Evening star., 1940-03-16
Business Recession
AtCritica| Point;
Outlook Cloudy
Upturn Must Wait
For Accumulation
Of New Orders
Special pispa tch to The Star.

special Oispatch TO Tho Star.
NEW YORK, March 16.-The re-
cession is at q critical juncture, says
Business Week today. AS yet, there
are no conclusive signs that the
decline In industrial activity will
not be arrested at the estimated re-
sistance level of los in the Business
Week index.
But at the same time there are no
tangible indications that the index
will start up, once it gets down
around los. It Is still well to look
for periods Of stalemate at that
level-a tedious period. during
which an upturn will have to wait
on an accumulation of orders, pos
sibly war orders.
For the immediate present, 1t Is
worth noting that industrial activ-
ity has lost all of its wartime gains.
The index now stands at 1919.
When the war started 1t registered
1882. And though this back to
where 1t started relationship makes
a nice point for reference, it Is not
by any means a substantial basis
for reasoning that business can now
take up where 1t left of when the
war began. That sounds fine, but
it is unrealistic. 1t assumes that
the war has had no influence on
business, that you can strip the six
war months of the calendar and be
back in September, unscathed.
Inventories Adjusted.
Actually, however, we know that
the war definitely accelerated the
industrial tempo during the six
months from September through
February. That is not only true
OF the war Observation-Disclosures,
machine tools, motor trucks and
steel-but of nearly all industries.
There was general accumulation
of inventories, and now. as a re-
action. destocking of those inven-
tories is taking place.
The steel industry is an illustra-
ton. Current consumption is es-
timated at close to 10 per cent of
capacity, but production is running
along at 65 per cent of capacity and
incoming orders are at less than so
per cent of capacity. Thus con-
sumers are not taking shipments of
as much steel as they are using
and they are even ordering far less
than actual requirements It sug-
gests that steel orders ought to pick
up in the next few months-perhaps
when auto companies place bids for
194l model needs. But since the
producing rate is not far below the
consuming rate a big rise in out
put is not to be expected.
Auto Lull Expected.
Other basic industries. however,
do not offer such favorable indica-
tions as steel: Cd Autos, for in
stance, might be said to be doing
"suspiciously we'll" A dip in both
sales and production is to be ex-
pected during the next few months
CD Textiles continue on their
enigmatic course The decline so
far has been moderate, and a Jump
In cotton cloth orders last week
boosted backlogs. But even so, some
further curtailment in production
seems likely. 81
90 Construction can be : inter-
preted both favorably and unfa-
vorably. Total construction remains
considerably below 1899 levels. On,
the other hand, the usual sharp
seasonal drop from January to Feb
ruary in contracts awarded did not
occur this year. Factory and COM
mercial building are still the strong
spots, but residential volume is not
expanding.
On the other hand, purchasing
power continues at comparatively
high level-right near the 1897
highs, providing a definite cushion
against any general business COL
lapse, and the war offers a constant
incentive to maintain inventories
so that reordering will respond
quickly to any drop in retailers
stocks. Further, there is longer
term influence at work. The state
of confidence is better than it has
been in long time.
For five years now business has
held within a yearly range OF 86 to
112 in the Business Week index.
That's not high-prof1t range, but
it's not bad either. And those five
years have built up a greater will
ingness to take a chance-a greater
willingness than when the depres-
sion lows. of 81 in 1882 and SO in
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