Masonry Magazine June 1975 Page. 23
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THE BUSINESS RECOVERY WILL GET STARTED THIS SUMMER, but economists in government and industry don't expect the upturn to be sharp or vigorous. They have turned a bit less confident in response to the latest statistics. There will still be some real growth though less than in past recoveries. But unemployment will stay high and the expansion may lose steam in 1976.
Economists have been disappointed by a number of recent developments-developments that now have forced them to rethink the earlier forecasts of a very solid recovery.
FOR ONE THING, AUTO SALES HAVE STAYED DEPRESSED through the spring-the traditional time of heavy volume. Sales are at a 6 million-a-year rate, an extremely low figure. Price cuts and rebates haven't helped very much. Auto manufacturers are cutting output again, laying off workers just rehired.
ANOTHER WORRY: A SPRING PICKUP IN HOUSING hasn't appeared as hoped. Figures show that home-building activity has bottomed out in recent months. But there isn't any big push in housing starts yet the kind of push needed for housing to provide the stimulus to any general recovery in the economy. To be sure, there are several positive signs on the home-building front. Mortgage money is plentiful and there has been some increase in home sales. The new $2,000 tax credit is helping the builders whittle down unsold units.
But negative factors seem to be outweighing the positive ones.
* Lack of consumer confidence is a major depressant to sales.
* High interest rates are a big drag. Though lower than last year they are still around 9% and unlikely to decline much.
* Soaring house prices are scaring off many home-buyers. The median new home price is $38,000-more than many can afford.
FINALLY, CAPITAL SPENDING BY BUSINESS won't be generating thrust. Economists expect spending for new plants to be extremely weak during 1975. The electric utilities are cancelling plans to add to generating capacity. Traditionally, they account for about a third of such spending by business. And manufacturing won't be lifting outlays with so much capacity idle now.
BUT THE OUTLOOK ISN'T ALL GLOOMY. There are still pluses at work. And these positive elements will dominate, determining the over-all trend. The consumer is being counted on to increase his spending in coming months. After all, his purchasing power has been enlarged by the large tax rebates. And he is less worried about his job, now that recession fears have eased.
What's more, the rundown in business inventory will be ending soon. Industry has been slashing holdings even faster than economists expected. With retail sales rising, except for autos, many firms will have to rebuild their reduced stocks just to meet the rising demands for their products. Output will have to be increased, bringing a resurgence in activity.
BUT THE ANALYSTS ARE WORRIED ABOUT THE PACE of the coming recovery. They are concerned that the upturn will prove agonizingly slow and gradual. Many expect consumers to buy low-priced goods instead of big-ticket items This, in turn, would make many companies cautious about rebuilding stocks. Some think it could take four quarters to wind up the inventory correction.
NET, THE RECOVERY WOULD PROCEED QUITE SLOWLY in 1975 and into 1976. Real Gross National Product-output of goods and services, net of changes in prices could expand at only a 4% to 5%-a-year rate in the last quarter. (By contrast, gains in the first year of past postwar recoveries were 7-8%.) That would mean continued high levels of unemployment... certainly over 8%.
PRESIDENT FORD MAY ASK FOR NEW STIMULATION if the recovery fails to gain speed in 1976. He can't face the voters without a quickening economy. A repeat of the tax reductions in 1976 might be requested by the President. Some Administration officials already are saying an extension is desirable.
Ford wouldn't be so quick to veto spending increases voted by Congress. Public works programs and public service jobs may get a green light from the President, despite opposition now.
THE GOVERNMENT MAY NOW HAVE AN EASIER TIME WINNING antitrust actions. Legislation is taking shape in Congress to give trustbusters some new tools. The measure wouldn't alter the basic definition of monopolistic practices. But it would give the U.S. greater power to block mergers before completion. And it would let states bring suit on behalf of alleged victims of monopoly.
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