Bare Shelves

After three months of the longest industry-wide steel strike in U.S. history, the shelves of industry were finally showing some bare spots. Manufacturing and trade inventories at the end of August stood at $89.4 billion, a decline of $400 million from the previous month. Commerce Department experts predicted that inventories, which had been building up at an annual rate of $9.8 billion in the second quarter, would be cut so sharply that the rate may drop by more than $10 billion in the third quarter. Chiefly because of the depletion in inventories, they expect the gross national product to skid $5 billion in the third quarter, perhaps preventing the G.N.P. from reaching the half-trillion mark by year's end.

The fact that the slide will not be more severe is a good indication of the basic health of the U.S. economy. Despite the steel strike, most sectors of the economy are moving along steadily. To help offset a bigger drop caused by inventory depletion, the gross national product will benefit in the third quarter by increases of $1 billion in state and local expenditures, $1 billion in new plant and equipment, $3 billion in consumer spending. "Despite the crippling of one of the nation's chief industries," said the First National City Bank of New York in its monthly business letter, "the economy has been strong and vigorous."

But even the basically sound economy has taken some hard body blows. August machine tool orders were down 17.3% to an estimated $52.4 million as manufacturers held off ordering machines until they were sure of having the steel to feed them. Sales of manufacturers, wholesalers and retailers dropped $2.2 billion in August to a rate of $59.5 billion. Freight carloadings were only 74% of normal for this time of year. Assessing the situation, the National Association of Purchasing Agents reported that "the steel strike has lasted too long to enable us to avoid serious dislocations in production. Prospects for good business in the immediate months ahead are tied directly to an adequate and steady supply of steel."

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