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Show mm (Mm MM 1 SURPRISINGLY STRONG ECONOMY SHOWS SIGNS OF SLOWING An early preliminary estimate of economic achievement for first quarter 1981 was recently made public by the Council of Economic Advisor, based on data prepared by the U.S. Department of Commerce. It indicated that the real gross national product the value of goods and services produced during first quarter 1981, adjusted to offset the effects of inflation for that period might well chalk up a 5 per cent growth rate compared with final quarter 1980, on a seasonally adjusted annual basis. Such an increase would, of course, attest at-test once more to the surprising resilience of the American economy. ESTIMATE PROBABLY TOO HIGH This assessment, however, of the performance of the economy for the first three months of 1981 was actually made public nearly two weeks before the end of the quarter, and may be overly over-ly optimistic. It is the opinion of the Research Department of Babson's Reports, in fact, that a later estimate based on more complete figures will range somewhat lower than 5 percent. The first release was only a "guesstimate," based on partial statistics for January and February, plus some weekly figures for March. Thus, subsequent revisions with more comprehensive facts may well trim the estimated real GNP. This is exactly what happened to the series of estimates and preliminary releases on real GNP for the final 1980 quarter. There was envisioned for that period also a growth rate 5 percent better bet-ter than for the third quarter of 1980. Each revision that followed, however, successively trimmed back the real GNP for the final three months of 1980, bringing it ultimately to a 3.8 percent annual expansion rate. ' Even if the government's initial guess on the economy's performance for the first three months of this year does ultimately prove to be on the high side, it is clear that there is still considerable con-siderable overall vigor, preventing any pockets of troubled business in certain regions of the country from dragging business as a whole down the recession path. Still it would not be surprising if the succession of downward revisions of the real GNP for fourth quarter 1980 were ' lo-continue' into the estimate for the -: past quarter. If this were to be the case, it would , leave no doubt that the economy has settled into a period of less spirited growth. The Babson Staff is of the opinion that this is what is taking tak-ing place. SECOND QUARTER 1981 SHOULD EDGE LOWER The April-June period of 1981 will undoubtedly un-doubtedly see some business softening. Latest studies carried out by Babson's Research Department indicate the U.S. economy will find it difficult to achieve any upthrust much beyond the seasonal norm for the spring months. Hence, our forecast for real GNP is for a reading that will be flat to modestly lower. The prospects for industrial production are likewise drab for the three month period now under way, on a seasonally adjusted basis. On the important new building front, continuing high mortgage mor-tgage rates and the paucity of mortgage mor-tgage credit are expected to keep new housing starts from matching seasonal norms, despite the relatively firm pace of activity in recent months. Achievements in retail tratibvl may also be unimpressive this spring-on a physical volume comparison, com-parison, ex inflation-'owing to anxieties over the impact of proposed pro-posed federal spending cuts along with further erosion of discretionary buying power by inflation. Nevertheless, automatic wage increases and newly negotiated wage hikes under revised agreements will serve to keep gross personal income figures moving toward higher ground. More sizeable aggregate income in-come gains are unlikely in view of the fact that employment rates are not going to do much more than drift sidewise, while the jobless rate creeps upward to the year's peak in the 8 - 9 percent range by late spring. |