| OCR Text |
Show Economy sluggish because of high interest, First Security letter says The U.S. economy is expected to remain sluggish in the third quarter as high interest rates continue to restrain economic growth said Bill Gibson, vice president and manager, Vernal, quoting the First Security Newsletter. The quarterly report, which will be published this week, is edited by Dr. Kelly Matthews, vice president and economist for First Security Corporation, Cor-poration, regional bank holding company. Following the torrid 8.6 percent annual growth rate recorded in the first quarter, Real Gross National Product substantially flattened in the second quarter. Economic weakness was evident in most sectors of the economy including employment, income, production and sales. The near-term economic outlook, characterized by slow growth, high interest rates and persistent inflation, is reflective in part of the economic policies being pursued by the Administration Ad-ministration and the Federal Reserve. This combined policy approach, centrally cen-trally designed to slow the rate of inflation, in-flation, is working, but not without pain as evidenced by numerous businesses throughout the industrial spectrum facing severe financial circumstances. Markets highly sensitive to speculative forces and economic uncertainty, un-certainty, are giving a strong vote of confidence for eventual success if current U.S. economic policies are sustained. In the foreign exchange market, the U.S. dollar is at a five-year high against the German mark and record levels against the French franc. Consumer spending is expected to remain cautious in the months ahead particularly for automobiles. The average rate of inflation will probably remain stuck near 9 percent in the second half of 1981. Wage increases in the nonagricultural economy in the second quarter averaged 10-percent above last ' year. Rising wages, along with modest productivity gains, will maintain cost pressures in the economy. Interest rates rose sharply in the second quarter and continue stubbornly at very high rates despite a pronounced slowdown in economic growth and some moderation in the rate of inflation. in-flation. The prime lending rate reached 20'i percent while average mortgage rates were in excess of 16 percent. .,. , Business conditions .in Utah, in the third quarter are expected to maintain, but probably not exceed, the relatively flat growth rates recorded during the first half of 1981. High interest rates and persistent inflationary pressures continue to weigh heavily on Utah's economy. Only modest relief is anticipated an-ticipated from these nationwide problems in the second half of the year. In June, nonagricultural employment totaled 558,300, an increase of 0.8 percent or 4,700 jobs above last year. The settlement of the coal strike returned 3,150 Utah miners back to active payrolls. Contract construction employment, reflecting the depressed housing industry, in-dustry, was 2,300 jobs or 6.9 percent below a year ago. The manufacturing and trade sectors each had created 2,000 new jobs above June 1980. Utah's employment rate is expected to remain near 6 percent in the third quarter. In June the jobless rate dropped to 5.8 percent from 6.2 percent in May. There were, however, 44,000 unemployed in Utah in June compared with 40,300 last year. One of the highest components in the Utah economy during the first half of 1981 was the substantial increase in building permits for nonresidential construction. In the January - May period building permits were issued for $171.1 million, 56 percent above the same period a year ago and Vk percent above 1979. Total construction value in the first five months of 1981 reached $404 million, up 51 percent above last year. The outlook for residential construction con-struction in the third quarter suggests only moderate improvement. Building permits for new dwelling units increased in-creased in May, aided by two large condominium projects in Salt Lake City. Mortgage rates in the third quarter are expected to ease modestly from their current lofty levels, but should remain well above 13 percent. New programs of variable or adjustable rate mortgages are now being announced which provide an alternative mortgage instrument. Mineral and fuel production maintained main-tained generally stable production schedules in the first half of 1981 with the exception of the coal miners strike. . Coal prices rose in the second quarter and are currently quoted more than 30 percent above last year. Copper production in Utah, through April, was essentially unchanged from a year ago. |
