Capital Goods Industries and Recovery

Report Outline
Recent Trends in Capital Goods Production
Recovery by Spending vs. Recovery Through Savings
Obsolete Machinery as a Recovery Factor
Restoration of Industrial Balance
Special Focus

Recent Trends in Capital Goods Production

Since 1929 there have been four distinct upturns in American business. The first spurt occurred in the summer of 1932 and according to the Federal Reserve Bulletin, was due largely to long deferred increases in textile output. The second came in response to the reopening of the banks in the spring of 1933. An anticipated rise in steel prices brought about a third brief upswing in May, 1934. The fourth is now in progress, and in two important respects it differs sharply from its predecessors. It is of considerably longer duration, and it is the first of these flights from depression to be accompanied by a marked gain in the production of capital goods.

The current upturn may be said to date from September, 1934, when the Federal Reserve index for production of manufactures started a climb from 69 to a peak of 90, reached in January of this year. Instead of declining sharply from the latter figure, as was the case in the three earlier upturns, the index dipped slightly and continued at an approximately even level until October, when it reached a new post-depression high of 94. The low for the year is 84, reported in May and June.

1934–35 Gain in Orders for Industrial Equipment

While the index for total industrial production continues upon an even keel, the production of machines and of foundry equipment is increasing with a speed and constancy unmatched since the depression began. These gains in production of industrial equipment are clearly revealed in the following indexes, which are typical of the current trend: