Masonry Magazine September 1967 Page. 13
theWASHINGTONvire...
FORECASTS OF A FALL BUSINESS PICK-UP ARE COMING TRUE-briskly and convincingly. Just about all the economic indicators show, unmistakably, that the tempo of industrial activity is quickening. The growing concern now is that the pick-up may prove to be too rapid-not too slow. Inflation is regarded as the more immediate danger-no longer just a potential threat. This is why President Johnson is fighting so hard for his embattled surtax.
The strength is appearing in just about every area:
-Personal income has been leaping, expanding buy-power.
-Retail sales have been rising smartly, with autos leading.
-Home-building has been making big gains in recent months.
-Factory output has turned up, after many months of slide.
-Employment is setting records. Joblessness is below 4%.
-Profits did better in the second quarter than in the first.
The strength in total sales-business and retail-has helped bring the inventory adjustment close to its end. The shift from rapid accumulation to modest liquidation-the prime cause of the first half slow-down seems just about to have run its course. Now, a return to even modest accumulation will give the business improvement an extra upward kick.
ECONOMISTS LOOK FOR REALLY BIG GAINS IN TOTAL OUTPUT this fall. For one thing, Federal spending will be a big stimulator, despite Administration and Congressional efforts to cut the total. The consumer will be spending even more of his higher income-and saving relatively less. And, as noted, the turn-around in business inventories will add the final touch to demand.
These figures reflect the forecasts for the rest of 1967:
-The second quarter saw total output rise $8 billion-plus. (This was up from the first-quarter's draggy $4 billion.)
-The third quarter is due to bring a $12-$14 billion rise.
-The fourth quarter is down for $16 or $18 or $20 billion. This would be as big as the spurts of inflationary 1966.
There will be some pauses and hesitations along the way. Every sector of the economy can't leap ahead every period at these very rapid rates. Government officials wouldn't want this: It would mean boom-and-bust. So they would welcome a few less bouncy figures. But they stress that any such softer statistics would not diminish the buoyant outlook.
THE DANGER OF INFLATION IS GROWING MORE PRESSING and disturbing-almost week by week. The indexes show this clearly. Consumer prices are making big gains, only some of them being seasonal. More ominous, though, industrial wholesale prices have begun to stir. They were stable through the first half of the year. But lately they have been moving along at an accelerating rate-steel, other metals, trucks, chemicals, plywood, etc.
What worries government officials and economists is the fact that these price creeps began at a time when demand for goods and services was only just so-so. What will happen now that demand is quickening and a brand-new round of wage increases is starting to percolate throughout industry, line by line?
WASHINGTON FEARS THAT A "GET-IT-WHILE-YOU-CAN" PSYCHOLOGY may now be developing with respect to price hikes. The worry is that such an attitude will spread through the economy and accelerate the climb in the indexes. Recently revised statistics show that industry's unit labor costs increased substantially more than was thought earlier. First estimates had put the gain that occurred between the second quarter of 1966 and the second three months of 1967 at 4%; now, the statisticians calculate the rise at 52%.
In other words, industry is being pinched even more from increasing labor costs and shrinking profits than was originally assumed. Pressure to raise prices, to protect or restore margins, is now correspondingly greater, too. (Continued on page 27)