Page 3 Economic Outlook - Uncertain Dr. Rex L. Cottle Chairman, Department of Economics and Dr. Rodger S. Lawson Director, Center Businesses and Economic Training Research At the outset of each new year a able of economists, who make their Aving betting on the future, come forth with pronouncements as to the likely outcome of events in this country during the next twelve months. While, in some disciplines, such speculation would be disregarded, these wagers do indeed help shape the economic events of the new year and affect us all either directly or indirectly. While we must frankly admit that we are _ not members of this gambling fraternity, we are nevertheless called upon from time to time to convey our views as to the economic outlook for this country during that nebulous period of time referred to as the ‘‘foreseeable future.”’ Listed in the following table is the summary of our bets for the year 1977. For purposes of reference, we have also included the rates of growth experienced during the past year. 1975-1976 Gross National Produce 11.6 Personal Consumption Expenditure 10.8 Durables 18.7 Nondurables 7.6 Gross Private Domestic Investment 3 3 Residential Structures 30.9 Government Purchases 7.9 Federal 7.1 State and Local 8.6 Consumer Price Index 5.8 Rate of Unemployment 7.7Interest rate on Mortage 9.0-Prime interest rate charged by banks 6.84Money Supply (M1) 5.9 Real disposable income 4.1 e-estimated - level of total unemployment -- interest rates ; Underground water (continued from page 2) public ownership of the flood plain near the mouth of the canyon might be necessary to insure that the area }would always be available to be used for artificial recharge. Often when the supply of gravel 44gom gravel pits is exhausted they are f ized as landfills to dispose of a »}region’s trash. If the gravel pits along the Weber River were used for this pose, water percolating through e fills would become contaminated fand result in damage to the quality of water in the aquifers. The recharge areas along the mountain front in both the Ogden area fend Ogden Valley are regions unlergoing extensive development. The feifects of these developments upon fhe quantity and quality of water fentering the aquifers is unknown and | -BSnot taken into account during the Planning process. i Percentage 1976-1977 11.0 10.3 11.0 8.8 16.5 21.7 9.4 8.4 10.0 7.0 7.19.0-6.25-6.5 3.0 Experience in other areas indicates that uncontrolled and unsystematic development of an artesian aquifer system is expensive, inefficient, and wasteful. Every well that is drilled and pumped will effect the water level in every other well in the basin. Excessive withdrawals of groundwater can produce damaging land subsidence. With systematic development, a well field can be designed to capture the maximum amount of water with. the minimum effect on other wells in the basin, and a maximum yield can be obtained without subsidence effects. However, it must be understood that both stream-water and groundwater are part of one closely connected system and that planning for their development must include managing them together as a single system. Despite widespread dissatisfaction with the U.S. economy in 1976, employment, output and disposable income made large gains. Because of the unusually large rise in labor force participation, the unemployment rate remained at a distressingly high level. The rate of inflation slowed. Interest rates moved downward, even though the present commercial bank prime lending rate of 6.25 percent has been exceeded in only seven of the last 32 years. Looking ahead to the balance of the current year the outlook is far from certain. The likelihood that the economy might move from the growth plateau achieved at the end of 1976 onto a higher growth path is not overly strong. To achieve the projected rate of growth, the spurt in consumer spending which keyed the economic recovery of 1976 must continue throughout the year and manifest itself as a positive factor. The Index of Consumer Sentiment published by the University of Michigan’s Survey Research Center suggests this could possibly occur. However, they are quick to point out that the’smallest gains in favorable attitude are those concerned with personal finances thus tempering the Utah has been unusually slow to develop its ground-water resources and to spend the necessary money to collect the information vital to plan for their development. The current drought may be a blessing in disguise if it makes us more aware of the potential of our ground water supplies as insurance against future drought. Short-term outlook for consumption behavior. According to the survey, many families do not foresee improvement in their own financial situations over the next year or even in the next five years — although most do not see deterioration. This attitude Supports our projection of only a small rise in real disposable income for the balance of this year. This projection reveals a_ slight redistribution of income resulting from the provisions of the Tax Reform Act of 1976, which will have its greatest impact upon taxpayers with large incomes from investments. It also reflects our view as to the insignificant influence of the proposed Carter rebate program. It was reported that families expect little improvement in prices, interest rates and unemployment in the near term. This attitude appears to be supported by recent events. For example, families may expect moderate increases in prices for staples such as milk and sugar as a result of political pressure for increased price supports. With regard to investment spending, the picture is mixed. Early projections for spending on new plants and equipment suggested the likelihood of rapid growth. The latest Commerce Department figures show, however, that while 1976 spending came in below expected levels, businesses are still planning substantial expansion in new plants and equipment for the remainder of 1977. This projection is supported by the concensus outlook of a pre-tax increase in corporate profits of nearly 10 percent. (continued on Page 4) - Indicators nang’ ge oe pees Economic ECONOMIC INDICATORS FOR 1977 ee CONCENSUS FORECAST OF = Placing “‘bets” on the economic outlook for ’76-77 are Dr. Rodger S. Lawson and Dr. Rex L. Cottle.