High Half-Time Score

Less than a year ago, politicians in both parties were predicting that the economy would be Richard Nixon's Achilles' heel in the election campaign. But as the 1972 economy moves into its second half, the outlook continues to brighten so steadily that the Democrats may have to stick to issues like tax reform and income redistribution.

Preliminary reports of the economy's performance in the March-June quarter are that the gross national product scored about a $30 billion quarterly increase. Though the gain was off slightly from the first quarter's $30.6 billion, this time more of the increase was "real" and less was due to inflation. Corporate profits are sparkling, and some economists are talking about a 17% to 20% gain over last year. Industrial production continues to pick up. Consumers are spending more freely, particularly on autos.

Even areas that remained sluggish throughout the winter and early spring are starting to move. Manufacturers' inventories rose $410 million in May, nearly six times the average increase for the previous twelve months. Exports have begun to revive. Unemployment is still much too steep, but the rate dropped last month from 5.9% to 5.5%, the lowest in 20 months. The heartening decline was due partly to a large seasonal adjustment for the annual flood of June graduates. White House economists are not sure why relatively few of them are listed as unemployed this year. "They must be out working for McGovern," quipped a top Administration official. In a more serious vein, IBM Chief Economist David Grove, a member of TIME'S Board of Economists says: "The economy is improving enough to develop an upward momentum of its own, one that is capable of withstanding adverse news." Wholesale prices in June rose a discouragingly large one-half percentage point for the second straight month. Last week the President called in members of his Cost of Living Council to discuss ways to moderate rises in food prices.

Short Memories. Interest rates have begun to creep up again, as more and more banks are raising their prime rate to above 5 1/4% -- a move that may have a ripple-up effect on home-mortgage and auto-loan rates. Moreover, the nation has lost billions of dollars in unrealized profits and wages because the President undertook a disastrous campaign to slow the economy early in his Administration. Nixon's economic advisers are counting on voters having short memories.

The fate of the economy after November's election is murky. Corporate profits will be so strong this year that labor unions will be inspired to ask for even larger-than-usual wage increases. Many major labor contracts expire next year--including those of the Teamsters and auto, electrical and rubber workers. Intolerably high settlements in any one of these labor negotiations could wreck the Administration's wage controls. The current fiscal year's budget has already begun to swell beyond its officially anticipated $27 billion; budget officials now say that it may well hit $35 billion. Whoever recaptures or inherits the White House may find that the economy is again a sensitive political issue after the first half of 1973.

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