The Economy: Cheery Cherry Blossoms

In Washington last week, Government economists were as cheery as the cherry trees — and for much the same reason. Despite some sickly buds here and there, the economy seemed to be blossoming with the season. Warm weather had brought out the biggest show of shoppers in retail stores since last autumn. Retail business in March, reported the Commerce Department, was $26.47 billion, a 3% increase over February. After adjustments were made for this year's unusually early Easter, March figures were still 4% above retail spending a year ago.

All winter, customers were squirreling money away in savings accounts, but the return of spring has put them in a mood to spend again. The Administration, too, has fertilized the economy with some extra cash. A billion dollars was turned back in the form of earlier-than-usual G.I. insurance dividends, and the higher withholding rate on federal income taxes has guaranteed a spendable rebate for many a taxpayer.

The upturn was what put Washington in a cherry-blossom mood. "I thought the figures would be good," said Assistant Commerce Secretary William Shaw. "I just didn't expect them to be that good." Even April sales of autos showed a sharp increase for the first ten days of this month. Chrysler reported a 25% rise, struggling American Motors had an 8% gain, and General Motors improved sales by 5%. Only Ford was still off with a 9% decline from last year. "People," said Pontiac General Sales Manager Thomas L. King, "walk into showrooms now in a buying rather than a looking mood."

Unpromising G.N.P. Along with such promising indicators, though, the Commerce Department reported that the gross national product, the total production of goods and services, increased during the first quarter of the year by only $5 billion. And even that small advance represented merely a rise in prices. Meanwhile, wholesalers' and retailers' stocks on hand in February —the latest month for which figures were complete — rose to $136.6 billion. Not since February 1961, which was the worst month of the last recession, had unsold inventories been that high.

Administration economists were quick to blame the poor G.N.P. showing on the high, but not dangerous, inventories. Unlike 1961, when they had to be liquidated with a loss, the current stock piles are being gradually sold off. Mean while, unemployment is a small 3.6% of the labor force, and industrial production rose in March to end a two-month decline. Certain that the mood represented by rising sales would continue on into summer, Washington economists reaffirmed the forecast they made in January. After a slow first half, they said confidently, 1967 will end with a strong second-half finish.