Wait Awhile

Within the last two months the barometric industries (steel, textiles) sprinted ahead on the theory that the start of real fighting in Europe would set off a simultaneous export and defense boom in the U. S. By last week the export boom was out, the defense boom was still in the future, and businessmen figured the barometers had jumped the gun. But meanwhile business operations generally had raced ahead of the stockmarket, which after a brief spurt in June had marked time. Last week manufacturers began slowing down to the stockmarket's pace. They realized that the expected U. S. boom is still on the drawing boards. Mass production of arms cannot start until Defense Advisory Commissioner William S. Knudsen guides the program out of its present engineering phase, through the plant and equipment building phases, to the assembly lines--all of which may take from six months to three years.

Last week Westinghouse Electric's shrewd Chairman A. W. Robertson returned to Pittsburgh from Washington saying that mass production of shells, gun mounts, fuse timers, motors and radio equipment (which Westinghouse is able to turn out) would take four to 24 months to organize. In Aviation Curtiss-Wright's Vice President Theodore Paul Wright, analyzing the requirements of President Roosevelt's goal of 50,000 airplanes a year, said that such a rate of production could be reached only after the U. S. has spent five years and $572,000,000 on new plants. These views helped to put the coming boom in its proper perspective.

But already some industries, having misgauged the boom's immediacy, were running into inventory trouble.

>Steel operations in two months soared in a straight line from 60% of capacity to 87.7% (this week's figure: 86.4%). As recently as three weeks ago, steel peddlers were solemnly warning customers to buy ahead for 1941, but last week inventory trouble was a salesman's complaint.

>Copper, fresh from a June sales spree 450% ahead of March, sat on an export inventory which had backed up when France was put out of the war. By last week, it was clear that June's sales would not look so impressive when averaged with a couple of "correctional" months.

>Worst inventory sufferer remained the oil industry, which was also suffering from export trouble. In the first five months of this year crude oil and gasoline exports were 29,204,000 barrels, 34% less than in the same months of 1939. Gasoline tank car prices had reached a new seven-year low. Gasoline inventories were just under 100,000,000 barrels, about 20,000,000 more than the trade thinks they ought to be. Consequence: No. 1 U. S. oil producer, Texas, last week ordered crude-oil production prorated down 219,000 barrels a day. To complicate the readjustment, the No. 3 producer, upstart, unregulated Illinois, continued to help offset Texas' curtailment by raising production.

All this inventory trouble forecast a temporary production recession that would have the healthy effect of bringing production and consumption more nearly in line, and provide a sounder base for later improvement.

Happiest note of the week came from Detroit--automobile sales had broken through "normal seasonal slack" to total 405,000 units for June, up 33% from hopeful 1939. One good reason for this month-end spurt (which made up for early-June slowness) was public suspicion that the 1941 new models might be the last for some time--at any rate they are expected to cost more than the 1940 models. Chrysler Corp., which sold more cars in the last week of June (31,982) than in any week in its history, and Chevrolet, with June sales setting a new record, had much to cheer about. Said Chrysler's tough, dynamic boss, K. T. Keller: "Don't get down in the mouth about business in this country. There is going to be a lot of money spent here--more than any of us realize--and this money will get into circulation. Taxes will be higher and in the long run this may cause some change in the buying of luxuries. But what we have ahead of us immediately is accelerated business. . . .

"Some idea of the production capacity of this country to meet the needs of a defense program may be indicated by the fact that Chrysler Corp. alone could take care of the entire present forward demands of the United States Army for trucks for national defense purposes."

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