The Next Five Months

What's the outlook for business for the rest of the year? Last week businessmen added up all the factors of the steel strike and arms production and came up with a moderately cheery answer. Business would be good, but the cost of doing business would rise, along with retail prices.

The steel strike was responsible for both conclusions; it had cleaned out overloaded inventories, while threatening to boost the prices of manufactured goods all down the line. On top of that, consumers were once more swarming into stores. Installment credit, increasing at a rate of more than half a billion dollars a month, hit a new all time high of $14.4 billion in June. As buying soared and the strike pinched output, swollen stocks of appliances and many other items dwindled. Apex Electrical Manufacturing Co., for example, reported last week that it was selling washing machines right off the production line.

Auto dealers, who usually carry a 30-day supply of cars, were down to as little as a three-day inventory; some were out of cars altogether. Used-car prices began to rise, and it looked as if some new 1953 models would not only be harder to get, but more expensive to boot.

If steel prices had been boosted without a strike, many a manufacturer with lagging sales would have been forced to absorb the raise. But with inventories cleaned out, the raise can now be passed on to consumers. Much of the lost civilian production will not be made up this year, since a big bite will be taken out of civilian goods to make up for the lost arms output. Beginning in the fourth quarter, said NPA, the military will boost its steel take by 50%, to about one-fifth of total output. In some grades it will be taking virtually the entire production.

Prices were also going up in other fields. Food prices jumped more than 1% in a fortnight to an alltime high; and the drought (see NATIONAL AFFAIRS) would probably send them higher. In the textile industry, mills operating at half speed only a few months ago were close to capacity, and prices of such items as acetate rayon yarns were boosted last week.

Barring any change for the worse in the international situation, the nation would have its hands full for months just meeting the new consumer demand and making up the production of civilian and military goods lost in the strike.

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