Slichter Predicts Economy Will End Recession by Fall

Humner H. Slichter, Lamont University Professor, forecast yesterday that the nation's present economic slump would end by the middle of this year.

In an article printed in the Boston Globe, Slichter also predicted that the latter half of 1954 would be a period of general expansion for business.

Slichter said that the country has been experiencing a contraction of production and employment for the past six months, but he saw as upturn in the economy by the fall. The peak of production, he said, was reached last year when the output was over 372 billion dollars, but Slichter does not expect it to contract to less than 355 billion dollars.

Explaining that this contraction will not be particularly severe, Slichter said that the extent of the drop in production will depend on the tax and spending policies of the government and the investment policies of business.

He criticized President Eisenhower's plan to replace tax cuts scheduled for April 1 with new taxes to prevent a loss in revenue. Commented Slichter, "Certainly a period of contraction in business is no time for denying scheduled tax cuts to consumers."

He based his prediction of an end to the slump on the following four reasons:

1) By the middle of the year, business concerns will have reduced their inventories by about as much as they desire.

2) The reduction of short-term consumer indebtedness will have laid the foundation for an expansion of consumer demand.

3) The continuation of contraction will make the government increasingly aggressive in attempting to halt it--indeed the continuation of the recession may cause Congress to make additional cuts in taxes.

4) Consumers are likely in the near future to increase the proportion of their income after taxes spent for consumer goods. During the last year this proportion has been about 92.5 percent. This is low by past standards.

As competition for the consumer's money becomes keener, Slichter expects business concerns to produce better goods at cheaper prices.