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Show Inflation to hurt economy in 1980, FSC report says The United States' economy in 1980 will be characterized by inflation, recession and politics, according to Bill Gibson, vice president and manager, Vernal Office, First Security Bank of Utah, quoting from 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, a regional bank holding company. Much of the economic weakness in the fourth quarter was centered in the automobile and residential construction construc-tion industries. Automobile sales were 21 below the 1978 peak and production dropped 28 in December. A reduction in housing starts is anticipated in the months ahead, although the recent suspension of usery laws in many states and the introduction of new savings certificates cer-tificates will help buffer the housing weakness. The Newsletter added that as a result of the December OPEC price increases, crude oil prices will likely increase another 40-50 in 1980. The impact of these oil prices combined with rising labor costs and declining domestic productivity pro-ductivity will likely maintain the rate of inflation near 12 during the first half of 19H0. These higher oil prices, combined with international uncertainty, combined combin-ed to drive up the price of gold and further fur-ther weaken the dollar on international exchange markets. During the 70's, the U.S. dollar declined nearly 20 on a trade-weighed basis and more than 30 against the SDR. Limited by this weakness and continued con-tinued inflation, the Federal Reserve will have essentially no flexibility to influence in-fluence interest rates downward as the national economy weakens in the first quarter of an election year. Short-term interest rates may actually edge higher while long-term rates are expected to remain near present levels. Locally, the pace of economic expansion expan-sion in Utah in 1980 is expected to case below growth rates recorded during the previous two years, the Newsletter reported. Utah should remain generally insulated against economic problems appealing nationally and internationally, international-ly, although continuing inflation will be primary areas of concern for the state's economy this year. Population growth for the coming hear is forecast to again exceed 3. With many new corporations establishing industrial locations in Utah accompanied by continued growth in existing facilities, a total of 27,000 new jobs are expected to be created in 1980. The rate of unemployment, however, will probably edge modestly higher, predicted the publication. According to the report, residential construction activity during the first half of the year is expected to remain sharply below year-earlier levels. Average rates at year-end Salt Lake were in the 12-12Mz ranges while rates in sources of mortgage financing from the secondary market remain near 13. Rates are not expected to drop during the first half of the year. Commercial construction and the mineral industry have been and are expected ex-pected to be sources of economic strength, the Newsletter said. |