Masonry Magazine June 1973 Page. 10
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DOUBTS ARE GROWING ABOUT THE ECONOMY'S TREND
Many government and industry economists still expect the business expansion to lose steam this summer, despite the widespread and exuberant strength that is currently so obvious. But many others feel that the boom is going to continue for the rest of the year. And this school expects further trouble in keeping wages and prices in check. It's just too soon to know which blueprint will turn out to be the right one. The latest business statistics are inconclusive. They can be used to support either viewpoint.
Most officials still hold to the forecast of notably slower activity. They expect the economy to gear down to a healthy rate of growth before 1974 a rate that could be sustained indefinitely and without another recession. They point to signs of moderation already visible in several key areas.
THE BUDGET IS BACK UNDER CONTROL,
for one thing, and less stimulative. This year's deficit may be $17 billion, not the $25 billion once expected. And the red ink for the year starting July 1 will be less than $5 billion. This school also expects spending by consumers to taper off after mid-year. Retail sales have been easing since March. New car deliveries have slipped. What's more, consumers won't be receiving further huge additions to incomes; the impact of big Social Security benefit boosts and tax refunds has passed. Surveys also show a big drop in intentions to buy new cars and appliances.
Home-building has also been slowing for several months. Building permits, which foreshadow future housing starts, also have been falling. And mortgage interest rates are rising, at a time when savings flows to lenders are off.
IT ADDS UP TO AN ENCOURAGING OUTLOOK,
according to this majority view. Inflation will subside -- to a 3%-to4% a year rate, from the recent 64% clip. Real physical growth will go on at roughtly half the 8% first-quarter tempo. The economy will keep rolling along, at a pace very close to full capacity.
As this thinking goes, a recession late this year or carly next will be avoided. No rise in unemployment will occur.
UNFORTUNATELY, THOUGH, THIS VIEW IS LOSING SUPPORT
almost day by day. More and more economists seem to be reworking the early optimistic estimates. They fear activity will move on through 1973 at too fast a pace for safety. To be sure, they don't expect the recent torrid pace of activity to continue to roar along unabated. And they certainly don't look for further speed-up. That is not the real issue. The fact is even a slower rate can be too much.
These pessimists concede that both housing and consumption are slowing. But they insist that this does not guarantee that the economy will cool off, or get down to the 4% rate of real economic growth considered safe for late this year.
These economists point out that the second quarter saw only a moderate decline in economic activity from the post-Korean war record advance of 8% during the first quarter. The second quarter rate of growth is still far too much to be sustained for the long run. It would mean trouble ahead.
THIS VIEW WORRIES ABOUT A STRENGTHENING BUSINESS SECTOR
later in '73. It is nourished by the big orders for durable goods received in past months. This thinking anticipates a really big build-up in inventory accumulation. Recent strength of final sales has so far prevented big additions to stocks. Many firms no doubt feel they are losing sales because of spotty inventory. And they will be making extraordinary efforts to correct such deficiencies.
What's more, capital spending by business seems destined to strengthen. Recent surveys show industry planning huge outlays for new plant and equipment to keep up with those big orders. (Continued on page 39)