Bouncing Back

The Federal Reserve Board hauled down a storm signal last week. Ever since last November its production index, one of the barometers of U.S. business, had been skittering down. It had dropped 33 points to 162 in July, indicating a 17% fall in overall U.S. production. Last week FRB reckoned that production was bouncing up again and that the index for August had risen, probably back to the June level of 169.

The rate of industrial layoffs had slacked considerably. In the latest week, said the Labor Department, new claims for jobless benefits totaled only 251,000, the lowest for any week since last November. Department store sales, hard hit by the hot summer, had also perked up a bit; retailers saw better business ahead. At the end of July, said FRB, 296 of the largest department stores had ordered $401 million in new goods, v. $286 million at the end of June.

Tires & Refrigerators. The upturn in business was not yet general, but it was spreading, thanks to a seasonal boost in some industries. Hot & heavy summer driving, for example, had finally resulted in an increase in tire sales, which made rubbermen revise upwards their 1949 output and earnings estimates. Part of the upswing resulted from special reasons. Example : the fear of a steel strike was partly responsible for the increased demand for steel which had boosted production to 86.3% of capacity (Weirton Steel Co. was back at 100%).

Many appliance makers were feeling the effect of the expiration of consumer credit controls (installment credit rose to an alltime peak of $9.3 billion in July). General Electric Co.'s President Charles E. Wilson said that the outlook was bright (see below) and that G.E.'s appliance business had picked up more than it usually does in the summer. Other appliance makers, who had cut back for lack of orders in the spring, were once more allocating some goods and calling back furloughed workers.

Packards & Postcards. All through this year's recession, a big prop under the sagging economy has been the auto industry, which boasts that one out of every seven U.S. workers is in some way dependent on it. Automakers rolled out more units in August (about 650,000) than in any other month in history.* But that was not good news to dealers already having trouble selling cars.

In Chicago, Hudson Dealer Jim Moran offered to transport any customer free from any point in the U.S., pay for his stay in Chicago until his car was delivered. In Detroit, the McMillan Packard agency distributed self-addressed postcards to its old customers, paid them $20 apiece for every tipoff that led to a sale. It looked as if the shakeout in the one big industry not yet affected by the recession might not be far off.

* Previous peak: 621,910 units in April 1929.

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