Masonry Magazine October 1974 Page. 14
theWASHINGTONvire...
BUSINESS ACTIVITY WILL REMAIN SLUGGISH IN 1975. And inflation, while slowing measurably, will remain a major problem. That is the preliminary size-up of a number of economists in government and industry. These early projections are tentative, of course, subject to change. At the moment, though, analysts simply don't see what will give the economy any lift next year, when soaring farm, food and fuel prices will keep climbing rapidly.
The pessimism begins with the weakness analysts see in the economy now. It is showing up clearly in many indicators.
• Industrial output keeps falling as it has been for months.
Investment in plant isn't as strong as early plans hinted.
• Retail sales look quite weak, after washing out price gains.
And layoffs are numerous in construction and manufacturing.
But the economists don't see a serious recession developing this year one that can run over into 1975. There are some sectors of strength, too. And the present weakness is not showing the spreading pattern of past classical recessions.
THERE IS NOT MUCH ON THE HORIZON TO GENERATE great optimism, though. The analysts can't point to any sector that will provide significant gains. Home-building, already in a depressed condition, will clearly stay that way; today's high mortgage rates guarantee a protracted slump in housing starts. The consumer is not expected to go on a new spending spree anytime soon-not with inflation continuing to chew up so much of his disposable income.
Inventory accumulation won't be providing major strength during 1975, either. Inventories have soared this year, as the economy was easing, so stocks seem adequate now.
WHAT'S MORE, PUBLIC POLICY WILL BE FOCUSING on controlling inflation, rather than providing stimulation to get real output moving at a faster pace. President Ford is determined to make sharp reductions in the Federal budget. At best, therefore, fiscal policy will prove a neutral force in the economy. And monetary policy is likely to remain moderately restrictive for a while. To be sure, the Federal Reserve has eased away from its extreme tightness, but it is a long way from being ready to see interest rates fall sharply.
masonry • October, 1974
Net, the economists expect activity to rock along at a very slow pace. Real Gross National Product, deflated for price hikes, may not rise at all, at least through the first half of 1975. Even minus rates of real growth appear possible.
PROSPECTS FOR BRINGING INFLATION UNDER CONTROL AREN'T GOOD for 1975. The economists see a little improvement as the year goes along... with luck. The vicious double-digit inflation rates of 1974 aren't likely to continue. But farm and food prices may rise more, in the wake of the summer's drought. Industrial commodity prices are likely to continue moving higher, though not at this year's rapid pace. But wage gains will stay very large as workers attempt to catch up and get ahead of the surging cost-of-living increases.
Most economists are predicting an inflation rate of 7% to 8% next year; others are worried it will be somewhat higher. None sees a return to anything that could be termed normal.
TAX REFORM STILL HAS A GOOD CHANCE OF PASSAGE by Congress this year. Congress seems likely to return to Washington after the November election. The House leadership has been hoping to clear a bill before voting time-allowing the Senate Finance Committee time to work on it after November 5. The Ways and Means tax measure was drawn to stimulate building of capacity, while closing loopholes so there is no great revenue loss to the Treasury. It would reduce individual income taxes by more than $2 billion in a year, ease capital gains taxes, and give breaks on investment to key industries.
Petroleum industry taxes would be increased to offset the revenue loss. Also, the minimum tax on preferential income and taxes on foreign-source income would be increased some.
WORLD OIL PRICES WILL COME DOWN-not immediately perhaps, but in time. Ford Administration officials are still hopeful that declines will develop, despite the recent decision of oil-producing countries to boost the price. These officials point out that dissension is now appearing in the Arab ranks. The Saudi Arabians refused to go along with the size of the latest increase.
What's more, the oil-producing countries are feeling severe pressures-more political now than economic. The troubles high oil costs are causing for both the industrialized and less developed countries-may yet bring "reasonable" action.
(Continued on page 16)
15