Evening star., 1940-06-11
Basis Declared Laid
For Expansion in
Factory Activity
Manufacturing Rote
SubnormuI in Relation
To Farm Income
Special Dispatch to The Star.


NEW YORK, June 1.-THE value
of factory output in March declined
below this years prospective level of
farm income and still further below
the farm income level in April. This
means that a basis has begun to be
laid for a recovery in the value of
factory output since the value of
factory output is dependent on farm
income, according to the Alexander
Hamilton Institute.
The present prospect is that the
index of farm income in 1910 will be
87.5 as compared with 835 in 1899
This estimate is based on the as
sumption that the prices Of farm
products will remain relatively
steady at the present level during
the remainder of the year, that the
quantity of farm products marketed
will equal last years volume and
that Government benefit payments
this year will be the same as in 1899
1t is possible that this is an under
estimate of farm income, since farm
prices may advance later in the year
as the result of the development of
imitation. Such initiation, however
is problema tical. since it will depend
on the war continuing throughout
the year.
Deflation Offset.
If the war should come to an end
IN the near future. a def1ationary
force would be set in motion which
would tend to prevent a further rise
in the prices of farm products. 1t
is questionable however, whether
the dehationary effect of peace
would be suffiaiently strong to offset
the inflationary influence of in
creased deficit-spending by the
United States Government, which
the enlarged defense program calls
for. Consequently. it may be ex-
pected that farm income this year
will be at least as large as the pres
ent estimate, If. not larger.
Based on the assumption that
prices OF manufactured goods will
remain relatively steady at the pres
ent level, and on the current esti-
mate of farm income, the normal
annual index of factory output in
1910 works out at 106. The index OF
normal last year was 103 while the
index of actual output last year was
1O5.
If the estimated 1910 normal is
equaled, the index of factory output
during the remainder of the year
will average los. since the index
during the first four months aver
aged somewhat above the year S
normal figure.
Expansion in Prospect.
This will mean that factory out
put during the remainder of the
year will average somewhat above
the volume in April when the index
was 103. Consequently, it is appar-
ent that the downward trend in
factory output has practically run
It's course and that some expansion
is in prospect. In fact, the expan-
sion may be greater than is indi-
Gated by this calculation.
If the war shows signs of con-
tinuing during the remainder OF
the year, the tendency will be fol
manufacturers to build up their in
ventories. Such a development will
mean that factory output this yeal
will be in excess of normal. If il
should exceed normal by as great
an amount as in 1887. the index OF
factory output during the remainder
Of the year would average III. A
very sharp recovery in manufacture
ing activity is thus possibility.
If the war should some to an end
in the near future, however, it is
probable that actual factory output
this year would not exceed the esti-
mated normal and might even dror
below It, Even in such a case 1t is not
likely that factory output during
the remainder of the year would
average much below the present
rate.