Show BUSINESS s t HI REASSESSMENT OF 01 1977 BUSINESS When we issued our forecast for 1977 business at the last turn lurn of the annual calendar prospects favored an extremely bright first quarter of the year for the economy and the second quarter looked as though it would be even better beller It was our opinion in fact that the spring three month span of 1977 would be the liveliest phase of the whole year There were questions raised about the possible adverse impact of labor problems after midyear but we still felt that business would continue its upward trend in the final half though not as strongly as in the first half With the results of the first quarter now flowing in It is time for an update of the economic prospects for the remainder of the current year A DISHEVELED BEGINNING The keen optimism with which the 1977 business outlook was viewed before the year opened was quickly and cruelly dashed The expected rousing start was immediately stalled by weather problems including a seemingly endless spell of record-breaking record blizzards and bitter cold in large sections east of the continental divide Drought conditions hit the nations nation's grain belt and the Far West Some regions suffered from either a fuel shortage or orthe orthe orthe the threat of one As a result of these troubles there were plant and store closings shortened workweeks workweeks work workweeks weeks t transportation ra tion disruptions crop damage and stymied construction and building activity So after only six weeks of 1977 the economy was in a position where it had to play catch up Fortunately weather conditions did soon begin to show enough improvement improvement improvement im im- im- im provement so that business could again make headway Despite this relief enjoyed by most sections s of the countrY after the middle of February some of the ill effects will be hard to eradicate Consumer budgets will continue to suffer from high prices for fruits vegetables fuel and energy for some time to come and this will willbe he be reflected in stiff demands in labor talks BENEFITS FROM l CATCH CATCH UP UP Ul EFFORTS Owing to the bad start economic results for the first qua quarter of 1977 are proving to be only moderately better than forthe forthe for forthe the previous two quarters While this was the third disappointing quarter in terms of expectations there is a positive aspect up Catch-up attempts attempts attempts at at- tempts in industrial activity and new building should lend more power to the up-thrust up anticipated for this spring quarter thus providing more momentum for the economy in inthe inthe inthe the second half than previously seemed possible Assuming that the recent steel labor pact is ratified at the local level without undue hitches hitches hitches hit hit- ches an important uncertainty will wil wilbe be eliminated While there will be a slight change in the years year's ears business profile the 1977 outlook still stil remains favorable AREAS AlmAS OF C VS U UNCERTAINTY TIn T In real terms tex ex inflation the nations nation's Gross National Product for 1977 is likely to wind windup windup windup up close to the 6 percent year to year gain that we forecast earlier Because of the limited quarter first advance industrial industrial industrial in in- activity should rule higher over the balance of the year than had been expected But 1977 overall may not top 1976 by much more than the 4 percent projected in our forecast for this year ear Although new building was muted more than normally early in the lire year this extremely extremely extremely ex ex- ex- ex significant sector of the economy has already been staging a strong comeback With Vilh mortgage money generally in good supply strength in residential building is particularly evident and we regard our forecast of 18 JB million units of nev housing starts for the year as definitely k attainable There are of course some murky spots in the total picture Chief among these is inflation with its potential effect on consumer spending business capital outlays and investment In confidence There are also alo a number of world hot not spots that will bear watching I F |