STATE OF BUSINESS: Moderate Optimism

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To spur the upswing in residential building, the Federal Housing Administration last week eased credit for home buyers, second such move in two weeks. Most buyers will no longer have to put up cash for closing costs in buying a new house, but can tack them on the mortgage loan, thus lowering down payments. To attract more lenders, the agency increased allowable discounts (to a maximum 3%) on FHA-backed mortgages in 17 Western states, where mortgage money is tight.

But the Federal Reserve Board kept other forms of credit tight, despite the rising clamor of businessmen for easier money. The New York Chamber of Commerce and Chairman William H. Moore of Manhattan's Bankers Trust Co. both appealed to the Fed to ease credit by lowering the amount of funds that commercial banks are required to hold in reserve against demand deposits. But Fed Chairman William McChesney Martin Jr., speaking at Richmond, Va., still branded inflation as the economy's enemy No. 1—hardly the talk of a man prepared to make money easier.

Easier moneymen argued that the economy needed a lift. Unemployment was still rising (see NATIONAL AFFAIRS), notably in Detroit. Auto sales were sliding, and Detroit last week rolled out 18% fewer cars than in the same week of 1957 (but 57% higher than the previous week in 1958). Automakers slashed first-quarter production schedules by 13% from the total projected a few weeks ago. In the slowdown more than 9% of Detroit's work force was idle. General Motors has laid off about 6,000; Chrysler last week passed out 4,000 pink slips and more were coming.

On the brighter side, department-store sales last week moved 2% ahead of the same week of 1957. The National Retail Merchants Association polled the top men in 2,000 department and chain stores, reported that 72% look for 1958 profits to equal or exceed last year's record. The Commerce Department, in its annual survey of the nation's major industries, found "moderate optimism." Though it conceded that production declines are in store for autos, steel, machine tools and railway cars, it predicted that some of 1957's softer industries will snap back. Said the report: lumbermen should enjoy "a somewhat better year," copper and aluminum sales should prove stronger, and sales of agricultural equipment "should be up between 10% and 15%."