More Signals on the Slowdown

Aside from the slumping stock averages, the signals on the economy's health last week were mixed. On the bright side, the University of Michigan's quarterly Survey of Consumer Attitudes found a "very favorable" outlook for the kind of open-wallet spending needed to continue the recovery. For the first tune in three years, in fact, a majority of the families polled thought it was a favorable time to buy big-ticket household items like furniture, refrigerators and TV sets. Yet other key indicators suggested continued economic softness. In September, retail sales rose an almost imperceptible .1% over August. Higher spending on farm equipment and fall clothing was largely offset by a sharp drop in auto purchases. Moreover, the industrial production index, at 131.3, remained unchanged from August, the first tune factory output had failed to rise since March 1975.

Some more definitive answers as to whether the recovery is in a pause or actually in peril are due this week:

PRICES. While inflation is far below the nearly 17% annual rate prevailing when Ford took office, consumer prices have edged up from 2.9% in the first quarter to 6.2% in August. The September rate is not expected to rise much more.

HOUSING. In August, housing starts were running at an annual rate of 1.5 million, up 11% from July. Compared with the 2.7 million starts posted in February 1972, new home construction, which provides an enormous market for furnishings, appliances and other goods, still has a long way to go. It has been one of the drags on the recovery, and is not expected to show any great improvement in September.

GROWTH. The latest report on the economy's rate of expansion--and the last to appear before the election--is certain to show further slowdown, but how much? After the booming 9.2% pace of the first quarter, the growth rate slipped to 4.5% in the second. Clearly seeking to mitigate possible bad news about the third quarter this week, President Ford said that the July-September rate would be lower still--"about 4%"--but predicted a pickup to 5% or more in the last quarter. If the July-September rate turns out to be 3% or even less, as some economists are forecasting, the Democrats will have further ammunition for their charge that the Republicans should have adopted more expansionist tax and spending programs last summer. Indeed, there is talk--in and out of the Administration--that unless the economy shows more snap and ginger soon, a new tax cut may be needed early next year to get the recovery moving forcefully again, no matter who wins on Nov. 2.

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