Show BUSINESS and end the theby STOCK MARKET by BABSON'S REPORTS IN INC Copyright 1971 1911 HOW BUSINESS LOOKS As we move into the second quarter of the year it is becoming more evident that the economy is emerging from the doldrums The Babson Dabson Research Staff however feels that the key question is still how rapid the recovery will be In recent weeks there has been increasing doubt as to the reliability of the Nixon Administrations Administration's prediction that the Gross National Product will reach the smashing record rate of 1065 trillion by the end of 1971 Not A Cinch At this time it appears the Administration Administration Admin Admin- may have set its sights too high It could well be that unless additional additional additional addi addi- pump priming measures are initiated initialed initiated in in- the which still pervades general business may prevent achievement achievement achieve achieve- ment o of of the he White House objectives even though the basic trend has turned turned turn turn- ed d' d rd Our monetary policy has thus far not been able to move business upward to any appreciable degree Even the infusion infusion in in- fusion of credit into the banking system has not led to expansion of legitimate business endeavors and loan demand continues to lag The chairman of the Federal Reserve Board opposes any further further further fur fur- ther speed speedup speed up in credit expansion because because because be be- cause of the persistent inflation threat plus the lack of credit demand Other Possible Assists Liberalizing of depreciation guidelines guidelines guidelines guide guide- lines and hike in social security payments payments payments pay pay- ments are steps in the right direction Also postponement until 1972 of expansion expansion expansion sion of the social security tax base is helpful in lifting demand for goods and services But unless the economy picks up soon it may take further stimuli to get things going High on the list could be a tax cut This could stem from early implementation tion of the benefits included in the 1969 tax reform program The Research Staff of Babson's Reports does not however expect a move of this nature to be made until after aCter midyear Some form of incomes policy is another pos This Quarter Crucial As our 1971 business forecast earlier predicted the first quarter of this year ear was marked b by substantial strength In steel and autos Residential building also provided some support However it was disappointing that other economic forces for for- forces ces ct's did lid not also gain momentum This second calendar quarter will bear special watching Steel inventory accumulation accumulation in anticipation of a possible strike will probably be the backbone back bone of industrial activity We are arc also headed into the brisk season for home building But ut the rest of the picture is less clear Consumer spending has shown some improvement in recent weeks but the sustained high unemployment rate and the scarcity of jobs are stifling confidence nce And business still shows little lit tle tie inclination to expand inventories to step up capital outlays Deceptive Comparisons In examining the performance of the economy during this quarter we must look beneath the surface rather than accept at face value what appear to be bo solid year year-to year year-to-year year advances Physical volume of business for example is likely like ly to show up favorably versus a year ago because results for the second quarter quarter quarter ter of 1970 1910 were hurt by the Teamsters' Teamsters strike against the trucking industry In terms of dollar value there is the added consideration of the inflation fac fac- tor Sales as well as costs are magnified magnified mag by rising prices thus making the results for the current year ear even more impressive as compared with second sec ond and quater Outlook Still Constructive Overall despite the many problems surrounding us including possible upcoming strikes the staff of flab Dab sons son's Reports views prospects for 1971 as being generally constructive There will willI be gains despite probable work stoppages stoppages stoppages stop stop- pages but they are likely to be moderate ate |