Evening star. [volume] (Washington, D.C.) 1854-1972, 1938-08-08
FASTER RECOVERY
HELD INDICATED

Steel Production Is Most
Impressive, Symbol Of
General Trend.
BY FREDERICK GARDNER.
Associated Press Financial Writer.
NEW YORK, Aug. 8.-Business has
stepped on the accelerator since 1t
rounded the theoretical corner toward
recovery in May and June. The speed
1t has licked of on the principal in
dustrial gauges now make many suspect
this recovery may be faster than the
long and often tedious pull up the hill
from the lows of 1882 and 1888 to the
heights of 1887.
Early in the year some optimistic
forecaster talked about a speedy re-
covery." That idea was based partly
on the assumption the collapse of pro-
duction in the final four months of
1887, one of the fastest declines in
the history Of American business, in
itself assured an equally rapid re-
bound. once the corner was turned.
Such hopes were blasted, or at least
deferred. by the continued decline into
the spring months. Meanwhile, nearly
everything recording business activity
has shifted to the uphill grind again
and developed considerable momentum
for this period of the year. The As
ISOLATED Press weekly index Of indus
trial activity, for instance, based on
such things as car loadings, steel out
put, residential building and automo-
bile and electric power production, has
recovered more than 10 per cent.
The swing of the business pendu-
lum on the upward phase of the arc
is described most strikingly in steel
production. Some analysts consider
this symbolical of what is happening
all along the industrial front. Steel
had the most startling fall last au-
tumn. dropping from above 80 per
cent of capacity in mid-September to
around 10 per cent at the end of the
year. Trade authorities said this was
a record decline for so brief period
The abrupt contraction of steel
operation was attributed chiefly to
cessation of inventory accumulation
by consumers, who began a frantic
effort to reduce stocks All through
the first half of this year. it appears,
consumers were working off inven-
tories, using more steel than they
bought. Midyear reports of motor
manufacturers and other big users of
metal pointed to a substantial reduc-
ton in supplies.
At the rate steel output has ex-
banded lately, with operations nearly
doubling in course Of a month, OBJ
servers infer stocks have run down
and resumption of buying makes for
relatively rapid recovery. compared
with the first painfully slow steps out
Of depression in 1882 and 1888. No
body has been bold enough, however,
to come forward with. forecast the
industry would climb as fast as it fell
last autumn. The most optimistic
forecast to reach the records lately
has been a trade authority's predic-
ton that steel operations should re-
turn to around so per cent of capacity
this autumn.
Steel Inventories Shrink.
The National City Bank, in a mid
year roundup of inventory figures
from the balance sheets of 70 leading
companies. finds the sharpest declines
in inventories in the first htalf of the
year took place among the principal
users of steel. Inventories of four
automobile and equipment companies
in that time dropped about 80 per
cent and for six machinery makers
were off nearly 2l7 per cent. Also
conspicuous for inventory depletion
were textile and apparel companies,
household goods. metals and building
materials.
Most of these represent the durable
and seml-durable goods lines where
depression always eats deepest Like
wise. when stocks run low, recovery
tends to be comparatively swift in
these fields. This simply means, an
alysts explain. that trade generally
holds up better than production on
business recessions, making for a
sharp rebound when the slack has
been taken up and surplus productive
capacity absorbed. At that point, it
was argued, recovery gains momentum
from resumption of expenditures for
new factories and other capital equip
ment.
Arguments for Fast Comeback.
Those counting on relatively fast
recovery this time stacked up against
the rate of revival from the big de-
preston. mention several factors in
support of their argument.
Highly important, they urge, is the
absence of the extensive banking debris
which cluttered the path of recovery
in 1888 and 1884. Business has come
out of the depths of the latest fall
with only minor banking casualties
compared with the thousands of closed
institutions awaiting liquidation at
the end of the 1888 banking holiday
That also goes for savings and loans
and other financial institutions,
although there still is plenty of fore
closed property awaiting market.
Also cited in favor of quicker res
toration of business strength is a
substantial reduction in the private
debt burden through bankruptcies. re-
payment of debts and refunding of
loans at lower interest rates From
1885 until business went over the re-
covery top last year, big corporations
were busy refunding debts to tighten
the load of carrying charges: They
benefited when earning power slumped
the past year.,
Farm Income Estimated.
Reduction in the debt burden is one
reason why some optimists take a
cheerful view of the farm situation,
even with wheat and cotton at badly
depressed levels compared with 1929
Or early 1887 prices:
In face of the big crops being, or to
be harvested in the United States this
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