Evening star., 1940-06-02
Big Defense Drive
Expected 10 Bring
Industrial Boom
Quick Jump in Steel
Output Indicates
Coming Rush
BY FRANK MacMILLEN,


dustry boom under the lift Of Uncle
Sans multi-billion dollar defense
program.
Steel centers felt the initial i'm
pulse OF the greatest arms spending
drive since World War years as
consumers hurried to accumulate
metal before Government orders
occupy mill capacity.
Many mills, trade reports said,
planned to step up operations
rapidly this month. Some observers
suggested the busiest summer Of
steel-making in a decade was in
prospect If the buying rush con-
tinues and Washington's expanded
arms program gets going soon.
Industrial barometers were on the
! rise as result of quick Jump in
steel production and preparations in
various industries for the antic-
ipated boom in war equipment
manufacture.
Indications Federal appropriation
for the fiscal year starting July l
may top $4,000, 600, 900 in the
heaviest Government spending since
l917-l8 centered business attention
on Washington efforts to speed the
defense plans.
Eclipsed by the proposed s5,00O..
100000 defense outlay were the New
Deals ''pump-priming" campaigns
which absorbed the interest of
financial circles in recent years.
Markets Are Inert.
| speculative markets, nevertheless,
were strangely inert in contrast with
the eXcitment stirred by some Gov.
eminent spending announcements
OF previous years.
Resting after the bad spill on
news OF the Allied defeats in the
Low Countries and Northern France.
security and commodity markets
ended relatively quiet week today
with little outward display over the
impending huge Federal expendi-
lures and trade forecasts of a boom
IN heavy industry.
Brokers said the speculative urge
to buy in expectation of an industrial
pickup was restrained by such con-
siderations as these:
| ID Prospects of heavier general
taxes to help pay the mounting arms
Dill and the belief levies eventually
may be imposed on war profits.
CD Threat of Italian entry into
the war and closing of the Medi-
terranean to trade, which would
draW tighter the blockade of the
European continent against trans.
Atlantic commerce.
! CD Dislocation of domestic as well
as foreign trade in the shift to war
economy, already evident in the
slowing OF wholesale and retail buy
Ing in some markets.
Cited as example of the varied
wartime aspects of business was
curtalment of cotton textile manu-
featuring while steel and other war
lnoustry barometers climbed.
Textile Demand Lays.
Textile demand, trade reports
said, has slackened since the Nav
break in farm prices, including cot
ton, and the transfer of emphasis to
war industries.
The drop in cotton manufacturing.
however, was more than offset bv
expansion in steel, electric power and
nome building components of the
Associated Press index of industrial
activity.
up Tor the fourth straight week
this yard-stick now stands at 80 per
cent of the 1929-30 level, the highest
SINCE mld-March, compared with
the April low of 93.6. A wear ago
it was 1873.
Steel operations-up from go to
around n per cent of CAPACITY on
the belated spring rebound-ap.
peared headed for another rise.
Mills in the Chicago district were
reported to have scheduled opera
tlons Tor the coming week at above
% per cent of capacity, compared
with 8O.6 at the start of this week.
making the sixth week of advance.
Increased Allied buying of war
supplies in the United States, to-
gether with the diversion of steel
demand to this market from non
combatant nations. brought in the
heaviest flow of orders since the
short-lived rush of war buying last
September.
In addition mills were said to be
building up their own inventories to
prepare for the full force of United
States and Allied arms needs, ex-
pected to become the major influence
in heavy industries by autumn or
early next year.
New Equipment Needed.
Tool and motor making centers
around the Great Lakes and in New
England. shipbuilding communities
along the seaboard and aircraft
manufacturing sectors also adjusted
plans to the expanded defense pro-
gram, requiring hundreds of millions
of dollars in outlay for factory equip
ment and materials.
Much of the country's reserves of
idle men and idle dollars, it seemed,
would be called to work to equip the
naval and military forces.
While Congress studied proposals
for increasing taxes Immediately to
pay part of the arms cost, banking
circles looked for resumption of
large-scale Treasury borrowing in
the open market to meet the indi-
Gated wide deficit in Federal outgo
and income.
An undiminished inflow of gold
and capital from abroad, partly to
pay for Allied arms purchases in
this country, swelled the unprece-
dented stores of idle credit available
for Treasury use.
Commodity men said reserves Of
most industrial materials were ample
for prospective needs Of the defense
program. But higher shipping costs
and disruption of normal trade
channels moved many users to cover
future requirements on imported
staples, such as rubber and wool.
Retail trade reports said sales of
motor cars. particularly, had slowed
since the May collapse in stocks and
farm commodities. The decline in
grains was blow to the pocketbooks