The Shape of '62

In the four centuries since the German banking house of Fugger began to pay an astrologer to predict financial trends, economic forecasting has become so universal a pastime that today's conscientious investor or businessman is hard put to it to know whose voice to heed. One voice that is heeded is that of the National Association of Business Economists, whose membership is drawn from the top economists employed by U.S. private industry. A year ago, the N.A.B.E. produced a forecast of the 1961 business rebound that proved to be dead right. Last week, meeting in Chicago's Edgewater Beach Hotel, 193 N.A.B.E. members gazed forward into 1962. Their consensus: prospects for''62 are bright--but not brilliant.

The N.A.B.E. economists were skeptical about the chances for what FORTUNE calls a superboom. There will be no real boom, most of them agreed, until businessmen start spending vigorously on capital expansion--and that is unlikely to happen until the newly tightfisted U.S. consumer (TIME, July 21 et seq.) decides to open his wallet wider. The N.A.B.E.'s outgoing president, Dr. George Cline Smith, senior partner of the Manhattan economic consulting firm of MacKay-Shields Associates, blamed the international news for the consumer's timidity. Said Smith: "If the economy is going to take off for the expected highs, consumers are going to have to get their heads out of the fallout shelter and act as though they think the economy is going to last for a while."

The Dual Spur. Sears, Roebuck's Arthur Rosenbaum did not think that war jitters alone account for consumer sluggishness. The unemployment rate remains high, noted Rosenbaum, and there has been a fall-off in the rate of U.S. marriages (down from 9.5 new families per 1,000 population in 1956 to 8.5 last year). Perhaps even more important, consumers are weighed down with near-record installment debt and with record quantities of already purchased durable goods.

For all that. Rosenbaum looked forward to a 6% rise in consumer spending next year. One likely spur to spending is the nation's steadily rising personal income, which in September rose to an annual rate of $420 billion, $17 billion above the recession low last February. Still another spur to business, "particularly in the durable goods area," argued FORTUNE Economist Morris Cohen, will be increased spending by federal, state and local governments--a figure that Cohen expects will jump from 1961's $108 billion to $119 billion next year.

Summing up the prevailing mood of the business economists, incoming N.A.B.E. President William F. Butler, of the Chase Manhattan Bank, fell back on the phrase "cautious optimism." Samples:

sbSTEEL: Production in 1962 will rise 10% to 15% above this year's anticipated 100 million ingot tons, predicted Republic Steel Corp.'s William P. Carlin.

sbHOUSING: This year's 1,300,000 housing starts should rise to 1,375,000 in 1962, said David K. Gillogly of the National Association of Home Builders.

sbCHEMICALS : Du Pont Economist Ira T. Ellis predicted a 10% production increase.

sbELECTRICAL EQUIPMENT: A 5% to 10% increase in sales was forecast by Chief Statistician A. J. Nesti of the National Electrical Manufacturers Association.

How High? Along with the cautious optimism went some cautious pessimism. U.S. business expansion in 1962, predicted Chase Manhattan Economist John V. Deaver, would mean an increase in U.S. imports of raw materials. Probable result: an uncomfortable surge in the U.S. balance of payments deficit. Even more bearish was Irwin M. Stelzer, president of National Economic Research Associates, Inc., who emphasized that U.S. industry is still producing far below its capacity, that deliveries are quick, and hand-to-mouth buying the rule. Brushing aside forecasts that the industrial production index will climb to 125 (from September's 112) within the next few months, Stelzer said: "I doubt that by mid-1962 the production index will exceed 120."

At bottom, however, the differences between the "optimists" and "pessimists" in Chicago were arguments over degrees of optimism. For by Pessimist Stelzer's own account, the production index may well show an 8-point rise in the next eight months--and that would be a healthy jump.

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