Masonry Magazine April 1975 Page. 11
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THE U.S. ECONOMY IS GETTING A HUGE SHOT-IN-THE-ARM from Washington. The big Democratic majorities in Congress mean to get things moving again. Between tax cuts and high spending, consumer incomes are being increased. Business will see more orders-and the bigger investment credit will help. As a result, the coming recovery is likely to be brisker than many expect.
A number of analysts already believe they see some faint, if hopeful, signs of an upturn. Unfortunately, the stimulation threatens to bring major trouble for the financial system.
THE TAX CUTS ENACTED BY CONGRESS ARE
NOW DEEMED big enough to do the needed stimulative job. The cost will be $7 billion more than Ford asked. And much of the stimulation will be crammed into a period of a few months. The refunds on 1974 incomes will start going out in May and run into June. The withholding rates on 1975 income will be reduced-starting on July 1-with a full year's reduction sandwiched into the July-to-December period.
Congress has no desire to reduce spending, as the President proposed. It has already rejected his requested slashes in outlays for health and education. And the Democrats keep on adding money to on-going programs of the Federal government.
RENEWED CONFIDENCE OF BUSINESS AND
CONSUMERS HOLDS a key to recovery. And there are already signs that people are feeling better over the outlook. The recent easing in the rate of inflation has been a very promising factor. Continued progress in moderating the price-index rise will be a major plus.
Retail sales are holding up quite well, even rising in some sectors-indicating that consumers aren't so worried about the future of their jobs. The recent run-up in stock-market prices also seems to reflect the slowly improving climate. The deep gloom of the winter months seems to be dissipating.
Some other indications of recovery the economists see:
* New orders rose 2% in February. Of course, one month does not establish a trend. But the gain is a positive sign.
* Auto production has been boosted-only a little so far, to be sure, but a healthy sign. Workers are being recalled.
THE BEHAVIOR OF BUSINESS INVENTORIES IS
MOST CRITICAL to the upturn. Over-built stocks must first be liquidated before new ordering can restart. There is solid evidence now that the turn in inventories is well under way. Figures for January show the first decline in business holdings in months. The drop was particularly-and surprisingly sharp in the non-auto sectors.
The decumulation is expected to be gathering in momentum all through the first quarter. Then the second quarter is also likely to witness further substantial reductions in stocks.
Analysts now feel that the accelerating phase of the slide is over. That may not seem significant, with business depressed and joblessness rising. But an end to the economy's downward phase is a clear sign of progress. Historically, a bottoming out of the economy precedes an upturn in business activity.
ECONOMISTS ARE NOW CONFIDENT THAT A
RECOVERY WILL begin quite soon. Signs will be visible in the third quarter and be unmistakable in the last. Businesses will have worked off their large over-hang of inventory by then. Many will find it necessary to begin boosting production to stock up again. Retail sales should begin to accelerate, after many months of little growth. Consumers will be spending a large part of the refunds they will be getting.
Home-building should be making a slow recovery from its current slump. Money is flowing back into the thrift institutions, making them more willing mortgage lenders.
TOTAL OUTPUT OF GOODS AND SERVICES WILL
BE UP BRISKLY by year-end. Many analysts can see real Gross National Product-net of price increases-rising at an annual rate of 4% perhaps even 5% during the fourth quarter. That would still fall short of the 7% or 8% growth of some earlier upturns. But it would be a very solid start and would hold out hope for more gains in 1976 when hopefully a full-fledged recovery will be roaring along.
ALL THE FISCAL STIMULUS MAY BRING RISING
INTEREST RATES later in 1975. It means huge-and growing deficits in the Federal budget for fiscal 1976, the government accounting year that begins July 1. That deficit will exceed the President's projected $55½ billion. The red ink could hit $80 billion. And it doesn't take unreasonable assumptions to see it up to $100 billion. (Continued on page 22)