Forecast for 1939

Cassandra was always right, but nobody believed her. A great many people, however, believe Colonel Leonard P. Ayres, vice president of the Cleveland Trust Co., who last year predicted that the bottom of Depression II would come in the first half of 1938. Last week tycoonry's favorite seer gave his followers a lavish exhibition of his powers by predicting practically everything for the coming year except the dew point in Wall Street at midnight on Friday, June 23. Excerpts:

"The monthly average of industrial production was no in 1937 and it will probably be 85 or 86 in 1938. It now seems likely that its average in 1939 will be about 104. . . . National income seems likely to make a new high record for the recovery period, and to be a little above the level of 1937. . . . Average freight loadings may advance about 15%. . . . Automobile output in 1939 should be between 30 and 50% larger than that of 1938*. . . . Wholesale prices will probably advance slowly. . . . It seems probable that the average price of all stocks listed on the New York Stock Exchange will be higher than it has been this year and that it will be above the level of 1935 and below that of 1936. . . . The year as a whole will almost surely be a better business year than this has been, but it is quite possible that the trend of affairs may be downward again before it draws toward its close. . . ."

In keeping with Colonel Ayres' optimism, the stockmarket last week stirred out of its doldrums and staged a strong, though brief, rally. Other indices, like public spending shown by weekly bank debits, were less cheery. On the other hand, building--most bullish factor in the industrial equation--continued onward & upward. F. W. Dodge Corp. announced that November building contracts awarded in the familiar "37 States east of the Rockies" were up 52% over November 1937, bringing the eleven-month total to $2,807,489,000, highest since 1931.

That building is approaching a boom largely because the Government is underwriting mortgages up to 90% no one could deny. Colonel Ayres warned: "The most urgent economic problem that we face is that of making next year the transition from this pump-priming recovery over into a long-term recovery carried forward by business instead of one pushed along by Government. . . . Our people have quite generally become convinced that Government is primarily responsible for business activity. It is as futile for us to believe that we can spend ourselves rich as for us to suppose that a man can drink himself sober."

* Year ago Colonel Ayres misgauged the slump in auto production by a full 20%.

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