Strong economy in 1986

By Dr. Alison Lynn Reaser Vice president and senior economist First Interstate Bank

HE HOUSING and home center market should have quite a good year in 1986, especially in the first half of the year. A strong econoffiy, moderate inflation, but a graduallyupward trend in interest rates will be key features of the landscape.

We expect economic policy to be stimulative in 1986. The federal deficit is likely to be close to $200 billion, as government spending grows substantially. Monetary policy is now focusing on promoting growth in the U.S.economy. Inflation is not presently a concern; problems in manufacturing, rising protectionism, and credit problems in this country and abroad do trouble both the Administration and the Federal Reserve. Monetary growth will, therefore, continue to be rapid in 1986.

Lack of general public interest and strong pressures by individual groups have probably scuttled chances of any major tax reform in 1986. A bill con-

Story at a Glance

Stimulative economic policy... business rebound...inflation higher, but moderate...interest rates to trend upward...impact on building and home center industry...1.68 million housing starts.

taining comparatively small changes in the tax code might be approved next year.

The U.S. economy will be entering its fourth year of recovery in 1986. After the pause of the past year, we look for a substantial rebound, with real GNP up 7.7s/o from the end of 1985 to year+nd 1986. The thrust of the past and next year's monetarY growth, a swing towards some rebuilding of inventories, and a levelingoff in net exports should support. this growth. The result will be rising employment and income. An expected drop in the unemployment rate below 6.590 by the second half of the year should also bolster consumer confidence.

We believe the rapid growth of the money supply this year (expected increase of about I I 9o) together with the

Orchard Supply Hardwore, with new stores in Redwood City and Millbrae, Ca., has plans for store {22 in Watsonville. Ca. National Lumber and Supply Inc. opened a San Bernardino, Ca., store last month

HomeClub Inc. and Zayre Corp. have signed a merger agreement (see p. M for details); the newest HomeClub warehouse store opened in Cardena, Ca., Nov. 23 Home Depot is planning a store in a Pico Rivera, Ca., shopping center . .

Uncle Richord's True Value Hardware S/ore is new in the Farmington Mall in Aloha, Or. . Pay 'N Pak is doubling the size of its Wenatchee, Wa., store in a $1.5 million expansion and remodeling.

Ganahl Lumber is remodeling and adding space for its contractor sales dept. in Carden Grove, Ca. . . . Imperial Stores plans a new hardware store in El Centro, Ca. . . Home Depot has opened its second store in Tucson. Az.

Groce Home Centers West will rdlocate- from Brea, Ca., to offices in nearby Diamond Bar, Ca., in early Jan. . . Zimmerman Family Portnerships of California has acquired 5090 of Pay'n Sove, Seattle, Wa., from the Trump Graup of New York

Three C's Lumber Co., Grants Pass, 0r., is closing after 65 years

. Ronstsdtts' Hqrdware Mochinery, a 97 year old Tucson, Az., business started by the grandfather of singer Linda Ronstadt and the last of a chain of eight stores, has closed.

B re me r's Hirdware St o re, Y uba City, Ca., is celebrating its Z5th birthday Dole Hardware, Fremont, Ca., completed a new parking lot for its recent 3fth anniversary celebration.

Innovative Interiors and Envirotherm will be tenants in the Marin Home Center scheduled to open early next month in San Rafael, Ca. Beqr Creek Lumber is moving to a new location near the Inter-City Airport in Okanogan,Wa....

Top company officials and private investors have bid $1.3 billion to acquire National Gypsum Co. in one of the largest leveraged buy-outs in history; the move must be ok'd by National Cypsum's board and its shareholders . . . the firm is one of the biggest gypsum producers in the country.

The U.,S. Supreme Court has temporarily blo'cked a buy-out of Pacific Lumber Co. by Maxxam Croup, a New York investment firm. minority stockholders were given a chance to plead their case to prevent the $870 million takeover of the venerable San Francisco redwood firm as this issue went to press. . .

Jefferson Smurfit Group Ltd., Ireland, has agreed to limit its Southwest Forest Indusfties Inc., stake to the current 9.390 level for at least 10 years with an option for the Phoenix, Az., co. to buy back the shares next Aug. . .

Potlqtch Corp., San Francisco, Ca., which rejected a $693 million takeover offer from the Belzberg family of Canada, has been placed an Stondard & Poar's creditwatch list...

Weyerhaeuser Co. shareholders have approved an anti-takeover bylaw amendment LouisianaPacific Corp.'s board of directors has authorized buying back of up to 3,000,000 shares of its common stock . .

Mqnvil[e Corp., Denver, Co., has reshuffled divisions to form two new operating groups: specialty products and glass fiber to replace the building materials and international operating groups; the forest products group remains intact the firm says it intends to emerge from Chapter 1l bankruptcy in '86

Crown Zellerbach. San Francisco. Ca.. has authorized redemption of about 2.5 million shares and swapping of about I million shares effective next month. .

Mauk-Seattle Lumber Co., Seattle, Wa., has closed after 87 years Riley Creek Lumber Co., Laclede, Id., has filed for Chapter l1 bankruptcy protection .

The Golden State Millwork Div. of J. E. Higgins Lumber Co. has been reacquired by its founderpresident Lew MacDonald for an unannounced sum; he is now operating it as a separate co. under its original name Golden Stste Moulding Co. Ply*Gem Industries Inc., New York, is acquiring The Allied Plywood Corp., Charlestown, Ma.

Amweld Building Products, Niles, Oh., has opened a regional distribution center in the City of Industry, Ca. Accent Pacific Frames Inc., Thomss Csnby Co. Inc. and Accent Molding have merged and will move into a new 44,000 sq. ft. manufacturing facility in Kirkland, Wa., next month

Crane Mills is adding a new computerized optimising edger and double track dry kiln in a $400,000 plant modernization of its Paskenta, Ca., mill . Specialty Forest Products, Chandler, Az., is adding 5 acres for a remanufacturing operation to its 7 acre distributionfacility...

Housing stsrts bounced up l0.8Vo in Oct. (latest fig.) spurred by single farnily homes starts of 1,123,000 units multis were up only 2.9s/o at an annual rate 0f 637,000 units . the seasonally adjusted annual total was 1,760,000 for both . although permits were down 7.Tslo at 1,675,000 units, some analysts were confident that there will be another 3 to 4 months of growth in starts and permits