Increasing Confidence

Although he has more up-to-the-minute statistical data at his fingertips than any other businessman in the world, the U.S. executive still leans heavily on his intuitive reading of the economic signals. That reading has made him more optimistic about the U.S. economy than he was six months ago. Of dozens of businessmen interviewed across the U.S. last week by TIME correspondents, the great majority look forward to slowly rising business activity this year--or, at the worst, a plateau of high-level prosperity. In contrast to President Kennedy's warning about a possible recession unless a tax cut passes Congress, few are seriously worried about a recession. In fact, few think a tax cut would do them very much good for some time, and they are not counting on it to get through Congress.

Tangible Proof. Businessmen who feared that the stock market's summertime drop heralded a recession seem almost astonished at how good business has remained. "It's still hard to believe," says Borg-Warner Chairman Robert Ingersoll, "but it looks like another good year." Noting the sharp change in the business climate since last summer, General Electric Chairman Ralph Cordiner says: "In mid-June through October, the economy seemed to be geared to the stock-market reaction, and people apparently lost their confidence. But that seems to be behind us now." Samuel A. Groves, president of Boston's United-Carr Fastener Corp., now sees the stage set for a move "pretty steadily--if slowly--upward." He is seconded by Raytheon Financial Vice President George Ingram Jr., who looks for "a gradual improvement this year."

Some businessmen give tangible proof of their confidence--and by doing so pass their own assurance on to the entire business community. General Motors announced last week that it will spend $1.2 billion (equivalent to the entire annual budget of such countries as Spain) on capital expansion this year. Procter & Gamble plans to spend $50 million, and G.E. intends to go ahead with $120 million in outlays. Despite the talk on all sides of a profit squeeze, corporate earnings are running at a peacetime record, and Wilson & Co.'s President Roscoe Haynie sees "no reason not to be optimistic about an increase in earnings for the year as a whole." Businessmen are impressed by the stock market's rebound from last summer's lows, the upsurge in consumer spending, and the higher depreciation allowances that have already boosted companies' cash flow. Some of the earlier rancor against President Kennedy has even softened, not necessarily because businessmen think Kennedy is a friend, but because they rate him too wise a politician to hurt business deliberately.

Executive Paradox. Despite this improvement in the businessman's mood, many executives paradoxically are not yet willing to gamble their funds on expansion and modernization. Capital spending is barely above the level of 1957, and a rise of only 3% is predicted this year (to $38.2 billion)--far less than the increase economists figure is necessary to give the economy the kind of growth it needs. Businessmen are just now beginning to show signs of restocking their inventories, and President Lawrence A. Harvey of Harvey Aluminum grumbles that the basic manufacturing companies have been forced into "maintaining inventory for all the rest of business down along the chain." The economy needs more companies that are willing to put their money where their confidence is.

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