The Morning After

Monday, Mar. 24, 1958

Article Tools

Reprints

(6 of 9)

Pickup in Autos? Many steelmen believe that steel's inventory cutbacks may also be nearing an end. Production is down about 40%, twice the drop in consumption. Estimates are that total steel inventories are already down below 20 million tons, off 5,000,000 tons from the peak, and below the 21 million-ton inventory considered normal. While inventories got as low as 14 million tons during the 1954 recession, steelmen reckon that in 1958's bigger economy a bare-minimum inventory is 17 million tons. What could turn steel around—and give the entire economy a healthy lift—is auto sales. With an inventory of 900,000 unsold cars, the industry needs a big pickup in sales before it can step up production again. While automakers have just about given up hope of turning out the 5,500,000 cars they once expected (TIME, Dec. 30), they still hope to do far better than the 4,500,000 current rate, thus feel they have no place to go but up.

After a miserable January, sales rose in late February, and are still climbing in March, with some dealers reporting business 100% better than last month. These increases encouraged dealers to hope that the bad winter weather was as responsible for poor sales as all the complaints about Detroit's 1958 cars. One all-inclusive gripe, from Economist Slichter, who drives a 1951 Ford and recently refused to buy a 1958 model: "They are inconveniently long, inconveniently wide, inconveniently low, wasteful of gas, expensive to maintain, clumsy and ugly."

Beef & Macy's. Everyone expects the U.S. consumer to start buying more of everything soon. Purchasing power has been held up by unemployment compensation and other benefits. Furthermore, despite the jobless rise, overall U.S. employment remains high. Some 50% of the unemployment rise is in manufacturing industries (autos, aircraft), which employ only 23% of the total labor force. The service industries, which employ 35%, show no recession, have held remarkably steady, with little or no change over the last three months.

One problem that bothers retailers is the big rise in savings, which have gone up $7 billion since January 1957. Nevertheless, disposable personal income will still be so high this year (up 2% to $307 billion on Administration estimates) that about the same amount is being spent as last year. Installment credit, rising by $2.5 billion in 1957, has shown no serious falloff. While consumers are cutting back in durable goods, they are not cutting down on food, clothing, or services. With salesmanship, the consumer can even be enticed into buying summer appliances in the dead of winter. Said an executive of Manhattan's R. H. Macy & Co., which ran an air-conditioner sale in February's zero weather: "It was fantastic. We sold out, reordered, sold out again. It goes to show that the money is there when the public wants something and gets it at a bargain."