State of Business: The Long Gain

• Share

On April 1 the U.S. economy will begin what should turn out to be its 38th straight month of expansion —the longest peacetime period of gain in three decades.

The rise is much stronger than the 52-month expansion that came in the midst of the Depression of the 1930s, and is already longer than the 35-month boom of the mid-1950s. Both of those previous expansions ended with sharp drops; but today there is little worry that the U.S. has had it too good for too long and thus may face a jarring business decline.

The important indicators are rising (see box), yet none so fast that they cause concern. Last week, as reports came out heralding important gains in industrial production, personal income, auto sales and housing, many businessmen and economists were no longer taking seriously the old textbook notion that a modern economy can scarcely expect three consecutive years of record auto production, or four straight years of plump times. Said Chief Presidential Economist Walter Heller: "The expansion should continue well into 1965."

General Motors Chairman Frederic Donner figured that what is good for the U.S. is good for G.M., and vice versa. Dedicating a remarkable new plant at Fremont, Calif.—a factory that spews out Buicks, Pontiacs, Oldsmobiles, Chevies and two kinds of trucks from the same assembly line—Donner jovially sprang the news that the world's biggest manufacturer has just begun its most ambitious expansion in history.

Over the next two years, GM spend $1.2 billion to retool for new models and nearly $2 billion to build three new plants and enlarge and improve three dozen existing ones, many of which are producing to the limit. The spending will create 50,000 new jobs at G.M.—and thousands more for its suppliers and construction contractors. Donner predicted "continued dynamic growth for our industry," said that G.M. is gearing up for what should be a normal market of 10,000,000 cars and trucks a year by 1970. That is certainly a conservative estimate, considering that sales ran at an annual rate of 8,400,000 cars in the first 70 days of this year.

Pleasant Surprise. Businessmen everywhere are spending; American Telephone & Telegraph alone will invest more than $3 billion in plant and equipment in 1964. Many economic experts believe that capital budgets will rise more than the anticipated 10% this year—largely because they expect that the tax cut will inspire the U.S. public to spend more. The cuts will average out to $133 a year for each wage earner. It is still too soon to measure how much of his saving the consumer will spend, but early signs are hopeful.

Federal Reserve Chairman William McChesney Martin Jr., who depends on his personal impressions of the economy almost as much as on all the statistics, was surprised at how much the tax cut increased his own paycheck* and figured that other people will be just as pleasantly surprised. A quick check with department store executives in Los Angeles, Dallas, Cleveland and Detroit convinced him last week that sales are in for a substantial lift.

Another hopeful sign is that business policymakers still have much confidence in President Johnson—confidence that they denied to John Kennedy. "The business community likes the way Johnson