Evening star., 1941-10-19
Retail Demand
.Curbed by Rise
In Living Costs
Business on Plateau
As Initial Defense
Boom Fades
Special Dispatch to The Star.


NEW YORK, Oct. 18.-For sew
eral months, the volume of business
activity has held more or less on
plateau, says Business Week in It's
analysis Of the business outlook to-
day.
No important upturn appears In
the immediate offing, states the pub
lication. For the time being busi-
ness has lost its oomph-its defense
inspired resurgence.
That is because a change has
come over our economy. In the
early days of the war effort, ex-
penditures for armament stimulated
a demand for consumer goods, and
consumer-goods production in
creased. But now further expan-
sion in defense production, instead
Of stimulating consumer goods out
put, will in some cases reduce 1t.
Witness restrictions on refrigerators,
washing machines, non-defense res
idential building and so on.
Furthermore, consumer demand
is not as resilient as it was two or
three months ago. Higher prices
have curbed civilian appetites for
the new automobiles, despite the
sharp reduction in output. Indeed,
the o. P. M. cuts come as partial
blessings in disguise. AS Business
Week pointed out five months ago,
some falling off in 1912 model sales
was inevitable after two such bump
er model years as 1910 and 194l.
Then prospective car buyers had
borrowed from the future and "the
future" happens to be now.
Buying Power Cut.
Henceforward. prices will become
an increasingly important factor
in sales resistance. Recently the
cost of living has started to advance
faster than national income. That
means that aggregate wages, sal
aries, etc, are not keeping pace
with prices, that real purchasing
power" is not going up. Whenever
that happens. housewives think
twice about expenditures.
incidentally, if you were 10 use
wholesale prices" as a measure OF
costs instead of cost of living" real
buying power would show a drop
since May. And no major shift
impends. For one thing, the Nations
production machine is operating in
high gear and up to capacity; so any
big increase in employment and pay
rolls Chence in national income)
will have to wait upon new arma-
ment plants coming into operation;
for a second reason, priorities dis
locations during the next few
months will tend to Offset accessions
in employment in armament indus
tries.
Moreover, consumers have become
less urgent in their buying attitudes.
In August, on the silk-stocking
scare, housewives rushed TO stores
in fear of imitation and shortages;
last month, they flocked to retail
counters in order TO beat the new
Federal tax schedules. But now the
ultimate consumer is likely TO settle
down to normal buying-letting con-
sumption and purchases more or less
balance. Indeed, having stocked up,
it is quite possible that consumers
will hold off for while and live OF
their inventories. Therefore, retail
sales comparisons with a year ago
may not show the big 10 to 80 per
cent gains of recent weeks.
Painful Effects Seen.
The period of business adjustment
to war to repeat the theme of recent
Business Week analyses-is bound to
be painful. The transition occurred
first in production; but now distri-
button houses-both wholesale and
retail-are feeling the effects.
And future headlines about priori-
ties unemployment, ghost towns, in
creased diversion OF critical ma
terials to defense production, and
stricter Government controls over
industry are certain to depress busi-
ness sentiment and perhaps stock
and commodity markets.
However, along toward next
spring, transition will have been
virtually completed; new arms
plants will be in production, and en-
ployment and pay rolls will be on the
rise again. And as production picks
up, SO will pay rolls, and retail sales.
That Is the basic business pattern
| tn hear in mind over the reyt on n