Obviously, such statements become more meaningful when the importance of those production reductions are measured. 22% of firms responding asserted that the products listed above were a very significant factor in total corporate sales. 37% of the companies declared them moderately significant and 27% said they were marginally significant. In understanding this information, it may be useful to recognize the $10 million in sales to a billion dollar firm might be considered insignificant by that firm, yet could be highly significant in terms of total sales to the customers now unable to obtain the product.

There had been many reports of firms stopping production of certain products within a given product line because of controls, because of shortages attributable to controls, or because controls have forced companies to eliminate less profitable items. Frequently this has put the purchaser of these products in the position of having to upgrade to a higher quality product at a higher price. A classical example is the paper situation where buyers, in order to obtain their paper requirements had to settle, in some cases, for a higher basis weight grade than was necessary and at increased cost.

Another example deals with the manufacturer of steel reinforcing bars, used with concrete in construction. "Re-bars," as they are commonly referred to, are generally considered to be a low profit item for the steel companies, and therefore, since the price was not allowed to increase, demand soon outstripped supply and the steel companies were left with no incentive to produce the product. The regulatory provision allowing firms to obtain freedom from the profit margin restraint, provided they kept price increases within certain limits, led many firms to rely more heavily on higher profit items and provided little incentive for the continuation of production on the lower profit items. Moreover, many firms dropped entirely the production of items that had been, and probably would for some time have continued to be, carried at a loss.

The larger firms had half again as many production interruptions and curtailments as the smaller firms. It is impressive that one in three small firms and almost half of all large firms took such actions because of controls. The chart does not identify cutbacks which occurred for reasons other than the influence of controls. The fact remains clear, however, that an alarming number of fimrs were forced to reduce output because of controls.

Approximately 50% of all firms acknowledging cutbacks indicated that production was interrupted or curtailed because of the unavailability of raw materials. In the greater majority of cases, these shortages resulted in production interruptions and reductions rather than in total curtailments. Slightly more than 44% attributed the cutbacks to uneconomical production where economic return does not justify production activity in light of controls. The remaining 6% of firms gave other reasons for these actions. The most frequent response in the "other" category was that firms had or were about to exceed their allowable profit margin-a penance to be paid for efficient production.

Only a small number of firms were able to expand other product lines to compensate for the interruption or curtailment of products due to controls. 8.8% of the large firms and only 2.7% of the small firms reported expanding other lines to make up for cut-offs. 25.3% of the small firms and 33.1% of the large firms were able to make partial restoration. But a majority of 58.1% of large firms and 72% of small firms reported not being able to expand other lines to compensate, even on a partial basis.

PERCENT OF FIRMS EXPERIENCING UNUSUAL DIFFICULTY IN OBTAINING ITS
REQUIREMENTS OF IMPORTANT MATERIALS OR SUPPLIES.

"Has your

As demonstrated by the above graph, all firms were asked: company experienced unusual difficulty in obtaining its requirements of any important materials or supplies?" Practically all large firms (97%) and the vast majority of small firms (89%) said, "yes".

Firms responding in the affirmative were then asked to name the principle influencing factors to which the shortages were attributable. The responses are visually displayed on the following graph:

97%