Masonry Magazine February 1974 Page. 11
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A MILD RECESSION NOW SEEMS LIKELY for part of this year. Economists in government and industry agree on that. They can't see how dips in output can be avoided this quarter and next. Government figures show that business activity slowed appreciably during the fourth quarter of 1973-and that was before the full impact of current shortages of oil was being felt. But the economists don't expect really significant declines in total "real" output. And they think the "technical" recession will be ending in the second half.
The new recession forecast means only a modest change in the outlook. Most economists always held out some possibility of negative real growth-especially for the early part of 1974.
Of course, no forecast can be made with the usual degree of confidence this year. The impact of higher oil prices will last even though the embargo ends. It creates uncertainty.
BUT THE ECONOMY'S LATE-1973 PERFORM-
ANCE DEFINITELY TIPS the scale to recession. The real growth rate after removing effects of higher prices-fell to around a 1% annual pace, from a 3.4% rate during the third quarter. Some of the decline can be blamed on supply and plant-capacity limitations. But some of the fall-off was accounted for by a clear softening in demand.
BUSINESS ACTIVITY IS CLEARLY WEAKENING
FURTHER in the first quarter. The indirect impact of the oil shortages will be exerting a downward drag. People are not buying enough new cars; they worry about getting gasoline. Sales have declined sharply since November, especially of the large models. Auto production has been slashed; thousands of workers are being laid off. Auto-supplying industries are also feeling the impact of poorer car sales. Such industries as tires, textiles, glass and auto parts are curbing output. So production is being lost, despite efforts to shield it from oil crunches.
Travel-related industries are also suffering substantially from the crisis. Restaurants, resort hotels, motels and the like are experiencing slower sales. Home-building will be affected. Would-be buyers are now pessimistic. They might not be able to get delivery of heating oil or natural gas.
THERE'LL BE SOME OFFSETS TO THE WEAK-
NESS in consumption and housing. Plant and equipment spending by business will be a very supportive factor, capital expenditures are expected to rise by a healthy 12% over last year. In fact, the gains may well turn out to be much larger than now projected. There's a very good chance that price controls will be phased out in 1974. That should mean business will be able to sell all it can make at a profit. This may well be an added inducement for firms to speed up plant expansion.
Sales of American products abroad are also expected to be a plus this year, although, with weakness developing overseas, exports may not prove to be as big a plus as many forecast.
NET, THOUGH, ECONOMISTS SEE MORE WEAK-
NESS this quarter than last. Unemployment will be increasing again, going well above 5% by June or July. Most economists expect the rate to rise to 6% eventually-perhaps higher. Actual declines in real GNP of 1% are expected for this quarter and next. That's Gross National Product-total output, washing out price increases.
CURRENT INFLATION IS CERTAIN TO WORSEN,
despite the business slump. Analysts feel consumer prices could rise at a 12%-a-year rate this quarter. That would compare with the roughly 8% rate registered in December of 1973. Much higher gasoline and heating oil prices will be responsible, partially. But food prices will also be increasing again, and at a rapid clip, too.
Economists are also bracing for upsurges in most products made of metal; recent hefty hikes in primary metals will be pushing up prices on a host of manufactured products.
THE ADMINISTRATION IS NOW QUIETLY DIS-
MANTLING wage-price controls. The unwinding is being accomplished a piece at a time, with little fanfare. Already a very significant part of the economy is operating without curbs. The list now includes fertilizer, cement, most of the nonferrous metals, mobile homes, campers, recreational vehicles and the semiconductor industry. Even the biggest industry of them all-autos-has been freed from ceilings. And petroleum products are now under an automatic cost pass-through system.
The Administration also has tolerated some big jumps on the wage side. And it isn't expected to oppose the bigger union demands now emerging in steel, aluminum and in other fields.
The President may still seek extension of controls just to be safe. His power to control wages and prices ends April 30.
MANY EMPLOYERS WILL BE FORCED TO HIRE
handicapped workers under a little-noticed provision of (Please turn page)