Building Blocks

A pickup in capital-goods outlays is a key prerequisite to sustain the new boom. Last week there were plenty of signs that capital spending is accelerating at a faster rate than was expected and that the pace will continue into 1960.

Republic Steel Corp., the nation's third largest steelmaker, announced that it will spend $375 million on a major improvement program over the next four years. The first project will be a $45 million hot strip mill, with a capacity for 145,000 tons per month, to be added at Republic's Warren, Ohio plant. To dispel any doubts about overcapacity, Republic's Chairman Charles M. White told stockholders that he foresees the possibility of total steel industry output in 1960 exceeding 1955's record of 117,036,085 tons. Republic, which has boosted its own steelmaking capacity nearly 50% since the end of World War II, may, said White, well add another 3% by 1963.

Another sign of the capital-goods buildup was machine-tool orders. Makers reported that new orders in April reached an estimated $50.6 million, nearly double the $28.3 million during the same month last year, and well ahead of shipments (see chart). Said James C. Hodge, executive vice president of Warner & Swasey Co., leading U.S. toolmaker, whose orders are up at a rate more than 100% higher than last year: "We expect new order increases to continue during this year and probably into 1960."

Heavy electrical equipment makers also reported healthy improvement in new orders. General Electric's large steam-turbine-generator department said that orders thus far this year are almost equal those for all of 1958, while Allis-Chalmers' backlog of unfilled orders has risen 72% since the end of last year, now stands at $225 million, a record peacetime total. Other sectors of the capital-goods complex, such as generator makers, locomotive builders, and construction equipment manufacturers, reported rising new business. Summed up McClure Kelley, president of Baldwin-Lima-Hamilton (machine tools, road-building equipment): "The improvement comes from an across-the-board increase in our regular business and extends to all lines of our business."

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