Masonry Magazine July 1976 Page. 11
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SOME SLOWDOWN IN THE BUSINESS EXPAN-
SION IS SHOWING up these days. It doesn't mean that
the upturn is running out of steam. Most economists in
government and industry believe that, rather than an end
to the rise, it is just cooling off. And that's only because
the early-1976 pace simply couldn't go on. Actually, the
upturn is still healthy and likely to run on into 1977. Most
recoveries decelerate some after a year of rapid growth.
The signs of business slowing have been developing
for some months now. The most obvious weakening
has been occurring in consumer spending. The con-
sumer led the way out of the recession with large in-
creases in buying. But, recently, retail sales have
been quite lackluster or even declining. The current
softness has been especially pronounced in the non-
durables sectors, particularly in clothing and apparel.
Auto sales have now leveled off after surging ahead
earlier this year. Economists feel people who post-
poned new-car purchases during the recession were
catching up last winter. Now, the car market seems to
be linked to "normal" demand.
SOME OF THE THRUST FROM INVENTORY-
BUILDING IS STARTING to dissipate. With sales slow-
ing, retailers have turned cautious about adding to stocks.
In fact, they may well have overbuilt their inventories
earlier this year. Department stores now seem to have all
the goods that they care to hold. The production of non-
durable items has been slowing recently, as a result. Gains
averaged a little over 1% a month during the fourth quar-
ter of 1975. But the rise has slowed markedly since then.
April's advance was only 0.2%.
Spending for new plant and equipment is also running
below expectations. Recent surveys show only moder-
ate increases through the rest of this year. So one
source of lift to replace consumer buying has still to
make an appearance.
BUT MOST ECONOMISTS ARE NOT UPSET AT
THE SLOWING that is occurring. They note that brief
pauses are normal after a strong full year of recovery.
They look for retail sales to be moving up moderately
again in months ahead. Real disposable income has been
rising at a fairly solid pace for some time. And consumers
have been building up their savings as the economy ad-
vances. Just maintaining the current savings rate would
still leave money to spend.
Inventory-building of durable goods will offset the
slack in nondurables. Materials stocks are in need of
restoring now. So output in this area should continue
to rise for some time.
masonry
• July, 1976
WHAT'S MORE, ANALYSTS SEE A MAJOR BOOST
FROM PLANT SPENDING later. They note that succeed-
ing surveys of investment intentions have been revised
upward the most recent one hinting at strength about a
half-year from now. And these surveys have historically
underestimated the gains that occurred. Captial spending
is traditionally the star of later stages of an expansion.
THUS, ECONOMISTS BELIEVE THE EXPANSION
IS STILL on solid footing. Worries about too-rapid growth
and a new burst of inflation have now eased. Analysts see
an upturn that is strong, yet balanced, for the rest of 1976.
And the absence of stresses and strains will keep things
rolling into 1977.
THE ANALYSTS ARE FORECASTING GROWTH
of real Gross National Product, total output of goods and
services in the economy, net of price increases, of roughly
7% this year. After the 8½ annual rate of the first quarter,
the rest of 1976 will be calmer, but still strong-say, gains
of 5% to 6%.
But that's enough to raise production nicely and re-
duce the unemployment. Over-all, 1976 will still be a
great year.
THE ECONOMISTS ARE ALSO ENCOURAGED by
the recent behavior of prices. The rate of increase in the
consumer index has been only 32% so far in 1976. The
lag reflected significant declines in both food and oil-
product prices. Moderate increases in food prices are ex-
pected during the next few months, from increases in farm
and wholesale prices that haven't yet been passed on.
Nevertheless, the forecast is for moderation in food-price
hikes later on. If world crops are as large as expected,
stability could continue into 1977.
The oil producers' decision to freeze prices is a favor-
able sign. It reduces the possibility of big energy-cost
hikes.
RECENT TRENDS IN INDUSTRIAL COMMODITY
PRICES ARE also encouraging. Increases have been post-
ed in steel, aluminum, copper and other materials. But
these sensitive prices have risen at less than a 3% rate so
far in 1976. Wages have also turned in a surprisingly good
performance so far this year. Average nonfarm hourly
earnings rose at a 6.9%-a-year rate, December to May.
Net, officials in Washington believe the inflation rate
can be held to 5% to 6% this year-a big improve-
ment over 1975.
(Continued on page 20)
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