Up Another Notch

To no one's great surprise, the Commerce Department announced last week that during 1955's first quarter, the U.S. gross national product had risen to an annual rate of $370 billion, equaling the old record set in the second quarter of 1953. Now the big question is: How much higher will it rise?

The Federal Reserve Board indicated that it expects gross national production to hit a total of $380 billion by year's end, almost $15 billion higher than the previous peak in 1953, and $23 billion better than 1954.

But the rise is not going to be unbroken. The FRB expects the pace to slacken a bit in the next few months, slowed by a "leveling off" of steel and automobile output, then finish the year with a rush in the fourth quarter.

The expected "leveling off" in steel and autos may have already begun. As of the middle of May, although new cars were still selling well, dealers had about 750,000 new cars on hand, the biggest backlog since prewar days. While current orders from automakers remain strong, demand is expected to slip soon. However, with nonauto steel buying continuing to increase, the steel industry is looking for no real slump in demand.

Retail sales last week were 11% higher than a year ago, and consumers showed no signs of trimming their buying. The Federal Reserve Board reported that there are more people planning to buy cars, furniture and major household appliances this year than there were a year ago. And they expect to pay more for autos but less for other durable goods than last year's buyers. Consumers will spend an average of $2,700 for a new car v. $2,500 a year ago, while 1955's used-car buyers expect to pay $800 v. $750 in 1954. This year 16% of the public will buy cars v. 14% last year, while another 20% said they plan to purchase autos in 1956 or 1957.

Furniture and household appliances will be bought by 28.5% of the public, v. 26.9% in 1954, but they plan to spend $50 less than last year's outlay. More consumers plan to buy on credit. This year, the FRB reported, 60% of the car purchasers expect to buy on time, v. 56% a year ago, and 54% of the prospective household-goods purchasers expect to use credit, v. 51% in 1954.

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