State of Business: Optimism Is Back

Cliches prove such sturdy soldiers that they die hard. Now that “high-level stagnation,” used to describe the recent listlessness of the U.S. economy, no longer fits, a Manhattan economist has diagnosed “high-level stagnation with an upward trend.” Things are better than that. After months of being prodded, decried and even despaired of, the U.S. economy seems once more to be on the go. “The economy has finally formed a base from which it can move upwards with confidence,” says Wells Fargo Bank President Ransom Cook, whose own bank less than a month ago expressed no such confidence.

Hard & Solid. The signs of the economy’s new strength were obvious in a welter of statistics that set new records in industrial production, personal income (average: $1,850 per person after taxes), new orders for manufacturers and em ployment. But nowhere were the signs more manifest than in the attitude of the nation’s most important economic ingredient: people. Buyers returning to Wall Street last week sent the Dow-Jones industrial average surging to 711.68 at week’s end, its highest close since last spring. Consumers are crowding into department stores and auto showrooms, in April sent retail sales to new highs. And the 3,700 stockholders who trooped into a Bronx armory for the annual meeting of A. T. & T. seemed to share the optimism of Chairman Frederick R. Kappel, who made happy talk about a general improvement in business confidence. Businessmen were heartened by President Kennedy’s mild reaction to the steel price hikes, and even more buoyed by the record level of corporate profits.

The word recession is rarely mentioned any more, except by those economists who offer a hindsight opinion that the economic standstill may actually have been a “quasi-recession”—which would certainly make it the mildest on record. Now discussion centers on just how far the advance will go. Last week the President’s Council of Economic Advisers reported that the gross national product rose to a record annual rate of $572 billion in the first quarter, $2 billion more than the Administration had predicted. Chase Manhattan Bank Vice President William F. Butler figures that G.N.P. will reach $582 billion in 1963 v. 1962’s $554 billion, and others now feel that it may hit $585 billion. “There’s an old saw,” says Boston Federal Reserve Bank Economist Paul S. Anderson, “that a boom begets a bust, but it is also possible that the lack of a bust begets a boom.”

Bogy Word. So far has business psychology turned that another old bogy word is being heard again. President Kennedy voiced mild concern about inflation at last week’s appearance before the American Society of Newspaper Editors. Manhattan’s First National City Bank noted that U.S. business is beginning to catch up with overcapacity, which is what has kept most of U.S. industry from raising prices. Inflation is still, by common consent, a distant danger, but it is a better worry for long-range worriers than recession, and renewed talk of it shows how the climate has changed.