Survey of Current Business December 1939 · 2011. 10. 20. · Candy sales by manufacturers, 1928-38 1 17 Capital flotations (Commercial and Financial Chronicle) all series, 1937 and

DECEMBER 1939

SURVEYOF

CURRENT BUSINESS

UNITED STATESDEPARTMENT OF COMMERCEBUREAU OF FOREIGN AND DOMESTIC COMMERCE

WASHINGTONVOLUME 19 NUMBER 12

CONTENTSVolume 19 of the Survey of Current Business

SPECIAL ARTICLESNo. Page

Trend of Long-Term Debts in the United States, 1934-37 . . . . 1 10Review of Business Conditions in 1938 2 3Salient Features of the 1937 Census of Manufactures 3 9Incomes of Dentists and Osteopathic Physicians 4 7Capital Movements in the United States Balance of Payments. 5 12National Income in 1938 at 64 Billion Dollars . . . 6 10Alcoholic Beverage Industry Reestablished 7 10Recent! Developments in Construction Activity 8 9Trends in Wholesale Volume, 1929-38 9 11Financial Aspects of Unemployment Compensation Experience. 9 12The Impact of War on Commodity Prices 10 10The Depreciation of the Pound Sterling 11 HThe Position of United States Shipping 12 8Capital Expenditures of the Railroads 12 14

TABLES OF NEW OR REVISED STATISTICAL SERIESNo. Page

Alcoholic beverages:Total distilled spirits and whisky, production, tax-

paid withdrawals, imports, and stocks, 1901-39 7 15, 16Fermented malt liquors, production, stocks, and tax-

paid withdrawals, 1901-39 : • • - 7 16Rectified spirits and wines, production, total, and whisky,

1934-39 • 7 17Indicated consumption for beverage purposes of all

spirits and whisky, 1934-39 7 17Still wines, production, stocks, tax-paid withdrawals,

and imports, 1901-39. • • • 7 17, 18Sparkling wines, production, stocks, tax-paid with-

drawals, and imports, 1901-39 7 18Automotive replacement battery shipments, indexes, unad-

justed and adjusted, 1934-39 8 17Beef steers, average wholesale price, 1913-39. . . . . . . . . 8 18Benzol production, 1923-39 H 18Butter receipts, five markets, 1919-38 . 3 17Candy sales by manufacturers, 1928-38 1 17Capital flotations (Commercial and Financial Chronicle) all

series, 1937 and 1938 S 15,16Cellulose plastic products, 1935-38 3 18Cheese, total production, 1920-38. . - - 11 17Construction contracts awarded (valuation of total build-

ing) 1925-39 11 17Construction costs, standard six-room frame house (Federal

Home Loan Bank Board) 1923-39 6 17Corn, weighted average wholesale price, five markets,

1918-39 8 18Corporation profits, 1932-38 4 18Cotton cloth, exports, 1913-39 11 17Cotton cloth mill margins, 1925-39 11 18Cotton spindle activity, 1933-38 3 18Cotton stocks, world total, American cotton (in the United

States and in foreign countries) and foreign cotton,1920-39 8 15, 16

Dollar sales of general merchandise in small towns and ruralareas, by geographic divisions, adjusted, 1934-39 8 17

Electrical products, orders received and sales billed, 1934-39. 6 18Employment and pay roll indexes, unadjusted and adjusted,

1934-39 10 17Exports by grand divisions and countries and by economic^classes and commodities, 1937 4 14

No. PageFailures, commercial, Canada, 1934-38 11 18Farm wage rates, without board, 1923-38 ] 11 18Federal debt, including non-interest-bearing debt and

special issues to government agencies, 1916-39 4 16Federal expenditures, general (including recovery and

relief) revolving funds, transfers to trust accounts, anddebt retirements, net, 1931-38 4 17

Federal receipts, total, 1931-38 4 17Floor and wall tile, shipments, 1935-39 . . . . . . *. .'. . . 6 18Foodstuffs and raw materials, world prices, 1920-38. *. . . .'. 1 17Foodstufis and raw materials, world stocks, 1920-38.. 1 17Hog-corn ratio, 1913-39 6 18Imports by grand divisions and countries and by economic

classes and commodities, 1937 ' 4 15Income payments, 1929-38... 10 15, 16Inner tubes, production, shipments, stocks, and exports,

1921-39. 5 17, 18Lard, including neutral lard, exports, 1913-39 11 16Manufactures, durable and nondurable, indexes, unadjusted

and adjusted, 1919-38 3 14Meats and meat products, including lard, total exports,

1913-39 . . . . 11 16Milk, standard grade, dealers' price, 1922-39 8 18New loans, estimated volume, by all building and loan

associations, 1936 and 1937 3 16Passengers carried on electric street railways, 1929-38. . . . 3 15Petroleum and petroleum products, 1937 3 15Pneumatic casings, production, total shipments, stocks,

shipments of original and replacement equipment, andexports, 1921-39. 5 16, 17

Powdered milk, production and stocks, 1918-37 3 17Price, average, of United States Treasury bonds, 1931-38.... 3 18Production indexes (Federal Reserve Board), rubber tires

and tubes, unadjusted, 1936-39, and petroleum refining,unadjusted and adjusted, 1934-39 8 17

Pullman Company, selected operating statistics, 1913-38.. 1 18Sawed timber, exports, 1913-39 10 18Sawmill products, total imports, 1913-39 10 18Stock price indexes, companies producing capital goods

and consumers' goods, 1926-38 4 18Washing and ironing machines, sales, 1929-38 10 17Wheat stocks in the United States, 1923-39 6 17Yield, average, on United States Treasury bonds, 1919-38 3 18

Volume 19 Number 12

UNITED STATES DEPARTMENT OF COMMERCEHARRY L. HOPKINS, Secretary

BUREAU OF FOREIGN AND DOMESTIC COMMERCEJAMES W. YOUNG, Director

SURVEY OFCURRENT BUSINESS

DECEMBER 1939

A publication of the

DIVISION OF BUSINESS REVIEWM. JOSEPH MEEHAN, Chief

MILTON GILBERT, Editor

TABLE OF CONTENTSSUMMARIES

Business situation summarizedFinance ,Foreign trade

SPECIAL ARTICLESThe position of United States shippingCapital expenditures of the railroads

Page367

814

CHARTSFigure 1.—Monthly business indicators, 1929-39 2Figure 2.—New orders for selected commodities, by weeks, 1939.... 3Figure 3.—Pay rolls in selected durable goods industries, 1937-39.. 4Figure 4.—World steam and motor tonnage of ships over 100 gross

tons, June 30, 1914 and 1939 8Figure 5.—Zones established under the neutrality act, 1939 12

CHARTS—ContinuedFigure 6.—Percent of entrances and clearances in United States

Foreign Trade, by trade routes and nationality of vessels for theyear 1938

Figure 7.—Net railway operating income and expenditures for con-struction and equipment, 1919-38

Figure 8.—Unfilled orders of equipment manufacturers, 1920-39...Figure 9.—Employment and pay roll indexes, car (electric and

steam railroad) and locomotive (other than electric) buildingindustries, not including railroad repair shops, 1923-39

Page

13

1416

17

STATISTICAL DATA

Monthly business stat ist ics 19General index Inside back cover

Subscription price of the monthly and weekly issues of the SURVEY OF CURRENT BUSINESS is $2 a year. Single-copy price: Monthly, 15 cent*; weekly, 5 cents.Foreign subscriptions, 33.50. Price of the 1938 Supplement is 40 cents* Make remittances only to

Superintendent of Documents, Washington, D. C.

193528—39 1 1

SUKVEY OF CURRENT BUSINESS December 1939

Monthly Business Indicators, 1929-39INDUSTRIAL PRODUCTION

140

INCOME PAYMENTS AND CASH FARM INCOMEVOLUME (1823~E5-1OC) MONTHLY INCOME PAYMENTS (1929=100)

CASH FARM INCOME (l924~1929»100)

—w*CASH INCOME FROM FARM MARKETINGS(EXCLUSIVE OF RENTAL & BENEFIT PAYMENTS)

120

50

40

1929 1930 1931 1932 1333 1934 1935 1936 1937 1938 1939

CONSTRUCTION CONTRACTS AWARDED**

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

FOREIGN TRADE *

1929 1930 1931 1932 1933 1934 1935 1936 1937 1933 1939

FACTORY EMPLOYMENT AND PAYROLLS

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

WHOLESALE PRICES AND COST OF LIVING

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

RETAIL SALES *

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

STOCK PRICES175

150

125

100

75

50

25

0

AUTOMOBILE SALES (1929~3I»1OO)DEPARTMENT STORE SALES (1923-25=100)

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

* ADJUSTED FOB SEASONAL VARIATION

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

• THREE-MONTH MOVING AVERAGE

December 1939 SURVEY OF CURRENT BUSINESS

Business Situation Summarized

INDUSTRIAL output for November was higher thanthe average for October when the trend was sharplyupward. There was, however, not much actual ex-pansion during November from the rate reached atthe end of October, and a steadier pace of activitygenerally characterized the economy. This higher rateof production was maintained to some extent at theexpense of unfilled orders, but current backlogs areseemingly sufficient to continue the November rate ofproduction to the end of the year against the usualseasonal decline for December.

The slowing of the rise in business activity came after2 months of swift and substantial readjustments whichhad raised industrial volumes by about one-fifth andhad resulted in material improvement in employmentand consumers' incomes. Factory employment, in-creasing slightly in November, contrary to the custom-ary seasonal decline, was about 6 percent higher thanin August on an adjusted basis. An expansion ininventories and some advancement in the placement ofcontemplated orders for capital goods were the primaryfactors responsible for the magnitude of the rise experi-enced since August.New Orders in Smaller Volume.

The position of orders relative to production is, ofcourse, somewhat different from industry to industry,but the volume of incoming business has generallyfallen off from the recent highs; in many lines ordershave dropped to about or below the pre-Septembervolumes. This is a clear indication that the briefperiod of anticipatory buying based upon expectationsof war inflation has run its course for the present atleast. At their present volume new orders would seemto be insufficient to support the November rate ofproduction for any extended period.

The picture of the buying wave that was touched offby the war is indicated by the weekly new-order datacharted in figure 2 and that pattern for the movementis confirmed by other data not available for plotting.The prompt jump in purchasing of zinc, copper, andwool yarn was apparently typical of the buying of manycommodities and particularly for relatively standard-ized semimanufactures. Of significance is the sudden-ness of the move, the substantial extent of the rise, andthe fact that in about a month the bulk of the commit-ments to readjust company positions had been made.For some finished goods the buying movement wassomewhat slower in reaching a peak so that the resultsfor the month of October do not reveal marked cur-tailments from aggregate volumes in September.

Purchasing of such nondurable commodities as tex-tiles, paper, paperboard, sugar, and flour which had

been increased in September under expectations of war-time prices have receded considerably. Orders forpaperboard continued in large volume into Octoberthough they subsequently have fallen below productionwhich is exceptionally high. Paper manufacturerslocated in Massachusetts received much smaller ordersin October than in September. Cotton-textile mills,

WEEKLY AV JAN.-JULY 1939= 1003 0 0

2 5 0 -

200

150 -

WEEKLY AV. JAN.-JULY 1939 = 1008 0 0

5 12 13 26AUGUST

2 9 16 23 30 7 14 21 28 4 II 18 25SEPTEMBER OCTOBER NOVEMBER

_ _ _ _ _ _ ^ _ _ D. D. 39-288

Figure 2.—New Orders for Selected Commodities, by Weeks, 1939.

NOTE.—Relatives have been computed from the weekly data with average weeklyorders for the 30 weeks, January 1 to July 29,1939, as 100. The data are substantiallycomparable for the period covered, although slight variations occur in the numberof lumber mills reporting. Orders for wool yarn and wool cloth are compiled bythe National Association of Wool Manufacturers, copper orders are sales of domesticproducers as reported in the American Metal Market, and sales of slab zinc are from,the American Zinc Institute.

which had sold an exceptional volume of goods in thefirst weeks of war, have subsequently experiencedreduced sales and unfilled orders are on the downgradethough still sufficient to assure high operations intoJanuary.

October orders, as far as can be seen, compared mostfavorably with September in highly fabricated lines-

SURVEY OF CURRENT BUSINESS December 1939

such as machinery and equipment for which purchasecommitments cannot be made so quickly as those forgoods being bought continuously. Foundry-equipmentorders recorded a further large gain in October. Themetal trades located in Massachusetts received largerorders than in September and aggregate new businessof this type was above the peak months of 1937 and1929. Orders for steel barrels were larger than inSeptember and unfilled orders in this industry at theend of October were higher than at any time in 1937;purchasing of other fabricated-steel products also waslarge in October. On the whole, there is little doubtthat the volume of orders received in the durable-goods

-38 = 100

-BLAST FURNACESSTEEL WORKS 6c ROLLING MILLS

401937 1938 1939

Figure 3.—Pay Rolls in Selected Durable Goods Industries, 1937-39.NOTE.—Pay-roll indexes of the Bureau of Labor Statistics have been recomputed

on a 1937-38 base. The "other iron and steel manufactures" shown on this chartis the weighted average of pay rolls in the industries that manufacture (1) bolts, nuts,washers, and rivets; (2) cast-iron pipe; (3) cutlery and edged tools; (4) iron and steelforgings; (5) hardware; (6) plumbers' supplies; (7) stamped and enameled ware;(8) steam and hot-water heating apparatus and fittings; (9) stoves; (10) structuraland ornamental metalwork; (11) tin cans and other tinware; (12) tools (not includingedged tools, machine tools, files, and saws); and (13) wirework. This particulargrouping is not published by the Bureau of Labor Statistics, though indexes for theindividual industries are regularly made available.

industries would place the September-October volumesat the highest rate since the spring of 1937 and prob-ably not far below the monthly average at that time.Railway purchasing, which advanced considerably fora time, fell in November to a rather low level and thequantity of rolling stock now on order is much belowthe 1937 peak. (The contribution of this purchasingto current activity is analyzed in the article on p. 14.)Orders for electrical equipment, according to limiteddata, have also been much smaller than in the firsthalf of 1937.

There is no evidence as yet of the direct war stim-ulus which was to have provided the foundation forSeptember's price and purchasing rise. Exports inOctober increased—partly as a result of seasonalinfluences—but the remainder of the rise cannot betraced to "war" orders. While the British and French

Governments have set up buying agencies in thiscountry, their commitments thus far have largelybeen confined to aircraft and engines. It is possiblethat recent British action designed to impede themovement of German exports to overseas marketswill afford an additional stimulus to American exportsin such areas as Latin America but the outlook at thistime for exports continues quite indefinite.

Commodity price movements during November, asfor some weeks previously, reflected the let-up in for-ward purchasing and the general slowing of the businessrise. Prices of some industrial raw materials—hides,steel scrap, and wool, for example—declined slightlyand new increases in finished goods were less in evi-dence. It was announced that steel prices for de-livery in the first quarter of next year would be sub-stantially the same as the prices currently listed.The wholesale price index for "all commodities otherthan farm products and foods" did not change signifi-cantly from the position at the end of October. DuringNovember prices of farm products and foods on theaverage held around the readjusted levels establishedin the reaction from the initial September movement.

Steady Pace in Industrial Activity.

With minor exceptions, activity of the primary pro-ducers held to a steady pace during November andexpansion was mostly limited to production requiring ahigh degree of fabrication. While aggregate output ofthe basic industries was at a figure that has beenequalled only in a few months of 1929, the total volumeof productive activity, as indicated by factory employ-ment, has remained below that in the first half of 1937.Even after the contraseasonal rise in November, theadjusted volume of employment in manufacturing wasmore than 5 percent lower than in that period.

Production of steel exceeded the previous recordtonnage of October. As limitations of productivecapacity came into play even in that month, the ex-pansion in November was necessarily small. Ingotproduction at about 93 percent of capacity was halfagain as large as in August. Production trends, asindicated by the employment and pay-roll data of theBureau of Labor Statistics, reveal widespread advancesin steel-consuming industries between August and thelatest survey at mid-October, though these have notbeen so large as that recorded for steel ingots. Thetrend of operations to mid-October in the steel industriesand in two major fields of steel consumption is indicatedin figure 3. In a group of 13 iron and steel manufac-turing industries, excluding the classification "blastfurnaces, steel works, and rolling mills," which pri-marily represents basic production of steel and steelproducts, there was an increase of one-fifth in total payrolls from August to October and preliminary dataindicate some further rise in November. Over thisperiod plants manufacturing wirework, steel forgings,


and bolts, nuts, etc., experienced heavy increases inproduction, according to the pay-roll data. Machine-tool builders have also stepped up operations sharply.

Production in most of the nondurable goods indus-tries has advanced only moderately above the Augustposition after allowance for seasonal fluctuations.Nevertheless, the seasonally adjusted production indexfor these industries in October was at a figure that wasbut slightly below the average in the winter of 1936-37.Sugar refining and flour milling have declined afterthe brief rise in September resulting from unusual buy-ing. Textile production in the aggregate has been in-creased little more than seasonally and production ofshoes in October was lower on a seasonally correctedbasis than in August. Production in the cotton-textileindustry, though not rising much from the high Augustposition, has been seldom exceeded.

Railway freight traffic in November experienced theusual seasonal decline from the October peak. Freightvolumes were almost one-fifth above those a year ago,and on a seasonally corrected basis were as large asany time since 1930, except for the period November1936-April 1937.

The volume of new construction contract awardscontinues to make a relatively favorable showing.Publicly financed awards which had slumped sharply inOctober were swelled by several large projects in thefirst 3 weeks of November, but the prospects continueto be for a fourth quarter volume much below therecord awards in 1938. Privately financed awardswere not much changed from the preceding month;residential awards, on a seasonally adjusted basis,continue at the high levels of recent months.

The flow of income to individuals in November wasalmost on a plane with the 1937 average and as livingcosts are lower, consumers' command over goods iscorrespondingly enlarged. Retail sales of generalmerchandise have risen to totals that are on a par withthose in the peak months of the 1936-37 recovery.Business profits are expanding sharply during thecurrent quarter, and dividend declarations are naturallyincreasing. With rising incomes, the volume of fundsavailable for expansion has thus increased. Theextent to which these are flowing back into actualexpenditures is an essential element in appraising theprospects for business activity, once unfilled orders are re-duced to a level commensurate with incoming business.

MONTHLY BUSINESS INDEXES

Year and month

Monthly incomepayments, ad-

justed »

Monthly average,1929=100

Factory em-ployment

andpay rolls

: !§§

Monthly av-erage, 1923-

25=100

Cash farmincome 3

fMonthly av-erage, 1924-

29=100

Industrialproduction,adjustedi

Freight-carloadings,adjusted *

ifSI

Retail sales,value, ad-justed i

Monthly average, 1923-25= 100 1929-31=100

Foreigntrade,value,

adjusted'

iI

Monthly average,1923-25=100

fa

Monthlyaverage,1926=100

1929: October..1932: October..1933: October..1936: October..1937: October..

OctoberNovemberDecember

1939:JanuaryFebruaryMarchAprilMay —JuneJulyAugustSeptemberOctober

Monthly average, Januarythrough October:

19291932...19331936 -193719381939

100.257.260.484.888.8

82.683.183.4

83.383.084.183.083.484.183.785.486.788.3

100.061.556.682.289.381.484.5

102.155.959.082.587.2

81.482.483.0

82.382.082.181.081.482.882.884.084.287.0

100.060.254.578.787.078.783.0

101.959.960.984.989.3

83.584.284.7

84.484.484.883.884.385.485.586.786.989.0

100.064.357.982.489.282.185.5

106.665.882.9

102.4107.8

90.292.894.4

94.694.394.093.893.394.395.396.097.4

100.5

106.766.572.097.6

110. 188.995.4

113.745.861.192.9

104.9

84.284.487.1

83.786.087.685.585.086.584.489.793.6

101.3

111.947.548.883.6

105.276.488.3

151.550.067.5104.0107.5

91.578.072.5

68.551.057.555.060.059.063.071.092.596.0

102.342.847.772.279 668. 767.4

102.538.548.576.077.5

67.569.568.0

67.560.064.064.565.060.062.571.079.072.5

1186776110102

96103104

1019998929298101103111120

122657710311583102

1186676110100

95103104

1009796929197100104111120

123637710311480101

1167481105113

98102109

110110110959810410691114123

116718210311697106

10557597776

686969

69676660626769707780

109555873806169

10569676666

626161

62626261616162626362

105736765686162

111

84

101656079857780

141.028.053.585.5

127.0

85.0100.092.5

91.096.088.079.579.079.080.576.583.592.0

158.138.846.9

101.1113.460.4

11433425772

605867

55f.37064707069727272

115363453726866

11932466568

545554

55495353615857575965

116353761825057

10729375752

829696

86736967636367737371

123292256616172

163.262.666.0

102.1101.0

91.786.4

106.9

90.577.192.385.390.094.789.688.793.996.5

140.266.2

3 61.490.299.584.5

95.164.471.281.585.4

77.677.577.0

76.976.976.776.276.275.675.475.079.179.4

95.765.365.080.487.178.876.7

i Adjusted for seasonal variations; monthly averages, except income payments, are based on unadjusted indexes.' Average of 9 months, January, February, and April through October.

* From farm marketings.

SURVEY OF CURRENT BUSINESS December 1939

FinanceDOMESTIC financial markets were generally in-active during November. Stock prices eased andbond prices were firm, with trading in exceptionallysmall volume. The amount of publicly offered corpo-rate security issues remained very low. Loans byreporting member banks to commerce, industry, andagriculture continued to increase slowly.

In the foreign exchange market, quotations for thepound sterling moved erratically with changes in theoutflow of short-term funds from London; transactionswhich are admitted to the Bank of England's officialrate were not affected by the fluctuations. The inflowof gold in November was larger than in October, withBritish countries again the principal sources of goldimports. The stock of earmarked gold was againreduced by a substantial amount.

With the European war now 3 months old and theimmediate shock over, it is possible to appraise domesticfinancial developments since the beginning of the con-flict. After the initial sharp rise during the early partof September, stock prices fluctuated within narrowlimits around a level roughly 10 percent above averagesfor August. In view of the improvement in productionand profit prospects, the gains in the market forequities are not of a magnitude which reflect expecta-tions of an assured continued expansion in business.

High-grade bond prices quickly recovered most of thelosses registered at the outbreak of the war and aver-

ages recently were at midyear levels. The abrupt fallin quotations for Government obligations in Septemberwas followed by gains which by November had restoredprices in substantial part. The general structure ofinterest rates, after some brief rises in September, isnow virtually identical with that at the end of Augustand continues to reflect the extreme ease in the moneymarket.

The rise in commercial, industrial, and agriculturalloans by reporting member banks was given impetusby the acceleration of business activity in September,but the rate of increase has slowed down since the firstfew weeks of the war. The excess reserves of memberbanks reached new highs in October, as a result pri-marily of continued gold receipts from abroad.

The inflow of gold during the 3 months ended inNovember, including net releases from earmark,exceeded $735,000,000. The movement was not,however, so heavy as in the 12 months ended in August,when $3,360,000,000 of gold was added to monetarygold stocks from foreign sources. The total amountof gold held under foreign ownership at the FederalReserve Banks, which reached almost $1,300,000,000 atthe beginning of August, had been reduced to $962,000,-000 at the end of November.

Foreign exchange relationships established in Septem-ber after the 15-percent depreciation of the poundsterling were practically unchanged during Octoberand November.

FINANCIAL STATISTICS

Ye ir a n d m o n t h

1929: October1932: October1933: October1936: October1937: October1938:

OctoberNovemberDecember

1939:JanuaryFebruaryMarch . . _ . . _April . . .MayJuneJuly.AugustSeptemberOctober

FederalReservebankcreditout-

stand-ing,

end ofmonth

\Ion-etarygold

stock

C u r -rencyin cir-cula-tion

Excessreservesofmemberbanks,end ofmonth

Report ng member banks, Wediclosest to end of month

Loans

Total

Com'l,indus-trial,

and ag-ricul-tural

Invest-ments

icsday

Deposits_

De-mand,

ad-justed

Time

Millions of dollars

1,7432,2272, 5482,4532,580

2,5862,5842,601

2.6072,5982, 5872,5952,5732,5782,4862,4462,8792,801

4,0943,9394,037

10, 98312, 782

13,94014,16214, 416

14, 59914, 77815,01415,50915,87816, 02816, 18216, 39016, 82317, 002

4,5235,3565,3696,3216,566

6,6686, 7506, 888

6,7126,6976,7646,8676,9196, 9667, 0517, 0987,2497,328

499842

2,1751, 055

3,2273, 3833, 205

3, 6443,3873,5594, 0984, 2184,1404, 5534,7585,3525,553

18,93410, 4419,1268,7219, 625

8,3278,3178, 430

8,2338,1868,1918,0718,1268,0898,1668,2098, 3508,521

4, 761

3, 8923,8663,843

3, 7673,7733,8143,8413,8223,8333,8873,9964,2294,310

5, 4968,5858, 569

13. 79612,029

13, 08113,00813, 219

13,20913, 40813, 38813, 71413, 55413, 86214, 07814, 23314, 06914,207

15, 34014, 610

15, 76616,01315,986

16, 04815, 96515, 99116, 66016, 96517, 22017, 46218, 09618, 33318,556

6, 8685, 7094,9115,0655, 278

5,1555,1245, 160

5,1835,2025, 2175,2485, 2355,2375,2435, 2475,2315,249

All listedstocks,averageprice (N.Y.S.E.)

Dec. 31,1924=100

125 035.546.486. 562.8

65.464. 166.2

62.664.457.056.660.257.062.257.965.965.8

Alllistedbonds,

do-mestic,

ageprice(N. Y.S. E.)

Dollars

95.6482.0484.7099.4193.17

93.7093.3394 35

94 2595. 0194.9994.8396.0995.3496.4694.0592.4194.59

Capital flotations,corporate

Newcapital

Refund-ing

Thous. of dollars

724,16648, 474

3,109109, 88566, 987

63, 92243, 52159, 544

5,92623, 57152,97978,16021, 74030, 24150,13925,89516, 01918, 200

33, 08819, 015

0271, 517

71, 553

274, 237107, 702235, 493

10, 386136,11546, 689

181, 749161, 502251, 798180, 438317,463

74,175157,314

Divi-dendrate,averageper

share(600

com-panies)

Dollars

2.991.241.061.702.13

1.391.431.41

1.411.421.431.431.431.481.491.521.521.54

Interestrates,com-

mercialpaper(4-6

months)

Percent

13/ 21/

5 /

1/ 5/i ?-5/

5/_3/%-3/4


Foreign TradeFOREIGN trade in October continued the upwardtrend that has been in evidence throughout mostof the year. The commodity flow generally reflectedexpanding economic activity and the seasonal rise,although wartime influences were important, if some-what counterbalancing, factors in the trade movements.Exports of $332,000,000 represented an increase of 15percent over the total value in September, an amountone-fifth above that in October of last year and onlyslightly below the value of exports in October 1937.General imports were up 19 percent from Septemberand 21 percent in comparison with October 1938, to afigure of $215,000,000, the highest monthly total sinceNovember 1937, although import trade has not yetattained the level reached in the first half of thatyear.

The October export trade in nonagricultural productswas valued at $227,321,000, a figure 21 percent inexcess of the comparable total in October 1938 and 2percent above that in Oqtober 1937. Agriculturalexports totaled $95,847,000, representing an increaseof nearly $9,000,000 over October 1938 but a decline ofapproximately $12,000,000 from the total in October1937.

In comparison with October 1937, exports of coal,steel scrap, aluminum, metal-working machinery, and

chemical products were much larger in value in October,and cotton exports were moderately larger. On theother hand, wheat and tobacco exports were sub-stantially smaller and heavy steel exports, as well asthose of automobiles and aircraft, were also lower thanin that earlier period.

The import trade featured relatively large increasesover a year ago in crude materials and semimanufac-tures, as in the preceding months of this year, and lesssubstantial increases in crude and manufactured food-stuffs. Imports of finished manufactures have droppedbelow last year's value in each month since July, prin-cipally as a result of reductions in receipts of burlap,manufactures of silk, linens, works of art, and numer-ous miscellaneous articles. Newsprint imports haveshown larger increases over the 1938 level in recentmonths than in the earlier months of the year.

Actual gains in value of principal commodities inOctober as compared with October 1938 were as follows:Crude rubber, approximately $4,900,000; raw silk,$9,200,000; newsprint, $2,300,000; and lumber, cocoa,coffee, wood pulp, and cut diamonds, from $1,300,000to $1,800,000 each. While higher prices for certain ofthese commodities were a factor in the rise in the totalvalue of import trade, they were of less significancethan the increase in the volume of goods imported.

EXPORTS AND IMPORTS

Year and month

justed3! justed

Indexes

Valueof

totalex-

ports,ad-

Valueof

totalim-

ports,ad-

Monthly aver-age 1923-25= 100

Ex-ports,

in-clud-ing

reex-ports

Exports of United States merchandise

Total

Crude ma-terials

Total

Un-man-ufac-turedcot-ton

Food-stuffs,total

Semi-man-ufac-tures

Finished manufac-tures

TotalMa-

chin-ery

Auto-mo-biles,parts,and

acces-sories

Imports i

TotalCrudemate-rials

Food-stuffs

Senii-man-ufac-tures

Millions of dollars

Fin-ishedman-ufac-tures

1929: October1932: October1933: October1936: October1937: October1938:

OctoberNovemberDecember „ . _ ..

1939:JanuaryFebruary.MarchAprilMayJuneJulyAugustSeptemberOctober

Cumulative January throughOctober:

1929193219331936193719381939

11433425772

3 1153 363 343 533 72

119324665

3 1163 353 373 613 823 503 57

528.5153.1193.1264.9332.7

277.9252.2268.8

212.9218.6268.4230.9249.3236.1229.6250.8288.6332.1

4, 372. 21, 340. 61, 298. 11, 999.82, 711.12, 574. 92, 517. 2

522.4151.0190.8262.2329.4

274.3249.7266.2

210.3216.0264.6227.6245.9233. 4226.7248.1284.0323.3

4, 301. 01,310.81, 276.11, 968. 42, 668. 32, 542. 82, 479. 8

174.360.581.8

100.488.3

72.159.949.4

36.436.540.126.030.225.729.736.566.878.4

871.6406.1446.2518.6561. 1485.2406.4

128.940.054.257.445.0

24.125.019.0

15.013.717.09.27.56.26.0

11.935.747.3

573.4267. 7305.1268.1285. 1184.6169.2

71.825.223.524.938.9

33.329.528.4

31.126.628.023.626.919.519.724.328.837.8

628.9205.7154.6175.1212.3375.1266.2

64.616.924.436.758.7

44.540.050.5

35.534.945.741.048.248.546.053.559.064.5

622.7166.4184.3326.9566.8415.4476.7

211.748.461.1

100.1143.6

124.4120.4137.9

107.4118.1150. 9137.0140.5139.7131.4133.8129.4143.4

2,177.8532.6491.0947.7

1, 328.11, 267. 01, 330. 5

52.811.613.531.844.6

38.734.640.9

31.234.649.443.944.442.243.743.640. 142.3

510.4111.7100.7277.7396. 7411.2415.4

32.85.08.6

15.825.4

17.325.429.2

21.425.328.524.923.820.418.514.912.518.9

489.966.874.0

190.2277.4216.7209.1

391.1105.5150.9213.4226.5

178.5171.7165.5

169.3152.5191.2185.8194.2178.4170.5180.4199.5207.1

3, 751.11,121. 21,187. 51, 983. 42, 593. 81, 613. 71, 828. 9

126.527.246.963.071.7

53.752.453.5

53.948.159.554.962.354.750.061.067.670.5

1,321.5301.8344.7596.5835.9470.6582.5

82.333.534.861.453.0

48.446.844.0

43.441.654.549.151.950.249.648.457. 953.6

827. 3346.8344.2603. 3751.6480.1499.2

82.316.733.240.551.9

35.835.235.3

37.234.0

• 38.837.939.938.636.935.738.345.4

761.1183. 6236.9400.5544.3315.5382.7

100.028.136.048.649.9

40.637.332.8

34. 928.838.443.840.434.833.935.435.738.6

841.2289. 1261.7383. 1462.0347. 5364.8

General imports through December 1933; imports for consumption thereafter. > Adjusted for seasonal variations. 3 Monthly average of unadjusted indexes.

8 SURVEY OF CURRENT BUSINESS December 1939

The Position of United States ShippingBy G. Griffith Johnson, Jr.* Industrial Economics Division

THE provision of necessary shipping facilities provedone of the most critical problems faced during theWorld War by both belligerent and neutral countries.In the later stages of the war its acuteness arose pri-marily from the scarcity of ships resulting from theunrestricted submarine warfare. From the beginning,however, there were serious dislocations owing to thedisruption of ordinary trading operations and routes,the paralysis of port facilities, the diversion of ships andports to military uses, and the near-stagnation ofshipbuilding and repair activity in the belligerentnations. Government action to relieve these difficul-ties was slow in getting under way.

As a result of this 1914-18 experience attention wasnaturally directed promptly toward the probable effect

M ILLIONS Of GROSS TON ON5 OF GROSS TONS

Figure 4.—World Steam and Motor Tonnage of Ships Over 100 Gross Tons,June 30, 1914 and 1939 (Lloyd's Register).

of the present European war on the shipping situation.Would the movement of our foreign trade be hamperedor restricted by a shortage of ships, either in generalor on specific trade routes? How would our own shipsand shipbuilding activities be affected, particularly inview of neutrality legislation? Some tentative obser-vations are possible at this time on the basis of thesituation before the outbreak of war, the experienceduring the last war, and certain trends in the first 3months of the present war. Most of the possibledevelopments which are discussed in this article depend,of course, on the continuance of the war. Should thewar be terminated in the near future, the world shippingsituation will be entirely altered.Tonnage Distribution.

In June 1939 the aggregate gross steam and motortonnage of the world, according to Lloyd's Register, was68,509,000 tons. Figure 4 gives the tonnage of theprincipal countries in 1939, and a comparison withtheir 1914 tonnage. There was an increase of 23,105,-000 tons, 51 percent, from 1914 to 1939. Notable hasbeen the eightfold increase in tankers to 11,437,000tons. These vessels are owned chiefly by GreatBritain, the United States, and Norway.

Throughout most of the post-war years there has beenan excess of shipping facilities, arising in large partfrom State subsidization of national merchant fleets.The World War focused attention upon the defensiveimportance of carrying power, and total tonnage con-tinued to increase after the war, although there waslittle economic need, except in the case of tankers, forit to do so. The trend was partly due to new construc-tion, but it was also a result of the general reluctanceto scrap old tonnage which had been built or bought atgreatly inflated prices. More than off-setting thisobsolescence, however, is the greater speed and generalefficiency of carriers, as compared with 1914, plusimprovements in port facilities and loading equipment.The world's merchant fleet in 1939 is not only 50 per-cent larger, but it is also more efficient per ton than in1914.

The aggregate tonnage figures exaggerate the relativeposition of the United States as a maritime power.The merchant fleet of the United States is comprisedof ships which would ordinarily be considered obsolete,and one-fifth was 1 aid-up as of last June. The mostmodern part of the fleet is the tankers, with an averageage of 16 to 17 years; the passenger ships average21 to 22 years; and the freighters around 24 years.As can be seen in table 1, the United States fleet ismuch older than that of other leading maritime powers.

Table 1.—Age Distribution

Country

United States (sea) -United Kingdom _ -_JapanNorway..Germany

Total, world

i of Tonnage as of Junei 1939

Percent in age group—

5 yearsor less

621272420

16

6-10years

6111121

5

10

11-15years

4247

1823

16

16-20years

3521161633

23

21-25years

381223105

16

Over 25years

1111161114

19

Source: Lloyd's Register of Shipping, 1989-40.

The United States merchant fleet is also considerablyslower than that of other maritime powers. Approx-imately 70 percent of United States vessels are under 12knots in speed, compared with less than 45 percent inthe case of British ships. Ships having a speed of 15knots and over comprise 13 percent of the United Statesfleet and 24 percent of the British.World Shipbuilding Capacity.

The net increase in world tonnage in the year endedJune 1939 was 1,654,000 tons, the largest net increasesince 1921, except for 1928. Launchings in the calen-dar year 1938 approximated 3,000,000 tons, more thanin any year since 1921. Despite this high level ofactivity, rough estimates indicate that in June 1939world shipyards were working at about 75 percent of

December 1939 SURVEY OF CURRENT BUSINESS 9

normal capacity, with 2,859,000 tons of merchantvessels and over a million tons of naval vessels underconstruction. The bulk of the unused capacity was inGreat Britain, where activity had dropped off rathersharply in early 1939. As a result of aggressivegovernment programs, however, operations in bothGreat Britain and the United States have been steppedup considerably during the last 6 months.

The capacity for construction at any one time giveslittle indication of the capacity over a period of time.The size of a ship actually being built on a way may beconsiderably less than the maximum size which the wayis equipped to handle. More important is the fact thatthe speed with which a ship is launched can be variedsubstantially, and this is a determining factor inestimating output capacity. An ordinary merchantvessel of, say, 8,000 tons customarily may require 9months or a year for launching from the time the keel islaid. Recently, a 10,000-ton British ship was launchedin 3 months' time.

The elasticity of ship construction is therefore sub-stantial, and figures on construction capacity at anyone time only roughly indicate the output capacityduring the course of the year. Assuming a similarrelationship between output and ships under construc-tion as existed in 1938, and using the estimate of totalcapacity presented above, the maximum possible worldlaunchings would have been in the neighborhood offour million tons. How much of this could have beenincreased by speeding up launchings at earlier stagesof completion or by the use of night shifts, or to whatextent expansion would have been prevented by short-ages of skilled labor or materials, it is impossible toestimate.Relation of Tonnage to World Trade.

While no exact computation of the excess of shipping-facilities is possible, evidence of its existence is providedby several factors. First, in June 1939 there were3,000,000 tons of laid-up vessels, and this total wassubstantially below that of previous years. Secondly,while total world tonnage had increased over 1913 by52 percent in 1937 and by 55 percent in 1938, aggregateentrances and clearances in world ports, as shown bythe League of Nations figures, had risen only 46 percentand 41 percent in the same years; and the extensivesubsidization of shipping makes it likely that loads pership in 1937 and 1938 represented smaller proportions ofcapacity than in 1913.

Recent movements in freight rates, furthermore, maygive some indication of the extent of this excess capac-ity. In July 1937 entrances and clearances rose to 56percent over the 1913 level, and that year also repre-sented the post-depression peak of the League of Na-tions index of world trade volume. The movement offreight rates in 1937 seems to indicate that the sharprise in world trade led to a mild squeeze in the provisionof shipping facilities. An average of the indexes ofrates on trade to and from four countries (Britain, Ger-

193528—39 2

many, Sweden, and Denmark) was 117 for 1937, com-pared with 84 for 1936, 93 for 1938, and 89 for the first5 months of 1939. Furthermore, the upward movementof freight rates was very sharp in the period May toSeptember 1937, reaching a peak of 134 in the lattermonth.

Consequently, the level of shipping activity duringthe middle of 1937 can be considered, after adjustmentsfor changes in total tonnage, as representing close to fullutilization of shipping facilities for any short-run period.This level was about 15 percent in excess of the levelduring January-June 1939. Over a longer run there issome elasticity in the supply of shipping facilities, aris-ing not only from new construction, but also from thereconditioning of laid-up tonnage, the more efficient re-arrangement of existing routes and ships, and the exten-sion of the life of ships which would ordinarily be brokenup.Immediate Effects of the War.

The above brief outline of the shipping situation atthe outbreak of the present war indicates a substantiallymore favorable position than in 1914. The outbreak ofwar in September had several immediate repercussions.The bulk of the 4,483,000 tons of German vessels wereswept off the seas and immobilized. While this reducesthe supply of shipping facilities, the impediments toocean trade with Germany, except in the Baltic, alsocurtail the need for facilities. Entrances and clear-ances in German ports (including Danzig and Gdynia)amounted to around 7 percent of the world total,whereas her tonnage constituted 6.5 percent of worldtonnage.

Requisitions for military purposes by the belligerentsare also important. During the 1914-18 war, over 20percent of British merchant tonnage on the average wasin military or naval employment, the range being from4 million tons shortly after the outbreak of war to nearly7Y2 million tons in May 1916. The extent and natureof war is important in determining the military require-ments. If the present war is confined to the westernfront the needs will be substantially less than if fightingshould spread to the Mediterranean and Asia Minor.If the productive facilities of France are maintainedunimpaired, its dependence on supplies from Britainwill be less than in the last war. Finally, troop shipsare ordinarily passenger liners, for which there is sub-stantially reduced demand for commercial purposesduring a war. It is unlikely that requisitions are asyet or will be in the near future as large as in the earlystages of the last war.

War conditions, also, immediately involve importantdelays and inefficiencies in shipping operations. Neu-tral ships carrying goods to belligerent zones sufferdelays from contraband control. Roundabout routesmust frequently be substituted for ordinary routes.The needs of the military for port facilities and delaysowing to contraband control are certain to cause someport congestion. The convoy system ordinarily in-


volves very substantial delays, as each vessel is forcedto make intermediate voyages to the port of assemblyand there must frequently wait some time for the con-voy to be collected. On voyages, the speed of the con-voy group is reduced to that of the slowest ship, andzig-zag tactics and round-about routes must frequentlybe used. In addition, port congestion is increased bythe arrival of ships in large groups rather than a dailystream. The British convoy system in 1917-18 in-creased the average length of a round-trip voyage inthe North Atlantic by 25 percent.

Offsetting these factors, however, is the tendency forships to carry substantially larger loads per trip. Dur-ing the last war the quantity of imports per ton of ship-ping entering British ports increased 44 percent between1913 and 1917—each ship carried on the average almosthalf again as much cargo.Long-Run Determinants.

The influences just discussed are important in theperiod following the outbreak of war. They wouldnot, however, determine the adequacy or inadequac}^of shipping facilities in an extended war. This wouldbe determined primarily by three factors: the extentof losses, the level of shipbuilding, and the trends in thetonnage of sea-borne trade.

During the 1914-18 war the Allied and neutralcountries lost 12.8 million tons through enemy actionand 2.2 million tons through marine risk or capture—an aggregate of 15 million tons—40 percent of theirtotal fleets in 1914. The Central Powers lost 0.2 milliontons through enemy action, 2.4 millions through cap-ture, and 0.4 million by marine risk, making a totalof 3 million tons—nearly 60 percent of their pre-wartonnage. The monthly average for the war periodof Allied and neutral losses due to enemy action was251,000 tons; including losses from marine risk, theaverage was 295,000. Losses were 100,000 tons amonth in 1914 and reached a peak in the secondquarter of 1917, when they averaged 746,000 tonsmonthly. Thereafter they declined steadily to 178,000in October 1918.

It would be logical to expect the present war to startout at a stage considerably in advance of the operationsin 1914, insofar as shipping operations are concerned.According to official reports, in the period September 3to November 23, a total of 331,000 tons of Allied mer-chant shipping and 142,000 tons of neutral shippingwere sunk—a monthly average of 173,000 tons. Inaddition, 52,000 tons of German ships were sunk. Thebulk of the Allied losses came in the period immediatelyfollowing the outbreak of war, when ships were scat-tered and without convoy protection. Of total Britishlosses to date, 46 percent or 131,000 tons occurred inthe first 2 weeks of the war. Up to the present,therefore, the Allied and neutral losses of merchantships have not been of a serious nature. They couldprobably increase to double the rate so far withoutseriously impairing shipping facilities, if shipbuilding

operations are maintained. On the other hand, lossesduring the week beginning November 18 rose abruptlyto a level nearly equal to that of the first 2 weeks ofthe war, as a result of the destructiveness of Germanmines. The progress of the war so far, therefore, doesnot provide conclusive indications as to how Alliedand neutral ships will fare in the future.

The convoy system was not started by the Britishuntil February 1917, and by the latter part of 1917only half of the British over-sea traffic was runningeither in ocean or short-sea convoys; by the end of thewar, the proportion was 90 percent. The system provedsuccessful; of 16,693 vessels escorted on ocean corners,99 percent arrived safely at port. This time the con-voy system was inaugurated shortly after the outbreakof war and was undoubtedly responsible in large partfor the sharp decline in Allied losses from the level ofthe first 2 weeks.

With respect to world shipbuilding output, Britishpolicy is of primary importance. It is already apparentthat the British Government is not making the mistakeof the last war, when it permitted the output of mer-cantile tonnage to dwindle to less than 100,000 tons inthe last quarter of 1915. An aggressive program ofconstruction was inaugurated in Britain last springand has been stepped up further since the outbreak ofwar. In neutral countries shipbuilding operations areat or near post-war peaks. The outlook, therefore, isfor expanded world ship production; British launchingsalone may reach two or three times the 1938 level of 1million tons, if shipbuilding operations are not impededby aircraft destruction.

Ship output can be speeded up in an emergency bythe adoption of standardized ship construction. Suchprograms were adopted by Britain at the end of 1916,and by the United States under the Shipping Board.At the Hog Island plant standard ships were assembledfrom 20,000 pieces made from blueprints of a modelship and manufactured at plants all over the country.If it is felt undesirable to undertake a standard shipconstruction program, substantial economies of moneyand time can be achieved through "repeat ships/' thatis, additional production of an ordinary commercial shipof a widely used type.Decline in Tonnage of Sea-Borne Trade.

It seems almost certain that the tonnage of bellig-erent trade will decline as it did in the last war. First,the British blockade prevents in large part the carry-ing-on of ocean trade with Germany, and Germanblockade of the Baltic cuts off that area to Allied andprobably to neutral shipping. Secondly, the Britishhave already indicated their intention to restrict im-ports to essentials from the outset and to conservetheir exchange resources by consumer rationing, importprohibitions and restrictions, and exchange control. Inthe last war no important steps were taken to restrictimports until the end of March 1917, when the importa-tion of a long list of commodities was prohibited except


under license. As a result, the quantity of total importsfell from 81 percent of the 1913 figure in 1916 to 64percent in 1918.

A further tendency affecting unfavorably the quan-tity of trade is the shift toward the movement of fin-ished goods requiring less cargo space than crude ma-terials. Belligerent imports of machinery, airplanes,explosives, and similar manufactures tend to increase,whereas imports of such bulky commodities as lumber,cotton, and paper materials tend to decrease.

The tonnage of nonbelligerent trade may also beunfavorably affected. The trade of neutral countriesin and around the war zone declined sharply in thelast war. A comparison of entrances and clearancesin 1915-18 with 1913 shows an 81-percent decline inthe case of the Netherlands, a 35-percent decline forNorway, and a 49-percent decline for Spain. Whilethese declines do not represent necessarily a comparabledrop in the quantity of trade, since ships tend to carryfuller loads, nevertheless they indicate the decrease inthe demand for shipping facilities. In the course ofthis war the trade of the western European neutrals islikely to suffer again, to a degree depending upon warlosses and the effectiveness of the blockades.

Two factors tend to increase the quantity of non-European neutral trade, namely, the shifting of formertrade with Europe, notably Germany, to non-Europeanroutes and the stimulus to incomes in neutral countriesas a result of the war. However, although the value ofnon-European trade rose sharply in the last war, therequirements for shipping facilities actually declined.Japanese entrances and clearances declined 22 percentin 1915-18 under 1913; those of the United States, 9percent. United States entrances from and clearancesto Latin American and West Indian ports declined 10percent, despite a value increase of 72 percent.

Combining the expected sharp decline in the tonnnageof belligerent trade with the prospects of neutrals aroundthe war zone and elsewhere, the result indicates notonly no likely increase in the aggregate tonnage ofworld trade, but a possible decrease of substantialproportions.

Possible Shifts in Trade Routes.

In addition to the effects just discussed on the totalsupply of and demand for shipping facilities, war con-ditions also tend to induce shifts of tonnage among thevarious trade routes by both belligerents and neutrals.A dominant factor in the shipping situation, not onlyin belligerent trade but in trade throughout the world,is the policy which the British adopt with respect totheir ships operating on non-British routes. Onlyslightly less important are the policies of neutral coun-tries, such as Norway and the Netherlands, with re-spect to the withdrawal of their tonnage from dangerzones and its reallocation to other routes.

Both of these factors depend in large part on the ef-fectiveness of German ocean warfare. In the last war

when the tonnage situation became acute as a result ofthe losses and the withdrawal of neutral tonnage, theBritish adopted the policy of Atlantic concentration.Cross services or direct services to distant countries werestopped or drastically reduced in order that every avail-able ship might be employed in bringing cargoes fromthe nearest available sources. As a result of this policy,British tonnage engaged in non-British trade declinedfrom an estimated 7,675,000 tons in 1913 to 3,703,000tons in 1918, despite the fact that the amount of Britishtonnage engaged in French and Italian ocean trade rosesharply.

To the degree that German ocean warfare proves ef-fective, the neutral countries will tend to withdraw theirships from belligerent trade routes and to attempt toplace them on other trade routes. This in turn willforce some diversion of belligerent tonnage from non-belligerent trade and the concentration of that tonnageon the most essential routes. During the World Warthere occurred a sharp decline in the tonnage of foreignships in the trade of the United Kingdom, especially in1917 and 1918 when submarines were active. The fol-lowing table shows an index of the tonnage entered withcargoes in British trade: 2

Year British Foreign Total

1913 68 32 1001915 56 25 811916 50 24 741917 46 10 561918 49 S 57

The sharp drop in foreign ships operating on Britishroutes was primarily a result of the unwillingness to riskships in combat areas. In view of the Norwegian expe-rience during the last war, when nearly half its merchantfleet was lost, the neutral countries in this war may beexpected to take measures to prevent any large-scale de-struction of their fleets. To some extent these tenden-cies have already appeared in the present w âr. Largeamounts of tonnage have been withdrawn from UnitedStates trade routes, primarily routes to Europe. At theend of the first week of October, nearly 200,000 tons offoreign ships had been withdrawn in ports outside NewYork. Of these, around 75,000 tons were Norwegianships taken from United States-British routes, and muchof this was reallocated to United States-Latin Americanroutes. Finally, the action of the United States inwithdrawing its ships from north European routes is anextreme example of a shift in neutral tonnage, which inturn will induce some shifting on the part of othertonnage.

Summarizing the position of shipping, it appearsthat, unless war losses are unexpectedly large, facilitieswill be more than ample, at least for nonbelligerenttrade. The rising level of shipbuilding and the prob-able decline in the total tonnage of sea-borne trade inan extended war makes it possible that the next fewyears will produce an even larger excess capacity than

2 Source: C. E. Fayle, The War and the Shipping Industry (London, 1929), p. 276.


that existing in the first half of 1939. If, on the otherhand, war losses should prove to be severe, shortageswill appear on belligerent trade routes (as a resultnot only of the losses but also of the probable with-drawal of neutral tonnage), and attempts by belliger-ents to purchase old and new ships abroad can beanticipated.

Restrictions of Neutrality Legislation,

In the case of the United States fleet, the chief directeffect of the war arises from the neutrality legislationrecently passed by Congress. Figure 5 shows theareas forbidden to American ships as a result of thePresidential proclamation under the law: Zone 1 con-stitutes the combat area, into which ships are for-bidden to enter; Zone 2 is the area in which ships areforbidden to visit belligerent ports unless not carryingcargo or passengers; and Zone 3 is the generally unre-stricted area. The merchant fleet was employed ontrade routes as shown in table 2. Only 19 percentwas engaged in overseas trade, of which 9 percentwas on European and Mediterranean routes.

As the combat area is now defined, approximately600,000 tons of United States shipping will be affected.This amounts to about 38 percent of the tonnageengaged in overseas trade. Mediterranean, Black Sea,and Arctic routes remain open, and the possibilityexists, of course, that United States vessels can carrycargoes to open ports from which they can be trans-shipped to final destinations. As long as ample

shipping facilities are available on the forbiddenroutes, however, the extensive use of United Statesships in this manner is not likely.

What are the possibilities of shifting the withdrawnAmerican tonnage to other routes? At the presenttime the total tonnage operating on United Statestrade routes is probably more than adequate to servicethe demand for shipping facilities. The possibility ofplacing American tonnage onto other routes depends,therefore, on the withdrawal of foreign tonnage fromsuch routes, on the favorable competitive position ofUnited States lines which is presumably possible onlythrough subsidies, or on an increase in the quantity oftrade.

It is not unlikely, as already mentioned, that somebelligerent tonnage will be transferred from non-belligerent to belligerent routes, the extent dependinglargely on such factors as war losses and the spread ofŵ ar zones with the consequent need of tonnage formilitary purposes. Furthermore, it may be expected—providing the volume of trade is maintained—thatsome belligerent or neutral ships wall be transferred toAtlantic routes to replace the United States shipswithdrawn. That these transfers will equal the UnitedStates withdrawal in the near future is unlikely, sincethere have been excess facilities on Atlantic routes upto the war period and the decline of passenger trafficwill make available additional space for cargo purposes.In addition, the tonnage of belligerent trade is likelyto decline.

Figure 5.—Zones Established Under the Neutrality Act, 1939 (Prepared by the Division of Commercial Laws, U. S. Bureau of Foreign and DomesticCommerce).


Table 2.—Employment of United States Steam and Motor Vessels, over1,000 Gross Tons, as of June 30, 1939 (Excluding Lake and River Tonnage)

[In thousands of gross tons]

Item

Laid-upCoastwise trade . . _ _ _ .Nearby foreign'Overseas foreign:

Europe and MediterraneanAfricaOrient and Far East -Australasia and IndiaSouth America . _Around the world, etc

Total overseas.

Grand total- . .

Passen-ger andfreight

306300209

1908

6036

12476

494

1,309

Freight

1,2061,871

142

452747588

17928

896

4,115

Tanker

2242,127

182

62

19

1774

172

2,705

Total

1,7364,298

533

70482

154124320178

1,561

8,129

Percentof total

21 352.96.6

8.71.01.91.53.92.2

19.2

100.0

i Includes Canada, Mexico, Central America, West Indies, and north coast of SouthAmerica.

Source: United States Maritime Commission.

On the other hand, it has also been noted that neutralcountries are likely to be hesitant to continue large-scale operations between the United States and bellig-erent countries, particularly if wrar losses run high.While this may involve further shifts of Allied ships toAllied routes, it will also increase the competition ofneutral shippers on nonbelligerent trade routes. Itcan be anticipated that this neutral competition willprevent American ships from capitalizing to the full onthe diversion of belligerent shipping from UnitedStates trade routes outside the war zone.

Approximately 28 percent of United States entrancesand clearances in 1938 were United States ships, 34percent were ships of belligerents in the European war,and 38 percent neutral ships. Figure 6 shows thetonnage entered and cleared at United States ports in1938 by geographic regions and the nationality of thecarrying ships. On the basis of a rough estimate, ap-proximately 155,000 tons of belligerent shipping wereengaged in carrying trade between the United Statesand Latin America. An additional 575,000 tons wasengaged in United States trade with Australasia, theOrient, and the Far East. An outside total of the ex-pansion possible for United States shipping under theneutrality legislation—assuming 1938 trade activity—is 730,000 tons. That assumes complete withdrawal ofbelligerent ships from United States trade, other thanwith Europe and Africa, and no replacement by neutralshipping. This compares with 600,000 tons whichhave to be withdrawn from European routes. Since itis unlikely that all belligerent shipping will be with-drawn—at least immediately—from United Statestrade routes with countries outside the war zone, andfurthermore, since it is certain that United States ship-ping will have to share such diversion as does occur withneutral tonnage, it seems probable that the neutralitylegislation will cause the laying-up of some United Statestonnage, for a time at any rate.

A further possibility is the sale of United States shipsto foreign countries. During the World War 268,000tons of shipping were sold to aliens. The prices of

ships soared along with freight rates. If shippingfacilities again become scarce on belligerent routes as aresult of extreme war losses, the Allies might attempt

PERCENTO 20 40 60 80 IOO

/AT/A/ AMER/CA & L _ L ^ ^ _ _ L _ ^ _ L _ ~ JW£ST /AJO/ES • • • ^ • ^ • I H H T C & tW//M------'------,\-,

TOTAL MMIHBiHK1 1 1

mJmm1 1 1 1 1 1

• • UN/TED STATES ^ ^ GERMAN IHH JAPANESEB8833 BR/T/SH V777A NORWEG/AN E^l OTHERSEE2 FRENCH K m DUTCH

D. D 39-286

Figure 6.—Percent of Entrances and Clearances in United States ForeignTrade, by Trade Routes and Nationality of Vessels for the Year 1938(U. S. Bureau of Foreign and Domestic Commerce).

to purchase tonnage from United States owners, eventhough the tonnage available for sale would largely beobsolete and inefficient. The possibility also exists forthe transfer of United States vessels to foreign registry,subject (as in the case of sales) to the approval of theMaritime Commission. Between October 1937 andAugust 1939 vessels totaling around 300,000 tons weresold or transferred; and in September and October 1939,215,000 tons were sold or transferred. However, inNovember permission was refused the United StatesLines to transfer eight of its vessels to Panamanianregistry.

Should it become necessary to extend the combatarea to include Mediterranean and all British Dominionwaters, an additional 500,000 tons of American shipswould be affected or 1,100,000 tons in all, and the maxi-mum possibility of replacement owing to the with-drawal of belligerent ships w ôuld be reduced to less than500,000 tons. Furthermore, to include Australasiaand Far Eastern waters in the war zone would be to putour essential import trade with that region in anextremely vulnerable position, as a result of its presentdependence upon British and neutral shipping. In1938, British ships provided 56 percent of entrancesand clearances in our trade with that region, and neutralships 25 percent.

The Maritime Commission Program.

In view of the unfavorable prospects for full utiliza-tion of the existing United States merchant fleet thequestion naturally arises as to the need for new con-struction under the program of the Maritime Com-mission. The answer to this question lies in the factthat the merchant marine is vitally important, not onlyas some insurance of services for essential foreign trade,

(Continued on page 18.)


Capital Expenditures of the RailroadsBy Herman Lasken, Division of Economic Research

INDUSTRIAL production, as measured by the FederalReserve index, has recently risen to a volume com-parable with that of the early months of 1937. Thestaying power of this recovery is dependent, amongother factors, upon the current and near-future in-creases in investment expenditures other than thosemade for inventory accumulation. One area in whichcapital outlays have expanded is the railroad industry;hence, the size of this increase in investment and thepossibility of its continuing are of fundamental impor-tance to an appraisal of the prospective economicsituation.

Volume of traffic carried is the principal factor deter-mining the requirements of the railroads for equipment.The direct connection between earnings and traffic,however, and the greater propensity on the part of therailroads to make purchases when their earningsposition is favorable, leads to a fairly close relationshipbetween net railway operating income and total ex-penditures for construction of ways and structures andfor equipment (see fig. 7). Separately considered, ex-penditures for fixed plant show less variation thanthose for rolling stock, and this leads to wide fluctua-tion in equipment purchases with variations in income.

With the large decline in income after 1929, expendi-tures for new equipment fell to a small fraction of theannual average for the decade of the twenties. Follow-ing the increase in carloadings and operating income in1933, equipment outlays rose in 1934, but it was notuntil the improvement in operations became marked—in 1936 and 1937—that this item became significantlyhigher. In 1937 it compared favorably with the samefigure for about half the years of the post-war decade.A decline in net railway operating income in 1938 ofmore than 50 percent from 1937 to the lowest figure ofany year since 1932 brought a reduction in new equip-ment expenditures of almost two-thirds. Of theamount spent for new equipment in 1938, estimated at121 million dollars,1 a large part was the result ofdeliveries of orders placed in the previous year. Aresumption of the upward movement in operatingincome during 1939 was followed by additional ordersfor new equipment, but the extent of this buying hasnot been sufficient as yet to bring equipment manu-facturing activity up to the levels reached in 1937.Requirements for New Equipment.

Further placements of new orders by the railroadsobviously depend upon their expectations with regardto the need for new equipment, in addition to thatnow on order, to meet shipping requirements duringthe coming year. In this connection it may be noted

i Estimated Expenditures for New Durable Goods, 1919-38, Federal Reserve Bui-l.ttin. SpntpmbpT 1939. D. 731.

that the highest weekly loadings reported since 1930,which came during the week of October 21 of thisyear when over 861,000 cars were loaded, allowed afreight-car surplus for the week of about 50,000 cars,and no important shortages were reported. Loadingsof coal and ore increased substantially and the reported

MILLIONS OF DOLLARS1400

1000

A.• \ : // ̂ \//

\\J Vf \TOTAL EQUIPMENT 8c '

\ CONSTRUCTION EXPENDITURES

\ / \ /A " *V •

\^v EQUIPMENT EXPENDITURES

\ ^ — ^

CONSTRUCTION EXPENDITURES

1 1 1 1 1 1 !

-/V£7" RAILWAYOPERATING INCOME

\

\ \ ^

/f

/

!

AA/ \/

x ^

V\

1919 70 71 72 73 '24 75 76 77 78 79 '30 '31 "32 '33 '34 '35 '36 '37 1938

Figure 7.—Net Railway Operating Income and Expenditures for Con-struction and Equipment, 1919-38. (Income Data are Reported by theInterstate Commerce Commission and Cover All Steam Railways Re-garded as One System, Intercorporate Payments Eliminated; Expendi-ture Data are Estimated by the Board of Governors of the Federal Re-serve System and Cover All Roads.)

car surpluses of the types used in carrying these com-modities were reduced to unusually small figures.However, the number of gondola hopper cars suitablefor coal, coke, or ore shipments awaiting repairs onOctober 1 amounted to more than 110,000 units.

Table 1.—Railway Equipment Installed and Retired, Class I SteamRailways (Excluding Switching and Terminal Companies)

Year

19321933..1934193519301937 .. .1938

Locomotives l

Installed

Total

477268312424

1,054877395

Newunits

901490

13998

441252

Re-tired

Total

2,3162,6812,9122,1501,7981,3211,237

Freight-train cars

Installed

Total

8. 5456', 410

31,36618, 49675, 97991,12825, 721

Newunits

2, 8151,936

23, 9486, 987

37, 55469,11815, 213

Retired

Total

69,394117,268129, 026122, 346131, 754105, 32470, 235

Passenger-train cars

Installed

Total

579607703730

1,1231,074

642

Newunits

587

270225159576275

Re-tired

Total

1,9283,4433,3683,0491,6311,4131,592

1 Not including reclassifications.

Source: Interstate Commerce Commission.

The ability of the railroads to meet an importantpart of their needs by repairing old equipment isindicated by the data in tables 1 and 2. The differencebetween the total number of installations and the partof that total consisting of new units is considerable.The availability of further cars and locomotives for


service after repairs is indicated by the difference be-tween the total number of units on the lines and thenumber serviceable. This difference comprises thoseunits which are awaiting classified repairs, of which alarge proportion can be made serviceable. While therecorded total of locomotives continued the declinewhich is now of 15 years7 duration, repair operations in1936 and 1937 reduced the percentage of bad-orderunits to total and yielded net increases in the pieces ofequipment available for enlarged traffic requirementsin 1937. Similarly, the decline in the number offreight cars—14,000 units from 1936 to 1937—wasoffset by repairs so that there was a net increase inserviceable units over this same period of 6,000 cars.That the railroads have taken advantage of the supplyof equipment awaiting repairs in order to meet currentneeds is evident from the statement of the Associationof American Railroads to the effect that an unusuallylarge number of cars and locomotives were repairedand placed in service just prior to the fall peak intraffic.

While there is a distinct impression that many ofthe locomotives and cars now in use or awaiting repairsare obsolete or superannuated, the age limits whichwere commonly accepted during the early twentieshave been extended by the greater use of steel infreight and passenger cars and by more efficient build-ing of locomotives. Over three-fourths of the passen-ger cars are now steel, and of the remaining quarter,two-thirds have steel underframes. The proportion offreight cars entirely steel has increased from less thanone-third in 1925 to more than one-half at present,while the same figure for cars either all steel or steelunderframe has increased from about three-fourths toover 95 percent (see table 3). The rapid rise in the

proportion of steel cars since 1931 results partly fromthe decrease in the total number of cars, brought aboutlargely by the retirement of cars of nonsteel construc-tion. However, there is no doubt that the better-constructed equipment on the lines today is capableof longer service than that of earlier periods, and withthe large supply of cars and locomotives now availablefor repair and reinstallation into active service, therequirements of the railroads for new equipment underpresent conditions of traffic need not be considerable.On the other hand, an increased volume of carloadingsbeyond the point reached this fall, if susta ned, wouldno doubt necessitate substantial purchases of newequipment.

Table 3.—Steel and Steel Underframe Freight Gars, Class I Steam Railways(Excluding Switching and Terminal Companies)

Year

1925192619271928192919301931

Percent of total freight cars

Steel orsteel

under-frame

75.979.280.281.783.785.687.2

Steel

31.733.434.034.535.937.137.8

Steelunder-frame

44.245.846.247.247.848.549.4

Year

1932193319341935193619371938

Percent of total freight cars

Steel orsteel

under-frame

88.090.091.392.394.295.295.5

Steel

38.439.641.743.546.951.152.5

Steelunder-frame

49.650.449.648.847.344.143.0

Source: Interstate Commerce Commission.

Capacities and Utilization of Existing Equipment.Another source of increased ability to carry traffic

which is not revealed by either the number of service-able units or the total number available, is the greaterpower and capacities of the newer locomotives andfreight cars. In all the periods shown in table 2, from1924 through June 1939, the average power of locomo-tives and the average capacity of freight cars hasincreased. In several cases these increases have been

Table 2.—Number, Power, Capacity, and Condition of Locomotives and Freight Cars; Class I Steam Railways (Excluding Switching and TerminalCompan ie s )

End of month

December:1924192519261927192819291930193119321933193419351936

June: 1937December: 1937.June: 1938December: 1938,June: 1939

Total

Steam locomotives

Serviceable

Number

64, 87063,60862 45260, 78458, 75856, 81955,67854, 46252,49050, 32346,86945, 37544, 03543, 67343, 44843 12442, 44241,807

58, 94358, 46058, 01656, 37854, 37852, 70750, 46247, 47242, 93239, 42836, 52535, 46136, 68536, 99737,13035 24934, 56133, 425

Tractiv

All loco-motives

Millions ofpounds

2, 5892, 5842,6092, 5952,5622,5312,5282, 4962, 4352,3702, 2512, 2062,1672, 1602,1632 1552, 1292. 105

3 effort i

Average perlocomotive

Pounds

39,91540, 62941, 77942, 69943, 60644, 53745, 40745, 83046, 38247, 08848,02848, 60749,21149, 46949, 78149 969

SO, 16050,344

Electriclocomotive

units

Number 2

352362419449596601618670725738748842817

818

829

Freight cars

Total- Serviceable

Thousands

2,3372,3472,3362,3132,2822,2632,2582, 1932,1272,0271,9071,8171,7451,7291,7311 708l' 6821,654

2,1462,1892,2062, 1832,1482,1442,1102,0061,8611,7371,6171, 5501,5401 5451, 5161 4791, 4501, 431

Capacity

All cars

Millions ofpounds

207,177210, 137211, 407210,923209, 539209, 516210, 426205,913200,547192, 826183, 363175, 772170, 410169 883170, 809169 002166, 766164, 460

Averageper car

1,000 pounds

88,64389, 54290,49191,17591,81792, 59393,21193,87994, 28795,10896,13196, 75497,64398 24398, 70098 92999,17099, 424

1 Not including power of boosters.2 Figures prior to 1928 represent "number of locomotives."Sources: Steam locomotives and freight cars, Association of American Railroads-, electric locomotives, Interstate Commerce Commission.


more than sufficient to offset the decreases in the numberof units available. While this consideration may notbe important to a discussion of available facilities asrelated to freight-car loadings, each being expressed innumber of units, it has a bearing on the ability of therailroads to meet the higher tonnage requirements ofa general business expansion.

More efficient routing of available cars through theCar Service Division of the Association of AmericanRailroads has acted to reduce the possibility of carshortages. Except for very brief periods, there havebeen no important shortages during recent years of lowutilization of the railroad facilities, and the systematicshifting of cars to points needed through the activitiesof this central organization has tended to keep shortagesof a local nature at a minimum. The possible invoca-tion of the authority of the Bureau of Service of theInterstate Commerce Commission, should serious short-ages be threatened, is also a potential factor, the efficacyof which has not yet been tested.

Purchases of Rails.

Steel rail manufacturing represents a small but im-portant segment of the steel industry, and the positionof the railroads in regard to their demand for new railsis of interest in any consideration of the part played bythe railroads in the stimulation of other industries. Itis evident from table 4 that the major part of total railproduction is made use of b}̂ the railroads for replace-

ment purposes. Despite large variations in this itemfor the railroads, the relatively greater stability indemand for rails than for rolling stock is in agreementwith the relative stability of expenditures for waysand structures noted above. The more direct rela-tionship between tonnage carried and the wear on railsis a factor in determining the future rail requirementsof the railroads in the event of further increases intraffic. Reports indicate large increases in rails cur-rently on order since the summer, but it is doubtfulwhether the greater part of these are intended for useimmediately on delivery. Ordinarily, such orders areplaced later in the winter for delivery in time for lay-ing in the spring and summer. The placement oforders at this time appears, therefore, to have thecharacteristics of the anticipatory buying evident inmany lines following the war declarations of September.Table 4.—Steel Rail Production and New Rail Applied in Renewal by

Class I Steam Railways (Excluding Switching and Terminal Companies)[1,000 tons]

Year

1925192619271928192919301931

Steel-railproduct ion

2, 7853,2182, 8062, 6472 7221, 8731,158

New raillaid in re-

newal, classI roads

1.9502,2102,1252,0801, 9581, 517

985

Year

1932193319341935193619371938

Steel- railproduction

1

11

403416010712220446623

New raillaid in re-newal, class

I roads

395403631583921

1,030600

Sources: Troduction, American Iron and Steel Institute; rail laid, Interstate Com-merce Commission.

NUMBER OF LOCOMOTIVES

MONTHLY AVERAGE

l\ FfiE/GHT CARSI \ f (RIGHT SCALE)

1 [ I

THOUSANDS OF FREIGHT CARS45

END OF MONTH

LOCOMOTIVES(LEFT SCALE) \

1920 '21 '22 '23 '24 '25 26 '27 28 '29 '30 '31 '32 '33 '34 35 36 '37 38 1936 1937 1938 1939

40

0.D.39-28I

Figure 8.—Unfilled Orders of Equipment Manufacturers, 1920-39. (Data on Locomotives are Reported by the Bureau of the Census and Cover All Pur-chasers; Data on Freight Cars are Reported by the Association of American Railroads and Cover Orders of Class I Roads, Exclusive of Orders in RailroadShops.)


Railway Equipment Manufacturing Industry,

The degree to which the equipment industry, asdistinguished from railroad shops, has shared in ex-penditures for new equipment has varied considerably.In 1933, Class I railways reported only 1 freight car onorder with equipment manufacturers during the entireyear, while the number of cars on order in their ownshops during the year averaged in excess of 1,000 units.The fluctuations in activity in the railroad shops, asmeasured by unfilled orders on hand, have been wide,but they have not been so violent as those of the equip-ment manufacturers. That the railroads are able tofulfill a large part of their requirements themselves isindicated by the fact that during the peak of 1937activity, unfilled orders held by the railroad shops ranaround one-fourth of the total and were higher than atany time since these data were first made available in1923. More than a fifth of the unfilled railroadfreight-car orders at the end of September 1939 werein their own shops, and increases in the number on handduring October were evenly divided between the rail-road shops and equipment manufacturers.

Activity in the equipment manufacturing industrynaturally reflects the irregular placement of orders bythe railroads. The high production immediately afterthe war was followed by a steady downward movementto exceedingly low totals in 1932 and 1933, with theonly important break in this trend occurring in 1929.Federal aid extended to the railroads in 1934 helpedreverse the movement and rising freight traffic andearnings in 1936 and 1937 brought further advances inthe equipment industry.

Important orders for new equipment were placed latein 1936 and early in 1937 in anticipation of an enlargedvolume of traffic during the 1937 fall peak, and thesebrought unfilled orders held at that time by equipmentmanufacturers to totals which compared favorably withthe volume on hand in 1929 (see fig. 8). With thenormal seasonal decline in new equipment demand,shipments exceeded new orders, and unfilled orders onhand dropped after April. Employment was reducedin car manufacturing in July and in locomotive buildingin October (see fig. 9). Carloadings, which had beenmaintained at relatively high levels throughout the firstthree quarters of 1937—reaching a recovery high inSeptember of that year—dropped precipitously duringthe last three months of the year. For the first quarterof 1938 they were the lowest since 1933. A lack of neworders, usually placed around the year-end for deliveryin time for the following fall peak of carloadings,brought about a decline in activity in the railway equip-ment manufacturing industry. By the middle of 1938,the indexes of employment and pay rolls in the carindustry were about one-third of the 1937 top. Em-ployment in the locomotive industry fell in about thesame proportion, while pay rolls declined to about afifth of the earlier figure.

Some improvement toward the close of 1938 andthrough the first half of 1939 was indicated by theslightly higher volumes o unfilled orders, employment,and pay rolls in the industry; activity neverthelessremained relatively low until September. Then neworders placed for freight cars brought the volume ofunfilled orders held by equipment manufacturers at the

BY YEARS

INDEX NUMBERS(1923-25-100)I8O

I 60

140

120

100

80

60

40

20

O

LOCOMOTIVES,EMPLOYMENT

CARS;PAY ROILS

IOCOA4OT/VES,_PAY ROLLS

\ ^ . vi i i i i i i i i r i i i i i

1923 '24 '25 '26 '27 J28 29 30 '31 '32 '33 '34 '35 '36 '37 '38

INDEX NUMBERS (1923-25 = 100)I 80

I 60

BY MONTHS

CARS,.EMPLOYMENT^

y^LOCOMOT/VES, PAYROLLSPAYROLLS

I I I I I I I I 1 1 I I I I I I 1 I 1 I 1 1 I I I I I I I I I I I I 1 II I I I

140

I 20

I 00

80

60

40

20

01936 1937 1938 1939

D.D-39-28O

Figure 9.—Employment and Pay Roll Indexes, Gar (Electric and Steam Railroad) and Locomotive (Other Than Electric) Building Industries, Not In-cluding Railroad Repair Shops, 1923-39 (U. S. Bureau of Labor Statistics).


month end to the highest total for that month since1929. While a favorable showing was made in Sep-tember, due principally to the unseasonal placement ofthe new orders, the absolute volume of car orders onhand was still only about half the number on hand at thehigh point of 1937. The comparative position of ordersfor locomotives was not so favorable as that for freightcars.

Reports for October reveal further increases in thequantity of unfilled orders on hand, though the waveof buying has receded with November placements muchreduced. Unfilled freight-car orders at the end ofOctober were about equal to those held in August 1937,and locomotive orders to those held in December 1937.Some gains in employment above that shown in table3 are, therefore, to be expected. However, these gainsmay not be great unless further orders are placed insubstantial amounts.

Because of the long period of production for the majorproducts and because of shifts in type of output, neithernew orders, unfilled orders on hand, nor shipment datafor railway equipment afford complete measures ofactivity in this industry. The employment and pay-roll data compiled by the Bureau of Labor Statisticsof the United States Department of Labor, correctedto the various Census reports, afford perhaps the bestindication of the actual trend of operations, includingthose forms of activity which are related neither to themanufacture of new cars nor to the building of newlocomotives. Repair work done by the car industry,as reported by the Bureau of the Census of the UnitedStates Department of Commerce, adds some stabilityto an otherwise widely fluctuating total value product.

While the total value of cars and parts produced fellfrom 225 million dollars in 1929 to almost 10 milliondollars in 1933, the decline in receipts for repair workwas from 97 million to 33 million dollars. Duringthis period, employment fell about two-thirds and payrolls three-fourths. In 1935, receipts for repair workof almost 48 million dollars again exceeded the valueof cars and parts produced, and in 1937 a further in-crease was reported in repairs although the much greaterincrease in building operations reduced the relativeposition of this item in the total. Another source ofactivity which has become of considerable importanceto the car industry is the production of other metalproducts not normally classified in this industry. Whilethis type of production represented less than 6 milliondollars of a total of 328 million dollars in 1929, its im-portance had increased by 1937 to the point that outof a total of 335 million dollars almost 35 million dollarsworth of products not normally classified in this in-dustry were reported.

Repair work has not been so substantial a buffer forthe locomotive industry as for the car industry, butthe manufacture of products not normally belongingto the industry represented more than half of the totalproduct in 1933 and one-fourth in 1935. The per-centage-to-total decreased considerably in 1937 as aresult of the relatively large orders for new locomotives,but a sizable increase in the "other products" item wasnevertheless reported. Both the car and locomotivebuilding industries have developed along lines whichoffer them limited basic stability even though their mainsource of operations fluctuates very