Masonry Magazine March 1967 Page. 18
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THE BUSINESS NEWS IS GOING TO GET A LOT WORSE, before it begins to get better. That's now the virtually unanimous view of economists on both industry and government. They believe that the much-talked-about business readjustment is already well under way-though the figures are just starting to show it. The shake-out, though, still seems to have some distance to go.
The most negative reports in so far tell what's going on in manufacturing areas. Industrial production and new orders are declining, indicating that businessmen are finally doing what's necessary to bring top-heavy inventories into line with the quite dreary level of auto and other retail sales.
Sure, housing does seem to be bouncing back, now that money is easing again and this is all to the good. What's more, employment is staying high and personal income has been rising briskly. But some experts don't consider this good.
They fear that some businesses don't fully realize the to retrench-to lower their sights for the next few months. The longer this readjustment takes, the longer the current sluggish, inadequate growth will continue. And the more danger the slide will gain too much momentum to be stopped.
ECONOMISTS STILL HOPE THAT THE BUSINESS TEMPO WILL QUICKEN later in the year, despite all the new evidence of softening of the past few weeks. Much of the latest weakness was anticipated by the various forecasters. A slump can occur, but you can still make a case for a renewed boom next fall. In fact, fears of a resurgence of inflation are surprisingly strong again.
The forecasts of "recovery" are based on these assumptions:
-The inventory shake-out will have worked itself off, and business will be ordering more briskly again. This will expand production, employment, and incomes and retail sales.
-Government spending will keep rising though at a much slower rate than last year. The deficit of $8 billion for fiscal 1968 means stimulation-especially if it turns out bigger.
-Social Security benefits will be expanded substantially at mid-year, without an off-setting increase in payroll taxes. This will be a big addition to incomes and will spur buying.
-And home-building, which plays a big role in the economy, will keep rebounding, helping material makers, etc., etc.
THE ANALYSTST COUNT ON A DROP IN THE RATE OF SAVINGS of consumers to give the economy further lift in the second half. Right now, the typical American family is on a thrifty kick. In the fourth quarter of 1966, people were salting 5.9% of their incomes away in savings accounts or securities or were paying off debt (a disguised form of savings). But in the third quarter the rate was only 4.8%. More recently, the rate seems to have jumped to 7%. Net, folks have cut down buying by a whopping $10 billion a year or more.
But the record shows that the savings rate does not stay so high for very long. Before too long, it comes down, as the consumer discovers that he needs goods and his fear of job loss fades away. A drop means a buying spurt all by itself.
ALL THIS ADDS UP TO A RATE OF REAL GROWTH OF 4% in the second half. That is a significant gain from the feeble 2% projected during the current six-month period, though it is down, of course, from last year's super-heated 5½. The 4% is all that the experts call for or feel the economy can stand.
If things really work out this way:
-Unemployment will stay low, helped by fewer new workers.
-Retail sales will show vigor because incomes will be rising again, in addition to the effect of the lower savings rate.
-Profits will be better than the pessimists are saying. Net earnings could end up a little ahead of 1966-not behind.
THERE WILL BE A NEW DANGER OF INFLATION in the economy's rebounding during the second half-assuming, of course, that the economists' pessimistic projections prove out. Concern about cuts keeps growing steadily. It may seem far-fetched at this time, with the business so soggy. But the shake-out is seen as short. And the picture can turn around in six months.
The labor unions will still be winning 5% wage increases, just when reviving demand will allow in-(Continued on page 36)
MASONRY
March, 1967