Business In I960: Tough Prosperity

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starts. As a result, appliance manufacturers also expect a 3.5% rise in 1961 business. The consumer, who bought at a record rate ($329 billion) in 1960, showed every indication of being in an even better buying mood at year's end. One reason he may step up his buying in 1961: despite big spending, he put away record savings of $26 billion in 1960, or 15% above 1959.

Plant and equipment spending, while expected to decline about 3% in early 1961, is still a strong stabilizing factor that has slumped far less than anyone expected. The Government will not only increase its defense spending but probably step up federal highway work. State and local spending is also likely to continue its $3-$4 billion yearly rise.

The Big Boost? When the turn comes, will it be strong enough to give the economy the big boost it needs? FORTUNE Magazine is one forecaster that thinks so. It predicted that "the U.S. economy is heading into a broad advance that in the next 18 months should carry the gross national product from its recent rate of $505 billion to $545 billion, and will produce a sizable boom within a year's time. By 1962 business will be using its plant and equipment more fully than at any time since 1955. This portends an acceleration in investment that should keep the economy expanding well into 1963 at a rate of 5% a year."

A strong upsurge is needed. One of the economy's troubles is that it did not recover strongly enough after the last recession to take up the slack in employment and plant capacity. Since World War II, the business cycle has been getting shorter, with more frequent but briefer recessions and shorter periods of expansion. In the first postwar business cycle, the economy took 56 months to go from peak to peak. In the last cycle, the economy took 34 months. The U.S. may be approaching an economy in which there will be more jumps and drops—but smaller ones.

Many economists feel that the U.S. may have to wait until the middle of the decade before it begins to experience the promised great boom of the 1960s. Reason: it will be another five years before the vast tide of war babies starts marrying and raising families, thus providing a huge stimulus for the economy. Sears, Roebuck Economist Arthur Rosenbaum calculates that the 16.3 million people between the ages of 18 and 24 in 1960 should yield 1.5 million marriages. By 1965 there will be 20 million people in that age group, yielding 1,850,000 marriages, and by 1970 the group will have increased to 25 million which should produce 2,300,000 marriages.

While many businessmen do not see any big upturn, all of them know that there are vital forces at work in the U.S. economy that could prove them wrong once more. The U.S. is spending $12 billion a year on research, turning out hundreds of new products that might at any time, like the transistor, provide a basis for a whole new industry. Even Government spending tends more and more to projects that have commercial applications. Missile technology has already produced a hand-sized device that has no moving parts, can produce a temperature of minus 47°; designed to provide a cold spot on the nose cone of a heat-seeking missile, it might some day be used as the heart of a new type of compact refrigerator.

As proof that reverses can be overcome, many U.S. industries that have found themselves in trouble are now coming