As busy as alchemists in their laboratories, U.S. economists last week gazed upon the bubbling statistics of U.S. business, tried to discern exactly what they meant. Before the Joint Congressional Economic Committee, four top economists forecast that business activity in 1960 will certainly meet—and perhaps exceed—the rosy predictions made in the President’s Economic Report. George Cline Smith, chief economist of F. W. Dodge Corp., and Peter Henle, assistant research director of the A.F.L.-C.I.O., agreed that Ike’s forecasts of a national output of $510 billion in 1960 is right on the line. Martin R. Gainsbrugh, chief economist of the National Industrial Conference Board, and Roy L. Reierson, chief economist of Bankers Trust Co., took an even more sanguine view: they believe that the gross national product may well climb as high as $520 billion in 1960.
Recession Talk. But the rosy talk of boom on top of boom also brought out some doubters. Vice President William F. Butler of the Chase Manhattan Bank told the committee that “one would look for another recession starting some time in 1961.” From Professor Paul A. Samuelson of Massachusetts Institute of Technology came the warning of “a slowing down of the rate of expansion in the last half of 1960, with a downturn to follow some time in 1961.” The idea of a 1961 recession, based on postwar economic cycles, is not new, but it is also based on economic probabilities that often do not turn out as expected.
One such probability was that the steel strike would be followed by a big rush of businessmen to rebuild inventories that would further squeeze credit, boost interest rates and perhaps nip the boom. But the Commerce Department announced last week that the inventory total in the fourth quarter remained about level. Though there was a December spurt in inventories, it was not as big as expected. The Commerce Department now expects that inventories will accumulate by the end of the second quarter at an $8 billion rather than a $10 billion rate, thus spreading out buying and making growth more steady through 1960. This is already partly borne out by the fact that pressure on interest rates has eased. The rate on Government bills fell for the fourth week in a row to a three-month low of 4.039%.
Housing Upsurge. Spending on business plant and equipment is moving ahead at a steady rate of about 15% increase a year, said the Commerce Department. With the credit squeeze loosened, more money was becoming available not only for business but for consumer uses.
Doubt was cast on another economic probability last week. Housing experts had expected tight money to cut building this year. But the Federal Housing Administration said that requests for loan guarantees had jumped 13% in December over November. That indicated that the construction industry may travel at a much faster pace than expected in 1960.
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