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To keep up with the trends, U.S. retailers have a new weapon: the computer. Macy's was the first U.S. department store to bill all of its charge accounts by computer, and next month it will add two faster, more versatile computers to take some of the guesswork out of merchandising. The new machines will speed daily reports to Straus and his aides, telling them which colors, sizes and styles are selling fast—and which aren't. By 1966, many of Macy's goods will be automatically reordered by computer. The machines eventually will do quite a bit more than that: within four days after a piece of merchandise goes on sale, they will be able to predict with 80% accuracy what its final sales will be.
Scary Headlines. The nation's economists, who are generally pretty good forecasters themselves, could use an even more accurate computer to tell the future of the economy as well as the fate of dresses. Their immediate problem is to figure out what is likely to happen to the U.S. economy in 1965 —and how to keep it riding high. The U.S. consumer may well believe that the economy will continue its swift ascent, but the economists are not so confident. They reckon that the older the expansion becomes the more it will be likely to show the arterial hardening of great age.
The economic thinkers seem to be in general agreement that a slowdown is on the way, but they differ about how sharp it will be. Some, like Chicago Economist John Langum, figure that "1965 is likely to be quite a troubled year, with surprises and a downturn in the second half." Others, notably FORTUNE, predict that the economy's annual growth will slow down from an average 5% over the past four years to 2½ over the next 18 months. Last week Yale Economist Henry Wallich forecast a strong expansion in the first half of '65, a tapering off in the second half, and perhaps a marked slowdown thereafter.
That comes as close as anything to being the standard forecast. It has made for some scary headlines, but readers who get down to the finer print discover that it means nothing worse than a temporary leveling at the current high rates—"a change of pace, a year of consolidation," as Raymond Saulnier, chairman of President Eisenhower's Council of Economic Advisors, puts it. A vocal minority of experts, recalling that 1964 turned out to be a much better year than most businessmen had predicted, are more optimistic. Says American Bankers Association Executive Vice President Charls Walker: "It will be a strong 1965 all the way through."
Several important trends for 1965 seem clear. Housing starts will fail to increase for the second successive year. Unemployment may inch up because 4,000,000 youngsters will come into the labor force, 18% more than last year. On the positive side, capital spending will rise, though the gain is expected to be somewhat below this year's brisk 14%, from $39 billion to $45 billion. The automakers are expected to turn out 8,000,000 cars again, and the steelmakers to beat their 1964 record of 126 million tons by some 2%. Appliances will rise 4%, drugs 5%, furniture 6%, aluminum 10%. State and local spending will jump by $5 billion, topping federal spending for the first time since the 1940s.