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Show THE BUSINESS Babson Forecast LESS DOMINANT more ambitious projection of both the real GNP and industrial production is not warranted at this time since business capital expenditures for the expansion of productive capacity are likely to remain limited. Such spending, particularly when superimposed upon powerful consumer demand and aggressive inventory accumulation, is a prerequiste for a business surge of boom proportions because it takes this type of activity to hike demand sharply for manpower and materials. But there is still a sizable amount of productive potential in American industry either underutilized or idle. Until the impetus of fullscale production is felt and business coincidence isagain running strong, it is unlikely that budgets for capital investments will be liberalized to any appreciable extent. This may apply especially to 1976 inasmuch as the high level of factory operations will doubtless be reached in the second half when profit margins will feel increasing pressure and the monetary climate may well present a considerably IN1976 Sudden changes in the policy of business toward inventory holdings in the year ahead will not be the dominating influence on economic activity that they have been in the past two years. The Arab oil embargo created fear of supply shortages and price increases. The ensuing splurge of inventory accumulation served to buoy 1974's business for the better part of the year before it was realized that consumers had altered their spending pattern and that high borrowing costs were negating the cost benefits of stockpiling.' The resultant turnabout in in inventory policy in favor of retrenchments holdings and bank loans triggered the sharp slump in industrial activity in late 1974 and early 1975. And, here again, in some segments of the economy businessmen overrreacted. So, as signs of a loosening of consumer purse strings were, seen, overly deep slashes in inventories had to be corrected. It was this move to replenish stocks of raw materials and finished goods which brought about the unexpectedly early and steep business climb starting in the second quarter of 1975. Such pronounced swings in business inventories are not likely to be repeated in 1976. There may be some stockpiling early in the year to hedge against the debilitating effects of a possible protracted tie-u- p of the nation's trucking industry by the Teamsters early next spring, but for the most part labor negotiations during the year ahead do not involve industries which would require intensive strike-hedg- e Moreover, the inventory accumulation. somewhat more liberal consumer spending pattern is neither deep-roote- d nor extensive enough to encou-ag- e merchants to load up. And manufacturers and retailers still haunted by memories of the surplus goods of the past 18 months are not anxious for a repeat of that fiasco. INDUSTRIAL GARLAND TIMES, December 31, 1975, Page Three E posture. HAWAII DREAM TOUR - 4 Islands - True, political overtones will be strong in much of tre new year, and there may well be a push for business capital expenditure incentives. Capital spending policies, however, are not likely to anticipate any such favorable legislation but rather to wait and see. The total of capital spending in 1976 may top that of 1975, but the edge should be small and contain asubstantial inflationary content. It should be noted, too, that many such outlays will be for compliance with environmental improvement regulations rather than for raising production. So, this aspect of economic activity in 1976 should prove to be more of a sustainer of business than an upthruster. 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With the prospect of even further advances in business during the new year. low-cos- - f , CORPORATE PROFITS t policy, you , n combine protection A days ahead' DESEKET TRAVEL - DUANE BUNNELL 288 North 1 WEST, Provo, Utah &40U1 v Year-to-ye- ie 60 to 120 For all your travel needs, call or write -- ickage policy from Farmers surance is designed to give u complete coverage against ;s (including liability) all in HONGKONG (Charters must be cooked Inflation has its advantages. You can live in a more expensive neighbor- long-subdu- and Ranch Sentinel days MB PRODUCTION The last major cyclical uptrend in industrial production peaked in the latter part of 1973. Except for a moderate adjustment, factory operations were sustained near that top level for almost a year owing to the scramble for inventories. Finally, however, the stagnation in consumer demand forced a drastic liquidation of surplus stocks during the second half of 1974 and triggered the nosedive in production. In the six months encompassing the final quarter of 1974 and the first quarter of 1975, the economy was battered by an awesome sequence of events: Production curtailments, shortened workweeks, employe layoffs, and plant closings. But since the upturn last May, the Federal Reserve Index of Industrial Production has advanced steadily and somewhat more steeply than was thought likely a year ago. What with the gathering momentum of the fledgling recovery phase,1976 makes its debut enjoying a brisk pace of factory operations. While the strength is not evenly spread across the industrial spectrum, the cyclical advace of automobile output and the more positive signs in the home building sector are optomistic. Comsumer demand for apparel, appliances, and home furnishings is also contributing to the industrial improvement. So- even- - with allowances for possible strike interruptions, it now looks as if 1976 can manifest an overall upward trend, although factory production may not exceed the close-to-- 3 percent long-tergrowth rate of the economy. comparisons are likely to be most impressive during the first four months since corresponding 1975 figures were in the cyclical Thereafter, gains will trough of the recession. narrow even as factory operations continue to make strikes. This may not seem impressive, progress-e- x but a predominantly upward trend at approximately the rate of the nation's basic suffered in parts of the past two years. ie Farm 30 CHARTER FLIGHTS - Low, low cost to EUROPE You can say one nice thing about that mean kid next door: at least five mothers use him as a bad example. tax 3.00 5.00 5.00 6.00 7.00 9.00 9.00 10.00 10.00 II II .00 .00 12.00 12.00 16.00 21.00 2 |