Condition of the Automobile Industry

Report Outline
Growth of the Automobile Industry
Evidence of Recession in Automobile Industry
Condition of the Automobile Market
Competition. In the Automobile Industry
Effects of the Stock Market Collapse
Special Focus

The Federal Reserve Board's index of industrial production declined from 126 in June, 1929, to 117 in October, the month of the stock market collapse. This decline of 7.1 per cent in a period of four months, coming after an almost continuous rise since January, 1928, may be compared with the decline of this index in 1927, the last year of business recession, from 112 in March to 100 in December, a decline of 10.7 per cent.

The Federal Reserve Board's index of industrial production does not include building construction, which was less active during the first ten months of 1929 than in any corresponding period since 1925. Analysis of the decline in building has shown that it was due almost exclusively to a falling off in residential construction during 1929. In the November issue of the Federal Reserve Bulletin, an analysis of the figures that make up its index of industrial production was presented by the Federal Reserve Board, which showed that almost the entire responsibility for the decline after June lay with the automobile industry and closely related industries. These industries, which make up about 30 per cent of the total, were chiefly responsible also for the increase in the general index in 1928 and the first half of 1929. The following table shows the changes in the general index and in the indices of automobile, automobile tires, and iron and steel, all of which showed a much more rapid advance up to last June than did total production, and since that time have shown a much more rapid decline.

The decline in iron and steel production since June appears to have been due chiefly to a curtailment of orders from automobile concerns, for the railroads, which are the second most important users of steel, have been buying equipment at a rate exceeding that of any other recent year. In August, September, and October, the railroads bought seven times as many freight cars as during the corresponding months of 1928, and three times the volume of rails and locomotives. Aside from the construction industry, the condition of the automobile industry is acknowledged to be the most important element in present industrial uncertainty.