Evening star., 1926-10-02
BUSINESS CYCLE LOSING OUT
ASPROSPERITY REGULATOR
Familiar Law Has Been Plotted So Often
It's Reliability Wanes-Construction
Field, for Instance, May Ignore It.

| 1t is scarcely a matter for wonder
| that, at a time when the country
more or less suddenly found the pock
| cts of its citizens and the vaults of Its
| banks full to overflowinG with un-
precedented accumulations OF money
and credit, ways would be found for
| easing the rapid flow of large portion
/ of this money and credit into one OF
the most rapid growing and con
spicuously prosperous of the large in
dustrious industries OF the country,
Furthermore, it was an industry
which had scarcely had adequate
credit facilities in the past.
| Expanding construction activity,
expanding construction facilities, eX'
panding credit, all accompanied
growth in general industrial and com
mercial prosperity and an unprece-
dented growth in wealth and income
OF the people of this country. BY the
time our pressing construction needs
were caught up with, at the END OF
1924, It was no longer necessary to
consider merely the country's ab-
solute space requirements for houS'
:ng it's population, it's industry and 1t
commerce.. The people. in the in
dustry and commerce of the country
were ready to consider buying what
they wanted in the way of buildings
with all kinds of modern improved
features, rather than to hold them
seelves down to immediate space re-
ouirememenas. This was the situa'
ton at the end of the second or
growth phase of the postwar era.
Construction activity during the
first few months of 1925 did not show
any particular tendency to increase
greatly over the activities of the
previous year. 1t was IN MloSunl-
mer that the boom started. Con.
tracts reached the record volume of
S663 ,OOO, 900 in August of last year,
and contract volume and construc-
tion activity continued at record
breaking levels practically up to the
nresent time. The boom that de-
yeloped last year brought the 1928
contract total up to S6,622, 100000, an
increase of &c per cent over the
preceding year.
Gain in Third Stage.
lust as the transition from the flrst
uhaSe to the second phase OF the
postwar era was accompanied py
very marked rise in construction vol
,me 1as between the years 1921 and
1927 so also was the transition from
the second phase to the third phase
marked by a big increase. The
monthly contract average for l9Zo
was S552 900 GOO, compared with S456'-
600 900 a month in 1924 and $265,oOV'-
600 a month in the 1919-192l per1od.
This brings the record up to the
current year, the final outcome OIL
which Is still uncertain. 1t IS also
desirable to make some sort or guess
as TO the much more uncertain ouC-
come of 1927.
At present it looks as If this year S
total construction volume would De
fairly close to that of 1925 At the
end of August there was lead OF
to per cent over 1925. The declln-
ine, tendency of the earlier monthS
of this year rather led to the eXpecta,
ton that the margin over 1879 Woulo
decrease a little faster than II acl
" has and that 1t would propaoly
va nish before the end of the year.
Since this declining trend was inter-
runted in August by what now ap-
nears to he q minor Fall revival, the
nrospect for a final total very close
tn that of last year is very good. In
ether words. the monthly average Tor
1926 will probably not vary greatly
from that Of 1925, which was $oo2'-
600 900. If the remaining months OF
this wear should equal in volume the
corresponding months of last year
which might happen, but IS a niue
unlikely. the 1926 average Will DE
S575. O00. 900, probably the maximum
estimate that one would care to make
today. ,.
Tho first two years of the current
nhase of construction evolution ap-
pear to show q tendency toward sld-
bil;zation at a normal volume some
where around S555 900 900 a month, or
s6 600 600 900 a year. 1t remains TO
he seen whether next year is likely
20 run over that figure.
Surplus Production Capacity.
One characteristic of the current
phase Of the construction SITUATION IS
almost entirely new. The growth or
this Industry has produced a surplus
production capacity. 1t has been the
surplus capacity for the production of
materials that has held prices at rel
atiyelv stable levels ever since 1873
in spite of rapidly increasing demand
It is probable that very large in
crea Sc in construction volume could
be easily met at the present time with
an adequate supply Of materials. The
same is scarcely true Of the supply Of
labor. But it is true of the supply of
credit. Up to the present time the
only effective limitation on credit for
building operations is the judgment
of investors. lenders and lending insti-
tutions.
These conditions became apparent
last year and operated toward the de-
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