After the Snow Melts ...

To describe the mood of the U.S. economy last week, businessmen were telling the story of two Vermont farmers.

Said the first: "Did you sell them pigs yet?"

"Yep."

"Get as much as you expected?"

"Nope," came the reply, "but I didn't expect to."

Many businessmen candidly admitted that they had been guilty of a little Vermont optimism in year-end forecasts for 1960, and are now revising their estimates. Even with the revisions, they still expect 1960 to be the most productive year in U.S. history.

President John F. Smith Jr. of Inland Steel Co. estimated that 1960 steel-industry production will hit 120 to 125 million tons, down from his earlier forecast of 130 million, but still way above the previous record of 117 million tons in 1955. "Caution is in the wind," said Jones & Laughlin Steel Corp. Chairman Avery C. Adams, "because there are a few tangible signs that the early 1960 targets for the economy as a whole were set too high." Nevertheless, he expects that his company, fourth biggest steelmaker, will set records for 1960 sales and profits.

Borg-Warner President Robert Ingersoll trimmed his estimate for the company's 1960 sales by 5%, but it is still 5% more than 1959, when sales hit $650 million. Said Ingersoll: "The most encouraging sign at Borg-Warner, from the point of view of the economy as a whole, is that capital expenditures will be the largest in the company's history, $37 million, up from $20 million in 1959."

For all major industries, spending was on the rise. The Commerce Department's survey of capital spending showed outlays rising 14% above last year's to a total $37 billion during 1960. By the fourth quarter, spending for new plants and equipment will be at the record annual rate of $38.5 billion (see chart).

The two major factors that have helped upset earlier estimates of the 1960 boom are the weather and the decline in the stock market. Said Virgil Martin, president of Chicago's Carson Pirie Scott & Co.: "The weather has been violently bad, and everybody has been disturbed psychologically by the stock market dip. Even people who are not in the market are affected. It's the headlines." In the New York area, severe snowstorms cut heavily into department stores' sales, forced them down 25% for the week ended March 5. Blizzards caused sales to drop 25% in St. Louis, 31% in Boston. Across the nation the drop was 17% below the 1959 level. A blizzard closed most businesses in Atlanta last week, forced many department stores to postpone sales. Sighed one auto dealer: "A man has to be pretty desperate to shovel his way into a dealer's showroom." Another factor: Easter will fall three weeks later this year than in 1959, postponing much retail buying. Sears, Roebuck President Charles Kellstadt said Sears is having an unimpressive first quarter, but he still expects sales in 1960 to be as good as last year. Said he: "We'll have to wait a while to see whether there's been an underlying change in the economy or whether it's just been all this snow."

The newest figures from Washington showed no underlying change. Personal income for February is expected to set a new record, topping the $393.3 billion seasonally adjusted annual rate set in January. Employment figures, another key barometer, are expected to show that in February, unemployment dropped below the 5% mark for the first time since last June. In a reversal of the normal seasonal pattern, the figures are expected to show a decline in unemployment and an increase in employment during February.

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