Masonry Magazine July 1967 Page. 8
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THE BUSINESS OUTLOOK
THE BUSINESS OUTLOOK SEEMS INCREASINGLY BRIGHT as the third quarter of 1967 rolls on. Economists-government economists, especially-are very optimistic about what lies ahead. They are still cautious in estimating the gains they see. But they are now more concerned about the possibility of a brand-new inflationary surge than of a recession or even a sluggish rise.
The forecasters concede that the zip they are expecting has not yet made itself felt. It is clear now that the summer will bring only a moderately faster business tempo. But the fourth quarter will be strong-quite boom-like, in fact.
THE FIRST-HALF BUSINESS PAUSE
THE FIRST-HALF BUSINESS PAUSE WENT DEEPER than the analysts in the Capital had expected. The inventory workdown, for example, has lasted longer. Home-building is only just beginning to show vigor. And consumer buying has been restrained. All in all, the hesitation in the civilian sector has been offset by substantial strength in government spending-especially defense.
But now the private part of the economy is reviving fast:
-The inventory overhang will be worked off by summer's end, and won't be a drag on production. Output will be rising.
-Business spending for new plant is turning up. The first-half dip, though slight, contributed to the recent pause.
-Consumer buying will show new oomph from the rise in jobs and hours worked. The current extra-high savings rate is bound to get back to normal to bring a spurt in buying.
-Credit conditions will be kept nicely easy indefinitely.
At the same time, government spending will be rising, too. Washington will be pouring out more for Social Security pay raises, education, etc. And the states and localities will continue to expand their expenditures as in the past.
A TAX INCREASE IS NOW AN ABSOLUTE NECESSITY
A TAX INCREASE IS NOW AN ABSOLUTE NECESSITY, the economists think, one that takes effect January 1 or sooner. This is central to their policy prescription for the expansion that's coming. Without one, the pluses that are likely will get out of hand, and inflation will follow. But tax action would offset these forces, curbing excess demands without slowing recovery.
Will Congress vote a tax hike? The betting in Washington is yes, despite grumbling and calls for spending cuts. The choice is between higher taxes and tight money. Congress will shun a money squeeze that can clobber home-building.
HERE IS THE KIND OF FIGURES THE EXPERTS ARE USING
HERE IS THE KIND OF FIGURES THE EXPERTS ARE USING to give dimension to the trend they see. The figures show gains in Gross National Product-total output of goods and services-in annual rate of increase by quarters. (You don't have to be an expert to get the drift. A quarterly comparison conveys the relative gains expected, using January-March as a benchmark.)
The course of the year is now plotted this way:
-The first quarter brought an increase of $4 billion a year.
-The second period, just ended, saw a $9 billion climb.
-The current quarter is expected to generate $13 billion.
-And the last three months will see a $17½ billion surge.
THERE ARE SOME DISSENTERS FROM THE OPTIMISM
THERE ARE SOME DISSENTERS FROM THE OPTIMISM that is now the dominant view among economists. Some forecasters detect a lack of confidence among consumers; they feel that this argues against a step-up in buying or a drop in the savings rate. Others feel that the recent rise in long-term interest rates is bound, in-time, to reduce the flow of mortgage funds and keep home-building from recovering. Still others expect industry's spending for new plant to show very little vigor the rest of this year and all through 1968.
None of these experts sees a recession, to be sure. But they think that fears of inflation are exaggerated. They would go slow in advocating a tax increase at this time to keep all options open. They do not see a need to return to a policy of tight money, even with the huge Budget deficit.
To repeat, though this is only a minority view.
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MASONRY
July 1967