Towards Full Production

Last week U. S. business was producing at a level 12% above 1929. As a whole, it was close to capacity. In some key defense industries it was there already. The point at which the Army and Navy would exercise priorities over their non-defense customers was drawing closer.

First to approach the priorities zone was the steel industry. One day last week U. S. Steel's new chairman, Irving S. Olds, said that industry must be left alone. Next day he conceded that pressure might become so strong that priorities would have to be exercised. While huge U. S. Steel strained to get up from 96% of theoretical capacity to 100%, spryer, smaller Bethlehem Steel actually had to refuse some commercial orders in order to rush steel to the Navy. Many a specialty producer's unfilled orders continued to pile up. One such was little Crucible Steel. Its canny, portly president, Raoul Desvernine, who in last October's phony boom warned businessmen "not to get ahead of the war," urged President Roosevelt to confer "broader" (crackdown) powers on Commissioners Knudsen and Stettinius.

Also strained to fill orders was the copper industry. This month the British ordered 25,000 tons of brass, inquired for an additional 16,000 tons of sheets. This started another domestic buying move which assured coppermen of an all-time record month. Yet coppermen could not convince themselves it would last. Wailed C. Donald Dallas (Revere Copper & Brass), who in June had full mills: "Revere has appropriated in the last year over $1,500,000 for rounding out of plants and equipment. We cannot take the business risk of going further than this because first, if we built a new plant it would not be in production for over a year, and we do not know whether at the end of that time we would have any orders for it or not; second, if we did have orders, we know in advance that profits made would be largely taken by taxes, and at the end of the emergency we might have to borrow money . . . besides having a plant which was a white elephant on our hands."

Boom leadership was definitely passing to the capital-goods industries last week. Heavy construction awards for defense continued to appear steadily, and residential awards taxed lumber mills. In the offing were new records--and reduction in their unused reserve capacity--for the utilities (selling current at a new, still rising 1940 high) and the railroads (weekly loadings: 804,309 cars, 4,000 above 1939).

To keep up with the procession of rising sales, retailers rushed to build up inventories, made the sudden boom more hectic. Even dormant Wall Street stirred as heavy-goods producers began paying preferred arrearages. Prime movers: Republic Steel (A), up from 75 to 86 on payment of all its $12 arrearage. Up on dividend expectations were Otis Steel (pfd), from 25 to 32 (arrearage $11 June 15), Pittsburgh Steel's three preferreds, from 33% to 67% (arrearages: $12.50 to $59.50). In everything except confidence 1940 business was making 1929 look small.

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