Paradox of the First Quarter

Throughout the first three months of 1940 the Federal Reserve Board Production Index headed steeply downward, but last week corporation earnings reports failed to show the same trend. Associated Press's tabulation of the first 90 to report showed earnings 43% above the same quarter of 1939 (68% not counting overweighty American Tel. & Tel.). The reasons for this paradox were that: 1) although production continuously declined, the quarterly average was still good because of big backlogs of orders piled up last fall; 2) first-quarter earnings looked good because they were compared with the very poor first quarter of 1939. Some sample first-quarter reports.

> Johns-Manville, insulating and renovating other men's long-idle plants, ripped through its biggest backlog since 1936 for a net of $781,681, up 524.8%.

> With export markets disappointing, big oil refiners piled up huge gasoline inventories. But they managed to maintain prices, and a cold winter made a seller's market for fuel oil. Shell Union Oil netted $5,314,158 up 1,011%.

> Aircraft and shipbuilders strained to fill war orders, and automakers had a better winter than last. So did Electric Auto-Lite, which makes accessories for all three. Its net: $2,485,480, up 53.3%.

> Anaconda Copper has sold its share of 250,000 tons of copper sent to France alone since World War II began, is still exporting it. Its net: $10,400,000, up 182%.

> With better business, U. S. businessmen need more telephones, have made 7% more toll calls than last year. A. T. & T. netted $46,048,069, up 15.9%.

> Bituminous coal swings with the production index and the price of fuel oil. Both factors favored M. A. Hanna Co., which netted $390,238, up 126.7%.

> To U. S. papermakers Mathieson Alkali has been selling salt cake they used to buy from Germany. Its net: $364,142, up 124.9%.

> Railroads bought long-deferred modern equipment when traffic picked up last fall. Westinghouse Air Brake delivered these orders in 1940's first quarter, netted $1,847,140, up 362.9%.

> Steelmakers, now down to 60% of capacity, were for a time strained enough to need new firebrick. Harbison-Walker Refractories netted $379,600, up 82.9%.

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