Masonry Magazine April 1985 Page. 32
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MOST FORECASTERS NOW EXPECT good business to last through this year. Government economists-and many in the private area, as well-haven't seen such a satisfying combination of brisk growth and low inflation in decades. There are several soft spots, to be sure, in this otherwise solid picture: the farm sector is ailing, steel is depressed, and home sales are sluggish. And there are also some potential trouble spots discernible down the road-the deficit, the weak exports, and upturns in interest rates and inflation. But for today... it all keeps coming up roses as Ronald Reagan predicted.
BUSINESS ANALYSTS were forecasting the rebound in economic activity from the pronounced lags of last summer even before the close of last year. They were counting on declining interest rates and the budget's stimulation. Then, in January, the projected turn-around actually came... and with a bang. The total working surged, though joblessness rose, too, as more sought work. With inventories in shape after Christmas sales, orders and output climbed.
All in all, 1985 got off to a fairly fast start, and more good figures have come in since to confirm the conclusions.
MOST OF THE FACTORS that brought the surge are still providing lift. And they are likely to be doing so for several quarters... perhaps into 1986.
For example:
• The budget deficit. a strong locomotive... is not likely to fade away. Indeed, if Congress and President Reagan cannot get together, the red ink is certain to increase.
• The money supply is growing nicely now-and it is money that makes the economy go. (Now that the Federal Reserve is letting it grow, inter- est rates may not fall further.)
• Low inflation means that increases in wages and salaries stretch further, permit more consumer buying and add even more to the volume of new orders and pace of production. Fortunately, as surveys show, consumers still want to buy. And they have the money to pay for the things they want.
THINGS LOOK SO GOOD that analysts are raising their sights for 1985. A while ago, even optimists saw inflation- adjusted growth of only 3%-32%. (The White House guess was 4% ..but even government analysts doubted that.) Now, though, 4% is well within the range that the consensus is projecting. Indeed, a number of analysts would not be surprised to see a gain near 5%. That would prove quite impressive for the third full year of an expansion.
BUT THERE ARE PERSISTENT, low-key concerns about what happens later. Officials fear that the rapid economic growth may refuel inflation in 1986, especially if too little is done to trim the budget deficit significantly; interest rates would stay high and critical investment would be inhibited.
A halt to foreign fund inflows could materialize at any time. Interest rates would zoom if Americans had to absorb all of the Treasury's debt. The costs of imports would rise, too, giving U.S. producers less competition.
THE OUTLINES of the new federal budget are now beginning to emerge-slowly erratically... with a great deal of horse-trading still to be done. Nothing is really firm yet. The President has to work out an arrangement with Senate Republicans; then, both have to compromise with the Democrats. It will be many months yet before the details are finally set in concrete.
But sources say some conclusions can already be drawn:
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32 MASONRY-MARCH/APRIL, 1985