Masonry Magazine December 1965 Page. 19
theWASHINGTONvire...
ALL SIGNS POINT TO ANOTHER TERRIFIC EAR FOR U. S. BUSINESS. This is the confident prediction of economists in government and industry. They expect business activity production and sales, etc. to surge ahead. The rate of growth will match the torrid pace of 1965 or even exceed it. New records will be common. Consumers and industry will share in benefits.
The forecasters see a rising trend throughout the year, with demand for goods quite high. In fact, too much demand is the principal danger theses days not too little. Production is pressing on plant capacity. Skilled labor gets scarcer. Inflation is certain to be a persistent threat.
TOTAL BUSINESS ACTIVITY WILL RISE 6%-2% in 1966, the experts say. That's about the size of the gain registered in 1965 the best since Korea. The growth will be a bit less in real terms because prices will be rising. Output will still go up by 45%, though, even after deflating for any hikes. There is an almost unprecedented degree of agreement on this range of gain. Indeed, this unanimity disturbs some. It could lead to over-confidence.
Now-looking more closely at key determinants of of activity: Consumers Rising employment and wages mean rising incomes. And when income grows, people increase spending. Consumer outlays would would provide new comph, even if government didn't.
Business Spending on new plant will rise 15%, as against 14% in 1965. Additions to inventory will match those of the year just ending even without the threat of a steel strike.
Government- January's rise in Social Security and Medicare taxes will brake activity. But new excise cuts will offset this. Viet Nam and the Great Society will add new thrust.
THE WAR IN VIET NAM IS THE DOMINANT ACTOR in the business outlook for 1966. It will be a bigger force than first seemed likely when today's build-was announced last July. Troop strength is Southeast Asia may reach 300,000 by mid-year. Official hint that spending may rise $5 to $6 billion above present levels-which are already some billions higher than last year. This means new orders for equipment for already loaded de nse contractors. The impact will spread as contractors order materials and workers spend pay.
WASHINGTON HOPES TO AVOID A MAJOR RICE SURGE in 1966. Officials will be concentrating more on maintaining stability at a high level..... than on stimulating the economy. They count on increases in capacity to keep competition sharp. And they will use federal intervention such as stockpile sales. where necessary. Intervention may be bad economics, but it has chilled inflationary psychology. It doesn't seem to have hurt the government-business partnership, however or to have damaged confidence.
INCREASES IN WAGES IN 1966 SEEM LIKELY TO LAG BEHIND 1965's gains. Rising consumer prices and growing scarcities of skills add to union power. But the simple fact is that few major contracts come up for renegotiation-electrical equipment - telephones - West Coast longshoremen. perhaps coal. Most other increases will be limited by provisions of long-term con-tracts. In many cases, the pacts called for big hikes in 1965-smaller ones later.
Wage increases will average about 8e an hour in 1966, from 8.4 in 1965. In manufacturing, the hourly jump would be 74, down just a shade. In non-manufacturing, the rate would fall from 1965's 10.8 to, say, about 10.4e an hour.
UNEMPLOYMENT WILL SLIDE FURTHER IN 1966, extending 1965's progress. We will finally reach full employment only 4% jobless in the labor force. Currently, the rate is 412%. But in the next twelve months, the number of jobs generated will more than exceed the 1.6 million new young seekers of work.
CORPORATE PROFITS WILL CLIMB MORE SLOWLY IN 1966 than during 1965. Margins will shrink some as costs rise and prices are kept from following. It is not that wages and costs of materials will be moving so much higher. The jumps in productivity that came with more efficient plant utilization as industry moved from operating at less than 80% of plant capacity to 90% are largely behind us. These had offset other costs - but will do so less.
BUILDING ACTIVITY IN 1966 WILL CONTINUE TO RISE at 1965's 5% rate. That's what analysts conclude on the basis of construction-contract volume. Construction won't really boom but it will be a solid plus for the economy. Work on public projects will provide relatively more of the oomph in 1966. The increases will center in state and local projects, rather than U.S. work.
Private outlays will show a mixed pattern. Spending for new factories will continue strong. But home-building will lag. Housing starts will rise no more than 100,000 from today's 1,400,000. Cost hikes will lift dollar volume even more.