The Morning After

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¶ Plant-expansion slowdown and the consequent cut in spending: $3 billion. ¶ Inventory buying, accelerating at the rate of $3 billion annually, turned completely around in October and was decreasing at a lightning-fast $7 billion rate in January as businessmen lived off their warehouse stocks. Cut in demand: $10 billion. ¶ Total cut in spending rates: $21 billion.

The Bottom? When will the economy turn up again? At first the crystal-ball-gazers looked for an upturn starting at midyear. Now they have put the turn farther off, barring a tax cut that might give the U.S. a fast boost. Most economists agree with harvard Economist Sumner Slichter, who says: "It will be six months before the economy shows much pep." They think the recession will reach bottom soon, may be there even now. Then, say economists, it will rock along on a relatively even keel for six months or more before turning gradually upward in 1958's final quarter.

One reason many a businessman thinks that the recession is already bottoming out is the drastic cut in inventories. So many companies are eating into inventories so fast that it looks as if they will soon have to start ordering again whether they like it or not. Best evidence came from the National Association of Purchasing Agents, whose members were the first to issue a warning last fall. Last week the association reported that its members were more optimistic in February than at any time since last November; 24% reported that their new-order situation was improving, v. only 15% in January. Added the agents' Chicago association: "There is a slight indication that we may just about have reached bottom, and a reversal will start taking place in the not too distant future."

Another encouraging sign comes from railroaders, who reported that freight car-loadings, which had one of the worst slides, may have hit bottom. Though car-loadings for the year are still 17.5% below 1957, railroaders attribute at least part of the trouble to winter snows that tied up Eastern lines during February, and note a small but definite uptrend so far in March. A second hint that companies may start ordering soon: during a walkout at Aluminum Co. of America's Alcoa (Tenn.) plant late in January, General Electric Co. got a court order after four days to enter the plant and get desperately needed aluminum it had on order.

Copper producers also think that their customers, who have been liquidating inventories ever since September 1956, may be getting down to empty warehouses. Anaconda Copper Chairman Roy H. Glover reports that inventories are down to the point where any substantial reversal in business trends will mean a sharp pickup for the industry. Says Glover, who notes that all customers now demand immediate delivery: "Many of our very important customers now freely say that their inventories are on the tailgates of our trucks."