U.S. Boom Believed To Be Blunted

Press, Volume XCIII, Issue 27985, 4 June 1956, Page 11

U.S. Boom Believed To Be Blunted

(N.Z. Press Association—Copyright)

(Rec. 10 p.m.) WASHINGTON, June 2. Earlier optimistic forecasts of record-breaking prosperity in the United States this year are now being tempered by increasingly frequent warnings of stormy weather ahead. The economy in general is viewed as strong and healthy by most economists, but unemployment is going up in several “bell wether” industries. Total unemployment recently dropped by more than 300,000 to 2,600,000 and the number of workers in 'jobs throughout the country rose by 900,000 to 64,000,000, but the motor-car, farm machinery and house construction industries face an uncertain future, with still higher unemployment levels, before conditions improve.

The inflation-conscious Federal Reserve Board has made money dearer by raising its discount rate for the fifth time in a year. These developments, as well as uncertainty within the Government on what should be done—or should not be done —to hold the line without recession or inflation, are being featured as one of the biggest election - year news stories on the front pages of the newspapers. There is very little apprehension among Government economists of a recession this year. There is, however, a general feeling that the boom has been blunted for the time being. There is also disagreement between Government agencies, notably between the Treasury and the independent Federal Reserve Board, on means of keeping the economy rolling until the anticipated business upsurge towards the end of the year. The board, accused of risking a recession by making money dearer when the car and housing markets are sagging, was said to have been worried about inflationary practices creeping into the boom—such as the almost uncontrollable demand for credit, and rising prices. The Treasury, supported by President Eisenhower’s Council of Economic Advisers, took the position that this was the time to encourage consumer buying, which had not been keeping pace with increasing incomes. Those taking a pessimistic view of the future- of the boom are urging a cautious look at the fact that industrial prices are going up and that while the total economic picture has not changed much, there have been unhealthy dips and fluctuations in the last six months. They are also pointing to a decline in spending for durable goods in the first quarter of 1956.

But the optimists in the Government say that:

(1) The fall in spending on durable goods is more than made up by increased purchases of non-durable goods as well as a rise in spending for services.

<2) Business is planning to spend a record 39,000,000.000 dollars for plant and equipment expansion this year. (3) “Soft in industry are being balanced by gains in other segments of the economy.