Show f 1 d re p- p f ff f I f Pessimistic c Optimist By Dy Geor George c Vice Ire President lent an and l Chief Economist National Association of oC J I am often casually a asked ked when the interrogator wants a quick capsule statement on the economic outlook whether 1 I am a pessimist or an optimist I 1 usually pause take another sip from my glass tomato juice and answer anwer that I 1 am ama a little lillie bit of both The questioner questioner ques ques- usually mumbles hasty th thanks for my informative re re- reply reply ply and moves on My area of doubt lies in whether the listener listener lis lis- tener tenor would have regarded my views as pessimistic or tic In the first place the eco ceo economic economic recovery which began in inthe inthe inthe the spring is solidly based and will continue The flurry of midsummer pessimism was based on the fear that sharp rises in the price indexes in inJune inJune inJune June and July might be the start of a new inflationary outburst out out- burst But they were the accidental accidental accidental ac ac- ac- ac and temporary effect t 1 of price increases in a few products products prod- prod rather than the beginning of the next wave of general inflation The basic factor in the turnaround turnaround turn turn- around of business during the thep p past st four months was the subsidence subsidence sub sub- of the process of inventory inventory tory liquidation which began in the fall of 1974 and led to the deep plunge in production thereafter That process began to slow down in the spring and that was enough to turn business business busi busi- ness around It will continue to subside and that will supply power to the expansion We should not expect to see sec seca seea a sharp shaped V-shaped rebound from the economic plunge of October October October Octo Octo- ber 1974 to May 1975 That is not about to happen The modest modest mod mod- est pace of recovery is likely to tobe tobe tobe be regarded as discouragingly slow during th the rest of 1975 That will help to create the political political political po po- po- po atmosphere in which national national national na na- na- na economic policy for 1976 will be formulated There will be calls for more fiscal stimulation bigger deficits deficits deft and more monetary stimulation faster expansion of the money s supply They have started and they will grow row more strident Measures Measure of that kind operate with wilh a lag but as assuming assuming as as- suming policy does docs take that course we should see sec some of their effects in 1976 Business volume and employment employment employ employ- ment should be rising fairly steadily and briskly through most of 1976 The inflation trend will be fairly mild at least relative to what we experienced in 1973 1913 and 1974 Productivity will be rising at than better than term term average average rates in 1976 This will not be bean bean bean an indicator of any sudden improvement improvement im im- im provement in the fundamental efficiency of the economy It is isa a cyclical improvement in productivity productivity productivity pro pro- trends something that always happens in the early recovery phase The rest of the world will be lagging behind us in this process proc ess of recovery next year Th That t twill will have some adverse feedback feedback feed feed- back on our own economy But it will also prevent a repetition of the inflationary explosion of 1973 All this makes me sound like a thoroughgoing optimist But ButI I am deeply depressed by the reflection that the euphoric economic economic economie eco eco- nomie situation I expect for next year will have been achieved by feeding the economy economy econ econ- omy fiscal and monetary pep pcp pills They do give the economy economy economy econ econ- omy a lift but they also lead to toa a rather serious letdown somewhat somewhat somewhat some some- what later The picture I have sketched for 1976 is a lot like the eco ceo economic nomie picture we saw in 1972 1912 a very good year as we were living through it But But 1972 was followed by 1973 the 1973 the year of the inflationary explosion And 1973 was followed by 1974 1974 the year of stagflation at least through the first three qua quarters We ar are arc headed in the right direction But when I look over the history of th the past 10 years I sec see a progressive deterioration deterioration tion of the economy It is is hard to see sec any program emerging for reversing this underlying trend Am I a pessimist or an anop op optimist I dont don't know you tell me |