Masonry Magazine July 1969 Page. 18
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THE SECOND HALF OF 1969 WILL SEE THE LONG-AWAITED SLOWING in business activity. That's the forecast that more and more analysts are making these days, with more and more confidence. They now discern what they regard as persuasive evidence that the many-sided effort to brake the boom is starting to bear fruit. Some even see a modest but growing chance of a recession.
At the very least, the economists expect a virtual cessation of real growth, to become clearly apparent by fall. Dollar measures of sales and output will keep on moving up, to be sure. But gains will reflect higher prices almost entirely.
THE EXPERTS FIND INFLATION A TOUGHER NUT TO CRACK than expected. Officials of the Nixon Administration never thought the job would be easy. But they had hoped for more success in braking the price rise by this time. They haven't lost faith in their gradual approach. Even if the government economists are wrong, you aren't likely to get much more drastic measures.
Nixon advisers don't hide their disappointment at the slow progress against inflation over the last six months. The price indexes have kept climbing fast. At the consumer level, meat, mortgages, and rents have led the way. At wholesale, it has been farm commodities, metals, and lately chemicals.
But what bothers officials most is the unquestioning belief of businessmen that prices will keep rising indefinitely. Industry wants to build plant not needed now before costs go higher. This psychology, though, must be broken before the inflation becomes so deeply rooted that it lasts for years.
OFFICIALS STILL THINK THEY ARE ON THE RIGHT TRACK to disinflation. They are convinced that they have now worked out the right mix of policies to restore a substantial degree of stability without causing a recession. The U.S. Budget is tight. We'll have a $6 billion surplus for fiscal 1970. Credit policy is biting. Money for expansion is expensive and hard to get.
These policies are now producing specific results:
-Consumer income is rising more slowly, as is employment.
-Retail sales have been sluggish, despite a gain in autos.
-New orders for durables turned down several months ago.
-New housing starts have declined steadily since January.
-Spending for new plant is due to rise much more slowly now.
Real growth of the economy-washing out the impact of price increases was less than 3% in the first half of this year. That compares with the 6½% shown in the same period of 1968.
THE FORECASTERS STILL KEEP URGING PATIENCE in waiting for the desired reduction in inflationary pressure to appear. They have been singing this refrain for months. Now they argue that it would be foolish to weaken just before the target is reached. The Chairman of Nixon's Economic Advisers stressed the point again recently in a speech to leading American bankers.
He noted again that it generally takes about a half-year after money turns tight before the economy begins to respond. That "lag" period should be winding up fairly soon now.
THERE HAS BEEN ONE SHIFT IN OFFICIAL STRATEGY since the big drive to check inflation was begun. The authorities no longer talk "gradualism." They are not so prone any more to assure that there won't be a recession. This soft line, they have learned, only keeps inflation expectations alive. It is to blame, to a considerable extent, for the persistence of inflation.
Now, the officials talk of getting tough, of taking whatever measures are needed to bring inflation to heel. They know that home-buyers, small business enterprises and the local governments would suffer, but say the risk is necessary.
TALK OF CONTROLS ON PRICES, WAGES, AND CREDIT IS ONLY THAT, so far. Checks with the Federal agencies that would do the planning for any curbs and draw up the necessary legislation-disclose no work being done at all. What's more, a Congress that has been so reluctant to extend the 10% surtax isn't likely to approve a far more distasteful restraint such as controls. Controls will get real study in three months, only if present policy falls.
How, then, do you explain all those recent hints of direct controls, which made them appear so imminent? They were designed mainly to exert