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I’AGE EIGHT—The Newberry Sun, Newberry, S. C., January 5, 1067 • BABSON FORECAST (Continued from Pafe 1) whether Russia can persuade her wavering satellites to sign a final manifesto reading Red China out of the Party. 5. Recent elections in West Germany have fanned the embers of nationalism into a tiny flame. This has surely thrown a scare into Russian leaders. I predict that they will take a harder line against Germany in 1967 than in some time. I feel that we should par ticularly watch General de Gaule who is playing closer and clos er to Moscow from month to month. 6. Heavily armed with Soviet weapons, the Arabs of the Middle East—squared off against Israel—present a grave threat to world peace. Never theless, I do not believe that Russia or the Uunted States can afford a direct confronta tion at this time; hence my forecast that the smouldering conflagration there will not erupt into World War III. 7. While all reasonable peo ple are hoping for a genuine peace in Vietnam, I predict that the issue will not be re solved in 1967. Though the tide of battle is swinging in our favor, we may be forced to in crease our commitment in or der to retain this upper hand. 8. I predict, therefore, that military spending will be rais ed in 1967. This can help soft en the impact of any easing in the private sector of the econ omy. 9. Turning now to domes tic conditions, I foresee a def inite deceleration in business activity in 1967. The fantastic boom is in need of a rest. In stead of the strong uptrend of recent years, I look for a high level of industrial production early in the year; but unless some new stimulus is introduc ed, I fear that a cresting-over pattern is likely to develop as 1967 progresses. 10. I forecast a continua tion of the tug of war be tween inflation and deflation in 1967. Tight credit, and increas ed productive capacity re sulting from the flood of busi ness capital expenditures in recent years, are deflationary. However, I can see no sub stantial relief from the infla tion in labor and other oper ating costs. In short, we can have “cost-push” inflation co existing with deflation. 11. A key factor in the bus iness and financial outlook for 1967 is taxes. With defense out lays climbing, I look for a rise in corporate and personal taxes in 1967. Moreover, I forecast that various levies at the state and local levels will continue to increase. 12. The tightening tax squeeze on all fronts will wor sen as the year advances. And there will be rising complaints from both businessmen and employees that social security taxes are becoming unbearable. 13. Results of the recent elections indicate that the head long run of the Great Society Program must take a breather along with the economy. Gains scored by the Republicans have altered the balance of power sufficiently to force a more sober look in public spending. 14. One of the primary rea sons for expecting a decelera tion in the economy is the like lihood that business capital expenditures may ease. Tight credit, suspension of accelerat ed depreciation guidelines, and suspension of the tax credit on business capital outlays will be tough obstacles to surmount. 15. Except in defense in dustries, I look for an abrupt switch during 1967 from a bus iness policy of inventory ac cumulation to one of inventory liquidation. 16. I forecast that scarcity of credit will continue to be a problem with which business must contend in the early part of 1967. The money manager* should keep enough credit av ailable for legitimate business needs, but I expect no early radical easing of credit. 17. However, I do foresee enough of an easing in credit to permit more orderly mone tary conditions. If the eco nomic situation falters badly, money rates will, of course, move down sharply. 18. I predict that commer cial and industrial building will trend lower in 1967, reflecting the tapering off in capital out lays. 19. Mortgage money should remain scarce in 1967. Hence, residential building should see another disappointing year. 20. 1967 opens with the building of single homes in a state of crisis. Starts are down over 40 per cent from year-earlier levels. As a re sult, I forecast that the Ad ministration will leave no stone unturned to stimulate con struction of houses as soon as possible. At best, however, it may be mid-year or after be fore this important part of our economy can contribute much strength to over-all business. 21. Although new housing starts may remain in the dol drums for most of 1967, I confidently forecast that the new year will see the beginn ing of a great boom in the construction of new, modern nursing homes. 22. Despite President John son’s request for cutbacks, pub lic construction should enjoy a fairly good year; the emphasis will be on bridges, dams, and water and sewer systems. 23. The expected declines in residential building and in commercial and industrial build ing notwithstanding, I forecast that waterfront property will remain a good inflation hedge. 24. Labor stands at the crossroads as the new year opens. Things never looked better for nailing down record wage and fringe gains; how ever, neither the public nor the Congress is in any mood to tolerate long, costly, and in convenient shutdowns. I free ly predict that there is more likelihood in 1967 of restric tive labor legislation than at any time since Taft-Hartley was put on the books. Union chiefs are aware of this, and they may act with more strike restraint than most people now expect. 25. 1967 promises to be a year in which many manage ments will be fighting a “rear guard” action to control climb ing labor costs. The defense buildup will maintain hiring pressure in some industries; but even more activities will be wielding the paring knife. I forecast that the net result will be a rise in unemployment next year. 26. I do not look for price and wage controls in 1967, un less our defense expenditures contemplated. 27. An encouraging aspect of the 1967 outlook is the af fluence of consumers. I fore cast a further upward trend in personal incomes, due to higher wage rates. How’ever, if taxes are raised, take - home pay may not show a rise com mensurate with the gain in gross pay. 28. Retail trade held up well in 1966, but there was a note of lethargy throughout the year. The pattern is not expected to show much change in 1967 . . . with gains in dol lar volume largely reflecting price inflation. Though con sumers have more money to spend, tight credit, high bor rowing costs, and higher price levels could cause some tight ening of purse strings. 29. Spending for food, ap parel, and general merchandise should be greater in 1967. Also consumers will devote a goodly portion of their spending bud get for leisure activities, vaca tion, and travel 30. Durable goods may not fare so well Demand for home appliances, color TV sets, and furniture may be hampered by tight credit and high borrowing costs, plus the lethargy in new home building. 31. I forecast a decline in new auto sales. However, with the increase in the population of driving age, and with the record rate of personal in come, new car sales could hold within 10 per cent of 1966’s. 32. Soaring living costs will hit the headlines more often in 1967. It will be directed most strongly at runaway service expenses—especially medical— and at advancing red meat prices. 33. Despite new highs in the cost of living, I predict there will be many signs of deflation in the midst of infla tion. Chief among these will be sliding profits, rising bank ruptcies and foreclosures. 34. Industrial commodity prices should be firm to slightly higher. Selective price markups will be necessary to offset wage hikes. 35. Profits began to wobble in the final half of 1966. I am convinced that hesitancy will give way to decline during the year ahead. Big squeeze on margins will come from soar ing costs, especially labor. 36. But profit results will also vary widely from one com pany to another, as sales vol umes sag, hold, or advance. For example, I am willing to “stick my neck out” and say that oil companies will enjoy a sales rise, but that the auto makers will be struggling with a volume slump all year. 37. The combination of less vigorous business, pinched pro fit margins, and stringent credit conditions points to an increase in business failures, shaking out the finanically weak and inefficient. 38. Collections may be more difficult in 1967 on business accounts, consumer installment and charge accounts, and mor tgage debt. I forecast a further rise in nonfarm real estate foreclosures. 39. Barring crop failures, I forecast another good farm production year. Farm prices should rule firm to slightly higher in 1967, but higher costs may result in a slight drop in net realized farm income. 40. Nevertheless, farm sup ply manufacturers shoul denjoy good business. Sales of fertili zers and insecticides should post gains. 41. 1967’s stock market promises to be one of vicious selectivity. I am expecting the old aristocracy of the blue chips based on past perform ance to be replaced by a new aristocracy of super-able man agement based upon hopes of good future performances. 42. I forecast, however.that AUDITOR’S 1967 TAX ASSESSMENT NOTICE January 3rd, 1967 t February 28th, 1967 uary i, 1M7, and at tij Ctti MK- FINAL CLEARANCE All Winter Hate — % Price One Group Hate — Lew than % Price Also — Reductions an Jewelry THE HAT BOX 1109 CALDWELL ST. yEWMM, £. C- After-Christmas Sole Save $4 to $7 perpr. Dress and Casual Shoes (Were $12J99 to $26 NOW $8.99 10.99 & 12." ANDERSON’S