Jolts & Expectations

The stockmarket reaction whose appearance Wall Street had been waiting for last week blithely appeared. After a fortnight's drifting at about the same level, on volume about half that of booming June and July, prices dropped for six successive days. At week's end all gains since July 2 had been erased; from the August 6 recovery high of 145.67, Dow-Jones industrial averages plopped to 136.21.

Commentators generally passed this off as a "technical correction," Wall Street's way of saying that prices which had gone ahead faster than Recovery were dropping back to fall in line with the industrial trend. Meanwhile, business indices indicated no serious relapse into Depression. Steel production last week was still about 40% of capacity; carloadings were down 8% from the previous week; automobile output at 13,790 units was the year's lowest. Counterbalancing such statistics, power production climbed to the highest point since January, bank debits rose 10%. Detroit wires hummed with thousands of telegrams ordering laid-off workers back to the plants to prepare for what Ward's Automotive Reports foresaw as "a steady rise until November or December."

How U. S. business leaders as a group tot up these mixed figures was last week ascertained by Chairman George A. Sloan of the Consumers' Goods Industries Committee, who compiled a survey of opinion. He announced: "Reports . . . point to some definite improvements in demand and production and more especially in morale. . . . By and large these reports present evidence of hope and expectation rather than any material realization. . . ."

While the U. S. was thus expecting, if not enjoying, a continued revival of business, European businessmen were wondering how long their duress would continue. Great question in Europe last winter was whether the U. S. would pull Europe into the economic morass (TIME, Feb. 28). It did. Question now is whether the U. S. will pull Europe out again.

Last week figures from abroad indicated a slight leveling off in business, but London's famed financial sheet,The Economist, remarked: "We cannot conclude that the downward trend in British business has been reversed. . . . In France, where for some months rising wholesale prices have paradoxically countered falling industrial production, a slight improvement has set in. . . . Only in Scandinavia is business maintained at a high level, but even there certain signs of a recession in investment activity have appeared. The recession has gathered way in the Low Countries; and the Far East must still be counted out of the commercial ring. Elsewhere, mainly in the British countries and Latin America, trade is just hobbling along, as it was earlier in the year."

England's slump appeared in unemployment figures totaling 1,802,912 against 1,356,598 year ago; in slack seasons for seaside resorts like Brighton, Bournemouth and Ryde; in coal production, down from 20,000,000 tons year ago to 17,000,000 this June. The figures which most jolted British investors were the earning reports of the four chief railway companies--London & North Eastern, London, Midland & Scottish, Great Western, The Southern. Fortnight ago, when all four showed net revenues far below expectations and Great Western passed the first interim dividend since its consolidation, there were editorials in many a paper.

Actually, the British roads are in no such predicament as U. S. lines; net revenue for the four, totaling -L-38,000,000 in 1937, has fallen -L-4,668,000 in the first half of 1938. For W. B. Burton-Baldry, "world's wittiest market letter writer," this was enough of a decline to warrant a ponderous discourse; only at the end of his latest epistle did the usual whimsey appear: "Our serious moment has been occasioned by the result of the L. & N. E. Railway figures. We went to Kings Cross Station to take a ticket for Scotland. We pushed a ten pound note through the grille--it was a relic of last year's U. S. Steel dividend--and the booking clerk asked us if we wanted to buy a ticket or buy the railway."

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