Evening star., 1936-07-26
Record Power Production
Is Viewed as Barometer of
Increasing Prosperity.
PUBLIC NOW Is BELIEVED
TO BE IN SPENDING MOOD
Increasing Distribution of Con.
sumers' Goods Regarded as Good
Sign of Recovery Trend.
BY CHARLES F. SPEARE.
ecial DisnatcE IN The Star


NEW YORK July IS (NANA).-
The forward march of business con-
tinues in spite of the approach of the
peak Of the vacation season. In many
directions industrial activity is in
creaSing.
The advance orders of the electrical
companies are significant of expansion
by generating plants and of broader
area in which electric appliances are
now to be found. A Complementary
phase of this is the record power
production gain reported this week
from almost every section of the
United States. The diversity of de-
mand for electric power constitutes
the strength of the industry. 1t also
accurately registers the material well-
being of large section of the people.
For this reason it is being recognized
that movements in power and light
securities are perhaps better
barometer Of the Nations economy
than those Of the railroads or of the
industrials.
Consumers Goods Sales Rise.
More emphasis must also be placed
on the distribution of consumers
| goods in arriving at a conclusion as
TO our degree of prosperity. 1t is
estimated that department store sales
this month will be from 10 to. II per
cent higher than last year. The gain
by the chain stores will be little under
| this ratio when compared with July,
1885. Mail order companies in the
first half of the month had a turn
over from Is to over 80 per cent
greater than a year ago. Obviously
there is relation between these
figures and the higher merchandise
| arloadings of the railroads.
The public is in spending mood.
The unfortunate feature of it is the
extent to which. as prior to 1929. it
| is making commitments that will
compel inStallment payments until
well toward the end of this decade.
The most important developments
in the capital goods industry this
week were the advance in the price Of
| copper metal to 90 cents. the highest
since May, 1881, and heavy buying by
fabricators who supply the building
and electric trades. The lag in busi-
ness still continues in construction
and allied industries; any signs Of
quicker pace among them help to fill
in the blank spaces in the pattern of
business.
There is a subnormal condition IN
the railroad equipment field in spite
Of constant gains in railway earnings
and ability to borrow at record low
rates of interest. and very little buy
ing of steel for requirements.
Corporate Earnings Increase.
Two influences appeared to have
been at work during the month. The
primary one was succession Of cor
porate reports for the second quarter
of 1886 showing remarkable percent
ages of increase in earnings applica-
Bile to dividends. Standard Statistics
estimates June quarter earnings of
leading industrial companies as much
as 70 per cent over the like period in
1895. There was a whole lot of mod
crate to small corporations, however,
still in the red" which somewhat eX-
plains unemployment.
1t appears probable that the mo-
mentum of the business recovery will
carry company returns in the third
quarter to a new high level for the
period since 1880. The debatable
point Is how far this expectation
has been discounted in the prices of
on the bargain table is self-evident.
Not few prominent issues are quoted
at from 40 to so times their earnings.
There have been comparatively few
dividend increases when the wide
spread improvement in industry IS
taken into account. So far there has
been no evidence of a more liberal
distribution of profits on account Of
the new tax bill.
On the other hand. in a market
that has been discounting the future
quite generously, there are such bullish
factors as a scarcity of stocks, an
unwillingness to take profits owing
to the income tax penalties and to
the difficulty of reinvesting the pro-
ceeds of sales, and a certain amount
Of buying in anticipation of impending
credit imitation.
Effects of Landon Victory.
Looking at the situation realistically,
one may see obstacles in the way OF
a continued rise in stock prices in
the event that Gov. Landon is elected
and the pledges of his platform are
fulfilled. Few really believe that the
national budget can be balanced
quickly. The process of adjustment
to a sounder basis must be accom-.
panied by a considerable amount Of
deflation. The effects of this on
business are likely to be more visible
for time in the business picture
than those of satisfaction in a new
and perhaps more conservative fiscal
policy for the Government.
On the other hand, such a process
of contraction of debt would improve
the position of interest-bearing Sc
curities. Along with it, money would
remain abundant, interest rates alb.
normally low. In spite Of the so per
cent increase in the reserve require
ments of the member banks, with
which the non-member institutions
will probably fall into line, the re-
naming total of available reserve will
be great enough to prevent any sud-
den or considerable rise in interest
rates. Some slight change from the
long-existing minimum level Is prob
able. So We may expect, for some time
to come, a procession Of refunding
bond issues with such low coupons
that the small investor is rapidly de-
spairing Of his ability to exist.
tCc pyrisht 1886. by the North American
Newspaper Alliance. 4nc0