Masonry Magazine May 1971 Page. 15
theWASHINGTONire...
THE FIRST SIGNS OF A STEP-UP IN CONSUMER BUYING-the key ingredient of a solid recovery that has been absent up to now have started to appear. Latest figures show that spending has clearly quickened since late winter. But economists say the evidence of renewed outlays is still very tentative. The quickening in activity could easily slacken again. Even if it doesn't, the rate of rise may not be enough to cut unemployment much or zoom output.
The pre-conditions of a buying surge have been present for many months. Personal income has been climbing steadily-mainly because of rising wages. The end of the surtax, plus higher tax exemptions, have lifted workers' take-home wages.
But consumer confidence has been lagging. The worry about losing jobs, the strong desire to protect against persistent inflation through greater savings, and an uneasiness about the war and unrest are explanations for this pessimism.
MANY FAMILIES ARE NOW MORE OPTIMISTIC about their economic prospects as well as those for the economy, over-all. Confidence has been rebuilt-to a moderate extent, at any rate by the year-long drop in interest rates, by the greater availability of money and by a steadily rising stock market. Recent spending surveys show a definite improvement in consumer's sentiment.
New sales gains confirm this. They suggest that the 1970 recession ended with the first quarter and that the hoped-for upturn in business activity has now-finally begun.
* Auto sales, which have been recovering from last Fall's shut-down at General Motors, have been strong since late March..
* Easter store sales were brisk-running up to 10% ahead of last year's pace even after full allowance is made for the fact that the holidays came several weeks later this year.
* Sales of color TVs also have been showing signs of strength.
THE RECENT QUICKENING MAY MARK THE START of a satisfactory expansion. It's what economists think a solid recovery looks like in its early stages. But some analysts are still skeptical about the vigor of the budding upturn. They feel it still is much too early to assess its strength or durability. Good auto sales were expected after the strike. Sales contests added push. And a lot of the non-auto gains came in stores offering price concessions.
Economists in government and in industry point out that the Christmas sales picture also looked very promising. But it failed to carry through into the months after the holidays.
MANY ANALYSTS ARE KEEPING AN OPEN MIND as to the activity now ahead. They want to see whether the consumer continues to spend at recent rates... whether business spends more for new plant and equipment... whether firms will begin stockpiling of inventories .. before coming to any final conclusions.
They want to keep their perspective on the big first-quarter jump in Gross National Product-total output of goods and services. Most of the $281½ billion increase reflects the auto rebound. It was welcome, but fell short of official expectations.
CHANCES OF FURTHER GAINS IN OVER-ALL ACTIVITY are now considered good. From now on, the pace of activity should quicken gradually through summer. And the speed-up should accelerate and become quite pronounced by the fall.
All this would be setting the stage for a very brisk rebound in 1972... the "very good year" promised by President Nixon. This is what the stock market seems to have been forecasting.
ANY ADMINISTRATION SHIFT TOWARD STIMULATION would have to be carefully measured-and moderate. On the Budget, for example, a form of the gimmickry used by all Administrations may be a partial solution. The stimulation could come through programs that lend the government's credit to housing or anti-pollution projects that are financed outside the Federal Budget. And, in the case of monetary policy, any step-up which the Administration can convince the Fed to make is likely to be fairly modest. The present target of a 5%-plus a year in money supply growth will be increased... but only slightly.
THE DECLINE IN INTEREST RATES SEEMS TO BE NEARING an end. Indeed, the cost of borrowing at banks has already begun to climb. As the economy continues a moderate advance, the rise in money costs may actually quicken. But very few analysts anticipate a return to the record high rates of 1970, or the accompanying credit crunch that squeezed consumers and businessmen.