Masonry Magazine February 1970 Page. 15
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There is growing concern over the chances of a recession this year, now that the long-awaited economic slowdown is here. Most business analysts doubt that a serious slide will develop. They see too much latent strength around, ready to spur a pick-up as needed. But the downswing could get out of hand before a lot of damage is done and the right correctives are taken.
Many economists and government officials, too want to see preventive measures taken in time. And, as a matter of fact, such steps are in the works, especially on the credit front.
THE ECONOMY'S FORWARD MOMENTUM HAS BEEN HALTED.
Business activity is cooling off right on the schedule officials had projected. The expansion was braked by anti-inflationary programs- balanced Budgets and the Federal Reserve's very tight money policies. This shows up clearly in the fact that there was no real growth in activity, over-all, in the last quarter of 1969, after the distorting effects of still-large price increases are washed out.
To be sure, this is the point that the Nixon Administration has been trying to reach all along. A dead stop was deemed necessary to crack the entrenched inflationary psychology. But, now that the slowdown is here, the picture looks scary. Officials know that they cannot "fine tune" the economy with any dependable precision. The unexpected can always happen.
SIGNS OF WEAKENING IN BUSINESS CONDITIONS ARE SHOWING UP
everywhere you look these days. New, negative statistics seem to come out every day. Prices are still zooming but this is a lagging indicator, reflecting past pressures. There is really no hint of a revival to be seen in any sector. The government's Index of Leading Indicators which usually set new trends before the economy as a whole... have been pointing down for some months now.
Specifically, here is what key guideposts are showing:
-Personal income is rising slowly. Take-home pay buys less.
-Retail sales have lagged since spring and have even dipped a little, net of price increases. Auto sales have looked especially poor, running 15% to 20% below year-ago levels.
-New orders for durable goods are being cut back sharply.
-Industrial production has been falling since the late summer.
-Lay-offs at car plants... and elsewhere...are getting large.
-Home-building-already in a slump-is heading even lower.
-Profits are slipping as costs rise more rapidly than prices.
MOST ANALYSTS ARE PREDICITING EVEN MORE SLOWING
during the first half of this year. Total output of goods and services Gross National Product will rise at an $8 or $9 billion-a-year rate this quarter, as against $11 billion in the final period of 1969 and $16 billion before that. And GNP will increase even less in the April-June quarter. But all of this even more will be reflecting higher prices. Real output will actually decline.
In itself, this isn't considered dismaying. You need some slack to stop a wage-price spiral. But you don't want it to go too far or to cause a big rise in unemployment. So, many think it is now time to moderate the policies of restraint.
WHITE HOUSE ADVISERS HAVE BEEN CALLING FOR AN EASING
of credit curbs for some time. They have been pressing the Federal Reserve Board to change its constantly tightening policy to one that merely keeps conditions snug by letting the country's money supply grow just enough to meet the needs of an expanding but noninflationary economy. These officials see danger in delay.
Even the President has done some nudging in the direction of ease. The Federal Reserve is supposed to be independent of the Executive Branch. But the prods are producing results.
SUBTLE SIGNS OF EASIER MONEY ARE BEGINNING TO APPEAR,
here and there in the statistics and in the financial markets. They are the kind of hints that classically go with monetary shift-only hints at first because the "Fed" customarily moves with secrecy. Nevertheless, a basic new course is being charted. It will shortly be clear and will showing up in a slight increase in the supply of credit and in a modest decline in interest rates.
The easing will be moderate, at first, for several (Continued on next page) masonry • February, 1970 15