Up & Up

"People seem to have no more fear of the recession. Those who 60 days ago were thinking of buying $150 television sets now are talking in terms of $225 or even $250 sets." Thus spoke an executive of New Orleans' Barnett Appliance & Furniture Co. last week, reflecting the experience of many a store across the nation as retail sales showed a sharp upsurge. While department store sales still slightly trailed last year's, the Federal Reserve Board last week reported that sales in September topped the same month in 1957, for the third month-to-month gain in a row.

The pickup was most evident in the appliance industry (see below), but it led many a merchant in other fields to predict that he would equal last year's record --breaking retail sales, if not exceeding them. In Chicago, Carson Pirie Scott's department store last week had the biggest sales day in its history to cap a record September. Said J. Borthwick, district manager of Peck & Peck's store, which also had the biggest September in its history: "We're looking forward to tremendous business for the remainder of the year."

Specter Without Substance. While there was talk about rising prices to match the rising sales, there were actually only a few scattered increases--especially in autos. There was also some price-cutting to balance the hikes. In Chicago, Spiegel Inc., one of the nation's largest mail-order houses, cut prices in its Christmas catalogue 3% to 3^% overall, and as much as 38% on some items. The mail-order firm of Aldens Inc. cut prices in its Christmas catalogue 5% to 6%.

As for the future, wholesale prices gave little substance to the specter of inflation that seemed to haunt some businessmen. Among the best barometers are commodity prices, which often first show the pickup in demand at the wholesale level and, by rising, forecast a rise in retail prices. But after rising to a peak in March this year, commodity prices have since been falling (see chart). More important, they have failed to rise even seasonally this autumn.

Betting on Earnings. Recovery was still moving along at a brisk pace as business entered the fourth quarter. Unemployment dropped slightly in 125 major areas. There were predictions that the gross national product will reach and perhaps exceed its record annual rate of $445 billion in the fourth quarter. New construction held steady at its record level in September, and carloadings made their best showing in nearly a year.

Watching these signs of recovery, the stock market continued going up and up. On three days last week the market moved to one new high after another, ended the week at 533.73 on the Dow-Jones industrial average, almost 13 points above its previous alltime high in April 1956. For the first time in the market boom, the ratio of stock prices to earnings was nearly as high as in 1929. Investors did not seem worried; they are counting on recovery to bring a substantial rise in earnings by year's end or early 1959.

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