Masonry Magazine July 1972 Page. 12
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INVENTORY BUILDING WILL PROVIDE THE NEXT BIG THRUST for the economy this fall. Economists in government and industry expect businessmen to be adding substantially to their shelf and warehouse stocks in the near future the one missing element of the otherwise healthy business recovery. The accelerated build-up will help keep the expansion rolling on into next year.
Inventory growth was weak over the year's first quarter and continued unimpressive in April and May. In the January-March period, inventory investment exerted a modest drag on Gross National Product-total output of goods and services.
ECONOMISTS HAVE GENERALLY BEEN PUZZLED by the lackluster behavior of inventories up to now. It's possible, they say, that the low accumulation rate is involuntary-that businessmen simply underestimated the strength of demand. Then, too, after a period of cost-cutting, businessmen want to make sure that the economic upturn is for real before loosening purse-strings. They want to hold down costs by increasing output without adding to stocks.
But now final sales are accelerating, credit is readily available at relatively inexpensive interest rates, and optimism about the outlook among businessmen has been on the rise. These are favorable signs for the near future.
SO SOME BUILD-UP IN INVENTORIES WILL BEGIN SOON. Indeed, quite a few economists are now convinced that this process is already under way even though it hasn't shown up in the figures yet. They keep getting reports from major companies that customers are now ordering more than current consumption. These firms may have reduced stocks below the point e point consistent with service.
The economy will be getting a nice boost when the inventory turn-around becomes apparent. The impact could be as large as $1.25 billion a month for several months in terms of the increase in Gross National Product or $15 billion a year. That could mean brisker industrial production and more jobs.
Some doubters question whether the thrust will be all that powerful. They don't read the recent sluggishness in the inventory trend as so puzzling, after all, when it has been put into the perspective of the history of the last decade.
INVENTORIES MAY WELL HAVE BEEN ABNORMALLY HIGH during the Vietnam build-up-a necessary accompaniment to the increase in defense production. Since then, stocks have gradually been worked lower. While inventories will grow as business picks up, it may simply be unrealistic to expect a return to the high inventory-to-sales ratios that prevailed in the Vietnam period.
Many companies are now doing a much better job of managing stocks, too. Business has better tools in this recovery-like computerized techniques than they have had in others.
But even if this historical view proves right and the old ratio highs are not regained-inventory-building will still be great enough to give the rolling economy some extra spin and even lead to greater growth than originally forecast.
THE BARRIERS TO INCREASED TRADE WITH RUSSIA WILL COME DOWN this year. A final US-USSR agreement on trade will probably be signed during the fall. But some important parts of the final pact may be okayed before summer ends. Resolution of the tough Lend-Lease issue is a stumbling block to settlement. This involves repayment by the Soviets for American aid during World War II. Until this issue is resolved, Nixon can't accede to Russian trade demands-namely, most-favored-nation tariff treatment and Export-Import Bank credit.
Congress must legislate the granting of most-favored-nation status-giving the USSR the lowest tariffs that this nation makes available to others. But the lawmakers just won't go along until a satisfactory solution on Lend-Lease is fixed.
THE RUSSIAN MARKET COULD BECOME A SUBSTANTIAL ONE for U.S. companies. The Soviet Union is only beginning to satisfy the demands of its consumers. U.S. firms already have contracts to build production plants for tableware. The Russians are negotiating with other companies for facilities for locks, motorcycle parts, auto and truck parts, electric hot plates and door hinges. The Soviets will continue to purchase grain from the U.S. in big quantities. Russia has launched a campaign to produce more meat and needs feed grains.
U.S. companies are interested in fuel and mineral resources from the Soviet Union. Russian petroleum products such as liquified natural gas have special appeal. So do the large deposits of nickel and chrome ore that the Russians boast.
THE TREASURY WILL TOUGHEN ITS ENFORCEMENT of the anti-dumping and countervailing duty laws to protect U.S. firms against unfair competition from abroad. It is studying possible refinements of these laws, partly to make sure they appropriately cover newer prac-