Evening star., 1938-04-25
INVENTORY JAM
BLAMED IN SLUMP
Dun & Bradstreet Study
Points to Huge Stocks
as a Prime Factor.
BY HARDEN COLFAX.

A log jam of inventories of goods
much larger than Government agen-
cies had estimated-is getting more
and more blame for the continued lag
of orders that accounts for today's
depression.
It now develops, too late for remedy,
that American industry and American
business stocked up in unprecedented
fashion during 1896 and the first half
Of 1887. Manufacturers, in particu-
lar, acquired huge quantities Of raw
materials and processed these raw
materials into vast quantities of fin
ished goods that went into store
rooms.
BY the end of 1887, in spite of the
drastic curtailment of industrial pro-
duction. these stocks Of goods still
were of nearly record-breaking size.
Government officials whose business
1t is to diagnose the reason for broad
movements in business were surprised
by results of a study made by Dun
& Bradstreet, Inc. Of industrial
inventories. This study covered 1900
corporations and served as the basis
for the most comprehensive analysis
of the problem yet made.
Inventories Jump.
This study showed that inventories
of goods in the hands of manufac-
turers, wholesalers and retailers in
creased $5,15O,OOO,OO0 between the
end of 1885 and the end of 1887
two-year period. This was huge in
crease and brought the inventories Of
many industries to a point far above
1929.
Manufacturing industries stepped up
their inventories from sl0,0l0,000,000
to $l3,645, 100000 on the basis of this
survey. Wholesalers increased their
inventories from $2,276 100000 to 81
827 100000, and retailers inventories
rose from s4.298, 100000 to s5,34S,-
100000.
Several reasons are advanced for
this accumulation of goods, which
resulted in sharp spurt in business
activity while the accumulation went
on.
One reason given by the Govern
ment experts is the belief on the part
OF business men that war preparation
and Government spending would lead
to an imitation that would mean stead
lily rising prices. To get in ahead of
the price rises goods were produced
regardless of the prospect of early
consumption.
Labor Trouble Feared.
A second reason offered is the fear
that business men had of labor trou-
BILE and of stoppage of work during
the period Of strikes in late 1886 and
early 1887. Whether or not they had
orders on hand, they hurried to build
up stocks in order to be prepared if
their own men went out. Again there
was an artificial stimulus.
Then the payment of the bonus in
1886 had led to sharp rise in the de-
mand for goods. Manufacturers and
merchants thought that this demand
was a permanent development and
that they could fill their storerooms
and shelves to meet an anticipated de-
mand at rising prices Here was the
third reason for inventory building
Overconfidence and fear both played
a part in the business developments
that preceded the present depression.
There has been some working off
OF inventories since the first of this
year. But their total was so much
larger than Government officials had
expected that this process will be
longer than originally counted upon.
In the meantime corporations with
stocks of goods on hand are not order
ing new goods for replacement. The
very absence of their orders tends to
set in motion further deflationary
forces, as production continues at a
low level and pay rolls are curtaled
Government spending is supposed to
intervene to provide the orders that
private business is not providing and
thereby setting in motion forces of
recovery
(Copyright, 1898. by Consolidated News
Service)