Show S' S BUSINESS PROSPECTS CONTINUE FAVORABLE By Babson's Reports Incorporated Incorporated Incorporated Wellesley Hills Mass Although uncertainties abound and there is no lack of unsolved problems the US U.S. economy is still pointing to the upside Admittedly some segments of business are not showing as much vigor as previously previously previously pre pre- yet relatively few really serious setbacks have occurred Thus far the Administration Administration Administration Ad Ad- ministration and Federal Reserve Reserve Reserve Re Re- serve fiscal and monetary control control con con- actions actions designed designed to bring about disinflation of the overheated overheated over over- heated economy have had only a token impact Capsule Forecast As things now shape up the staff of Babson's Baboons Reports expects expects ex ex- final compilations to show Gross National Product for for the first quarter of 1969 approaching the billion mark a gain of two per percent percent percent cent over the 1968 fourth quarter ter Despite the heavy restrictive restrictive tive influence of large spring tax payments and government credit curbs we feel there is enough forward business momentum mom mom- to carry the GNP to the billion billion level in the second second sec sec- ond quarter With perhaps half of f this additional two per cent increase coming from higher price tags the real expansion will be only fractional Yet the trend will still be up and new highs will be reached In hi the April June April June period The rate of gain gam posted by bythe bythe bythe the Federal Reserve Index of Industrial Production thus far farin farin farin in 1969 has been lagging the 1968 pace Preliminary figures suggest a first quarter first quarter average average average aver aver- age for the index of about 1695 We are looking for a second second quarter quarter average near with the high mark probably probably probably pro pro- bably occurring in May But beyond midyear production increases may be harder to come byRise by Rise in Construction Activity Our studies indicate that dollar dollar dollar dol dol- lar volume of construction will increase substantially compared ed with the 1969 first quarter While the rise in bank lending rates and higher building costs are dampening earlier forecasts forecasts forecasts fore fore- casts of a 10 per cent rise in housing starts this year the recent brisk housing starts should bolster residential construction con con- Heavy construction highways highways highways high high- ways bridges dams and the like will show good gains from first quarter first quarter levels And commercial and industrial building promises to lend support support sup sup- port to the industry's total activity ac ac- Hence the economy should benefit from a decidedly decided decided- ly higher level of spending for construction in the current quarter Accordingly the Research Research Re Re- search Staff of Babon's Reports Reports Reports Re Re- ports favors such building materials materials materials ma ma- stocks as Lone Star Cement Medusa Portland Cement Cement Ce Ceo ment and National Gypsum Pluses Plum and Minuses Minuses' Babson's Babson Reports are for forecasting asting that the following following follow follow- ing other industries will show the best gains during the second second sec sec- ond quarter Airlines aluminum aluminum num chemicals copper electric electric elec elec- utilities life insurance and railroads and transportation generally This augurs well for stocks such as FMC Corp Reynolds Metals and Republic National Life Insurance Currently Currently Cur tur favored by Baboons Babson's i Trending up also though at a slower pace will likely be beAuto Auto accessories electronics machinery metal fabricating and rubber Autos and steel will probably ly be the major laggards laggards- Auto prospects are rather drab and total output in the second quarter quarter quarter ter now promises to be down from the somewhat disappointing disappoint disappoint- ing results of the January- January March period Steel still goIng going going go go- ing great guns after a far better than expected than expected first ter will do better than autos Yet we feel we-feel feel steel is riding for fora a setback While shipments should hold up well autos auto's doldrums and resumption of foreign steel inflow may slow Orders slid and lead to a flattening flattening flattening flatten flatten- ing out of production before midyear Summary The bulk of the factors suggest suggest sug sug- gest that business will chalk up further over over all all gains in inthis inthis inthis this second quarter in both volume and profits Inflationary Inflation Inflation- ary pressures must still be reckoned with however and andas andas andas as we come closer to midyear we look for increases in profits profits profits pro pro- fits to taper off The high cost of carrying inventories and the impact of fiscal and monetary controls may restrain forward 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