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Since overall industrial output is to a very
great extent a function of coal and steel,
the economic weakness of the Zone lies in
its dependence on outside sources for these
basic commodities. Expressed in relation to
industrial requirements, coal availability in
recent months for the US Zone (including
zone-produced coal and receipts from other
zones) was less than one-half; in steel, the
May proportion was about one-sixth.
CONSEQUENCES OF WAR
To put present industrial activity in the
US Zone in its proper perspective, the back-
ground of the economic consequences of six
years of war, of complete military defeat of
Germany, and the resulting economic chaos
during the early months of the occupation,
must be painted in.
The high rate of German industrial output
during the war resulted in far more than
normal depreciation of industrial and trans-
portation equipment. Inability of the Ger-
man war economy to maintain a high level
of munitions and civilian production kept
consumer goods output far below- replace-
ment needs -   especially during 1043.44,
when heavy Allied air attacks accentuaft d
that need. The destruction of and damage to
factories, machines  railroad  and rolling
stock; the loss of all kinds -of-consumer
goods in the bombed-out cities, from pots and
pans to furniture and housig, all educed
industrial capacities while6 siujtaneously
increasing the demand for, tens 4;hoitusans
of commodities and services.;-A
Economic and especially indtistrial chaos,
virtually; complete througout, emaiy'6i
V-E Day, continued on a decrede ing stale
for perlbaps six months id. almostal .fieldi
ToJay, even where order has been &e-tab-
lished, the consequences othis long herio4
of almost complete sanator    stil its
fest. While the. ecxtrme w-ar-iand tear r-
sulting directly from war and adfet We
ceased, normal depreciation H4 all d Wurable
and non 'urable goods:- islf  from  bein
replacedl by thee Zone's 'pr'et  idAustrial
-output. An outstandn   e xap   i: iaI
mining machinery and equipment, replace-
ment and repair of which is vital to main-
tenance and increase of coal output. Thus,
viewed from this perspective, the industrial
economy of the US Zone is still in the
initial stages of recovery. Not until in-
dustrial output has tripled or quadrupled can
a reasonable balance between new production
and depreciation be expected. Only then will
"living off capital" cease.
In contrast to these fundamentally un-
favorable long-term aspects of the Zone's
industrial economy the short-term outlook
for a continuation of the upward trend since
December is encouraging.
Barring unfavorable developments, the
May increase of 18 percent in solid fuel
loadings assures a somewhat adequate supply
to industrial coal consumers through the
early summer weeks. This improvement
reflected a modest rise in coal output in the
Ruhr and Saar and the comtinued with-
drawal of hard coal from Ruhr stockpiles.
These ~two factolres, plus a 113 percent per-
fornm ae from the Soviet Zone, raised ful-
fillment of. allocations to the US Zone to
100 percent -the best performance yet. In
addition, a seasonal decline in coal require-
ment s on the part of non-German consumers,
made somewhat more coal available to in-
dustry.'
PiROGRE;SS IN STEEL INDUSTRY
Perhaps- even mrF basic than the im-
proved outlook for coal is the progress made
in the tivou and steel industry since the middle
of April, when  foif blast furnaces and
~~aller migllls were re4activated. The improve-
idite~nt in ingot VsfeeI production-should pro-
vide within the-near future some alleviation
of the shortage of steel which has held back
:production of many important industrial
items, notably mining spplies, farm machi-.
nery, trucks-and'- spare parts. To the--extent
that lack xf iron and steel has retarded
over all ou tputtim the past, tuore pig iron and
r           4t0teel neans stimulation of pronductio
rigthe early sumAer ll anongthe lime.