Backlog Boom

Landing in San Francisco from a tour of the Orient, the venerable Roger Babson had something to say to the press. Mr. Babson, who for almost 40 years has made his living selling the public charts and prophecies about business, announced last week that so far as the U. S. economy is concerned "The war in Europe is unimportant. . . . the important thing is . . . what is going on in the Orient. Trade always has moved westward."

During Mr. Babson's absence, however, the war undoubtedly made a bigger impression on U. S. trade. For the first time in years many a firm has now more orders than it can fill in three months' full production. By last week U. S. Business had begun to ask "Here's the war boom--but where are the war orders?"

This question was justified by the condition of many a manufacturer's order books: to provide against price rises and shortage, his customers had swamped him with orders; now they have ordered and the foreign war purchasers have not yet come along; he has a huge backlog but few new orders coming in. Shall he operate at 100% till January--and trust to the gods for 1940 orders--or shall he operate at 75% and be sure of keeping busy till March?

Some last week's evidence of this new stage in war boom:

> New orders in the cotton textile industry amounted to only 30% of the quantity in production:

> Copper sales fell off 95% from their boom peak in September:

> In several industries customers who had put in big rush orders began sending instructions to slow down deliveries. Perversely, some frightened sellers tried to speed deliveries lest the orders be canceled.

> Steel companies, faced with a $5 a ton rise in costs as a result of the $10 rise in scrap prices,* went on strike against $26 scrap, refused to buy till they got reductions of 25-c- to $1 a ton. Hard-bargaining Bethlehem managed to buy 90,000 tons in Buffalo at $22 to $23--a three months supply.

> Under the leadership of President Robert Wolcott of Coatesville, Pa.'s small plate-making Lukens Steel, which has already upped prices $5 a ton, steelmen formed a committee of 1,000 scrap-buyers, resumed their 1937 agitation for stopping tonnage export of U. S. scrap (favored by American Iron and Steel Institute President Ernest Weir, who also favors the embargo on munitions exports). There is a genuine scrap squeeze, mostly because Japan, England and other foreign buyers have taken 16,700,100 tons of scrap out of the U. S. in the last decade.

> Steel production rose from 88.6% to 90.3%. The Great Lakes division of efficient, profitable National Steel (which has a tonnage production monopoly in Detroit) had to close one of its 16 open-hearth steel ingot furnaces for too long deferred repairs. New York's Journal of Commerce commented sagely: ". . . May be a forerunner of a general condition in the industry."

> The coal industry, one of the few industries really exporting its product (to neutrals whose English-German sources are cut off), was so swamped that paradoxically, in spite of steady, increasing exports to Canada, Bethlehem Steel ordered 6,000 tons of coke a month from the Steel Co. of Canada's Hamilton (Ont.) plant.

> In the week ended Oct. 7, loadings reached 834,694--a rise of just 54 cars-indicating that until the railroads can repair their dilapidated equipment, a shipping ceiling has been reached.

> Rayon and paper, two industries sold out for months ahead at sellers' prices, last week slackened operations slightly: paper from 96.1% to 92.6%; rayon from 90% to 88%.

> In the case of rayon a shortage of yarn was responsible. The No. 1 U. S. rayon producer, American Viscose Corp., had a yearly fibre capacity of 25,000,000 lbs. at the end of 1938, will have 65,000,000 lbs. by spring 1940. Fortnight ago it announced that it will build a new yarn plant at Front Royal, Va. to up its capacity to 90,000,000.

Index Down. Indicating a further decline in war-boom enthusiasm, TIME's Index of Business Conditions this week dropped from 100.8 to 99.4 (94.2 year ago). The smallness of last week's rise in commercial loans reflected business caution.

> The index figure for the month of September was 100.9, substantially above August's 95.8.

> (TIME's Index, derived from money and banking figures, reports not on business volume but on changes in underlying conditions likely to affect the volume of U. S. business.)

* Most steel is made about half of scrap, half of new ore.

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