The sun. [volume] (Newberry, S.C.) 1937-1972, January 05, 1967, Image 8
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
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