High Bottom?

Those who were bullish on both the stock market and the U.S. economy took new hope last week. As the week opened, the market gave investors a bad scare. The Dow-Jones industrial average skidded to 161.60, right through the critical level that many a chartist thought would indicate a full-grown bear market. By such charts, the market should have kept going down. Instead, by week's end, it bounced right up again to 163.78. The market showed enough bounce, in fact, to make some Wall Streeters wonder whether, after months of sliding, it had finally reached its bottom. No one could yet say for sure, but some fence-sitting traders began to teeter towards the bull side.

In the same way, many a company which had been trying to discover the bottom on its "back-to-normal" slide seemed to have found it--and to be starting the upward climb again. In industrial alcohol, a basic raw material for many manufacturers, the surplus had caused prices to toboggan from 87-c- a gallon to 21-c-, but by last week the turn seemed to have come. Pub-licker Industries, Inc., a big U.S. maker of industrial alcohol, thought demand had picked up enough so it could raise prices 8 1/2-c- to 11-c- a gallon. Even in textiles, softest of the soft spots, there was some hardening; American Woolen Co. also raised prices on 14 of its woolen-type fabrics for women's wear. In short, some industries had already gone through their own private recession and were getting back to something like normal. Actually, a good deal of the buying slump had come because manufacturers were using up their inventories while waiting for prices to settle; once the inventories were gone there would be a new rush to buy.

How far along its way back to a normal route had the U.S. traveled? Harvard Marketing Professor Malcolm P. McNair squinted at the scenery and announced that one-third to one-half the trip had been completed. He guessed the index of industrial production, now around 175, would drop to about 155 before starting up again. The rest of the ride should not be "too severe," said McNair, certainly "less severe" than 1929 or 1937.

Those whose profits had been nipped by the recession were finding some consolation around the bargaining table. The powerful C.I.O. Textile Workers Union reluctantly decided not to ask for wage increases for its 120,000 members in the cotton-rayon industry when the present contracts expire in September. The Ford Motor Co. also decided the time had come for plain talking. It turned down the U.A.W.'s wage and pension demands and proposed freezing wages for 18 months. Said Ford's Bargainer John S. Bugas: "It would be utter folly to take any action which would increase the price of our products." The A.F.L. agreed. In its official Monthly Survey it warned that wage demands could force employers into bankruptcy. Said A.F.L.: "Competition is back; prices can no longer be raised indiscriminately to cover higher costs. Business executives show new interest in cutting expenses. Production per man-hour is now rising sharply. These are all healthy developments which can bring business to its normal postwar balance."

Pay Dirt Farther Down. For any businessmen not acutely aware that many prices were still too high, the Federal Reserve Board had some enlightenment. In a survey made early this year, FRB reported that consumers had almost as much cash as the year before, but were less ready to spend it unless prices went down. Consumers were in the market for up to 5,000,000 new cars, about 1,500,000 television sets and a million new homes. There was "strong underlying consumer demand," said FRB, "if goods were available at prices and qualities considered attractive." So far the price cuts on many things had not been great enough to coax out the "strong underlying consumer demand." And despite the drop in commodities and the general business recession, many an item in the cost of living was not following the trend. For example, meat, which had dropped, had gone up again. But those industries which had gone through their own recessions and cut prices had found that the bottom was not so far down as they had feared. They had learned demand was indeed enormous if they went after it with their oldtime salesman's zip.

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