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Show First Security Bank gives economic report The national economy bounced off the recessionary floor in the third quarter according to Bill Gibson, vice president and manager, Vernal office, quoting the First Security Newsletter. The quarterly report, which will be published this week, is edited by Dr. Kelly Matthews, vice president and chief economist for First Security Corporation, regional bank holding company. The renewed growth and economic expansion reflected the removal of credit controls and sharply lower interest in-terest rates which prevailed in July and August. Improvement was recorded in most key areas of the economy including in-cluding industrial production, retail sales and housing starts. The current position of the U.S. economy is, however, much different than the typical recovery phase of the business cycle. The underlying rate of inflation has not been significantly reduced and in recent months, interest rates have climbed sharply. Thus, the critical factor relating to the economic outlook in the months ahead is the extent high inflation and high interest rates will choke off this budding economic recovery. The most prohable outlook for the fourth quarter and into 1981 is for a sluggish, no-growth economy. Higher mortgage rates have already sharply reduced the demand for real estate financing, which in turn, will weaken the residential construction industry. The demand for other consumer durables including automobiles, is also expected to remain soft. The basic rate of inflation continues to be in the 9'i-10 percent range. Rapid monetary growth, accelerated unit labor costs and uncertainty regarding the Middle East war actually pushed inflationary expectations higher in recent weeks. By mid-October, interest rates had again reached levels which were adversely ad-versely impacting the pace of economic activity. Conventional mortgage rates at 14 percent were up two percentage points while the prime rate, also at 14 percent, had increased three points. Loan rates at financial institutions, reflecting the cost of money obtained through Certificates of Deposit, Money Market Certificates, the secondary mortgage market, etc., increased basically because the demand for credit began to strengthen, growth in the nation's money supply far exceeded target ranges, and inflationary expectations ex-pectations increased. Business activity in Utah revived modestly in August and September but continued inflationary pressures on income and higher interest rates will probably thwart additional improvement im-provement through the first quarter of 1981. Retail sales reported in the third quarter were up only 2.4 percent which, before inflation, reflects a significant - reduction in real spending. The unemployment rate rose to 5.7 percent in September and is expected to vary near 6 percent in the fourth quarter. Although employment growth has continued in the state during the first nine months of 1980, the rate in increase was sharply below recent years. Residential construction remains perhaps the weakest segment of the Utah economy. As mortgage rates declined during the summer months some renewed demand in Utah for mortgage financing was clearly evident. By the beginning of the fourth quarter, however, conventiional mortgage rates were again at 14 percent per-cent and the level of activity was sharply diminished. Furthermore, it now appears that for all of 1980, total permits for new dwelling units may be near 9,500, the lowest annual output since 1970. Personal income in Utah in 1980 is forecast to reach $10,920 million, an increase of $1,082 million or 11 percent above the 1979 level. With inflation, as broadly measured by the GNP deflator, now 10 percent, the aggregate gain in real income will approximate 1.0 percent. Total wages and salaries are expected to rise about 10 percent, reflecting a 2'4 percent employment gain and an 8Vi percent average wage inrrpflsp |