The Doctor's Scissors

Economist Arthur Burns, who took a leave from Columbia University last year to become the Administration's top economist, last week used a homely, school-teaching metaphor to tell some of his old colleagues what he thought about the state of the U.S. economy. Said Burns at a dinner in Columbia's Men's Faculty Club: "Early this year a scissors movement began to develop in the economy, with the financial and investment sector occupying the upper blade and the industrial sector the lower blade." The scissors, predicted Burns, are unlikely to remain open for long, but "will close through a movement of the industrial blade."

Last week the industrial blade was moving up. For the third consecutive month the National Association of Purchasing Agents said that a majority of its members had reported higher orders for May than for the previous month. In Washington the Federal Reserve Board noted that durable-goods inventories continued to drop, while output of autos and household durable goods was up moderately (although auto sales were not keeping up with production--see below).

The industrial blade of Dr. Burns's scissors, however, would have to move still faster to close the gap with the financial blade. Last week stock prices continued their eight-month advance. Among the most active stocks were Studebaker (up 2 3/4 to 18) and Packard (up 5/8 to 4) on reports that a merger of the companies would be announced shortly. The Dow-Jones industrial average rose 1.4 points, closed the week at a new 25-year high of 327.49.

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