Mild Stimulants

STATE OF BUSINESS

"Negative psychology seems to characterize the general mood," reported New York's Morgan Guaranty Trust Co. in its latest monthly survey of business conditions, "and a peaking-out of business before the year's end is now being discussed as a distinct possibility'' ("peaking out" is a positive-psychology way of saying "recession").

A growing list of unsettling economic indicators contributed to the negative thinking. Retail sales, off 1% in May, dropped another 2% in June--partly because of an unexpected fall in auto sales. Building permits for new housing, which rose last winter to foretell this spring's burst of construction activity, are now trailing off. Railroad carloadings--often considered a key index of business activity--ran below last year's levels for most of June, and railroadmen look for July's seasonal decline to be worse than usual.

Manufacturers' new orders, which foreshadow how busy the nation's factories will be, rose .5% from April to May, but the rise was all in the soft-goods industries; orders for hard goods fell for the fourth straight month.

These bothersome figures put more pressure on the Administration for quick across-the-board tax cuts. The Administration still had not committed itself on that. But last week Washington did respond with two milder stimulants:1) a long-awaited speedup in depreciation write-offs of industrial plant and equipment; 2) lowering the cash margin required in buying stocks from 70% to 50%.

Neither move was done solely to improve current business conditions: depreciation revision has been in the works for more than two years, and the cut in stock margins was a natural response by the Federal Reserve Board to the decline in stock prices and to the conviction that inflation is no longer a danger. Neither action is likely to provide much immediate stimulus to business activity, but the long-run impact of both moves should be good, and in the short run they should help shore up public confidence.

This file is automatically generated by a robot program, so reader's discretion is required.