Masonry Magazine October 1970 Page. 13
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PRELIMINARY FORECASTS FOR 1971 see only a moderate, unsatisfactory rate of economic growth. Analysts in government and industry believe that business activity may hit a "normal" rate of expansion by the last quarter of next year. But that doesn't necessarily mean that the country will get back to full employment then. The present lag below potential may continue.
To be sure, forecasts made this far in advance have to be tentative. Economists aren't even certain that there won't be some further slowing. In fact, a small minority looks for another bit of weakening. But most do not. The forces generally expected to be dominant point to a year of gains.
THE CASE FOR AT LEAST SOME PICK-UP IS STRONG. The looming Federal Budget deficit will help to counter the softness that has generated all the red ink. Further, credit has been getting progressively more available. Thus, housing and state-local spending, both heavily dependent on borrowing, will continue to revive. What is more, the inventory run-offs that slowed the first half are over, though no great accumulation seems likely, either. And consumers will soon be saving somewhat less spending somewhat more.
But strength in heavy manufacturing usually a very vital ingredient in any really brisk expansion will be lacking next year. Economists don't see more than a modest upturn in business investment in new plant and equipment. And they note that defense spending, a big factor in the surge that occurred between 1966 and 1969, is still heading downward.
THE RECOVERY MAY BE SET BACK TEMPORARILY BY STRIKES in months ahead. The impact of the auto union walkout at General Motors could be compounded by disputes stirring in the farm equipment, railroads, and building fields. To be sure, specialized issues make each industry's negotiations unique the fuss over firemen on railroads, for example. But the economy suffers.
For one thing, the auto workers' large gains will encourage other unions to strike for big wage packages, too-meaning more price escalation. The small rise in the Price Index in August reflected dips in the food area. It doesn't mean this is now the pattern or that inflation has been licked.
Finally, those price increases on a wide range of items as well as autos-will tend to shave the real buying power of the higher pay union members are getting. This could make the consumer that much less able to stoke a brisk recovery.
masonry October, 1970
THE FOURTH QUARTER WILL NOT SEE MUCH QUICKENING in prelude to 1971, even if labor disputes are settled fast. There will be some real increases in total output of goods and services-gains in actual physical activity, rather than in dollars that reflect inflating price tags.. but little more. The rate could be 1½% or 2% a year, slightly more than the summer quarter. but far short of the 4% to 4½% that would reflect the econ omy's potential.
With all of the foregoing as background, here is a detailed picture of the economic assumptions on which many companies are basing their budgets, planning. and decisions for 1971.
THE PACE WILL PICK UP AS THE ECONOMY MOVES through the year 1971. At this time, analysts are projecting a year-to-year gain in total output-in so-called real Gross National Product of a bit less than 3%, over-all. This is the key figure to watch the one that washes out price increases. The dollar figure will mislead with a 6¼% rate of rise to $1,040 billion.
YOU GET A CLEARLY BETTER PICTURE when you examine the trend likely within the year the quarter- by-quarter increases in the basic indicators. The farther ahead you look, the bigger the gains. Specifically, the growth expected for the last quarter may be twice as great as that of the first.
The economy may be growing at a normal 4% rate-a- year from now. But there won't be full employment; 4% output growth would only keep pace with the increase in plant capacity and the labor force. The gap between output and the economy's potential would remain just about as large as it is today.
BUSINESS SPENDING FOR NEW PLANT WILL STAY LEVEL for the next two or three quarters, accord- ing to soundings some economists have made. Then, the pace of spending will turn up very slightly. The year 1971 will see increases currently being projected at 2% to 4% in dollar totals. In real terms-net of price increases- there would be very little change, over-all.
Industry generally is operating at less than 80% of capacity. Uncertainty and the high cost of financing are making business management cautious about ex- panding too fast. The utilities, of course, must keep investing at high rates, to catch up to burgeoning demand. Otherwise, plant spending might slip.