Business In I960: Tough Prosperity

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prosperity in Italian history showed up in sprouting TV antennas atop even the rustic rooftops of remote mountain communities, and in the bumper-to-bumper traffic coursing through Italy's biggest cities. In 1948 Italy had only one car for every 112 citizens; there is now one for every 24 citizens. Japan's economic growth jumped 10% in 1960, its industrial production 23%, its exports 15%. One in every three Japanese families now owns a television set, washing machine, electric fan and rice cooker. The number of vehicles on the road is twelve times prewar, and is rising so fast that history's greatest traffic jam is already in the making on the still backward urban and rural roads.

To most Americans, the evident prosperity of the U.S. allies in 1960 was all the more reason for them to pitch in and help the U.S. by assuming more of their own military responsibilities and a bigger share in aiding the world's underdeveloped nations. But the U.S., which thought that the gold outflow was a convincing argument, found Europe hard of hearing. In fact, Europeans were not above blaming the U.S.'s troubles on its generosity, even when they benefited by it. Said one top German economist: "Perhaps the U.S. should have been more cautious in its giveaway programs." The Shape of '61. Because the U.S. is such a factor in the world's economy, its progress in 1961 will be watched as closely in London and Bonn as in Boston or San Francisco. U.S. businessmen are cautiously hopeful, but there are few of the flatfooted, optimistic pronouncements of a year ago. Almost to a man, businessmen and economists expect business to get a little worse before it starts up again, some time around the middle of the year.

Then, at year's end, the gross national product is expected to reach a new peak of $520 billion.

The stock market took a more decided —and optimistic—view than most forecasters. The market in 1960 had given the first clear warning of trouble ahead. After it reached a record high in January of 685.47 on the Dow-Jones industrial average, it faltered, then fell in a long swoop to 566.05 on Oct. 25. At year's end the market had begun a slow climb. Reason: just when everyone began to talk about sliding business, investors took a long look at how bad the trouble might be, decided that the market had already allowed for the worst.

There were some solid reasons for the market's optimism. The big drag on the economy has been inventory liquidation.

Economists feel it may continue; but the drop was so sharp that it might well end sooner than it has in other recessions. (Inventory liquidation has already run six months; liquidation in past recessions has been 10 to 13 months.) The auto industry hopes that sales of domestic and imported cars will hit between 6,600,000 and 7,000,000 in 1961, although production will probably be slightly lower than in 1960.

The auto industry assembled 6,693,800 cars in 1960 for its second-best year in history, 19.7% more than in 1959.

One powerful force that is expected to help the economy is a rise in construction, helped by easier money. Housing contracts in November exceeded 1959 levels for the first time in 1960, and overall construction rose 22% to set a new record for the month. Industry experts now expect that housing will rise at least 3% in 1961 to about 1,300,000 housing