Picking Up More Speed

Since spring, the signs have been evident that the U.S. economy was rounding a recessional curve and would pick up speed during the second half of 1967 (TIME, May 12). Inevitably, some skeptics continued to skep, arguing that a major downturn might still be in store. By last week, with the publication of a midsummer set of indicators, the statistical proof of a strong second half became so clear as to erase almost all doubt. Items:

sb PERSONAL INCOME. The Commerce Department reported that personal income in July rose by $4.5 billion over June to a record seasonally adjusted annual rate of $627.1 billion. The news reflected higher pay for wage earners and a reduction in unemployment. Also, last month the work week picked up, after a slight decline in June, meaning more overtime and part-time employment. Government economists predict that with the upward swing of the economy--and with the return to school of students who filled jobs during the summer--the currently unemployed will be offered an expanding work market. sbCORPORATE PROFITS. After a sharp dip during the first quarter, profits began a comeback during the second three months of the year. At $79.2 billion--compared with $79 billion in the first quarter--profits before taxes were still far below the record $84 billion achieved during the third quarter of last year. Yet the Commerce Department sees in the small rise important implications for the months ahead. Manufacturers' inventories have been reduced for the first time in three years. Retail sales, which slumped earlier in the year, continued to recover and were up 1% during July. All this leads the

Administration to believe that the outlook for business is undeniably bullish. sbINDUSTRIAL PRODUCTION. Like most of the indicators, once lackluster industrial production is joining the general upswing. Having slumped from its December peak of 159 (based on the 1957-59 standard of 100), the index for output in July recovered and climbed back to 156.3. Lending a helping nudge were major strike settlements in the television and rubber industries. In July there were also rises of 3.6% in mining output, 3% in electrical machinery production and 2% in auto manufacturing.

sbHOUSING STARTS. Perhaps the sickest of all major U.S. industries, housing rarely yields any reason for optimism. With high interest rates, the industry has suffered as potential home buyers have shied from signing costly mortgages. But the Census Bureau reported last week that housing starts in July on a seasonally adjusted annual rate had risen by more than 100,000 to 1.36 million--the highest level of housing starts since April 1966, just before the acute shortage of mortgage money.

Even as the indicators pointed toward resurgence, there was talk of tempering the upswing to avoid inflation. Prices generally have been rising, and last week Bethlehem Steel Corp. announced that it was hiking the base price of hot-rolled carbon and high-strength plate by $4 a ton. The specter of inflation has long worried the Johnson Administration and, in fact, is the main reason it gives for requesting a 10% tax surcharge on individuals and corporations. Last week, at the House Ways and Means Committee hearings on the proposal (see THE NATION), many Congressmen seemed determined to resist higher taxes until the Administration makes an effort to cut spending.

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