Looking Ahead

By Alvan T. Simonds, President, Simonds Saw and Steel Co.

T.he year 1930 waq a year of greatly reduced lumber production. ft was, of course, a yeat of small production and consumption of nearly every commodity. What is the outlook for 1931? The chart below shows that the reasonable expectation is for a rise in industrial production through 1931 and the first part of. 1932. This forecast was explained in detail in the January, 1931, issue of the Guide. The tion in these years turned men's thoughts arvay from building new residences, new homes. Perhaps most of them delayed this until after they cashed in on their profits in 1929. In the four years 1923 to 1926, inclusive of both, residential building was 46.3Vo of the total value of all building. In 1929 residential building was only 33.5% of the value of all building. Wild speculation hurt the lumber producer. It

Short Cycles Since The War

The dottctl line 'k commercial paper rates, New York City, reversed. The heazty soMd line is the solume of industrial production, Federal Reserve Bulletin. Thc' light solid line running through l93L into 1932 is the estimated aolume ol inilustrial production, if the fifth cycle develops os haoe the preceding four. lffi, the base tine for industrial production, is adjusted to an annual increase ol 3-l/3/o.

question now for lumber producers and distributors is, "Will lumber produ,ction and demand move up with industrial production?"

There has, without doubt, been some falling off in the use of wood by its three principal consumers-the builders, the railroads and the automobile manufacturers-who are using concrete, steel and aluminum in its place. There_is no gain in anyone closing his eyes to this fact. On the other hand, wood has and is yearly finding new uses. In the long run there is little danger in the United States of the supply exceeding the demand.

There have been four peak years in industrial production since the war, 1920, L923, 1926 and 1929. There have been four years of depression, 1921, 1924,7927 and 193O. Until 1926 lumber fluctuated with the short cycle movements in the volume of industrial production. Following the post-war depression of. 1921, there came a great revival in building, which reached its peak in 1928. Railroad demand and automobile production reached their peaks in 1929. Lumber production reached its peak in 1925 and fell off slowly through L926,1927,1928 and 1929. As we have stated, it fell off very rapidly in 1930 as did production of other commodities.

In the four years 1923,1924,1925 and 1926, lumber production was very stable at near the highest point since the war. These were also fairly stable years in business activity as a whole. With the speculative mania which began in L927 and ran wild over a precipi.ce in 1929, lumber production dropped sharply. The figures reveal that specula- doubtless hurt every other producer the lvorld over. Horv many lumber men helped it on in 1929?

The years 1931 and 1932 ought to see a considerable increase in residential building. With the railroads in better circumstan,ces, they should bring increased demand from that source. At this writing (February 16) the upturn seems to have arrived. There has been an almost general agreement since the first of the year that business would be better in 1931. The stock market has endorsed this belief in an unusually vigorous manner. The unfilled steel orders of the United States Steel Corporation have increased for three consecutive months. Ianuary. however. showed a decline in building contracts which- is not encouraging for lumber producers; but lumber production moved up during the month. January is usually near the year's low in building contracts. No great increase can be expected in February for it is a short month. In March, April, May and June building reaches its highest for the yeat.

Since 1925 commodity prices have been on the dovvn swing and very sharply since the end of 1929. They moved up during the second half of 1927 and all oI1928. This upward movement was a minor upswing in the longer downward movement from 1925 to date. Following each great war, as shown by the chart, commodity prices move down for many. years. This general movement is made up of minor swings, some up and some down. A rninor upward swing is indicated to begin soon if it has not already started. (March 1)