Forecasts for 1957

December 31, 1956

The economic future depends not only on the vagaries of nature, but on what two and a half billion people are going to think and do, individually and compositely. That future can therefore never be foreseen with certainty. But every businessman and worker is forced to base his producing and spending plans on some assumption regarding the future. Among the people best qualified to assess the business outlook are those who make a business of it. I have asked a group of prominent business forecasters to give me their estimates of the probabilities for 1957 or for the next six months. Here are the results:

Martin R. Gainsbrugh, National Industrial Conference Board: Business activity is still gaining momentum as the year ends. Four types of demand have pushed gross national product into higher ground each quarter: (1) consumer upgrading as well as rebudgeting, so that modest percentage increases in outlays for soft goods and services kept total consumption expenditures rising, in the face of a 10 percent decline in what was spent for the big-tag, durable goods, (2) a sharply accelerated rate of spending for plant and equipment by private industry, (3) further growth in the outlays of state and local units of government in response to ever-mounting population pressures, and (4) expanded markets for goods and services abroad. These should again contribute to expansion in 1957, excepting possibly private business investment. Our estimates of new capital appropriations prepared for Newsweek now show signs of decline. This may mean less capital spending six or nine months hence.

‘ANOTHER BEST YEAR’

The Conference Board Economic Forum’s collective view: Gross national product for 1957 may rise about 4 percent above the 1956 figure equally divided between price and volume. Rate of growth may decline in the second half, but a new offset may be emerging: Greater Federal spending directly for defense or economic aid or indirectly through resuming rapid tax amortization of new defense facilities, particularly steel.

Leo Cherne, Research Institute of America, New York: 1957 will be another best year ever—and yet, very different from those which have gone before. The momentum of current high spending assures continued gains during the early months of the new year. But the zip of the sharp pickup, evident especially during the last quarter of the current year, will be missing. By spring and summer the boom will begin to look somewhat wobbly, hesitation more prevalent than bubbling optimism. The long succession of tight-money moves will make itself felt. Their cumulative effect will be particularly noticeable in construction, inventory policy, and consumer purchases of new cars and other durables. The one unpredictable element which may color all expectations is the developing crisis in Soviet satellite nations and any repercussions which may flow from spreading unrest or Soviet military actions.

PRICES AND BUILDING

Charles F. Roos, Econometric Institute, New York: During the past year, industrial commodity prices have generally reflected an average 5 percent increase in hourly earnings, an average 3 percent increase in productivity or output per man-hour, and ½ of 1 percent decrease in average profit on sales before income taxes. Average hourly earnings will move up about 2 percent during the first half of 1957 and productivity about 2 percent. Because of increases in excess capacity, profits on sales are likely to decrease by about ½ of 1 percent. Hence prices are apt to be about ½ of 1 percent lower.

Roy Wenzlick & Co., St. Louis: Residential building in 1957 will be slightly under 1956, both in dollars and in number of units. In many communities the housing shortage has disappeared, and in all communities money is tighter and interest rates are higher. This will probably result in more than 900,000 new dwelling units for the year, but less than 1 million. The dollar value of new residential building will not be down by so large a percentage, as the buildings that go forward will average larger in size an better in quality. Total construction of all types will probably equal the dollar total in 1956.