For Pessimists

A little jaded last week were U. S. businessmen. The thrill of seeing industrial production run ahead of corresponding months in 1929 wore off. There were some who found many an indication to justify a little pessimism, if they felt like it. Items:

> Department of Commerce's October report from nearly 3,000 wholesalers showed a 6.5% drop in volume of sales, a 6.3% drop in dollar value from September. Meanwhile, inventories (from 1,729 firms) were up 3 1/2% (in cost value) from September, 6% from October 1938.

> October food chain sales lost their September oomph. The Department of Commerce's index (unadjusted) which usually rises seasonally, fell from 107.2 to 106.9.

> Exports, counted on since September to absorb overproduction, still got nowhere. Brightest spot was Latin America: October takings were up 14% from September, 18% from October 1938. But cash buying is a luxury for Latin America necessitated by War II's cutting down its barter trading with Europe. By last week most Latin American Governments had eaten into their New York bank balances, were wondering whether Washington intended to do some export pump priming.

> Steel, No. 1 U. S. industry (which weights no less than 18% on the Federal Reserve Board's Index of Production), has been running at 93.9% of capacity, well ahead of consumption, but the temperamentally optimistic Iron Age reported that orders for early 1940 production would account for only 65-80% of capacity. A decline to this level in the steel rate will be enough to drag the production index down from its current 120-plus to something closer to 103, the level the boom started from.

> At the outbreak of War II, steel manufacturers, inadequately stocked for capacity runs, fearing that war exports would cause a famine of steel scrap, cleared out the junk yards, sent the price of scrap skyrocketing to $22.50 a ton, but capacity production yields a good deal of new scrap, and the mills have already bought sizable supplies. By last week, scrap had not become too plentiful, but mills still in the market were picking it up for as little as $19.

> The National Lumber Manufacturers Association reported that new business was 23% below lumber production (another weighty item in the production index).

> In spite of the temporary coal boom which war produced, anthracite ran into one of its characteristic price wars, and bituminous coal production, down 6% from the 10,450,000-ton peak hit week ended Oct. 26, was apparently headed back down to a 9,000,000-ton weekly rate.

> Oil, not yet seeing any war business ahead, looking back on a very sour year, slipped towards another inventory crisis. (Last one: August-September 1939.) In spite of Texas' restricting crude production to only four days a week, gasoline inventories rose another 425,000 barrels to 73,696,000--approximately 4,000,000 barrels above the same week in 1938.

> Last week, the Department of Labor's all-commodity index, whose war-boom peak had been 79.5, slid to 79.1. The New York Journal of Commerce's more sensitive index (autumn peak: 82.4) was down to 80.9.

> In spite of big dividends, stocks first stagnated, then slumped to 148.47 on the Dow-Jones average.

> A supplementary SEC report on insiders' stock trading showed that one of General Motors' unbeatable Fisher Brothers, Lawrence P., sold no less than 11,000 shares of G. M. in September, when the market was higher than it has been since. From G. M. itself also came a note of caution: Yellow Truck, its almost wholly owned subsidiary, has enough business to carry it through June 1940, had been set to pay off its $14-a-share preferred dividend arrearage. Instead, the G. M. management drew in its horns, paid only half.

> Franklin Roosevelt, encouraged by production at 123, began to make noises like economy. If, as in 1937, he should get revenues to exceed Government expenditures, business will be deprived of nearly $300,000,000 a month of artificial stimulation.

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