Masonry Magazine September 1973 Page. 9
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A BUSINESS RECESSION has been all but ruled out now for next year by economists in government and industry. They still forecast less than boom conditions during 1974. There will be clear slowdowns in many areas, even some out-and-out weakness. But the economy won't be falling apart. There is a growing conviction on that. Two major sources of strength will keep plants booming and employment up. Shortages will be numerous especially for basic materials so there'll still be substantial inflation pressure.
Thinking has been turning more bullish in recent weeks. Odds against a slide worth calling a recession now seem 5 to 1. There are three reasons for the switch in thinking:
-The shortages say capacity-not weak demand-is the big drag.
-The mortgage outlook seems better. Lending institutions are no longer losing big amounts of deposits. This suggests that the drop in home-building will be shorter than anticipated.
-The money supply has begun to grow again, after being flat for most of the past summer. Many economists believe that the money supply is a key determinant of business activity.
SIGNS OF SOFTNESS are still apparent in some key areas, to be sure. And they are very important, with substantial drag effects on the outlook. Consumer spending is now providing little thrust to business these days. It has actually been off a bit since spring, if price hikes are washed out. Home-building will continue to be a negative factor throughout next year, even though. as noted above...it won't be as depressing as once believed. And U.S. spending will be matching or running below revenue...no real push.
The latest figures confirm that business is slowing. Total output of goods and services the Gross National Product-rose at only a 3.6%-a-year rate during the third quarter.netting out inflation. By contrast, the growth topped 8% during the first three months of this year. What's more, the employment figures have shown no big gains since spring.
BUT SOME SLOWING IS WELCOME. A pause in activity is desirable now. Economists would love to see the third quarter rate keep on or even shade down to 22% real growth. Cooling demand would help ease the shortages of materials and diminish inflation. And there are two big plus-factors in the picture. enough to guarantee 2% to 3% real growth well into 1974.
FIRST-BUSINESS SPENDING for new plant will climb by 15% next year. This is a very dynamic, expansionary factor, promising a substantial push. And there should be some thrust from a modest pick-up in inventory-building. Second-this country's exports are booming... not just farm products, either. Vigorously expanding economies in Europe and Japan are grabbing U.S. goods.
There won't be any drastic easing of credit, if this size-up is right. Interest rates may fall little further during '74.
THE CURRENT WAGE-PRICE CONTROL PROGRAM may be ended early next year. There are growing hints that the White House is ready to drop the controls in favor of some type of Federal board to review wage and price decisions. Officials won't be pinned down on a specific date for ending the controls. That would risk a new bulge in prices on many products if the controls go.
NEVERTHELESS EVIDENCE IS MOUNTING that controls are causing problems. They have interfered with labor bargaining, created shortages and hurt trade. These distortions are likely to increase and intensify if ceilings continue. Most economists are convinced that controls have outlived their usefulness. The administration would prefer to decontrol on a sector-by-sector basis. But officials have found it hard to draft a workable and sensible program-one that is equitable in an economy part controlled and part uncontrolled. Buyers and sellers would act in anticipation of the next White House steps.
So there is considerable pressure on the White House to end controls. Scrapping of restraints has been urged by several leading trade associations. Even the AFL-CIO has formally urged that the restraints be ended as quickly as possible.
BUT OFFICIALS ARE WORRIED ABOUT A SPIRAL OF WAGE SETTLEMENTS in '74. Union bargainers will be shooting for catch-up raises to offset inflation. Economists fear labor costs in 1974 will climb as productivity gains taper. The anticipated capital-goods boom may well generate extra wage pressures. Plant expansion and big energy projects may spur building-trades demands.
Construction wages rose a mere 5.8% in the 12 months ended in March. That was the lowest annual rate since 1967, off sharply from 1970's peak. A building trades boom in wages could also help set the pace for other industrial unions. The Steelworkers will be talking with three key industries-can, aluminum and steel. These talks will hit a climax as the White House and Congress decide on a new controls plan.
(Continued on page 33)
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