Business: Business in 1958

(9 of 10)

since record 1955. What gives automen heart is the low level of consumer debt and the prospect of a big increase next year. One of the axioms of the new economics—and the exact opposite of the copybook maxims—is that rising consumer debt is a sign of prosperity, expanding in times of optimism, contracting in times of doubt. With recession in 1958, consumers paid off $1 billion in auto debts, the highest repayment since World War II. Now, with recovery, they should be in the mood to borrow for cars again. While predictions are for a 5,500,000-car year, automen think they may do a lot better. One hopeful sign at year's end: cars were selling at a far faster clip than a year ago, when Detroit was already beginning to trim production to match falling sales.

Employment Up, Prices Down. A problem for 1959 that may take longer to solve is unemployment, which will probably stay at around 4,125,000 during the winter months, then start decreasing toward 2,500,000, which is considered about minimum unemployment. "We'll pick them up all right," says Commissioner of the Bureau of Labor Statistics Ewan Clague, "but it will take us most of 1959 to do it." Part of the reason is industry's rising productivity, which is expected to continue to rise smartly next year, and which in turn will hold down prices. Inflation showed up in almost every speech by leading economists in 1958, but not in prices. There was little doubt that rising costs, high demands, and big Government spending had woven some inflation permanently into the economy. The big question is: Can it be held in check, particularly since the budget will show another big deficit?

In the current Government fiscal year, the red ink will be about $12 billion; though President Eisenhower plans to present a balanced budget to Congress for the year beginning July 1, the outlook still is for a deficit of upwards of $3 billion. This may well be trimmed as Government income rises with business. Few economists believe that inflation can be ended, barring a depression, since a rising price level has been with mankind since the dawn of time, and is almost inevitable in a dynamic economy. The problem is to keep it within bounds—under a 1½% price rise per year. In 1958 prices did not rise even that much. The forecast is that they will remain stable in 1959.

Another question mark for 1959 is the state of the nation's foreign trade. To the delight of foreign countries, the new economy's huge purchases kept imports at record rates, though exports plummeted from a peak annual rate of $20.5 billion in 1957 to $16.6 billion the first half of 1958. Gold flowed out of the U.S. at such a rate that there was talk of a flight from the dollar. While exaggerated, the talk underlined the fact that foreign companies are engaged in a vast modernization program, which, with lower labor costs, will give them a double advantage on world markets. Warns Alfred C. Neal, president of the Committee for Economic Development: "For the past 30 years, the U.S. has been blessed in that we never had to worry about our balance of payments. But if this keeps up, we may lose important foreign markets which we vitally need."

Go West and Up. None of the problems are so difficult that businessmen, with work, can not solve them. Looking ahead, the U.S. can thank its lucky stars for a technology