Vigorous development of business activity during the rest of 1922, merging into fullfledged prosperity in 1923, was prophesied by Colonel L. P. Ayres, Vice-President of the Cleveland Trust Company, speaking Saturday night at the dinner of the Harvard Club which concluded the annual conference of the University Committee on Economic Research. The dinner was attended by some two hundred business men, Colonel Ayres said in part:

"The upturn of commerce and industry during the past year has largely been due to the attempt of the business world to make good four great shortages. The first of these was the shortage of building construction which had been accumulating during the past six years. This shortage had reached such large proportions by the beginning of 1922 that careful estimates indicate that in our cities it amounted to as much as the total amount of building normally done in two and a half years. This means that the construction industry would have to work at 25 percent above its normal output for 10 years to make good the accumulated deficiency. In view of the amount of this shortage and its widespread distributions, it seems entirely probable that the building boom of 1922 will continue through 1923, but probably with somewhat diminished vigor.

Shortage of Railroad Equipment

"The second great shortage was one of railroad equipment. It had been accumulating during the war period and since the war, and this year it has made itself felt in an acute demand for locomotives, cars, rails, and repair parts. Railroad earnings are increasing, and even those roads that are in straitened circumstances are placing large orders. There seems to be every probability that the makers of railroad equipment and supplies will continue to be active during 1923. This insures a very considerable bulk of business for the iron and steel Industries, for the railroads are their best customers.

"The third of these shortages was one of automobiles and trucks. Since most of us would not have agreed last year that any shortage existed, it seems strange to call it one. Nevertheless the amazing activity of the motor industry during 1922 shows that there did exist a real and great shortage of cars, for clearly there were some millions of people in this country this year who wanted new automobiles and who had the money with which to satisfy their desires.

High Automobile Production

"During recent months automobile output has been making new high records, altogether in excess of any heretofore reached in the second half of any year. There are no evidences that demand will suddenly diminish during 1923, and the present prospects are that sales will reach high figures next year. During the present year production capacity has increased, and very great extensions of automobile plants are now nearing completion. One thing that seems certain is that the automobile industry in 1923 will reach an unparalleled pitch of competition. Probably there will be notably fewer competing automobile firms in 1925 than there are in 1922.

"The last of these four great shortages was a somewhat general shortage in many lines of the thousands of articles sold in stores. This shortage has been gradually developing since prices broke in the spring of 1920, and started on their long downward course that continued to the early months of 1922. When prices are falling merchants purchase goods in as small amounts as possible, because they do not want to take the losses that would result if the market value of the goods should drop before they could sell them. For nearly two years the wholesale purchasing of the country was done on a short-time basis, and much of the ordering was almost on a week to week basis. This gradually produced a condition of distinctly low stocks on hand in thousands of retail establishments.

Prices Now Rising

"Since the beginning of this year prices have been rising, and the influences that produced the shortage are now reversed. Present tendencies are for merchants to order enough for present needs and those that probably will arise in the near future, for they fear that if they do not buy now they will have to pay more later. As in the case of the other three shortages, it seems probable that the effects of this one will continue to be felt in 1923, and that they will constitute a stimulating influence on industry and on commerce.

"We have considered four great shortages that were largely instrumental in bringing about the present revival of business. In discussing how long that revival is likely to continue we must consider the probable trends of four kinds of prices. First came the prices of securities, the market quotations for bonds and stocks.

Bond Prices Now at Top--

"It seems likely that bond prices have about reached their top for the present movement. In times of business revival the prices of bonds tend to rise during all the first part of the general recovery, and then to stop rising and gradually to decline as industry expands to full activity. That characteristic course has been followed so far in this business recovery. It would seem likely that not much further increase should be expected, and that bond prices might probably be somewhat lower at the end of 1923 than they are now.

"Stocks have been rising for more than a year in one of the steadiest and most sustained bull markets of which we have any record. It has been the experience of the past that such a market does not terminate until prosperity is general. If present conditions continue, that time will come not many months in the future. A personal guess would be that the turning point of the present rising market for stocks might be expected to come some time after January and some time before July, depending on the rapidity of expansion in industrial production.

Interest Rates Rising