Masonry Magazine March 1971 Page. 27
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THE ECONOMY'S EARLY 1971 PERFORMANCE
has been mildly disappointing. Most of the key business
indicators have been registering gains, to be sure. But they
are not as big as business and government economists had
hoped for. Things are lagging a bit behind the President's
ambitious growth schedule. Yet this quarter was supposed
to provide the momentum for a vigorous 1971.
Recent business gains seem big-until the figures are
put in perspective. Then the gains turn out to be re-
lated to the catch-up from the long auto strike and
other one-shot developments. They lack the follow-
through value needed.
• Industrial production is still below the prestrike
levels.
• Retail sales have lost some zip that appeared at
Christmas.
• Auto sales are rising, but still haven't reached targets.
• Personal income has increased, but partly on a
U.S. pay hike.
• Unemployment has declined some from its 6.2%
peak-but has not fully erased the jumps caused
by the shutdown in autos.
THE PACE OF EXPANSION WAS SUPPOSED TO
BE SPECTACULAR this quarter. Gains that are merely
"very good" won't deliver on the President's forecast of a
vigorous pick-up in production, with substantial cuts in
unemployment. The President has projected a 9% increase
in output-5% real and 4% prices. Statistically, that
means a Gross National Product of $1,065 billion in '71,
a rise of $30 billion in annual rate in each of this year's
four quarters.
But $25 to $26 billion now seems to be all the country
has hit in the January-March period. Many analysts
just don't see a spurt in the months ahead, either-
quite the contrary.
THEY JUST DON'T SEE WHERE THE PUSH WILL
COME FROM for a boomy surge. The new Budget is
stimulative-but mildly so. no more than the current
one. Monetary policy will not get more expansionary-
unless there is a new slump. Federal Reserve Chairman
Burns has made this very clear to the White House.
Note, too, that business is slowing its spending for new
plant and equipment. New housing starts continue to
show real strength, but are not expected to jump
much higher.
ONLY THE CONSUMER CAN PROVIDE THE
OOMPH to get things really rolling. His spending is so
big that even a relatively small shift brings big results.
masonry • March, 1971
And consumers do have the incomes and savings to permit
a surge in buying. What's more, there is plenty of credit....
to finance homes, appliances, etc. Once people let loose,
production and jobs go up and business expands more.
But consumers have lacked enough confidence for
a step-up in spending. They are worried about possible
further job layoffs. and about persistent inflation.
They're saving big-keeping part of today's pay for
tomorrow's price increases.
THE PRESIDENT IS TRYING HARD TO BOLSTER
THE CONFIDENCE of the public. His ambitious target
is designed to reassure-and encourage higher spending.
It is a psychological gambit.trying to talk the country
into prosperity. But many economists are skeptical about
chances of reaching Nixon's goals. This includes quite a
few in the government. but outside the White House.
MOST PRIVATE ECONOMISTS EXPECT AN UP-
TURN. and think it has started. But they don't feel it
will be as fast an expansion as the President says. More
particularly, they take issue with his economic advisers.
The skeptics insist that the White House reasoning is too
simplistic, on economic grounds. There will be only 3%
or so in real growth, after washing out price hikes. Ac-
cording to this view, retail sales will not begin to skyrocket
this year. And unemployment will continue to stay quite
high for many months to come.
These dissenters will concede that President Nixon
could just turn out to be right. The economy is unpre-
dictable. Surprise developments can change psychology
and touch off a new boom. But at the moment the
skeptics don't see this.
HAVE INTEREST RATES FINALLY REACHED
THE LOWS for this business cycle? A growing number
of money market professionals has concluded that they
have. (These include some astute bond dealers and man-
agers of large investments.) Main cause for this suspicion
is the President's determination to stimulate a rapid re-
covery; he may not really make it, but the mere attempt
to do so could.. these specialists feel. generate pressures
that will push rates up.
Officials at the Federal Reserve don't agree that the
bottom is here. Credit demands are not heavy, over-
all, and money is easy. Bond yields and mortgage rates
can decline some more.
NIXON WILL HAVE TO DO MORE TO CURB
SOARING WAGES before too long. To be sure, the
President has already taken some steps in this direction.
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