1985 looks tricky

By Burton G. MacArthur, Jr. Vice President Planning Building Products Champion International Corp.

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I is shaping up to be a qomewhat complex call. There's no recession on the horizon, yet prudence dictates that the recent boomfueled in part by budget deficits and foreigncashcan't go on forever.

We at Champion think the term "tricky" best describes the economic environment for the coming year. For most industries, periods of strong and slack sales will be interspersed as supplies temporarily get ahead of demand. In the building products business, conditions are unlikely to improve very much as housing starts decline somewhat and overproduction persists.

Acknowledging that economic forecasts do not exactly conform to economic performance, our caution for 1985 is dictated by the many optimistic scenarios which indicate a continuation of the present boom and,the much more pessimistic analyses which make an argument for recession.

Our baseline forecast is conservative but by no means unreasonably so. We are rejecting the more extreme optimistic and pessimistic alternatives.

Although housing starts have held up surprisingly well since mortgage rates for fixed rate loans went back up b l4a/o in 1984, a careful look reveals that the situation is deteriorating.

We don't expect the single-family market to deteriorate much further, settling at about .95 million next year, as mortgage rates stabilize. Those markets in part tied to new construction, such as building products, furniture and appliances will be adversely affected by the downturn in housing.

Story at a Glance

Unstable economic environment...improvement unlikely for building products. . .continued overproductrion. .housing downturn will aflecl related markets.