Masonry Magazine February 1976 Page. 16
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THE BUSINESS OUTLOOK HAS CLEARLY TURNED BRIGHTER in the past month or so. Economists see greater strength in the figures that keep coming in. And there has been some evidence of improvement on the inflation front. Most analysts still look for only a moderate upturn this year-not a boom. But lags in some key economic sectors will head off a new inflation surge.
Many economists were nervous about 1976 last fall when the numbers came in weaker than expected. Orders, production and employment slowed noticeably in October and November. Analysts wondered if the softening heralded basic weakness, or whether it was a pause not uncomon during recoveries.
THE FEARS HAVE BEEN DISPELLED by the latest run of business numbers. The most encouraging development has been the resurgence of retail sales. After months of dragging along, they took off during the Christmas season-rising a substantial 3.4% in December; they continued strong in January. Auto sales led the way-not just with big advances over the previous year, but over early fall as well, after making allowance for seasonal variation.
The significance of these gains should not be underestimated. At a time when other critical sectors are lagging, consumer buying is being counted on to provide forward thrust. If it does, business must increase orders, production, and hiring.
IN FACT, EMPLOYMENT HAS BEEN GAINING-rising a quarter-million a month. The gains haven't slashed unemployment because roughly about the same number of new workers have been entering the labor force at the same time, seeking jobs. But the pickups in employment are still encouraging to the economists.
What is more, industrial production has been posting quite brisk increases over the past half-year or so. The gains are spread over consumer goods and industrial materials.
ANALYSTS ARE ALSO ENCOURAGED BY IMPROVEMENT in the price indexes. After showing large, disturbing advances over the summer, they have cooled. Wholesale prices in December declined, with smaller consumer hikes likely. But the analysts are not ready to predict an end to all inflation troubles. For one thing, the trend reflects lower food costs, which can still reverse. And industrial prices continue to post steady advances, month after month.
There is also worry about an explosion in wage increases in 1976. The number of collective bargaining contracts up for negotiation is large with some 4.4 million workers covered, up from 2.9 million during last year. Talks will be led by very aggressive unions, like the teamsters and auto workers.
Nevertheless, labor experts can see the inflation rate easing to 5% to 6% in 1976, half the rate of 1974 and parts of 1975.
Most economists think that it is critically important that Congress and the Ford Administration go slow in adding more fiscal or monetary stimulation so as not to refuel inflation.
THERE IS A BETTER FEELING ABOUT HOME-BUILDING these days, too. The reviving confidence is expected to make people more willing to take the big step. More important, though, the backlog of unsold houses that accumulated in recent years has been shrinking-though it is still high in some areas. And there is plenty of mortgage money around to finance a step-up in volume.
Single-family building is doing well. It's multi-family that is weak. But even this area could see a doubling in starts to a half-million-lifting total starts to 14 million.
WITH SALES INCREASING, INVENTORIES SEEM READY to start rising again. Stocks are now quite thin in many sectors, especially in nondurable goods. The rapid decline in manufacturers' inventories has already slowed markedly. The record suggests that this step will be followed by some accumulation.
Inventories were expected to rise in the last quarter, as recovery moved along. Instead, stocks on store shelves and in factory warehouses fell by $6 billion. As a result, they are low relative to sales-at some of the lowest levels in history. Continued solid increases in consumer demand will force industry to step up replacement orders. Then, as confidence returns, business will want to increase inventory.
MONEY WILL BE KEPT EASY AND PLENTIFUL during 1976, as officials try to make sure that there is enough credit to keep the economy expanding. But the pace of credit creation won't be pushed up. So, as the year goes along and business needs more money to operate, a slow, gradual rise in interest rates could go under way-on bank loans, mortgages, even on long-term bonds.
SO, MUCH OF THE DOUBTS ABOUT THE RECOVERY HAVE NOW EASED. It is less open to a setback. Economists see real Gross National Product grow-