Show fill t hit if hi BUSINESS I I LOOKS COOl GOor FOR FOIL TilE THE BALANCE OF 1970 1976 The marked gains in economic activity during the first half of this year compared with the same period in 1975 1915 lined up up well with the predictions lions made earlier in our 1976 1916 Annual Business Business' Forecast As we had anticipated the most pronounced advance occurred in the first quarter with the improvement for that three-month three span even a little better than we had expected thanks to the vigor of consumer spending And business continued continued continued con con- its upward course in the second quarter too too too-in in spite of some softening in retail trade MORE MOKE GAINS AHEAD Our original 1976 Business Forecast called for a continuation con con- continuation of the in the second pc-ond half of the year although we did look for the margin of of improvement over the third and fourth quarters of 1975 to narrow somewhat Weare Weare We Weare are not inclined to alter this projection and the momentum gained thus far in 1976 makes it likely that a healthy business increase will hold through the end of the year In fact chances now seem favorable for the current upward phase of the cycle to lap over into 1977 NOT ALL CLEAR SAILING The second half of 1976 will not have the benefit of certain conditions usually responsible for powerful steady economic progress inthe early phase of most post recession post recession business revivals It must be remembered remembered remembered that this economic expansion expansion expansion ex ex- is now now more than a year old and monetary policies are less liberal because of the danger of inflation Indeed inflationary pressures will be steadily more evident inviting additional upward tendencies in the in in- t terest rest rate structure and eroding business and consumer confidence 1 r 1 j in 1 r Furthermore ur th there ere WI will 11 S still I Ibe be the threat of labor disputes particularly in the automotive field where contracts expire September mid between the Big Four and the Ul United ted Auto Workers Also it would be well not to overlook the potential dangers from world hot spots such as the Middle East and southern Africa In addition there are adverse implications stemming from the widespread and acute drought currently scourging parts of Europe INFLATION INFLATION GNP GNP INDUSTRIAL PRODUCTION The Research Department of Babson's Reports expects the rate of inflation to average around 6 percent in the final two quarters of 1976 and possibly a abit abit abit bit higher Short of the imposition of controls which controls which is unlikely in inthis inthis inthis this election year year there there is no noway noway noway way for the economy to avoid the effects of increases in the cost of labor transportation and raw materials The impact of these factors however could be softened somewhat by another hefty agricultural outturn which at this time appears to be a reasonable possibility The nations nation's Gross National Product should trend higher in terms of both current dollars and ex inflation On the latter basis the GNP could move upward sufficiently during the second half of 1976 to enable the year as a whole to top the real GNP of 1975 by 6 percent Industrial Production should also climb further assuming a protracted auto strike can be averted But the sharp jumps in durable goods output of first first- half of 1976 are not likely to be repeated Strength can be sustained nevertheless in the production of consumer goods and gains in some industrial lines that have lagged thus far farIn farin farin in the recovery should help to lift overall output to new peak levels OTHER F FAVORABLE ASPECTS S1 The expected force of the recovery should exert a favorable influence on employment em and personal income even though It will be difficult materially to reduce unemployment unemployment Consumer spending should be firm to higher The last half of 1976 is likely to see corporate profits racking Up fresh gains over and above earlier progress which may encourage more liberal capital spending |