Masonry Magazine October 1971 Page. 15
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THERE IS NOW INCREASING OPTIMISM about the business outlook among government and business economists. They expect the recovery to speed up even faster than they did a month ago. These analysts have taken second looks at the President's New Economic Policy and feel that the modest pre-August upturn in the economy will now be very brisk. The extra gains will be evident in this quarter -and will accelerate through 1972 and beyond.
To be sure, there are still doubts over parts of the programs the inflation curbs. But even here, government and industry analysts are optimistic that real progress is now being made.
THE PLUSES IN THE PICTURE JUST SEEM TO ADD UP to more zip these days. The experts were cautious right after the President dropped his bombshell. They were saying that these bold moves were bound to stimulate the economy. But, like everyone else, the economists were unsure of the precise impact. Many of the first doubts seem to be gone now. The coming spurs to business look even stronger. Officials note that the ground-work for a fast upturn had been laid before Nixon's dramatic moves-though it didn't get rolling. Now, income-tax reductions will generate the momentum needed for a big surge.
The figures don't show much of a speed-up yet, to be sure. Most of the response to Nixon's policy has shown up in big car sales not surprising, given the savings from the freeze and the proposed excise-tax repeal. But other sales have been edging upward and should begin to pick up speed now.
THE NEW POLICY IS RESTORING CONFIDENCE of consumers and businessmen. There is a dawning belief that the vicious inflation is finally being curbed. Consumers may well spend more now that they need worry less about prices. The personal savings rate-long at record levels-seems in for a big drop.
INVENTORIES ARE POISED FOR A SIGNIFICANT TURN-AROUND before year-end. Sales by businesses have been exceeding inventories for several months now. Some accumulation can be expected in response to stronger consumer buying. The runoff of strike-hedge steel stockpiles should end some time this fall.
Businessmen are reviewing spending plans for new plant and equipment. They will need more capacity, as rising consumer spending boosts orders. But most of the impact from capital spending won't be apparent until the spring of next year.
ALL THIS MEANS A STRONG EXPANSION is finally getting under way now. Even economists who were pessimistic for most of the year believe that now. The sluggishness of the year's first half is clearly a thing of the past. From now on, you will see the vigor and bounce of a classical recovery.
WE'RE HEADING FOR VERY SUBSTANTIAL REAL GAINS now, the experts sayas distinct from the only apparent growth in the inflated dollar figures. But don't expect huge advances in Gross National Product during this fall. Measured in dollar terms, output will still approach earlier projections. But more of the fall gain will be solid activity.. less of it price rise.
Next year, the real gains will be substantial. Growth will likely top 6%, well above the rate in store for this year.
FASTER ECONOMIC RECOVERY FORESHADOWS big productivity gains in 1972. The stage was set for a surge by industry's strenuous cost-cutting efforts during last year's recession-efforts designed to preserve profit margins. The mild first-half business gains helped lift output per manhour-to a rate above the long-term average of 3%; rising sales spread overhead costs over more units of output -cutting unit costs and increasing efficiency.
And now the even faster business expansion that looms will increase productivity further. The rate could soon top 4%.
CORPORATE PROFITS WILL BENEFIT GREATLY IN 1972 from the productivity gains. Economists note that pre-tax profits usually surge in a recovery. They have not so far, because this has been such a slow expansion to date. In fact, profits relative to total business activity are the lowest since 1938. But rising sales and efficiency will be widening profit margins. And the restored investment credit will further fatten the after-tax net.
Pre-tax corporate profits have advanced by 35% during the first year of earlier recoveries. Such substantial spurts have been by no means rare. In 1972, net profits could well increase to over $105 billion from this year's $84 billion.
UNEMPLOYMENT WILL REMAIN A PROBLEM through the rest of '71 and "72. The most optimistic Administration projections see a rate at 5% by summer. But many analysts feel the U.S. will be lucky if the rate nears