Down the Stretch

Last week U. S. business started down the year's home stretch into its biggest payoff period--Christmas trade. Business' seasonal pattern each year starts with a production upswing in late summer, when consumption is relatively low. Production outstrips consumption through each autumn. Then, after Thanksgiving, the consumption season begins, and business guessmen make book on whether or not autumn's inventories will be used up.

This year some economists say that the record boom in production has put inventories up to an all-time high. Recalling the unhappy aftermath of their last peak --the third quarter of 1937--these economists are worried. But the inventory bulge of 1940 is not so dangerous as it would be in normal times. Reason: it is concentrated in the warehouses of heavy industries, which, loaded with defense orders, are understandably freezing as much inventory as possible (mainly of durable goods) against possible war-goods shortages in 1941. Last week November's returns from the non-defense sector of the economy were coming in. They showed that late autumn consumption had begun to respond to the powerful stimulus of defense spending, was beginning to follow 1940's record production into a two-sided boom. Items:

>> October sales of 22,591 retailers (none of them department stores or chains) rang up a 10% increase over October 1939. This gain was greater than that for the earlier months of 1940.

>> Department stores made up for a sorry October by putting in one of their best Novembers ever. This moved the Federal Reserve Board's index of sales up from October's 94 to 101--first time in almost ten years it has gone this high.

>> Chain stores, which have been cutting into department-store business, gained likewise. Woolworth, for example, averaged only 4.8% above 1939 in 1940's first ten months: its November gain was 10.1%.

>> Most significant of all, automobiles have put the gloom casters to shame. In spite of bad weather, Detroit had its best November ever, sold 400,000 cars to retail customers. One catch to this performance: although the 1941 model year began early, the early-season rush is still on. Also, many buyers have been frightened into premature turn-ins by the thought that the 1941 models may be the last for some time. Yet the automakers, just as scared of rationing as their customers, have been anxious to build year-end inventories up to the level of 600,000 new cars.

Sales were too fast for them. The November inventory increase (about 90,000 cars) put dealers' stocks up to only 450,000 cars.

Main reason for the domestic retail crescendo has been 1) the assurance of future work guaranteed by rising order backlogs, 2) re-employment. Last week the American Federation of Labor issued its monthly employment figure: U. S. employment, which from January through August rose only from 43,103,000 to 44,903,000, by the end of October had jumped to 46,063,000. Yet a disconcerting number of the U. S.'s armament and capital-goods makers were still working only eight hours a day. A cheering announcement -- particularly for the U. S.'s remaining 8,130,000 unemployed -- came from Buffalo: Curtiss-Wright and Boeing agreed to put their plans to work in three shifts a day. The National Industrial Conference Board predicted 4,000,000 new jobs in U. S. industry by next June.

With such pointers before him, Secretary of Commerce Jesse Jones last week made a prediction too: that 1940's Christmas on record. As the Christmas shopping rush got under way, news from the big buying centres seemed to hear him out. Some Manhattan stores showed daily gains over 1939 of as much as 45%. No. 1 U. S. storekeeper, R. H. Macy & Co.'s Jack Straus, said: "While our dollar volume this year is below the record year 1929, the transactions are exeeding those of 1929 by an average of 35,000 a day."

Retailers even expanded their plants. In Manhattan, on the site of Flo Ziegfield's first Follies, the Bond clothing chain opened its 60th men's store (largest in the U. S.), set in motion a 26,000-suit assembly line. Same week, in Portland, Ore., Fred Meyer opened his tenth "unit" (which sells everything from groceries to Opening" that included cake-baking contests, daily vaudville, dog shows, a Ferris wheel, a free suckling pig, and eight performing lions, Merchandiser Meyer attracted 100,000 visitors in six days.

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