back to the course of the fighting in Southeast Asia. No decision has yet been made as to whether spending in the new fiscal year will level off somewhere near current rates, or continue to climb rapidly. The question is now the (Continued on page 26)