Masonry Magazine April 1972 Page. 21
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THE UPTURN IN BUSINESS ACTIVITY IS NOW DEVELOPING a solid, healthy tone. Economists in government and industry no longer regard the recovery as a fragile thing. They are seeing the sort of evidence they have been awaiting for months. Each new statistic seems to be another plus. Experts think that the economy is back on the growth track projected for this year.
There has been a big shift in the outlook in barely a month. There were few signs over the winter of the business upturn. Economists couldn't point to very much that was booming. Heavy monetary and fiscal stimulation wasn't producing the desired results. The economy was simply continuing to drag.
Now, economists see the bounce they have been expecting:
* New orders have been surging the most encouraging sign. Defense orders have jumped. Non-defense is strong, too.
* New plant and equipment outlays are increasing sharply. Especially strong gains are showing up in manufacturing.
* Industrial production has shown a steady 8%-a-year rise.
* Inventories are starting to build up again-a dynamic plus.
* Unemployment is dropping a move spread over many areas. And there has recently been a healthy jump in unemployment.
WHAT'S MORE, THE BOOM IN HOUSING KEEPS GETTING BIGGER all the time. Activity was expected to level out at 1971's rate.. but quickened instead. The flow of savings is continuing heavy, assuring plenty of mortgage money. Housing starts are continuing to zoom at a higher than expected annual rate. Home-building in January and February bettered December's all-time record.
Housing-related industries have been enjoying booming sales for months. Household durables have been running 13% above last year. Furniture and appliances are up by about 22%.
LAGS IN CONSUMER SPENDING ARE STILL SOME CONCERN to the economists. Expenditures are only so-so, over-all, despite the surge in household items. So the consumer can still spoil the promise of all those new plus-figures. Retail sales have been unimpressive-particularly in the soft-goods areas. Autos are moving at a moderate clip-no better than last year at this time.
But the experts are optimistic about consumers. With saving already high, income increases are likely to be spent. So it is reasonable to expect a pick-up. In fact, there are indications that consumer spending gained last month. What is more, the impact of tax over-withholding should be waning as people add to exemptions, thus increasing take-home pay.
SO ECONOMISTS ARE FEELING MUCH BETTER about their forecasts for 1972. Only months ago, some were doubting that their estimates could be realized the $100 billion gain in Gross National Product projected by the President. They felt activity would fall short in the first quarter and never catch up. But first-quarter GNP ran close to the 6% annual rate of growth forecast, despite the slow start in January. And the trend should continue strong.
Some think the economy will do even better than originally expected. The standard forecast may prove to be too low.
BORROWING COSTS FOR BUSINESS WILL BE GOING HIGHER in the months ahead. The quickening economy will generate steadily rising demand for bank loans. What is more, the cost of money to the banks will be gradually climbing, too. Short-term interest rates have risen about a full percentage point recently. The bank prime lending rate will keep rising moderately in coming months. Most analysts feel it will increase a notch by July, from the current 5%.
But home-mortgage rates may continue their down-drift for some time yet. The spread between long and short-term rates is high by historical standards. So short-term rates could rise some more before mortgage rates are affected. As noted, the savings flow into home-lending institutions continues high.
The Federal Reserve has abandoned its big effort to make money easier. The brighter business picture means less need for extreme stimulation. And the nation's money supply is growing rapidly, after lagging for months. But the credit controllers aren't about to slam on the brakes. They don't want to make money scarce and expensive again.
THE PRICE CONTROL MECHANISM WILL BE TIGHTENED UP in the months ahead. The behavior of the price indexes is putting pressure on the White House. The AFL-CIO is highly critical now that George Meany is off the Pay Board. And some Congressmen are threatening an inquiry unless controls get tighter.
Officials expected a bulge in prices following removal of the freeze. But they are concerned because the bulge is turning out to be a balloon. The catch-up has simply lasted months longer than Administration economists had hoped.