Evening star., 1940-11-04
Defense Upswing
Enters Seventh
Month Of Rise
Full Force of Arms
Spending Not Expected
Until Well Into 1941
BY FREDERICK GARDNER,
Associated Press Financial Writer.

NEW YORK, Nov. 3.-The de-
fense-stimulated business upswing
has entered the seventh month of
rising factory output and yet the
full force of United States and
British arms spending probably
won't be felt until well along in
1941.
Army and Navy expenditures.
running at the rate of about $780,
000,0 900 monthly before the present
industrial advance began, have
climbed to nearly $500, 900 900 and
are expected to top $500, 900 600 or
more month by next summer.
Much of the autumn increase In
factory activity appears to have
stemmed from forward buying by
manufacturers and dealers to build
reserve supplies of raw materials
and goods before the flood tide of
defense spending rolls in.
Factory Production Boosted.
AS soon as the administration dis
closed plans for stepping up arms
expenditures last spring, the second
big wartime wave of inventory build
ing helped boost factory production
we'll before defense planners began
to hand out billions of dollars in
orders and to lay foundations for
a vast new war industry.
In the earlier stages Of the up
swing inventory buying in anticipa-
tion of the defense program seemed
to carry most weight. Then both
mounting defense outlay and busi-
ness forward buying converged to
lift production indices in one of the
sharpest post-Labor Day upturns on
record.
This powerful combination still
appeared to be at work last week,
driving steel. textile, machine-mak-
ing and other industries to ca
pacity or near-capacity operation
for the first time in years. But
increasing arms spending seemed
to be overtaking inventory accumu-
lation as the primary driving force.
Steel Is Focus.
Steel, vital war industry, was a
focus of the expending defense de-
mand and rush of private orders to
lay by stocks before military needs
command a large share of mill
capacity.
Producers were confronted with a
delicate question of judgment. They
had to keep their usual customers
satisfied, yet avoid congestion so de-
fense orders might have right Of
way.
A fresh furry of steel buying fol-
lowed announcement Of the estab-
lishment of priority system to
give defense orders the green light
in event of traffic jam.
With most mills practically at
capacity, steel men had to keep
buyers from er-croWding until
they get over what may be only
temporary test of capacity. Some
steel executives assured consumers
there was plenty of capacity to go
around, providing orders were held
within reasonable bounds.
Private Orders Crowded Out.
In machine tools, defense orders
already have crowded private users
into the rear of the waiting line.
The situation in steel now has raised
the question whether priority would
become of wider significance in raw
material and semi-flnished products
when defense production emerges
from the 'tooling up" phase into
the stage where the Treasury may be
dishing out armed payments at the
monthly rate of $500 900, 900 or more.
President Roosevelt's disclosures
of British plans for placing addi-
tional aircraft orders and hints of
heavier United States appropria-
tions for aircraft also reminded buSi-
ness men arms expenditures more
likely would be stepped up than re-
duced.
A spectacular exhibit of the un-
filled orders industry has accumu-
lated was Bethlehem Steeps record
breaking backlog of s1,l23, 900 ,000
attributed mostly to warship and
ordnance contracts. Business cir
cles saw in such backlogs assurance
of sustained production for many
months to come.
Estimated at Record.
Besides steel, manufacturing pur-
chases of copper, cotton and other