Evening star., 1938-06-18
TRADE OUTLOOK
REMAINS CLOUDY
Steel, Auto and Electric
Power Rates Improve
Slightly in Week.
Srecial Diepa tch to The Star.

SESClHl blfpktCn 70 Ing 6tAI.
NEW YORK, June 18.-The news
from business was not very significant
this week, according to Business Week
today
Steel. automobile and electric power
production showed improvement, but
this was not viewed as establishing q
trend. Building contracts awarded in
May made a favorable showing. Sc
curity markets huctuated uncertainty;
commodity prices were higher; q de-
valuation scare sent the dollar down.
Sentiment continued depressed.
The rise in steel activity took it up
one point-to q per cent Of capacity.
This compares with 76 per cent a year
ago, a figure which was unnaturally
low due to the strike in Little Steel"
In short. the industry Is still in the
grip of deepest depression. Before
summer is well advanced the rate may
easily drop as low as 20 per cent de-
spite slight improvement in inquiries
which is reported currently.
Consumption Heavier.
The bright side of the situation is
that the rate of steel consumption by
the automobile. railroad, building, tin
plate, machinery and miscellaneous in
dustries is running heavier than its
production. The best estimate that
can be made indicates that this rate
OF consumption, in terms of output
capacity of the steel industry, is in
the neighborhood of 40 per cent. In
other words, stocks on hand are being
used up at the rate of 10 to IS per
cent of capacity, or, in terms of
ingots. at to 10 million tons a year.
Inventories may be down to minimum
proportions by the end of the third
quarter, or it may take some industries
until the end of the year. Eventually,
however, production will have to rise
to the rate of consumption, and it is
therefore quite possible that IS to
40 per cent rate of steel activity will
prevail in the latter months of 1888.
This may be overoptimistic, or 1t NAV
be an understatement. The main thing
to bear in mind is that operation near
20 per cent of capacity has always
been a temporary phenomenon and
must always be so until the age of steel
is past.
Auto Pickup Sharp.
The pickup in automobile produc-
ton last week was sharp, rejecting the
reopening Of one large company after
a Decoration Day holiday. Partly as
result OF this, electric power produc-
tlon made the best comparison with
1887 since eight weeks before. There
is no reason to believe, however. that
these fluctuations mean more than a
momentary interruption of a down.
ward trend which will not culminate
until August. Whether a broad shut
down Of automobile plants occurs in
July and August. as had been pre-
dlcted until recent slight improve
ment in retail sales occurred, or
whether plants keep on running but
on sharply reduced schedules, no sig
nlflcant upturn can occur until the
new model year begins.
This week the Government launched
Its spending program, and there are
signs that speed will be a watchword
Fa1ty million pounds of butter were
purchased with Government funds to
distribute to those on relief, and the
suggestion Of the Clothing Workers
Union that 100000 be spent for
clothing was adopted These are
dangerous precedents, but they NAV
simulate business for the moment
government money will help put a
bottom under the consumers goods
industries.