Slow upward movement

By Robert L. Strickland Chairman of the Board Lowe's Companies, lnc.

I F we'vg learned one lesson I from 1986, it's that making economic predictions in these unsettled times is like Predicting the velocity and progress of an elevator: with so many different hands on the controls, all you can say with certainty is that there will be ups and downs!Still. when I recently, and where it has the potential to go, I'm willing to Predict slow upward movement continuing through next Year' Nat'ionally, of course. we will be adjusting to the new tax bill. Right now it's like a stone that has just been dropped into a Pooli and nobody really knows how far the rionles will spread. But despite the disincentive -for capital spending represented bY the loss of the investment tax credit, I don't think the net effect of the bill will be a big nes,ative. I doubt it will make a maior difference in the overall busineis climate for 1987.

Interest rates will be held down as the Fed continues to maintain the money suPPlY near current levels. The trade deficit may see some reduction due to a weaker dollar, but what Congress will do to meet next year's Gramm-Rudman reduction target is anybody's guess. Mirrors and moonbeams lose their magic once election Year is over. and-rumors of new taxes are already rampant. Some form of consumPtion tax, or "value added" tax' will probably be considered for levy on imported goods. and might Prove ooiitically- appealing because it would give relief to beleaguered domestit industries like textiles and foodstuffs. By taxing sPending, it would also take a bite out of the "underground economY" that has managed to evade income taxes. I will be very surprised if we see any further income tax changes for the remainder of the Reagan administration.

When we look at sPecific industries and areas of the countrY, it's clear that we're not all riding on the same economic elevator' In 1986 both the East and West coasts fared better than the heartland, while the oil patch has, as the song saYs. been "down so long it looks like uP." But I believe the worst is over. When the elevator is at basement level, there's only one direction it can go.

In our own building suPPlY/ home center industrY, two economic factors effectively channeled investment away from home enhancement projects in 1986. One was the popularity of mortgage

Story at a Glance

Tax bill will make little difference in business climate interest rates will remain down... continuing stable single family housing starts . . warehouse wars over.

refinancing in the first half of the vear. and the other was the irresistible 2.9Vo auto financing offered bY General Motors and countered bY Ford and AMC. Consumers who took advantage of those oPPortunities are heading into the new year with comfortable mortgag.e and auto payments, and theY will again have income to devote to fixit-up proiects.