STATE OF BUSINESS: Counterpunches

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Before the White House announced its antirecession program last week (see NATIONAL AFFAIRS), the Federal Reserve Board aimed another and more familiar counterpunch at the recession. For the third time in four months, FRB cut the discount rate. Reserve banks in New York, Chicago, Philadelphia and Atlanta reduced the rate from 2¾% to 2¼%. Most of the other eight central reserve banks will soon follow; the cuts are expected to lead to lower interest rates to boost loans and business expansion.

There was little doubt that businessmen were holding back. For the first time in almost three years, the total of loans outstanding in New York City banks fell below the year-ago level. One reason for businessmen's caution was that a fresh batch of Government statistics showed somewhat more gloom than cheer. Manufacturers' sales for January dropped by $400 million, new orders slumped by $900 million, and order backlogs dipped by $1.6 billion — the 13th straight monthly decline. Manufacturers' production went down even faster than sales. Result: inventories were cut $600 million in January v. $300 million the month before.

On the bright side, department-store sales, hit hard by mid-February snowstorms, bounced back in the week ending March 1 to rise 1% above the same week last year. And in the last eight days of February new-car sales jumped 27% above the rate at mid-month.

Consumers had plenty of money, but they were saving rather than spending it. Savings were up 10% over last year.