Show BUSINESS STILL POINTING BUT NEARER As we begin the second quarter of 1979 and the fifth consecutive year of economic there is concern over how much longer business vigor can be This anxiety derives in large measure from the fear that the already high cost of business will be further swollen once the latest OPEC price hikes trickle down into the It is a well-grounded though it is one that is overshadowed by the continued momentum of In our Babson forecast for presented in this column last we predicted an economic downturn embracing the second and third with improvement late in the year making for a net gain in the October-December business vitality is so much stronger than we had earlier expected that we believe the second quarter will register at least a nominal upturn even if the beginnings of a reversal should mark its final PRICES AND MONEY COSTS Though first-quarter inflation did hurt consumer confidence the inflation upsurge mostly stoked the economic fires and fed on itself by increasing Producer paced by the early OPEC pricing ruled higher than we had forcing us to boost our targeted 7 inflation rate for 1979 to at this And two-in-a-ro-quarters of lagging GNP constituting a recession are likely to turn out to be the third and After some short-term money rates resumed their Th stiff OPEC boost in oil quotes assure s that they will move at least somewhat higher in the weeks just perhaps peaking at or But from peak rates will be We feel that both short- and long-term money rates are going to hold in a relatively high range right through CONSUMER ATTITUDES AND UNION MILITANCY Carter's wage-price guidelines are awash in a turbulent sea and near-term prospects favor additional markups in labor costs and consumer But during the second quarter we shall also see a stiffening resistance to further consumer price In due this will make for easing in inflationary pressures and play a key role in the business slowdown we anticipate as consumers are less able to cope with high mortgage rates and financing costs for autos and other big-ticket Yet we see no reason to change our original forecast that 1979 housing starts would dip no lower than million units and that the year's auto output would be a shade under 10 million units as compared with million in Most labor chiefs favor mandatory wage-price controls but the White House and Congress are largely against These will not be seen in the second quarter and could be avoided completely this but it would be foolhardy to rule them Rubber workers settlement due later this month may not be won without some plant Problems may also arise pacts this But of all contract that of the auto workers in September is still causing the most SUMMARY Regardless of continuing teamster we think the second-quarter business results are going to make quite satisfactory and possibly even very good the second quarter will undoubtedly end on a somewhat weaker note than prevails now at the But when slowdown does in fact become we feel that the impact will be cushioned because the imbalances to be corrected will be neither numerous nor of excessive Unless the inventory bulge that is still relatively modest is permitted to get entirely out of the recession we are predicting for the last half of 1979 should be comparatively short and |