Inventories

To John Businessman inventories mean one thing only--unsold goods. When production outstrips consumption, inventories pile in warehouse and on shelf, and sales-managers grow obstreperous. When inventories pile as high as they did in 1929 a depression follows. When they pile as high as they did last summer a "recession" is the aftermath. There are innumerable theories (generally monetary or social) to explain why buyers rarely outnumber sellers but few economists dare ignore the storm warnings of mounting stocks. By last week it was clear that ever since April 1 inventories have been accumulating at a more alarming rate than at any time during the past year.

Cotton mills were to slash operations 25% for twelve weeks to permit textile consumption to catch up with production (see p. 15). The silk industry had already taken a one-week holiday. Chemical prices were soft. Many a producer was cramming his warehouses with new goods at top speed for fear a strike would suddenly overtake him and his plant.*

Only business service specializing in production-consumption relations is Economics Statistics, Inc., ''featuring supply-demand-price analysis" and not to be confused with the world's biggest figure factory, Standard Statistics Co. Inc. In the last two months, Economics Statistics' index of total stocks, raw & finished, has risen from about 145 to 150, or almost one-third of the favorable decline registered from last July through last March. Steel production is running at least 10% ahead of consumption largely because of strike fears. Inventories of tires have reached the highest point since 1930. In such basic commodities as coal and sugar the maladjustment is growing worse. Two conspicuous exceptions are the woolen industry, which is now in one of the most favorable statistical positions in history, and petroleum, on whose outlook Economics Statistics differs with President Roosevelt, finding stocks of crude oil and gasoline by no means out of line with current consumption. But for industry as a whole the service declared: "It is obvious . . . that a curtailment in production schedules of considerable proportions is necessary."

Economics Statistics was founded by three bright young disciples of Economist Lewis Henry Haney of New York University--George Ogden Trenchard, Jules Blackman and Andrew Lavell Jackson, great-grandson of Thomas Jonathan ("Stonewall") Jackson and onetime editor of Bradstreet. Working in Wall Street by day and plugging for Ph.D.'s by night, they absorbed Professor Haney's theories of forecasting business by analyzing demand-supply factors, amplified his statistical methods, established the service just a year ago. Their clients already include nearly every big Manhattan bank, countless brokers, such major industrials as General Motors and International Harvester.

The Federal Reserve Board, the Department of Commerce, trade associations and a few private agencies provide the raw figures which Economics Statistics burnishes in the light of such factors as reliability, seasonal variations, money, politics. In an industry like steel, for which no inventory figures are available, the wobbles of thick, black chart lines tell the story. The supply index is based on the American Iron & Steel Institute's published statistics of ingot production. The demand index, which anticipates the trend of actual consumption up to three months, is calculated on figures from steel's customers--automobiles, railroads, building, oil. Gross railroad income furnishes a clue to probable purchases of rails and equipment. Building permits and contract awards hint at that industry's future steel buying. If the spread between the supply and demand indices is growing unfavorable, inventories must be piling up in some one's warehouses.

Professor Haney's interest in Economics Statistics is only that of a godfather. A quiet little man of 52 who likes to play a clarinet in his family trio, he writes a daily financial column for Hearstpapers which is noted for its forthright opinions. More than once during Depression Hearst-readers found a stinging Haney article sandwiched between the professional optimism of regular Hearst financial editors. Last week Professor Haney said: "I am widely known for my adverse criticism of the New Deal and of NRA in particular."

His dislike of Government-by-professors comes strangely. Trained at Illinois Wesleyan, Dartmouth and the University of Wisconsin, he later taught at Iowa, Michigan and Texas. In 1916 he became an economist to the Federal Trade Commission, helped handle its early but unsuccessful campaigns against alleged monopolistic practices in the gasoline and newsprint trades. During the War he helped the Government fix prices. After a short interlude directing publicity against the big meat packers in behalf of the Southern Wholesale Grocers' Association, he returned to Washington to establish the Department of Agriculture's Cost of Marketing division, which made extensive studies on the distribution of milk and potatoes. In 1920 he headed the Florida Hoover-for-President Club, ruefully admits that in 1932 he voted for Franklin Delano Roosevelt.

* A notable example of what happens when a threatened strike does not materialize to cut production was this spring's disappointing automobile trade following a roaring first quarter.

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