Masonry Magazine October 1985 Page. 15
theWASHINGTONire...
There's a touch more optimism about the business outlook these days in the thinking of economists in both Washington and in the private sector. They still don't feel that the economy has made up for all of the short-fall in growth that occurred in the summer's first half; actual gains still won't meet the projections of barely a few months ago. But the picture now looks better. The tempo has begun to pick up. The recent fears of a significant slowing-even to the point of pitching into a recession-have begun to fade.
Net, the analysts now believe that the year will end up at a pace that isn't all that far below the fairly solid rate of climb they earlier forecast for the second half.
The more hopeful appraisal reflects the surprisingly strong numbers reported for the economy in August-especially in the two sectors that were being counted on to assure continuation of the no-longer-so-young expansion. One is consumer buying. Lately, it has been doing better after a slowdown in late spring and early summer; auto sales have spurted because of the low financing rates offered. And now home-building-single-family, especially should soon begin to respond to the good sales of new and existing units; that, in turn, would be a reaction to the interest-rate drop of the spring.
Some of the new statistics have been downright strong. The jobless figures, for example, stunned many analysts by declining a hefty 0.3 points between July and August at a time when most were braced either for a flat or rising pattern. The trend in jobs is also encouraging, if not quite as vigorous as the first half's; the declines in manufacturing employment seem to have ended with the unexpected rise of 37,000 jobs the month of August. This implies that income increases will continue at a moderate-to-good pace and that consumers will keep on spending at a rate that maintains momentum.
What is more, inventories are likely to be a solid plus for the economy in this half-year, if only because the efforts to cut them back have largely run their course. Stocks appear heavy in only a few areas not even autos.
Economists can point to other supportive elements in the outlook to justify their revived belief that the last half will now see good gains. These include:
* Federal spending: Defense still remains a growth field.
* Business investment: It is close to early growth plans.
* Commercial building: Developers want to beat tax reform.
Officials think the trade balance is due for improvement; the lower dollar should soon begin to expand sales abroad.
Business forecasters now feel more confident about the predictions they made for the current half year-predictions they had seriously started to doubt as the statistics for July rolled in. The gains won't be as large as those the White House economists proclaimed around mid-year-a 5% rate of increase in total output of goods and services, adjusted for inflation. But growth of about 3%-plus, on the average, looks like an even better bet. That would be down almost a full point from the earlier range of forecasts. And it would be quite respectable for this mature a stage of an expansion.
Now he is touring the country to build popular support for his programs. But, if this doesn't work, Reagan will use his veto more freely than before. When it's over, though, there'll be compromises on virtually every issue involved. Here's the outlook for some of the main issues in dispute:
The Budget-The fight isn't over. While the President and Congress may agree on a total for deficit reduction, they disagree on specific cuts. He still wants more money for defense and less for other spending programs. The eventual outcome: A slight movement in his direction, but not much.
Social Security-Reagan's refusal to freeze the benefits will hold; most you'll see is a bigger bite on affluent retirees and that's not sure.
Tax Reform-There'll be progress in the House, though Senate action may go over until 1986. The key sticking-point-the proposal to eliminate deducting state/ local taxes to yield revenues for reducing bracket rates-may be compromised, maybe by denying deductions only above a certain level.
A proposal to speed up federal contract-letting is now under study. It has been dubbed SCAT the Simplified Competitive Acquisition Technique. SCAT would chop contract notification time in the Commerce Business Daily from 15 days to 5 and the period for responses from today's 30 days to 15. Decision time would fall from the present 27 to 37 weeks to 10 to 12 weeks. Involved are 400,000 contracts of $25,000 to $5 million-$55 billion in all.
Small business groups are unhappy with these proposed new arrangements. The new scheme could have effects opposite to those intended: It may be measurably less competitive in practice. The shortened periods will, allegedly, give the national corporations a big perhaps decisive-edge. The opposition may be potent enough to force a compromise.
A pick-up abroad could help the U.S. economy, reinforcing domestic sources of lift. Signs of accelerated expansion have recently started to emerge in West Europe, Japan and Canada. This implies stronger demand for American goods and more jobs.
MASONRY-SEPTEMBER/OCTOBER, 1985 15