Evening star., 1939-08-27
Business Maintains
Activity in Face Of
Foreign Tension
General Index Holds
Unchanged Levels for
Three Weeks
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK. Aug. 26.-As yet,
European developments have pro-
duced no outward manifestations of
business deterioration, according to
Business Week today. The stock
market. it's true, has been suffering
from q bad case of nerves, going
down on threats of bloodshed, rally
ing on hopes Of peace-very much In
keeping with its action du,<lg last
September's Munich crisis.
But for three successive weeks the
business index has remained re-
markably steady unchanged at
l0l.1; and commodity prices have
actually gone up on the war news
wheat. sugar, cottonseed oil and lard
particularly. Underneath the sur
face, however, the immediate busi-
ness outlook has been affected ad-
versely.
The bond market suggests what's
happening to business. Recent Of
ferings Of high-grade corporate Sc
curities have gone over anything
but well; in the argot of Wall Street,
they've been sticky, and United
States Government bonds-strong-
est of the strong-have been de-
cidedly weak these last 10 days.
There has been selling of short term
issues by foreign banks and investors
in pursuit of liquidity; but there has
also been liquidation by American
banks of lOnger-term governments,
presumably with a double motive;
to avoid decline in the Government:
market If one comes and to avoid
being overextended If interest rates
should be rounding out a bottom.
They are going on this traditional
theory; when war comes it's smart
to be liquid.
Governed by Caution. |
Business men. too, are governed by
natural and understandable cau-
ton. The inevitable result is that
forward commitments are not being
made; that buying for inventory is
being halted: that new contracts are
being withheld. It's part and parcel
Of crisis uncertainty-better to be
uncommitted and sure of where you
stand than be committed and be |
specializing on turn one way or
the other. So. over the next few |
weeks, business operations are bound |
to reflect the influence of the cau-
tion that prevails today. There Just |
won't be the volume of new orders /!
and new plans and new undertak-
ing that business men-on the basis |
of the current level Of business ac-
tivity-would be warranted in ex-
pecting.
BY no means, however. will busi- |
ness crack up, There is a strong
undercushion in the automobile in
dustry. The last of the thirty
miners rolled off the assembly lines
this week, and next week the VOL
ume Of output will step up sharply. !
That means that, for a while at
any rate. the pulse of business will |
beat pretty much to the rhythm Of |
1940-model automobile production
a rhythm which is not controlled
by moves in Europe but by a pre-
determined operating schedule call
ing for getting out cars fast for
October display.
Turn Out 194e Models.
Packard. Nash, Hudson, and Stud
ebaker have been turning out 1910
cars in volume. and Pontiac, Buick.
Plymouth and Dodge went into pro-
duction on new models in earnest
this week. Chevrolet and then Ford
will be along next month. This
completion of changeover means
that within the space of, say. six to
eight weeks. weekly production will
rise from last weeks low of 1885
units to more than $1,000. That
sharp stepup in output will keep in
dustry moving pretty much on
level keel, affecting as it does vir-
tually all American business-tires,
plate glass, steel. upholstery. plastics,
machinery. Ineed. it is even pos
sible that the motor car industry's
burst of energy may tide general
industry over the worst of the ef-
fects of the war developments.
In the meantime. the basic con-
ditions of domestic business suggest
that third-quarter earnings will be
encouraging. Profit margins are
widening as volume expands, and it
is easily possible that the automo-
bile production pickup may push
the total volume of business next
month to a new high for the year.
Distinctly encouraging right now
is the sound inventory position of
most corporations. This year, COM
modify prices as q whole have ruled
remarkably steady, and therefore in
ventory losses, if they exist at all,
are small. And now the unsettle-
ment abroad has created another
phase of hand mouth buying on
the part of most purchasing agents,
which implicitly suggests that year.
end writAOffs vrill MT dist,,rh e+a,,,