Quickening Pace

Two soft spots of the 1956 economy--auto sales and housing starts--were hardening up last week. As the first autumn chill spurred buying and business, new 1956 autos were moving from showrooms at a quickening pace of 18,000 a day. Despite the big publicity buildup for the forthcoming 1957 models, dealers' inventories of '56 cars dropped a healthy 10% below last year's totals. And for the first time in three months, home construction rose during August, was holding strong in September. Last month's housing starts galloped along at an annual rate of 1.11 million v. 1.07 million in June, although still behind the 1.34 million starts of last year.

The whole economy was recouping from a midsummer decline. Business activity in August climbed back to 141% of the 1947-49 level v. 136% in July, when steel was strikebound. Over the first eight months of 1956, retail stores rang up a record $123 billion business, about $4.5 billion above last year. This was due partly to rising prices; wholesale meat prices jumped 6% within the last month alone. But a bigger reason for the expanded volume was that the U.S. factory worker's weekly wages hit a $79.79 alltime high in August, nearly $1 over the month before.

Caution. Big companies were rushing headlong to grow with this richer market. Last week Dow Chemical Co. kicked off another $75 million expansion program. Revere Metals bought land for a $50 million aluminum plant. One cautionary signal was raised by the Department of Commerce, which warned that this record expansion could be sidetracked by a late-year steel shortage. Said Iron Age magazine: "When full impact of fourth-quarter automotive production schedules is felt, the already tight market will snap shut like a vise."

But no industry was trying harder to expand than steel itself. Production last week strained to 100.1% of capacity, and makers pushed toward reaching a 132 million ton capacity by Jan. 1. Detroit Steel Corp. asked the Government for a fast tax write-off on a $16.4 million expansion of ingot-making facilities, raising to $862 million the total fast amortization requests submitted recently by steel companies. To meet the steelmen's needs, iron-ore supplies were also getting a boost. At Silver Bay, Minn, last week, Reserve Mining Co. dedicated the nation's first large-scale taconite processing plant to turn low-grade (25% to 35% iron) taconite ore into high-iron-content pellets. A $190 million giant with a 3,700,000-ton annual capacity, Reserve's plant is just the first of many. Taconite plants abuilding or planned will have a capacity of 33 million tons annually by 1980, provide some 40% of all inland mill ore supplies.

Confidence. Even fairdealing Leon H. Keyserling, who was President Truman's chief economist, could find little to complain about. His prediction: "Despite points of vulnerability, the American economy will achieve a new peak of $409 billion for 1956," and the annual rate will soar far above that figure in the third and fourth quarters. At week's end a poll among directors of the National Sales Executives showed that 99% believed economic prospects for 1957 are "good," and that 98% thought consumer buying would remain strong.

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