STATE OF BUSINESS: Autumn Upturn

The Labor Day week is a traditional indicator of business activity for the rest of the year. Last week there were signs that an expected autumn upturn had begun.

Steelmakers got up out of their summer slowdown and pushed operations to 82.7% of capacity. For the rest of the year mills are expected to pour about 85% of capacity, may well crack 1955’s alltime production record of 117 million tons. Said Iron Age: “The looked-for upturn in steel is under way, and will reach a peak in late November or early December.”

Department stores happily met a late-summer buying rush. Sales in August’s last week jumped 5% above the preceding year. For the whole month, New York City area stores rang up 7% more sales than in last year’s record August. And in the Labor Day week, stores were crowded with shoppers, notably at Macy’s in Manhattan. Said Macy’s Chairman Jack I. Straus: “In view of the continuing high levels of employment and consumer income throughout the nation, we anticipate fall sales to be about 6% ahead of last year.”

Construction edged up to peak levels. Last month’s $4.6 billion worth of new building set an alltime record. The Government reported that spending for new plants and equipment for the rest of 1957 will continue with no letup at a steady annual rate of $37 billion, 6% ahead of last year.

Despite these portents, businessmen will not be certain of a bigger-than-seasonal fourth-quarter pickup unless there is also a sharp rise in new orders to whittle down fat inventories. Inventories are now about $4 billion higher than at the same time last year; manufacturers, who added $250 million a month to inventories during the first half of 1957, piled on $300 million in July. While the sales-to-inventory ratio ($1 to $1.86) stood close to the same level as twelve months ago, the lofty stocks mean that a better-than-seasonal autumn pickup in demand will be necessary to call forth a high wave of new production.

One of the big inventories is in the auto industry, with about 750,000 cars in the hands of dealers. But sales were picking up speed; in mid-August they ran 11% ahead of the same period in 1956, and the industry saw only a small problem in cleaning out 1957 cars before the 1958 models come out. The extent of a year-end rise in the boom depends largely on whether the public takes to the 1958 models, and if it can get the credit to buy them (see below),

Said New York’s First National City Bank: “Such is the importance of the auto industry, not only as an employer of labor and a consumer of materials, but also as a barometer of the spending mood of the American people, that a successful reception of the 1958 models would have a powerful tonic effect upon the whole economy.”