Turnabout in Expansion

Beamed Presidential Economic Adviser Gabriel Hauge: "No doubt about it. That's big news." The big news was a report from the Commerce Department that industry's expenditures for plant and equipment apparently stopped declining in the third quarter, will start climbing in the fourth quarter. The Department polled industry, found capital outlays are expected to be at the same annual rate in the third quarter as in the second, $30.3 billion, seasonally adjusted. Spend ing is expected to rise in the fourth quarter to $31 billion, some three to six months before forecasters had expected the turnabout to come.

Industry is encouraged to spend more because sales and new orders are on the rise. Washington reported that from May to July, manufacturers' sales rose $1.1 billion, to $26.3 billion. New orders to manufacturers also climbed $1.3 billion to $26.3 billion. Meantime, the rate of inventory liquidation slowed considerably, a sign that the day is near when manufacturers and retailers will stop living off the shelf, start replenishing stocks with fresh orders. The book value of manufacturers' inventories dipped $400 million in July, far less than the $700 million drop in June. The figure was down to $49.8 billion.

One of the reasons for the spurt in sales and orders was the ever-growing construction boom. Total estimated construction set in place during August reached an alltime monthly high of $4.8 billion--$160 million better than July.

Soft spots in the economy were beginning to harden:

P: Exports, though still 15% below last year, gained 3% from June to July.

P: Rail carloadings, while still 13% off the year-ago pace, rose to the year's high in August's last week, showed every sign of continuing up in weeks ahead.

P: Copper output was boosted 15% by Phelps Dodge Corp., the No. 2 domestic producer, following a similar rise by the No. 1 producer, Kennecott.

P: Aluminum production was increased by Reynolds Metals from July's 73% to 83 1/2% following a similar recent rise by Kaiser Aluminum.

Even the appliance industry, which has been lagging for more than a year and a half, showed new life. Factory sales of new TV sets during August topped the year-ago pace for the first time during 1958. Borg-Warner's Norge division hired 600 workers and put on second shifts "to meet unfilled orders and refill depleted inventories."

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