ERP 1948 Midyear

Mid r Economic Reportof the President

TRANSMITTED TO THE CONGRESS

July 1948

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

THE MIDYEAR ECONOMIC

REPORT OF THE PRESIDENT

To the Congress, July 30, 1948

Together with a report

THE ECONOMIC SITUATIONAT MIDYEAR 1948

by the

COUNCIL OF ECONOMIC ADVISERS

UNITED STATES GOVERNMENT PRINTING OFFICE

WASHINGTON: 1948


LETTER OF TRANSMITTAL

T H E WHITE HOUSE,

Washington, D. C, July 30, 1948.The Honorable the PRESIDENT OF THE SENATE,

The Honorable the SPEAKER OF THE HOUSE OF REPRESENTATIVES.

SIRS: I am presenting herewith a Midyear Economic Report to theCongress. This is supplementary to the Economic Report of the Presidentof January 14, 1948, and is transmitted in accordance with section 3 (b)of the Employment Act of 1946.

In preparing this report I have had the advice and assistance of theCouncil of Economic Advisers, members of the Cabinet, and heads ofindependent agencies.

Together with this report, I am transmitting a report, The EconomicSituation at Midyear 1948, prepared for me by the Council of EconomicAdvisers in accordance with section 4 (c) (2) of the Employment Act of1946.

Respectfully,

III


ContentsT H E MIDYEAR ECONOMIC REPORT OF THE PRESIDENT.

A time for action.The economic situation in summary.Recommended program.

T H E ECONOMIC SITUATION AT MIDYEAR 1948 (a report to the Presidentby the Council of Economic Advisers).


To the Congress of the United States:

ON January 14, 1948, I transmitted to the Congress my annual Eco-nomic Report under the Employment Act of 1946. At the present

stage in economic affairs it is again desirable that the Congress and thecountry be presented with an up-to-date survey of the economic situation,the difficulties it presents, and the solutions called for. This Midyear Eco-nomic Report is transmitted to the Congress for that purpose.

A Time for Action

IN the years since the end of hostilities in World War II, the Americaneconomy has offered an impressive display of inherent strength and elas-

ticity. More than 10,000,000 veterans have been smoothly absorbed intothe activities of the business world. Month after month, the labor forcehas been employed at a level which but few were willing to forecast. Inspite of high living costs, our people continue to enjoy high standardsof living. The income of American consumers, and the resources ofAmerican business, furnish the basis for sustained markets. Our financialcondition is strong. A national debt of tremendous size has been managedso skillfully that we are prone to treat too lightly the problems which itstill offers.

But our present prosperity should not blind us to the growing threatsto our well-being. Repeatedly, I have called attention to the developinginflationary conditions which endanger both our domestic strength andour place in world affairs. In addition, recent events have forced us intoa preparedness program adding to the strains upon our home economy,and making it even more imperative that we act with courage and dispatch.In my recent message to *he Congress upon the opening of the specialsession, I again advised the Congress of the dangers that we face, and maderecommendations to meet them.

I must emphasize that the course of inflation does not run accordingto any set schedule. Until the very eve of an economic collapse manypeople are apt to grow more and more confident about the soundness of theeconomy and the indefinite continuance of the boom. It may not be truethat "a boom is always followed by a bust," as many students of business

1


affairs frequently say. But it would be reckless to assume that the bust willnot happen if we neglect action to control the boom.

For 2 years, it has been asserted that if matters were left alone there wouldbe so great an increase in production that it would take care of prices.Increasing the supply of goods is, indeed, to be sought through every prac-ticable means. But, historically, no important inflation has been cured inthat manner. Nor has this one, despite the fact that every factor of highprofits, heavy market demand, and large funds available for investmenthas been favorable to the expansion of production.

The policy proclaimed in the Employment Act requires us to devise andadopt positive measures to stop this inflation and secure relative stabiliza-tion. It is not too late for preventive measures, and we are not yet'forcedby the tragic consequences of depression to adopt measures which wouldinterfere with our free economy far more than would any or all of themeasures I have proposed. I realize that the anti-inflationary program Ihave offered will impede some business plans, will curb some profit oppor-tunities, and may limit some wage advances. It is of the very essence ofa plan to counteract inflation that this be done. All groups will ultimatelybenefit when it is done.

The Economic Situation inSummary

THE recommendations that I have made for dealing with inflationare based upon a candid look at the whole economic situation as it

has developed over the past 6 months, and upon a careful analysis of wherethis situation may lead us if we do not act in time. Below I summarizewhat seem to me to be the points of greatest significance in this situationand this analysis. A more detailed examination of the facts, and a moreextended analysis, is contained in a report on The Economic Situationat Midyear 1948, prepared for me by the Council of Economic Advisers,which I am transmitting to the Congress along with this Midyear EconomicReport.

Employment in the first half of this year ran continuously above thelevel of a year ago. Some 850,000 workers were added to the labor force,yet unemployment in June was only 2.2 million—400,000 less than a yearearlier. June civilian employment set a new record of 61.3 million.

Industrial production reached a new postwar peak in February and, afterthe work stoppage in coal mining, approached it again in June. Improved


industrial relations and high business confidence reinforced by increasedGovernment commitments for foreign aid and defense give promise of con-tinuing high-level output for the rest of the year.

Agricultural production ran below the level of the first half of last yearbecause smaller numbers of livestock and tight feed supplies have reducedthe output of most livestock products. At midyear, our second largest wheatcrop was being harvested, and generally favorable crop reports were high-lighted by an indicated production of over 3.3 billion bushels of corn—anew record. While such a crop could not remedy the meat shortage duringthe rest of this year, it would provide the basis for more ample supplies oflivestock products in 1949 and thereafter.

Gross national product reached a new high of 246.5 billion dollars peryear during the first half of 1948, reflecting some increase in production butmostly the rise in prices.

Consumer income ran at an annual rate of about 208 billion dollars, com-pared with 195 billion in 1947. Consumer income after taxes increasedfrom a rate of 174 billion dollars to a rate of 186 billion.

Consumer expenditure, as a result of some buyer hesitation in the firstquarter, increased less than disposable income, leaving a small increase innet consumer saving.

The distribution of income, according to the most recent data, has changedbut little since 1946. A survey of families, however, showed half theNation's consumer spending units falling substantially behind in the raceof incomes with living costs during 1947. One-fourth of the family unitsspent more than they earned. Low-income people were spending pastsavings predominantly for current expenses, higher-income people moreoften spending theirs for durable goods or converting them into residentialor business investments.

Consumer credit continued to expand during the first half of 1948.Business investment took a larger share of the national output in the

first half of 1948 than during 1947. Equipment outlays have been excep-tionally high since the war; plant construction expenditures have increasedless strikingly. Present indications are that such outlays will continuehigh throughout the rest of the year. Nonfarm inventories increased mark-edly during the first quarter of the year, when sales lagged, but leveledoff in the second quarter as sales picked up.

Profits exceeded last year's average, reflecting high prices for a highvolume of output. First quarter data, however, indicated a drop in profitsof small manufacturing firms.

Residential construction is expected to increase the total supply ofdwelling units by more than a million during 1948. This high output has


been accompanied by an increase in costs that is outrunning consumers'ability to pay for the housing they need.

Net foreign investment, at less than half the rate of the last quarter of1947, in part reflected decreases in exports and increases in imports in ourtrade with all continents. The foreign aid program will increase our surplusof exports during the rest of the year.

The Federal cash surplus during the first half of 1948 amounted to 7.6billion dollars. Receipts ran 7 percent higher than last year, payments9 percent lower. The reduction in income taxes and the increase in ex-penditures for defense and foreign aid will virtually eliminate the surplusfor the second half year. The Federal debt was reduced about 5 billiondollars during the first half of the year, bringing it down to 252 billiondollars.

State and local government expenditures have overtaken revenues, anddeficits are likely to increase.

Prices rose after a decline in February. Many farm prices regained orsurpassed their earlier levels and industrial prices resumed their climb. Bymidyear, price increases appeared to be accelerating. The index of con-sumers' prices has now reached an all-time high.

Wages continued the third round of increases that began last fall thoughinterrupted by the break in commodity prices. Most of the third round in-creases have roughly corresponded to the rise in cost of living since the pre-vious contract.

Foreign aid and defense expenditures during the present fiscal year willincrease pressure on the domestic economy. New defense expenditureswill not be great during the next few months, but will rise thereafter. Bothprograms have a special impact upon such short-supply items as steel, othermetals, and farm machinery, and will draw increasingly upon our alreadyfully employed labor force. More adequate allocation authority is neededif we are to avoid progressively more serious disruptive effects of theseprograms upon supplies, prices, and the organization of production.

The reduction in income taxes will reduce Federal revenues by about5 billion dollars at the same time that expenditures will be substantiallyincreasing under the new programs. The deflationary influence of recentGovernment cash surpluses will thus be replaced by the inflationary influenceof additional expenditures on the part of consumers whose tax burdens arereduced.

The general outlook as to inflation shows conflicting influences. Onthe one side, the supply situation in a number of industries is improvedover a year ago. Bountiful crops are in prospect. Postwar expansion pro-grams are nearing completion in many lines of production, and we shouldexperience a gradual increase in output from an enlarged and modernized


industrial plant. Commendable caution continues to be shown by busi-ness in avoiding speculative overexpansion, and many leaders in bothindustry and labor can be applauded for the conscious restraint they haveexhibited in their pricing policies and wage demands.

The immediate situation is dominated, however, by three interactingprocesses making for continued inflation. First, consumer demand forgoods and services, business demand for investment goods, and demandsarising from expanding Government defense and foreign aid programspress strongly upon production. Second, we are currently in the midstof a round of substantial wage and price increases in major basic indus-tries. These developments foreshadow continuing and ramifying effectson cost structures and prices in many related lines of production, on the costof living, and on further wage demands. Third, credit expansion, partlya cause and partly a result of inflation, still persists.

The facts add up to a clear and disconcerting conclusion. In spite ofsome favorable factors, we are in the very midst of gathering inflationaryforces, which day by day are imposing additional hardships upon count-less families, and day by day are undermining the foundations of the re-markably high level of postwar prosperity that we have thus far maintained.

The hard facts of today leave no room for complacency. Though mostpeople are optimistic about the immediate business outlook, lasting pros-perity is not assured. Even in the midst of the present prosperity, theaverage American sees that the value of his accumulated savings hasdeclined, and that many of his neighbors living on pensions or fixed salariesare actually worse off than they were a year ago. Looking abroad, wesee that, despite great progress, many countries are still far below the livingstandards needed for sustained production and are dependent on outsidehelp for any hope of further advance. We must be on our guard lest ournational prosperity and security be undermined by inflation at home orby misery abroad.

Our American prosperity depends in part on world events, but far moreon our own action or inaction right here at home. More than 90 percentof all the goods and services that we produce are for domestic purposes.

But thus far we have shown a blind disregard of the dangers that besetour path. Despite my repeated warnings and recommendations, we havenot adopted adequate legislation for controlling inflation. The failure tocontrol inflation effectively in the past makes it increasingly urgent that weadopt and apply vigorous measures to guide us safely from the uneven post-war boom to an era of sustained and stable prosperity.

We are now challenged to carry out the pledge to the American peoplecontained in the Employment Act of 1946 that it shall be the policy of ourGovernment to "utilize all its plans, functions, and resources * * * to


promote maximum employment, production, and purchasing power/5 inan economy of free competitive enterprise.

It is no less important to take action to forestall a business collapse thanit is to use Government measures to overcome a depression once it hasarrived. Our success in this effort is essential for the reconstruction of apeaceful world.


Recommended Program(Excerpt from the President's Message to the Congress, July 27, 1948)

Positive action by this Government is long overdue. It must be takennow.

I therefore urge the Congress to take strong, positive action to controlinflation. I have reexamined the anti-inflation program I proposed tothe Congress 8 months ago. In its essentials that program is as soundnow as it was then. It has been revised and strengthened in the light ofchanging circumstances. The program I now propose is as follows:

First, I recommend that an excess-profits tax be reestablished in orderto provide a Treasury surplus and provide a brake on inflation.

Second, I recommend that consumer credit controls be restored in orderto hold down inflationary credit.

Third, I recommend that the Federal Reserve Board be given greaterauthority to regulate inflationary bank credit.

Fourth, I recommend that authority be granted to regulate speculationon the commodity exchanges.

Fifth, I recommend that authority be granted for allocation and inven-tory control of scarce commodities which basically affect essential industrialproduction or the cost of living.

Sixth, I recommend that rent controls be strengthened, and that adequateappropriations be provided for enforcement, in order to prevent furtherunwarranted rent increases.

Seventh, I recommend that stand-by authority be granted to ration thosefew products in short supply which vitally affect the health and welfareof our people. On the basis of present facts, and unless further shortagesoccur, this authority might not have to be used at all.

Eighth, I recommend that price control be authorized for scarce com-modities which basically affect essential industrial production or the costof living. I have said before, and I repeat, that many profit margins havebeen adequate to absorb wage increases without the price increases thathave followed. Rising wages and rising standards of living, based on in-creasing productivity and a fair distribution of income, is the Americanway. Noninflationary wage increases can and should continue to be made


by free collective bargaining. Where the Government imposes a priceceiling, wage adjustments which can be absorbed within the price ceilingshould not be interfered with by the Government. The Government shouldhave the authority, however, to limit wage adjustments which would forcea break in a price ceiling, except where wage adjustments are essential toremedy hardship, to correct inequities, or to prevent an actual loweringof living standards.

The measures I have recommended make up a balanced program toattack high prices. They are all necessary to check rising prices and safe-guard our economy against the danger of depression. If they are madethe first order of business by the Congress, as they should be, they can bepromptly enacted. Every week of delay will mean additional hardship forthe American people.


THE ECONOMIC SITUATION

AT MIDYEAR 1948

A REPORT TO THE PRESIDENT

BY THE

COUNCIL OF ECONOMIC ADVISERS


ContentsPage

I. EMPLOYMENT, PRODUCTION, AND PURCHASING POWER 1

The course of employment 1The course of production 2Production prospects 3The flow of goods and purchasing power 5

Consumer income, expenditure, and saving 6Business investment, income, and financing 10International transactions 15Government transactions 18Summary: the Nation's Economic Budget 22

II. PRICES, WAGES, AND THE IMPACT OF THREE GOVERNMENT AC-

TIONS 27

The course of prices 27The course of wages 31The impact of three Government actions 35

Foreign aid and domestic supply 35Defense demands and civilian supply 38The impact of tax reduction 41

III. THE ISSUE BETWEEN INFLATION AND STABILIZATION 43

APPENDIXES

A. The Nation's Economic Budget 51B. The Distribution of Consumer Income and Ownership of Liquid

and Other Assets 65C. Statistical Tables Relating to Employment, Production, and

Purchasing Power 74

793637°—48 2 III


LETTER OF TRANSMITTAL

COUNCIL OF ECONOMIC ADVISERS,

Washington, D. C, July 22, 1948.T H E PRESIDENT:

SIR: The Council of Economic Advisers herewith submits a report, TheEconomic Situation at Midyear 1948, in accordance with section 4 (c) (2)of the Employment Act of 1946.

Respectfully,

^_/?^l/V^v

Chairman,

Vice Chairman.

/W


I. Employment, Production, andPurchasing Power

W E enter the second half of 1948 with our labor force fully employed,with total production high, and with inflationary pressures con-

tinuing. A review of some major economic events of the first halfof 1948 will indicate where we stand and what trends can be foreseen.

THE COURSE OF EMPLOYMENT

The employment situation has continued strong, with the demand forlabor so active that a relatively large inflow of additional workers wasreadily absorbed. There were about 850,000 more workers in the laborforce in the first half of 1948 than a year ago, nearly double the rise thatwould have been expected on the basis of population changes and prewartrends. This increase was due mainly to the abundance of job oppor-tunities at good wages, but it also appears that the pressure of living costsinduced many housewives and teen-agers to seek jobs.

Total nonagricultural employment rose to record peacetime levels, whileagricultural employment was somewhat below 1947. In June, civilianemployment stood at 61.3 million, compared with 60.1 million a year earlier.(See chart 1 and appendix G, table 7.) Thus, "sixty million jobs" becomesa floor to be protected by every means possible in the future, no longer anobjective that the faint-hearted said our business enterprise could not attain.

With more than 61 million in civilian employment, the unemploymentfigures have continued low. There were 2.2 million persons unemployed inJune of this year, compared with 2.6 million in June 1947. While someworkers in certain areas had difficulty in finding suitable work, there hasbeen no general unemployment problem. In fact, some employers havecontinued to have trouble in securing the types of labor they needed.

The broad underlying demand for additional workers has been felt inalmost all major lines. Construction has been setting the pace, but sig-nificant gains have occurred also in manufacturing, finance, and services.Employment in mining, transportation and public utilities, and governmenthas changed little. (See appendix G, table 8.)

1


On the other hand, the leather industry experienced a greater than usualseasonal downturn this spring, followed by a substantial recovery in June.Employment in the rubber industry has been declining steadily, averagingabout 10 percent below the first half of 1947.

CHART 1

LABOR FORCECivilian employment in June exceeded 61 million for the first time.Unemployment continued at a very low level.

MILLIONS OF PERSONS*80

MILLIONS OF PERSONS*

80

TOTALLABOR FORCE

60

40

20

1946* 14 YEARS OF AGE AND OVER.

SOURCE: DEPARTMENT OF COMMERCE.

1947 1948

THE COURSE OF PRODUCTION

Total production has maintained very high levels. The output of in-dustrial goods (including minerals and manufactured goods) for the 6months was not quite 3 percent above the 1947 average level. (See chart2 and appendix C, tables 11 and 12.) As to particular industries, thevolume of construction and the output of electric and gas utilities haveboth been running considerably higher than last year. Transportationjust about equaled the levels of a year ago. Basic industries such as steel,chemicals, and construction have operated close to present capacities. Thepetroleum industry has had difficulty keeping up with demand even though


running with wide open throttle. Consumers' goods continued, in general,at high-level production.

The short corn crop of 1947 resulted in a tight feed situation and, incombination with declining numbers of livestock, led to reduced market-ings of livestock products in the first half of 1948. The total volumeof farm marketings in the first half of this year was about 7 percent belowthe level of a year earlier.

The output of goods would have been even higher but for certain specificshortages—notably of fuel, electric power, freight cars, and steel. Theseshortages continue to impede expansion, but there has been some improve-ment over 1947.

While industrial disputes, particularly in coal mining, reduced outputconsiderably in March and April, the return of coal mining to normaloperation has resulted in a substantial improvement in industrial outputduring May and June. By midyear, industrial production approximatelyregained the postwar peak reached in February. The fragmentary evi-dence available indicates some improvement in labor productivity duringthe first half of 1948.

PRODUCTION PROSPECTS

The heavy demands of consumers, business, government, and foreignbuyers for the output of American farms and industries emphasize theurgent need to expand production. The production outlook for the cominghalf year is good, but not significantly better than in the last half of1947 or the first half of this year.

Since we are currently operating at maximum employment and maximumcapacity in most fields, any further increase in production is dependentlargely upon increased efficiency and improved technology. Such gainscannot be very great in the short span of a few months or a single year.Other factors such as weather, industrial relations, and business psychologyare likely to have a far more influential short-run effect.

On these counts, the immediate prospect seems promising. Industrialrelations, while disturbed in some industries, promise to be better thanthey were in the first half of the year, particularly since relatively fewmajor wage contracts come up for negotiation in the late summer and fall.Forward commitments under the foreign aid and defense programs, addedto the vigor of the domestic market, give confidence to merchants, manu-facturers, and bankers.

In June 1948, there were 2.2 million more persons working in nonagri-cultural employment than a year ago. The flow of materials, while stillnot adequate in the durable goods fields, should permit production to pro-ceed with fewer interruptions than we have witnessed during the past


CHART 2

INDUSTRIAL PRODUCTIONIndustrial production has remained fairly steady sincelast September.

PERCENT OF 1935-39 AVERAGE, SEASONALLY ADJUSTED

TOTALINDUSTRIAL PRODUCTION

• 0 0 I I I I I I I I I I I I I I I I I I I I I I t I I I I I I I

1946 1947 1948

NONDURABLE MANUFACTURES

100 I I I I I I I 1 I I t I I t I I I 1 I I 1 1 I L__L_L_t— 100

100 I I I 1 y i I I I I I I I I I I I 1 1 1 1 I 1 1 I I I I t I 1 I i ^1946 1947 1948

SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.


year. There is a likelihood that nonagricultural production in the secondhalf of the year may be slightly higher than it was in the first half.

In agriculture, the season of damaging floods is past, and present cropprospects are excellent. If the favorable weather we have enjoyed so farthis season should continue, we may hope for a record-breaking corn cropand a general level of crop production rivaling 1946, the best previous year.

Animal products present a different picture. The number of cattleon farms and ranches has been declining since 1945. Dairy-cow numbersare down to prewar levels. Sheep numbers are the lowest in over 75 years.There are fewer hogs on farms than last year, and the spring pig crop wasdown 3 percent. The numbers both of laying hens and of young chickensare lower than a year ago. The combination of the reduced livestockpopulation and the continuing tight feed supply means inevitably thatthe output of most livestock products will continue to run less than lastyear, until some months after the new corn crop comes in this fall.

Favorable crops may more than offset the unfavorable livestock pros-pect to make the total output of our farms somewhat higher than lastyear. But in the case of crops especially, much of this year's productiondoes not come to market until next year. A bumper corn crop may evenreduce this year's meat production by encouraging holding animals overfor heavier feeding. Consequently farm marketings, in physical terms,will continue to run less than a year ago. For 1948 as a whole, they willprobably be down 3 or 4 percent. Domestic consumption of food for1948 will show about the same decrease, around 3 percent on a per capitabasis. Food exports will be down somewhat, but the reduction will bechiefly in cereals and, to a smaller degree, in edible fats and oils. Meatand most other livestock products, the shortage of which will be most keenlyfelt in coming months, have been exported in only relatively minor amounts.

Domestic food consumption will continue above prewar levels. But inrelation to postwar levels of demand we must expect, during the remainderof 1948, a relatively tight supply of food, which is the largest componentin the workers' cost of living.

THE FLOW OF GOODS AND PURCHASING POWER

The gross national product, that is, the total value of goods and services,which ran at an annual rate of 227.4 billion dollars during the first halfof 1947, and 235.9 billion during the second half, rose to an annual rateof 246.5 billion during the first half of 1948. (See appendix G, table 1.)The increasing flow of income and expenditures can best be shown in theaccounts of consumers, domestic business, international transactions, andgovernment.


Consumer income, expenditure, and saving

Consumer income. Personal income, which expanded at an annual rateof nearly 10 billion dollars from the first half of 1947 to the second half,leveled off in 1948 at approximately the December rate of 208 billiondollars. (See appendix C, table 4.) Employment and wage rates con-tinued to increase, but the upward trend in cash farm income was very slight.

TABLE 1.—Per capita disposable income, current dollars and 1947 dollars

Personal income after taxes

Period

1939__.1946 . .Annual rates, seasonally adjusted:

1947—First halfSecond half._ __ _ _ _ _ _ _ _ _

1948—First half 2 ._

Currentdollars

5361,127

1,1791,2291,274

1947 dollars»

8591,288

1,2081,2001,200

* Deflated by the consumers' price index, which does not fully reflect changes in the cost of living of allgroups of consumers.

1 Estimates based on incomplete data.

NOTE.—The figures in this table are based on revised estimates and are different from those published inprevious Economic Reports of the President.

Sources: Department of Commerce and Department of Labor. (See appendix O, table 6.)

Real per capita purchasing power dropped from 1946 to 1947, as statedin earlier reports. No measurable change occurred in the first half of thisyear, the rise in the overall average of money income per person being*just about offset by the rise in retail prices.

In a period of rising prices and high living costs, the distribution ofconsumer income becomes increasingly important. Of particular signifi-cance is the progressive deterioration in the economic position of thoseindividuals and families whose dollar incomes have fallen far behind inthe race with rising prices. Comprehensive statistics on income distribu-tion for the first half of this year are not available. A survey comparing1946 and 1947 showed that 30 percent of all families (spending units)had no appreciable increase in dollar incomes and almost 20 percent suf-fered a reduction, during a period when consumer prices increased nearly15 percent.

While the disappearance of large-scale unemployment and the increasein the number of gainfully employed persons per family tended to narrowthe disparity among incomes during the war period and immediately there-after, this trend has been arrested more recently. As there are relativelymore people with fixed incomes in the lower income brackets than in thehigher brackets, the favorable effects of full employment upon the dis-tribution of income have been offset by the unfavorable effects of inflationduring the past year. Of the family units whose dollar incomes remained


stationary between 1946 and 1947, according to the same survey, two-thirdswere in income brackets of $3,000 or less. (See appendix B, table 3.) Inaddition, old people were found more frequently among those with stable ordeclining incomes than among those with increasing incomes.

Consumer expenditures. Consumer expenditures were at an annual rateof about 174 billion dollars during the half year, compared with about168 billion during the second half of 1947. The increase was slightly lessthan the increase in income after taxes, indicating a small increase insaving.

The first quarter of 1948 was a period of consumer hesitation, in whichpurchasing of both durables and nondurables lagged. In the second quar-ter, there was a general strengthening of consumer demand. This reactionwas due only in minor degree to price adjustments, and resulted mainlyfrom a general feeling that prices were again headed upward and that scar-cities might develop from the unsettled international situation. Tax reduc-tion exerted some further stimulating effect, although the full effect on con-sumer disposable income will not be felt until the second half of the year.The upturn in expenditures was marked in the field of household appliances,although it applied generally to all types of consumer purchases.

Consumer saving. Previous reports have stressed the decline in the rateof net consumer saving since the war years. They have pointed out that asconsumers spent an increasing proportion of their incomes, they contributedto inflationary pressures that pushed up the price level. At the same time,the process of inflation was itself causing many families to save less in orderto prevent serious impairment of their standard of living.

Estimates for the past 12 months seem to indicate that the postwar down-ward trend of saving has been interrupted, although the nature of thestatistical methods by which these estimates are derived is such that no greatimportance can be attached to small changes in percentages. (See chart 3and appendix G, table 5.) An appraisal of the significance of this changerequires an analysis of the composition of saving and dissaving. The esti-mates include in saving such items as the purchase of homes and noncorpo-rate business investment, and it is chiefly into these categories that the in-creasing volume of saving appears to be flowing. The rate of accumulationof liquid assets—cash, bank deposits, and Government bonds—may actuallyhave decreased. (See appendix B, table 4.) It is savings of this latter typethat are most clearly anti-inflationary.

Furthermore, aggregate figures of net consumer saving do not reveal thenumbers of families who spend more than they earn. The rise in the costof living is causing this practice among many low-income families, as wellas many large families and families of fixed income in the middle-incomegroups. In the immediate postwar period, spending in excess of income was


CONSUMER INCOME, SPENDING,AND SAVINGConsumer income rose more than spending in the first

half of 1948

BILLIONS OF DOCLARS BILLIONS OF DOLLARS^2 5 0

2 0 0

150

100

5 0

0

DISPOSABLE PERSONAL INCOME

(PERSONAL INCOME LESS TAXES)

-

-

§ • ••111• I

DISPOSABLEINCOME >.

iB^finSBBi

HHHI•H

*

B

1• i

1-S883S8S t i

2 5 0

- 200

- 150

- I 00

- 50

1941 1942 1943 1944 1945 1946 1947 1948

resulting in an increase in saving.

PERCENT30

10 ~

1941 1942 1943 1944

* ANNUAL RATES, SEASONALLY ADJUSTED


- 10

1945 1946 !947 1948


concentrated among families with incomes of $3,000 or less. More recently,as durable goods have become available, an increasing number of familieswith incomes up to $5,000 or even $7,500, have become dissavers. In 1947,more than one-fourth of all families were spending more than they earned.

Closely related to the rate of and distribution of saving out of currentearnings is the ownership of liquid assets. Personal holdings of liquid assets,including currency and deposits in banks and savings and loan companies,and Government bonds, were 172 billion at the beginning of this year. Thisis nearly three times as high as at the beginning of the war in dollar terms.Of the total of 172 billion dollars of personal holdings, about 22 billionwere in the control of trust funds, and about 150 billion in the hands ofindividuals. The equity of individuals in private insurance is now over 51billion dollars, compared with 27 billion at the end of 1939, while the equityin the Government social-security funds has risen from only 6 billion dollarsto over 33 billion now.

Between 1946 and 1947, there was a small increase in the proportion ofthe population owning no liquid assets at all. The median size of the hold-ings of all spending units was $350 in early 1948, compared with $470 in1947. As shown in appendix B, table 8, less than one-half of persons withincomes under $1,000 had either liquid assets or life insurance, and 42 per-cent of the Nation's spending units had no liquid assets or less than $200worth of liquid assets, early this year.

Declines in liquid asset holdings or increases in debt should not be in-terpreted as indicating distress in all cases. In fact, the largest reductionin liquid assets has been made by families in the middle and high-incomebrackets. However, available data indicate that families in the lower-income groups in 70 percent of the cases reduced their liquid assets for thepurchase of nondurable goods and services, while in the upper-incomegroups the purchase of houses and other investments were a particularlyimportant component. Thus to a considerable extent the assets at thelower end of the income scale are being dissipated by current living expenses,while those in the upper-income groups are being converted into othertypes of property. (See appendix B, table 7.)

In line with recent trends in the distribution of saving and liquid assets,consumer credit has continued to expand rapidly. At the end of June1948, the total amount of consumer credit outstanding reached the recordtotal of 14 billion dollars, almost 3 billion higher than a year ago. (Seeappendix C, table 20.) Although the amount of outstanding consumercredit is not large in comparison with the current level of consumer incomes,the rapid expansion of consumer credit continues to add to inflationarypressures.


Business investment, income, and financing

Business investment as a whole absorbed an even greater share of thetotal national output of goods and services in the first half of this year thanin 1947. The expansion, improvement, and replacement of productivefacilities and housing, and the enlargement of business working capital tosupport record levels of output and sales, continued to swell the demandfor goods and services in competition with the demands of consumers,Government, and the export market.

While postwar replenishment of depleted inventories is by and largeaccomplished, and productive capacity has been adequately expanded ina large number of industries, there is no general speculative overexpansionof inventories, plant and equipment, or housing. All indications for theremainder of this year at least are that the volume of business investmentwill continue more than adequate to make the total demand for goods andservices match the supply at current prices. Shortages and inflation willcontinue to be the dominant concern. This will be true even if inventorypolicies remain cautious and nonspeculative.

Plant and equipment. A decade and a half of subnormal business ex-pansion, resulting in part from depression and war, set the stage for heavypostwar business investment. The upward trend brought plant and equip-ment outlays to a peak in the latter part of 1947. In the first 6 monthsof 1948, such outlays totaled 8.9 billion dollars. This represented anannual dollar rate nearly double that of 1929, 25 percent above the firsthalf of 1947, and 3 percent below the second half. (See appendix C,table 14.)

The postwar plant and equipment boom has shown significant changesof pattern. During the first stages of reconversion, the intense pressure toreplace facilities and to restore civilian output took precedence over theintroduction of innovations. More recently, there has been increasingemphasis upon cost reduction and the substitution of new products andtechniques. As table 2 shows, expenditures for equipment alone haveaccounted for an exceptionally high portion of total plant and equipmentoutlays and of gross national product in the postwar period. Plant con-struction expenditures, on the other hand, are now smaller relative to grossnational product than in any year from 1920 through 1931. Some of this in-creased emphasis on equipment reflects a long-standing trend. Some re-flects the fact that plant construction costs have risen much farther aboveprewar levels than equipment prices.

At midyear, the short-run outlook is for continued high outlays on plantand equipment. The foreign aid and defense programs, though slow toaffect requirements for capital goods, have firmed up business confidenceand have extended expansion plans further into the future. Unfilled orders

10


of equipment producers, while substantially lower than in the middle oflast year, are still unusually high in relation to sales and are being whittleddown very slowly. Conditions in individual industries vary, but the overallrate of investment in plant and equipment seems limited not so much bydemand or funds as by the supply of materials. Surveys of business inten-tions indicate that the dollar rate of plant and equipment investment inthe second half of 1948 will be about the same as in the second half of 1947and the first half of 1948.

The longer-range outlook is less clear. Whether or not the present rateof plant and equipment investment is larger than could or should continueover the long run is a question to be answered only by a comprehensiveand dettailed analysis of long-term needs. The Council of Economic Ad-visers is now making such a study.

T A B L E 2.—Private outlays for new nonfarm plant and equipment as percent of gross nationalproduct

Period

Percent of gross national product

Total plantand equip-

ment

7.99.25.73.93.87.58.89.0

Industrial,commercial,and publicutility newconstruction

3.03.51.51.0.8

2.02.02.0

Nonfarmproducers'

durableequipment

4.95.74.22.93.05.56.87.0

1919-29 average--1929. .,__

1930-39 average-.1933 -

1940-45 average._1946 .19471948: First half i_

i Preliminary estimates based on rate of increase from 1947 to the first half of 1948 in the plant and equip-ment expenditures made jointly by the Securities and Exchange Commission and the Department ofCommerce. (See appendix C, table 14.)

NOTE.—The plant and equipment expenditures on which the percentages in this table are based differfrom the Securities and Exchange Commission-Department of Commerce series primarily because certainplant and equipment outlays charged to current account are included in the former and excluded from thelatter series.

Source: Department of Commerce (1919-47).

Business inventories. During the first quarter of 1948, the book valueof nonfarm business inventories increased about 3.8 billion dollars, com-pared with 4.4 billion in the first quarter of 1947. Allowing for seasonalfactors, the increase in physical volume amounted to about 1.7 billiondollars or an annual rate of nearly 7 billion. Stocks of finished goods in-creased not only at the retail level, but also in the hands of producers. Theprincipal cause of these increases was a more than seasonal decline in sales.(For detail on inventories and sales, see appendix C, tables 15 and 16.)

In the second quarter of 1948, more favorable market conditions andthe restriction of some supplies terminated the rise in the volume of non-farm inventories, and such stocking-up as had occurred earlier in the

11


year was overtaken by rising sales. The total physical volume of nonfarminventories, adjusted for seasonal variation, showed practically no change.Present business policies and expectations indicate the reestablishment ofa moderately rising trend. But although business sentiment has improved,caution in forward buying has continued. There is little indication thatinventories generally are either excessive or deficient in relation to currentsales levels, though they would soon become excessive if sales should declinematerially.

Business income. Profits for the first half of 1948 were at levels abovethe average of 1947, the previous peak year. Preliminary data for thefirst half year indicate that corporate profits before taxes were at a sea-sonally adjusted annual rate of about 30.5 billion dollars, compared with29.8 billion in 1947 and a seasonally adjusted annual rate of 32.4 billion inthe fourth quarter of that year. Corporate profits after taxes thus farin 1948 have been at an annual rate of 18.6 billion dollars, comparedwith 18.1 billion in 1947 and 19.7 billion after seasonal adjustment inthe fourth quarter. (See appendix G, table 24.) These profits aftertaxes in 1948 represented a return of about 9 percent on net worth andabout 5 percent on sales, compared with about 9.5 percent on net worthand about 5 percent on sales in 1947.

The net income of unincorporated business and the professions in thefirst half of 1948 was at an annual rate of 26.2 billion dollars, comparedwith 24.4 billion for 1947 as a whole and an annual rate of 25.9 billion inthe fourth quarter. (See appendix C, table 3.) In addition net farmincome was running at an annual rate of 18.1 billion dollars during thefirst half of this year, compared with about 15.6 billion for 1947 as a wholeand an annual rate of 16.5 billion in the fourth quarter. These estimatesof net farm income reflect an unusually large statistical adjustment forchanges in farm inventories on account of the small corn corp and thereduction in numbers of livestock last year. Net income actually realizedby farm operators during the first half of 1948 (without allowing for changesin inventories) is estimated to have run slightly below the 18-billion-dollarrecord level of 1947.

The sharp price advances during the second half of 1947 and the main-tenance this year of high levels of production and sales despite unusuallybad weather conditions and work stoppages in some critical areas have ac-counted for the high level of profits thus far in 1948. With the outlookbright for a sustained level of production during the remainder of this year,aggregate profits are likely to continue at high levels.

A development to be watched is an apparent drop in the profitability ofsmall manufacturing corporations in the first quarter of this year, whileprofit ratios for the largest corporations rose. Average profits after taxes

12


of manufacturing corporations with assets under $250,000 dropped from3.9 percent on sales in 1947 to 2.0 percent in the first quarter of 1948.(For further details on corporate profits, see appendix C, tables 24-29.)

Business financing. Chart 4 and appendix C, table 30, show the prin-cipal ways in which corporations used their funds during the first half of1948, and also the principal sources from which these funds were obtained.

Corporate outlays for plant and equipment and for the expansion of in-ventories and customer financing amounted to about 12 billion dollarsin the first half of this year. This represents outlays at a rate somewhat

CHART 4

SOURCES AND USES OF CORPORATE FUNDSInternal sources, mainly retained net earnings and depreciationreserves, continued to supply the major part of corporatefinancial requirements during the first half of 1948.

BILLIONS OF DOLLARS6 8 10 14

USES

SOURCES

RETAINED NET EARNINGS AND:DEPLETION ALLOWANCES

NET NEWSECURITY

lllllllllllllllllllll0THER*

CASH AND U. S. SECURITIES

J __J 1* SEE APPENDIX C, TABLE 3O.

SOURCES: DEPARTMENT OF COMMERCE (PRELIMINARY ESTIMATES BASED ON SECURITIES ANDEXCHANGE COMMISSION AND OTHER FINANCIAL DATA).

lower than for the year 1947 as a whole. A small decline in the use offunds for expanding inventories and a large decline in the rate of expansionof customer financing more than offset the increase in expenditures on plantand equipment.

It is significant that the major source of corporate funds has continuedto be those sums retained from current receipts as offsets to depreciationand depletion charges and as undistributed net earnings. Indications arethat this source will be even more important in 1948 as a whole thanduring last year.

Net new security issues during the half year, amounting to 2.6 billiondollars, have risen in importance compared with the first half of 1947,when they provided 1.7 billion. The proportion of new issues represented

793637° 13


by common stock has continued at about the same low level that prevailedlast year, reflecting in part the heavy participation of those business groups,chiefly utilities, which characteristically make greater use of debt financing.Although the current ratio of common stock to total net new issues is lowby prewar standards, the average ratio for the whole postwar period todate has not been. Moreover, corporate equity/debt ratios in general stillcompare quite favorably with those prevailing in prewar periods.

As a corollary of the high degree of internal financing through retainedearnings and additions to depreciation reserves, and of the volume of se-curity issues, the use of corporate reserves of cash and securities representeda relatively minor source of financing during 1947 and during the first halfof 1948.

There was no net expansion of bank credit to corporations as a groupin the first half of 1948. The total of such loans outstanding showed adecrease for the half year, in contrast with a small increase during thefirst half of 1947. In appraising this decline in corporate use of bankcredit, however, the high rate of expansion of such credit in the latterpart of 1947 must be borne in mind. (See appendix G, table 21.)

While there are disparities in the ease with which businesses of differenttypes and sizes can acquire funds, the overall picture does not indicatea present or impending insufficiency of such funds so long as the funda-mental business outlook remains good. If that outlook becomes less favor-able, the originating point of the downturn is likely to be found elsewherethan in the availability of funds.

Residential construction. About 450,000 new residential units in newbuildings were started during the half year. Counting also conversions andalterations, more than a million units will probably be added to theresidential supply during 1948.

This volume of residential construction is already straining the capacitiesof the construction industry in many areas and of producers of some con-struction materials, and is unquestionably competing with other primarynational needs. (See appendix C, table 13.) This situation highlightswhat has become the chronic necessity of developing and applying newmethods and substitute materials to the house-building industry.

On the demand side, a distinction needs to be drawn between essentialneed and capacity to pay current costs. The basic housing needs of agrowing population in the face of a serious and cumulative shortage wouldbe sufficient to sustain the present level or even a higher level of homebuilding for many years to come. But only a few years at most would berequired to saturate the demand of those who can acquire houses at cur-rent costs, and that saturation would portend a serious downswing inlesidential construction. The unusually high level of current demand

14


for houses has combined with the unique character of the building industryto push homebuyers' costs far more above those prevailing after WorldWar I than consumer incomes have risen in the same time span. Duringthe past year, the average price of new houses has risen about 20 percent,while average family income after taxes was only about 8 percent higherduring the first half of 1948 than during the same period in 1947.

Another way of looking at the effect of high residential prices on theeconomy is to examine the trend in outstanding mortgage debt on one- tofour-family residential properties. This type of mortgage debt has risenabout 65 percent since the end of 1945, while nonfarm family incomes aftertaxes have risen only about 25 percent and the number of dwelling unitshas increased less than 10 percent. It is highly significant that the volumeof new mortgages of less than $20,000 placed since 1945 amounts to ap-proximately 26 billion dollars, which is about 80 percent of the face valueof all outstanding mortgages on one- to four-family residential properties.Even after allowance for payments already made on these new mortgages,this means that a high proportion of indebtedness on residential propertieshas been placed on the basis of current prices. Even at the high level ofcurrent incomes, high housing costs have imposed excessive burdens onmany families. These burdens, hard to carry in good times, would imposea serious strain indeed with any downturn in employment or incomes. Theproblem of housing costs is important in the short run, and of central sig-nificance to the longer-range aspects of general economic stability.

Farm investment and finance. Production and domestic sales of farmmachinery have continued to expand. Wheel-type tractor production for1948 as a whole is expected to exceed the record 1947 production by atleast 20 or 30 percent. Demand for most types of farm tractors andsome other machinery and equipment items continues to outrun supply,but the situation is more spotty than a year ago and for many items pro-duction has caught up with demand at present prices. The progress ofconstruction on farms reflects the higher incomes of farm families.

Preliminary indications are that the boom in farm real estate has tendedto level out in most regions, following the break in commodity prices earlythis year. The amount of farm mortgages recorded in the first quarter of1948 was slightly larger than in the first quarter of 1947, but the numberof new mortgages decreased. Total farm mortgage debt is still muchbelow prewar levels. Non-real-estate loans to farmers, however, apparentlyare continuing to expand in response to the higher level of farm costs.

International transactions

The net foreign investment component of the Nation's Economic Budgetdropped from an annual rate of 8.2 billion dollars in the last quarter of

15


1947 to 3.9 billion in the first half of 1948. This figure represents theportion of the excess of exports over imports of goods and services that isfinanced by loans and investments and by net liquidation of foreign dollarassets and gold. It does not include the portion financed by gifts andother unilateral transfers made by the United States Government and thegeneral public. When these are included, the decline was much less:from an annual rate of 10.5 billion dollars to about 8 billion, the lowestlevel since 1946. The excess of exports over imports of goods and servicesreached its low point in the first quarter of the year and rose only slightlyin the second quarter, as shown in table 3.

TABLE 3.—United States exports and imports of goods and services[Billions of dollars, annual rate]

PeriodExports ofgoods andservices >

4.115.019.321.119.219.417.817.9

Imports ofgoods andservices 1

3.67.28.18.68.38.99.99.7

Surplus ofexports ofgoods and

services

1936-38 average19461947—First quarter

Second quarter..Third quarter,...Fourth quarter..

1948—First quarterSecond quarter 2_

0.57.8

11.212.510.910.57.98.2

1 Includes income on investments.' Estimates based on incomplete data.

Source: Department of Commerce. (See appendix C, table 31.)

The decline in the export surplus reflected chiefly changes in the exchangeof goods rather than services. Lower exports and higher imports of goodscharacterized our trade with every continent. While the value of exportsfell, their average prices continued to rise. The sharp decline in value thusreflected an even greater decline in the physical quantity of goods shippedto foreign countries. The physical quantity of goods exported in the firsthalf of this year was at a rate 11 percent less than in the last quarter of 1947and 26 percent less than in the second quarter of 1947. (See appendix C,tables 33-36.)

More than half of the increase in imports reflected a rise in physical quan-tities. (See appendix C, table 38.) Production of exportable goods hasincreased in some of the areas that supply us. There is increased pressurein many countries, moreover, to divert to the United States goods thatmight otherwise be sold in the home market or in foreign countries thatdo not pay for them in dollars.

The depletion of foreign gold and dollar assets, which was an importantcause of the decline in our export surplus, was reflected in the reduced rolethat liquidation of these reserves played in its financing. As table 4 shows,

16


these resources were being liquidated at a rate of only 2 billion dollars ayear in the first half of 1948, less than half the 1947 rate. (See chart 5.)Foreign countries' spending of gold and dollar balances was one of theimportant factors in the expansion of our domestic money supply and bankreserves in 1947.

There was an increase in the rate of utilization of Government aid inthe first half of this year compared with the last quarter of 1947, but it was

CHART 5

FINANCING THE EXPORT SURPLUSA sharp drop in the liquidation of foreign assets was the mainfinancial factor in reducing the export surplus from the averagelevel of 1947 to the first half of 1948. U. S. Government aiddropped slightly.

BILLIONS OF DOLLARS

6 10

1946

1947

19481st half

(Annual rate)

NET FOREIGN INVESTMENT

U. S. GOVERNMENT AID

EXPORT SURPLUS

* INCLUDES ALSO MOVEMENT OF'U. S. PRIVATE CAPITAL, NET DOLLAR DISBURSEMENTS BY THEINTERNATIONAL BANK AND THE INTERNATIONAL MONETARY FUND, AND ERRORS AND OMISSIONS.


largely aid to Europe and did not ease the dollar position of other areas,which accounted for the major decline in our export surplus.

Our international transactions in the first half of the year involved lessdrain and exerted less inflationary pressure on our economy than they hadin 1947. The undertaking of new foreign aid programs in the past 6months, however, presages an increase in the export surplus in the secondhalf of this year.

17


TABLE 4.—Financing the surplus of goods and services supplied to foreign countries

[Billions of dollars, annual rate]

PeriodSurplus of

exportsof goods and

services *

Means of financing

Governmentaid (net) *

Liquidationof foreigngold and

dollar assets(net)»

Other meansof financing

(net) *

1936-38 average1946....1947—First quarter

Second quarter...Third quarter..._Fourth quarter...

1948—First quarterSecond quarter K

0.57.8

11.212.510.910.57.98.2

5.15.28.06.82.95.84.7

0.82.04.84.63.45.31.52.6

-0.3.7

1.2—.1

.72.3

1 Includes income on investments.a Includes grants and loans, but excludes subscriptions to the International Bank and Monetary Fund.

For detail, see appendix C, table 32.8 Excludes assets held by the International Bank and the International Monetary Fund.* Includes private gifts and remittances, movement of United States private capital, net dollar disburse-

ments by the International Bank and the International Monetary Fund, and errors and omissions.* Estimates based on incomplete data.Source: Department of Commerce.

Government transactions

During the first half of the calendar year 1948, Federal cash receipts tromthe public, under the impact of rising prices and incomes, continued theirupward trend. Allowing for seasonal influences, receipts during these 6months were running at an annual rate of 50.2 billion dollars, or 7 percentabove the 1947 figure of 46.9 billion. Thus for this period the cash surpluswas running at a seasonally adjusted annual rate of 12.6 billion dollars,compared with the 1947 surplus of 5.7 billion.

Actual cash taken in during the first 6 months of 1948, the magnitudeof which partly reflected the heavy concentration of income tax collec-tions in the spring, amounted to 27.2 billion dollars or 7.6 billion greaterthan actual cash payments in this period. The surplus during the secondhalf of this year, however, will be drastically reduced. This change is duemainly to the reduction in income tax rates and to the increase in paymentson account of the defense and foreign aid programs. Even after seasonaladjustment to allow for the fact that receipts are normally substantiallygreater during the first half of any calendar year than during the second,it is certain that the cash surplus will drastically decline from the firsthalf of the year to the second.

18


TABLE 5.—Federal cash receipts from and cash payments to the public

[Billions of dollars]

Calendar years

19461947 _Annual rates, seasonally adjusted:

1948—First half iSecond half2

Totals for half years, not adjusted for seasonal:1948— First half K _. . . . _ .

Second half a __ +..

Cash receiptsother thanborrowing

45.546.9

50.244.7

27. T20.3

Cash pay-ments

45.341.1

37.640.8

19.619.7

Surplus (+)or deficit (-)

+0.2+5.7

+12.6+3.9

+7.6+.6

i Based on incomplete data.* Estimates.

Source: Bureau of the Budget.

State and local government spending continued to rise during the firsthalf of 1948 so that the cash surplus of 1947 has disappeared. This trendin State and local transactions is likely to continue so that a cash deficitmust probably be expected for the rest of this year.

TABLE 6.—Cash receipts from and cash payments to the public by State and local governments


Calendar year

19461947 _ _.1948—First half (annual rate, seasonally adjus ted) i . . .

Cash receiptsother thanborrowing

11.013.113.8

Cash pay-ments*

9.912.114.4

Surplus (+)or deficit (-)

+1.1+1.0

- . 6

i Excludes Federal grants-in-aid.* Estimates based on incomplete data.Source: Department of Commerce.

In connection with the foregoing discussion, it should be noted thatgovernmental cash transactions differ considerably from receipts and ex-penditures as shown in conventional budgetary accounts. While some ofthese differences tend to balance out over a period of years, the analysisof cash transactions presents a more comprehensive and a more accuratebasis for appraising the immediate economic impact of Government opera-tions. The conventional budget accounts, however, are more significant-if the long-range financial position of the Government is to be shown.As an example, transfers from budget accounts to trust accounts are notshown as payments to the public, while they do reflect an increase inGovernment liabilities which will result in payments in later years. (Forfurther explanation, see appendix A, tables 6 and 7.)

Payments. During the first half of this year, total Federal cash paymentsto the public were running at a seasonally adjusted annual rate of about 37.6

19


billion dollars, or some 3.5 billion dollars (8 percent) below the rate for1947. The decline was chiefly in payments for national defense and inter-national affairs, and represented a shrinkage of certain extraordinary pay-ments rather than a reduction in continuing programs. In national defense,the decrease was accounted for in part by the tapering off of the cashing inof terminal leave bonds. The falling off of cash payments in the inter-national field was due to the exhaustion of the British loan, and to the factthat payments to the Bretton Woods organizations were heavily concentratedin 1947.

Payments under foreign aid and other international programs are expectedto expand from an annual rate of 5.2 billion dollars in the first half of 1948to 6.3 billion in the second half. This will still be below the 1947 level.Payments for defense likewise will rise because of increased procurementof equipment and some expansion of the armed forces. Thus, after declin-ing for the past 2 years, Federal payments are now expected to rise; duringthe second half of 1948, they will probably reach an annual rate of 40.8billion dollars, which is about 9 percent higher than during the firsthalf of the year, and slightly less than in 1947. (See appendix A, table 10.)

The major changes in payments by functions, discussed in the precedingparagraphs, are reflected somewhat differently in payments classified bytype of recipient. (See appendix A, table 11.) Federal purchases ofgoods and services from business, for example, were at an annual rate of10.6 billion dollars during the first half of this year, or 20 percent abovethe 1947 level, and they are expected to average during the second halfof this year about 50 percent above last year's rate. The increase duringthe second half of the year is accounted for largely by the increasing de-fense and foreign-aid programs. Some of the increase in 1948 over 1947is simply a statistical reflection of the shift from loans to outright grantsin support of foreign aid. Federal salaries and wages during the firsthalf of 1948 were a little below the 1947 level of 7.7 billion dollars, butare expected under the influence of pay increases and expansion of thearmed forces to return to their 1947 level during the second half of theyear. The aggregate of payments other than purchases from business,Federal salaries and international loans and other payments changes onlymoderately.

Payments of State and local governments have continued to rise steadily,reflecting increases in costs and also the expansion of activities to makeup for the restrictions of the war period and to meet new needs. Theaverage rate of cash payments during the first half of 1948 was about 14.4billion dollars, or 2.3 billion above the 1947 level, and this rising trendis expected to persist during the second half of the year.

20


State and local construction activity is continuing its rapid expansionin response to the pressure of urgent needs for new schools, streets andhighways, and water and sewer systems. (See appendix C, table 13.) Interms of dollar volume, State and local construction during 1948 is expectedto be about 45 percent above the 1947 level, compared with increases ofabout 30 percent for private construction and about 10 percent forFederal construction. In view of rising costs, these dollar figures con-siderably overstate the expansion in construction. The physical volumeof Federal construction, for example, will probably be little different fromthe 1947 level, and the real expansion in the private and State and localsectors is correspondingly lower than indicated by the dollar figures.

Receipts and debt management. Actual Federal cash receipts during thefirst 6 months of 1948 were 27.2 billion dollars, which is equivalent to aseasonally adjusted annual rate of 50.2 billion. For the second half ofthe year, the prospect is for a decline in actual cash receipts substantiallygreater than seasonal, from 27.2 billion dollars to 20.3 billion dollars or aseasonally adjusted annual rate of 44.7 billion. Over a full year's operationthe new tax bill might be expected, provided present income levels were notpushed upward by the forces of inflation, to reduce revenues by about 5billion dollars. Assuming some increase in present income levels, the taxreduction accounts for the largest part in the expected fall in total cashreceipts. Most of this decline is in personal income taxes, only a smallfraction being due to reductions in estate and gift taxes. Receipts fromsales of surplus property are also expected to fall sharply during the secondhalf of the year, while other receipts will show little change.

The annual rate of cash receipts of State and local governments duringthe first half of 1948 was somewhat higher than in 1947. These increasedreceipts reflected higher tax rates, introduction of new taxes (especiallysales taxes), and rising incomes, sales, and property valuations. Revenuesfrom sales taxes during the first quarter of 1948, for example, were 20 per-cent above the same period of 1947. State and local governments continueto seek new sources of revenue to meet expenditures which are mountingfaster than receipts.

About 4.6 billion dollars of the Federal budgetary surplus during thefirst half of 1948 was used to retire public debt. Furthermore, the netincrease in the public debt holdings of Federal trust funds and the netincrease in the amount of savings bonds and notes outstanding made addi-tional funds available to retire marketable debt held outside of the Govern-ment. In consequence, the marketable debt was reduced by about 5.4billion dollars during the first half of 1948. Debt held by commercial andFederal Reserve banks was reduced by about 4.9 billion dollars. Thegross public debt, which was just under 257 billion dollars at the end of

21


1947, was thus reduced to about 252 billion at the end of June 1948, whilethe Treasury cash balance increased from about 3 billion dollars to nearly5 billion during that period. (See appendix C, table 23.)

The reduction in bank-held debt was an important factor in the declineof about 4.5 billion dollars in the money supply which occurred duringthe period. (See appendix C, table 22.) Throughout the period, publicdebt retirements were concentrated in the first instance on debt held bythe Federal Reserve banks. However, the restrictive effect of debt re-tirements was offset in considerable measure by the gold inflow, by returnof currency from circulation, and by open-market purchases of Governmentsecurities by the Federal Reserve System. Such purchases were necessaryto support the prices of bonds as banks and others sold securities in orderto maintain reserves and to obtain funds for other purposes. Nevertheless,the budget surplus and debt retirement placed some pressure on com-mercial bank reserves and were to some extent a contributory factor tothe slow-down of commercial bank loan expansion which occurred duringthe period.

State and local debt continued to expand. It was possible during waryears, with high revenues and severely limited activities, to retire a sub-stantial fraction of outstanding debt; but the pressure of new needs since thewar has brought a return to the prewar picture of steadily growing physicalassets and indebtedness. State and municipal securities issues to securenew capital were 2.2 billion dollars in 1947, or more than twice as great asin 1946. A substantial amount of borrowing was for the purpose ofsecuring funds for payment of veterans' bonuses.

This survey of the transactions of Federal, State, and local governmentsindicates that during the first half of 1948 their combined effect continuedto serve as a strong factor of restraint on the force of inflation. Duringthe second half of the year this restraining influence will be almost whollylost. The Federal Government is faced with the prospect of decreasedrevenues and increased expenditures. While State and local governmentsare raising tax rates and levying new taxes, their expenditures continue toexuand faster than their revenues.

Summary: The Nation's Economic Budget

The Nation's Economic Budget is a convenient way of summarizing themain trends in the flow of goods and purchasing power, and of relatingthese trends to possible future developments.

The Nation's Economic Budget total, representing gross national incomeor expenditure, in dollar terms increased by 7 percent from 1947 to thefirst half of 1948 (annual rate). (See chart 6.) This is a rate of in-crease somewhat below the rise that took place in the preceding year.

22


A large part of the increase in 1948, as in 1947, reflects the rise in pricesand wages; there was, however, also some increase in the real flow ofgoods and services. The inflationary tendencies that prevailed particularlyin the second half of 1947 continued in 1948, though at a reduced rate.

TABLE 7.—The Nation's Economic Budget


Account

Consumers:Disposable income - .Expenditures.Saving (+)

Business:Undistributed profits and reservesGross private domestic investmentExcess of receipts (+) or investment (—)

International:Net foreign investment - - -Excess of receipts (+) or investment (—)

Government (Federal, State, and local):Cash receipts from the publicCash payments to the publicExcess of receipts (+) or payments (—)_

Adjustments.....

Total gross national product

Calendar year 1947

Re-ceipts

173.6

19 4

59.9

-21.3

231.6

Ex-pendi-tures

164.8

30.0

8.9

53.2

-25.2

231.6

Excess ofreceipts(+)or

expendi-tures ( - )

+8.8

-10.6

-8.9

+6.7+3.9

0

Calendar year 1948, firsthalf, annual rates sea-sonally adjustedi

Re-ceipts

186.0

21 4

64.0

-24.9

246.5

Ex-pendi-tures

174.4

37.2

3.9

52.0

-21.1

246.5

Excess ofreceipts(+)or

expendi-tures (-)

+11.6

-15.8

-3.9

+12.0-3.8

0

i Estimates based on incomplete data.

NOTE.—Detail will not necessarily add to totals because of rounding.

Source: See appendix A for sources and explanatory material.

Comparing the composition of the Nation's Economic Budget in thefirst half of the current year with the preceding year, the similarities appearmore significant than the changes that have occurred. The largest itemsin the Nation's Economic Budget are consumer income and expenditures.Their share in the Nation's Economic Budget total remains approximatelyconstant with 75 percent and 71 percent for consumer income and con-sumer expenditures, respectively. These percentages, large as they are,are somewhat below those that prevailed in most peacetime years in thepast. Large national and international government programs and largebusiness investment compete with consumer expenditures for limited na-tional resources. The sum of business, international, and government ac-counts in the Nation's Economic Budget maintained a relatively largeshare in the total; but there were quite substantial changes in the relation-ship among these accounts.

Gross private domestic investment increased relatively more than anyother major category in the Nation's Economic Budget. This was due to

23


CHART 6

THE NATION'S ECONOMIC BUDGETConsumer saving and the Government surplus increased between1947 and first half of 1948, while the excess of business andforeign investment declined.

1948, FIRST HALF (BILLIONS OF DOLLARS) *

CONSUMERS

BUSINESS

INTERNATIONAL

IGOVERNMENT

EXCESS OFEXPENDITURES (-), RECEIPTS (+)

0

EXCESS OFINVESTMENT

CASHSURPLUS

1947, QALENDAR YEAR (BILLIONS OF DOLLARS)

CONSUMERS

INTERNATIONAL

iGOVERNMENT

I 59.9

CONSUMERSAVING

, EXCESS OFINVESTMENT

, EXCESS OFINVESTMENT

CASHI SURPLUS

* ANNUAL RATES, SEASONALLY ADJUSTED.

NOTE: THE COMPONENTS DO NOT ADD TO THE GROSS NATIONAL PRODUCT BECAUSE OF CERTAIN ADJUSTMENTS.SEE APPENDIX A.

SOURCE: SEE APPENDIX A.

24


increases in new construction and inventory accumulation. Present indi-cations are that domestic investment will continue on a high level duringthe remainder of the year.

Net foreign investment declined by more than half during the first 6months of 1948. The increase in Government foreign assistance duringthe second half of the year will in large part take the form of grants, whichare recorded in government expenditures rather than in net foreign invest-ment. For this reason, the net foreign investment component of the Na-tion's Economic Budget will probably not rise, even though the total excessof exports of goods and services increases.

Government payments have been declining since the war peak, andshowed a further slight decline during the last 6 months. Because of theincrease in Federal outlays for defense and foreign aid, and the continuingincrease in State-local payments, this trend is likely to be reversed. Anincrease in government payments therefore appears certain for the coming6-month period.

Thus it seems likely that expenditures for private domestic investmentwill continue at a high level, while the decline in government paymentswill be reversed. In the present situation of full employment and capacityproduction, this makes for a situation of inflationary pressure.

The picture of an unstable economy is presented even more clearly whenattention is focused upon the excess of receipts or expenditures as pre-sented for each year in the third column in table 7.

Both in 1947 and during the first 6 months of 1948, the excess of invest-ments and exports in the business and international accounts was largelyoffset by consumer net saving plus the government cash surplus. Betweenthese two periods, the excess of business investment increased by nearly5.5 billion dollars, as did the Government surplus. The most importantchange in the Nation's Economic Budget that is bound to occur underpresent legislation for the coming period is that this Government cash surpluswill be drastically reduced. This means that by necessity other items ofsaving or excess of investment must adjust themselves correspondingly.

It should be recognized that the large dollar amounts of individual savingand Government cash surplus that helped to balance the large excess in-vestments and excess exports during the last 2 years were partly a resultof the inflationary process. When incomes and prices are inflated, theamounts of saving and taxes tend to increase. Thus we have in our eco-nomic structure a kind of automatic emergency brake that helps to slowdown inflation. By reducing tax rates despite inflationary prospects, wehave acted like an engineer who releases his emergency brake—in the faceof an emergency. The question for the coming months is whether once

25


again we will permit a price rise to balance the Nation's economic accountsin the precarious manner that is characteristic of an inflationary movement.

Looking at the Nation's Economic Budget from the long-range aspect ofeconomic stability, it appears also that major adjustments still remain tobe made if a peacetime economy of sustained prosperity is to be achieved.The sum total of business investment, net foreign investment, and govern-ment expenditures will probably require a smaller share in the Nation'sEconomic Budget total than in recent years. That means that, in a futureexpanded economy, consumer income and expenditures will require a largershare in order to assure markets for everything that can be produced.Adjustments that must be made eventually in order to assure sustainedprosperity are not appearing in the course of unchecked inflation. Bypermitting further inflation, we render the future task of transition toa condition of sustained prosperity that much more difficult.

26


II. Prices, Wages, and the Impactof Three Government Actions

THE first half of 1948 has shown several important developments—andat times cross currents—in the process of market competition, collec-

tive bargaining, and price making through which our system of free enter-prise operates.

THE COURSE OF PRICES

As 1947 closed, both wholesale and consumers' prices were at postwarpeaks, after sharp advances in the second half of 1947 which carried whole-sale prices to 47 percent and consumers' prices to 29 percent above themid-1946 level. Early this year, this trend was broken by a sharp downturnin commodity prices, but during the second quarter prices again marchedforward. At midyear of 1948, the level of wholesale prices was 1.8 percenthigher and the level of consumers' prices was 2.8 percent higher than at thestart of the year. As we enter the third quarter of 1948, price rises areoccurring on a broad front, though somewhat more selective in characterthan a year ago.

The course of wholesale prices and consumers' prices has varied con-siderably. During the first quarter, there was a sharp break in farm prod-ucts and foods, which carried the wholesale price index substantially down-ward. In the second quarter, farm products almost regained, and foodsmore than regained, the ground lost earlier in the year. (See chart 7 andappendix C, table 18.)

Wholesale prices other than farm products and foods were strong, witha slight upward movement. Three commodity areas in particular showedadvances in wholesale prices in response to strong pressures of manufactur-ing and construction demand. (See chart 8.) These were fuel andlighting materials (notably coal), metals and metal products, and buildingmaterials. The second quarter saw prices increase for such importantnonferrous metals as lead, tin, and aluminum. At the same time, weak-ness in a number of cotton-textile products reflected a reduction in de-mand and a much easier supply position. The one major industrial priceindex which showed a net decline for the whole period was hides and

27


WHOLESALE PRICESWholesale prices showed little net change during the first half of1948 because of the break in farm prices during February. Pricesduring the second quarter moved forward again.PERCENT OF 1926 AVERAGE2 2 0

2 0 0 -

180 -

160 -

140 -

120 -

100

OTHER THAN FARMPRODUCTS AND FOODS

PERCENT OF 1926 AVERAGE220

- 200

180

- 160

- 140

- 120

100

1946 1947 1948

PRECENTAGE INCREASES SINCE JUNE 1946 AND SINCE JUNE 1947

ALLCOMMODITIES

FOODS

OTHER THANFARM PRODUCTSAND FOODS

FARMPRODUCTS

SOURCE: DEPARTMENT OF LABOR.

28


CHART 8

WHOLESALE PRICES(COMMODITIES OTHER THAN FARM AND FOODS*)

Price advances during the first half of 1948 were marked for basicmetals, fuel, and building materials. Hides and leather productsshowed a substantial drop.PERCENT OF 1926 AVERAGEI 40

I 20

100

CHEMICALS AND ALLIEDPRODUCTS

PERCENT OF 1926 AVERAGEI 40

I 20

I 00

FUEL AND' LIGHTING MATERIAL

80 I 1 I 1 1 I I I 1 1 1 1 I I 1 I M I 80 I 1 I I 1 I 1 I I I I I I 1 I I I 1J F M A M J J A S O N D J F M A M J J F M A M J J A S O N D J F M A M *

1947 1948 1947 19482 2 0

2 0 0

180

160

140

120

100

HIDES AND LEATHERPRODUCTS

TEXTILE PRODUCTS

I 1 1 1 1 I 1 I I I 1 I 1 M 1

220

200

1 80

1 60

140

1 20

100

BUILDING MATERIAL

i - *

•wm^ METALS ANPR0DU

-

1 1 1 1 1 1 1 1 1 1 1

S_ ^*—

-

0 METAL ~ITS

-

1 1 1 1 1

1947 1948 1947 1948

* H0USEFURNISHIN6 GOODS AND MISCELLANEOUS ITEMS NOT SHOWN.

SOURCE: DEPARTMENT OF LABOR.


leather products. This resulted from the better supply position and thereduction in market demand for shoes.

Consumers' prices advanced somewhat more than wholesale prices dur-ing the half year. (See chart 9 and appendix C, table 17.) There wasa temporary dip in food prices which reflected the February break in theprices of farm products. Thereafter, food prices rebounded and still con-tinued upward, reaching new peaks. The growing effects of the declinein the supply of meat were reflected in a substantial rise in meat prices.Even during the dip in food prices, other consumer goods continued toadvance as the increases in wholesale prices in the last quarter of 1947 werepassed through to the retail level. Rents, which rose some 5 percent withpartial decontrol in the fall of 1947, showed a slight continuous advance thisyear.

A significant aspect of advancing consumer prices lies in their effectupon wage demands, while wage increases in turn are reflected in industrialprices.

The course of prices in 1948 has been highlighted by several spectaculaieveiits. First came the unusually sharp break in grain prices in earlyFebruary, following noticeable weakness in the last half of January. Thedecline affected cattle, hog, cotton, and other farm prices, as well as grain.The readjustment of farm prices was of unusual severity. It raised fearsin some quarters of a widespread break in prices, production, and employ-ment similar to the 1920-21 collapse.

In this instance, however, the break was isolated, and did not have thefeared effect upon industry and commerce. The existence of agriculturalprice supports set a limit to the possible extent of the fall and gave reassur-ance that there would be no agricultural collapse. Grain prices remainedabove the support levels for the 1947 crop, but wheat prices fell to aboutthe level of the prospective supports for the 1948 crop. Furthermore,owing to the nature of the agricultural industry, the break in farm pricesdid not lead to curtailment of production or discharge of workers. A highlevel of investment in plant and equipment was being maintained, construc-tion activity was expanding, and there was a large, export movement anda high level of consumption. All these factors continued to enable theeconomy to localize weakness in one sector, and even in that sector pricessoon resumed their rise.

Nevertheless, the recession in grain prices acted as a warning signal tobusiness generally that price movements are no one-way street. Insofaras it damped down the spirit of inflation, its effect was salutary. Hopewas generated in some quarters that prices were about to level off and thatnecessary price adjustments could be made in an orderly fashion in responseto an improving demand-and-supply situation. There was belief, too, that

30


CONSUMERS' PRICESAfter some hesitation in the first quarter of 1948, consumers1

prices resumed their upward climb, with food prices in the lead.PERCENT OF 1935-39 AVERAGE PERCENT OF 1935-39 AVERAGE

220

200

180

160

140

120

100

FOOD.

1 1 1 1 1 1 1 ) 1 1 1

ITEMS*

RENT

1 I I I 1 1 I I 1 I I I 1 I I I

220

200

180

160

140

120

100

1946 1947 1948

PRECENTAGE INCREASES SINCE JUNE 1946 AND SINCE JUNE 1947

ALL ITEMS*

FOOD

APPAREL

RENT

* ALSO INCLUDES HOUSEFURNISHINGS, FUEL, ELECTRICITY, ICE, ANDSOURCE: DEPARTMENT OF LABOR. MISCELLANEOUS GOODS AND SERVICES NOT SHOWN ON CHART.

31


such developments on the price front would have a restraining influenceon the forthcoming wage negotiations in major industries.

A second major price development which took place in the first quarterof the year was the gradual advance in numerous steel prices, culminatingin the mark-up of semifinished steel on February 12. This rise gave noticethat, whatever the readjustments in the farm area, demand pressures werestill very strong in the area of basic industrial materials, and that the boomin capital goods was continuing unabated.

Late in April, it is true, the leading company in the steel industry an-nounced a series of price cuts and joined with other large employers instating that the continuation of the price-wage spiral was harmful bothto management and to labor. But this attempt to hold the price and wageline was short-lived. It was soon followed by both price and wage in-creases in many industries. Automobiles, aluminum, rubber products, andelectrical equipment and appliances, and finally coal and steel, were promi-nent examples. Recently announced price increases for steel average morethan $9 per ton, or about 11 percent.

The price situation at midyear was thus dominated by the emergence ofa new impetus to the wage-price spiral. The substantial increase of coaland steel prices, in conjunction with recent and prospective increases intransportation and public utility rates, represents a broad upward move-ment in the cost structure of industry at large, and forms the potential basisfor a dangerous general spiraling of prices.

THE COURSE OF WAGES

Wage trends during the half year have corresponded fairly closely to thecourse of the economy as a whole. As the year opened, the inflationary tideof the second half of 1947 was running very strong, and this was reflected inwage settlements. When the break in commodity prices engendered a lessinflationary sentiment, there appeared for a time a strong resistance to wageincreases, revealing in part the feeling that they could not be passed on tothe consumer through higher prices. When the pulse of inflation againquickened and the cost-of-living trend again became clear, the resistanceto wage increases abated, and an upward spiral of prices and wages againdeveloped. For the entire first half of the year, this spiral has not beenas extreme as in the second half 3 of 1947, but its momentum increasedrapidly during May and June.

By the beginning of this year, most union workers had received at leasttwo postwar wage increases, and a sizable fraction had received three ormore. Available information indicates that unorganized workers did notfare quite so well. The third round of increases was well under way lastfall, and the signing of new and significant wage agreements continued as

32


the new year began. Increases were negotiated in woolen textiles, west-coast lumber, building construction, part of the meat-packing industry, andother fields. Arbitration awards gave increases to maritime workers onboth coasts and to some ladies' garment workers in New York. Interspersedwith the third-round increases were many minor and some major second-round contracts.

These wage settlements, like those of 1947, were dominated by the risingcost of living. Higher living costs had by early 1948 largely dissipated themonetary gains of the second round. Hence, organized labor was seekingnew advances to restore its purchasing power. The third round settlementsaveraged somewhat less than those of the second round, and were moreclosely adjusted to particular situations, following somewhat less of a"pattern" than in previous years.

When the price break in the commodity markets induced a widespreadhope that inflation was losing its force and that the cost of living mightbe stabilized or reduced, coupled with the belief that the economy mightnot stand further advances in industrial prices, it seemed that the thirdround of wage increases might not extend to the major industrial concernswhose contracts were to be negotiated in the spring. The major electricalcompanies sought to hold wages and to lower prices. Negotiations inthat industry had been practically deadlocked for weeks when, in April, theUnited States Steel Corporation refused the demand of the steel workers fora substantial increase, and made moderate reductions in prices of finishedsteel products. Following this action, major negotiations in other branchesof industry were suspended, and several major companies in the automobileindustry appeared to be standing firm in their opposition to wage demands.

After the commodity price break had been arrested without spreading toother segments of the economy, and after the defense program wasannounced, it appeared to workers that costs of living would not decline andmight advance and to employers that the passing on of wage increases inhigher prices would be possible. Since profit prospects were good, and thedenial of wage increases carried the threat of suspended operations, therewere by May widespread settlements at higher wages, even in the metalrworking field. The General Motors settlements of May 25 cast the die infavor of wage advances in the mass-production industries. In relativelyshort order, settlements were then reached in most of the automobile, elec-trical, aluminum, rubber, coal, and steel industries.

Automobile contracts generally provided for around 13 cents increasein hourly wages, rubber 11 cents, and steel an average of 13 cents. In themajor electrical companies, except for General Motors where the automobilecontract applied to the electrical workers, the wage increase was 8 percent,and in aluminum an average of 10 percent. By June, the average weekly

33


earnings for manufacturing as a whole were nearly $53. (See appendix C,tables 9 and 10.)

The terms of the General Motors settlement were noteworthy, sincethey embodied the principle of adjustment up or down at short intervalsin response to changes in cost of living and also provided for a future risein dollar income to reflect technological progress. This formula has beenadopted in very few subsequent contracts.

On March 15, the bituminous coal miners stopped work in a conflictover the welfare fund. This stoppage resulted in a loss of steel output byabout V/2 million tons. Work was resumed on April 12, but new strikethreats arose in May, when negotiations were opened for the new year'scontract. This was settled on June 25 by the granting of a $1 a day wageincrease and doubling the welfare fund royalty—from 10 cents to 20 centsper ton. On July 4 the anthracite companies accepted a similar contract.The steel companies also reached an agreement covering their captivemines on July 14. As a result of the new contract, bituminous coal miners'average weekly earnings will rise to approximately $80, assuming a con-tinuation of a full 40-hour workweek.

Earnings in the building construction industry have risen only somewhatless steeply than in coal mining in recent years. Wage rates for constructionworkers have been adjusted upward periodically since VJ-day. Skilledconstruction mechanics in metropolitan areas today average nearly $2.25an hour. Bricklayers are at the peak with an hourly wage running from$1.75 to $3.20 an hour. Weekly earnings for all construction workersaverage slightly more than $68 a week. (See appendix C, table 9.) Thisfigure reflects the short average workweek in construction and the lowearnings of many unskilled and semiskilled workmen, particularly in non-metropolitan areas.

The fact that many wages have advanced sharply should not overshadowthe fact that millions of workers, who have not participated in the regularrounds of postwar increases, have seen their real earnings decrease as thecost of living has mounted. Such unevenness of wage movements has adisturbing effect upon the whole wage structure, upon relationships amongthe various cost factors in production, and upon interindustry relationshipsas well.

Most third round increases have been roughly comparable, percentage-wise, to the increase in the Consumers' Price Index since the previous con-tract. With few exceptions, bargaining has been concentrated this yearon wage changes, rather than on pension and other security benefits.The limited fringe benefits have consisted largely of additional paid holi-days and medical or hospitalization plans. Also, a significant number of

34


contracts have been signed for a 2-year period, thus improving the prospectfor industrial peace.

Despite the substantial wage rate increases in particular industries, neitheraverage weekly earnings nor total wage and salary incomes have risen sig-nificantly. This was partly because of the delay in settlements in the Feb-ruary-May period, and partly because the effects of recent contract adjust-ments have not yet been reflected in the statistics. It was also partlybecause many workers have not had their wages raised, and partly be-cause the hours worked per week have been somewhat reduced. Theworkweek in manufacturing industries, which averaged 40.4 hours in thelast half of 1947, fell to an average of about 40.1 in the first half of thisyear. Similar decreases occurred in construction, telephones, electricpower, trade and service industries. On balance, weekly earnings havebeen relatively stable throughout the early months of 1948, with increasesin hourly earnings about offsetting reduction in hours.

THE IMPACT OF THREE GOVERNMENT ACTIONS

While these price and wage developments were going on, three importantnew factors were introduced into the price picture. The seriousness of theEuropean situation led to an expanded defense program. The Congressapproved an increase of approximately 3.5 billion dollars above the Januarybudget recommendations of 11 billion dollars in support of national defense.At about the same time, the Congress authorized a new foreign aid programand set up an Economic Cooperation Administration to carry the programinto effect. On April 2, Federal taxes were reduced in an estimated amountof 5 billion dollars a year. The impact of these three actions will beanalyzed before evaluating the whole prospect for inflation.

Foreign aid and domestic supply

Under the Foreign Assistance Act and other aid programs, the Congresshas, over the past 6 months, provided funds for foreign aid in an aggregateamount of over 7 billion dollars. Over 6 billion is intended for aid toEurope, primarily through the European recovery program. These fundsare for use not later than the middle of 1949.

The Economic Cooperation Administration was established by the Con-gress to administer the major new foreign aid programs. The ECA is in-sisting that the programs of the individual participating countries bescreened by their joint organization before being submitted, so that the ECAwill receive a unified program for all of western Europe. This procedureshould serve to encourage a high degree of cooperation among the partici-pating countries.

35


Programs for the third quarter of 1948, allotting over 1.1 billion dollarsof EGA funds, were recently announced. Programs for later periods havenot yet been finally determined. Procurement of commodities and servicesincluding freight, amounting to over 800 million dollars, had been author-ized by the EC A up to July 19, 3 percent of this being for China andthe rest for European countries. In accordance with the Government'spolicy of maximizing the use of private channels of trade, three-quarters ofthese authorizations were for procurement directly from private industryand only one-quarter, representing chiefly agricultural commodities, wasfor procurement through United States Government agencies. About halfof the total consisted of authorizations to procure goods outside the UnitedStates, primarily in Canada, but including also the participating countries.Such "offshore procurement" constitutes the bulk of the authorizations inthe cases of such commodities in tight supply in the United States as petro-leum, nonferrous metals, meats, inedible oils and fats, fertilizer, and lumberand newsprint.

The foreign aid program is not designed to put props under our currentbusiness boom. The unfilled demands of the American market, withits enormous purchasing power, would sustain our prosperity for thepresent even if foreign markets were sharply reduced. We are deliberatelysubjecting ourselves to inflationary pressures on the domestic economyin the short-run, in order to contribute to international security and eco-nomic stabilization in the long-run.

Stabilizing the world political situation and restoring peaceful worldtrade is vital to maintaining our domestic economy on a high level ofproduction and employment in the years to come. After accumulateddemands at home have been successfully met and supply lines filled up,the American economy, to continue to operate at high speed, requires thatthe world in which we trade shall likewise be active and prosperous. Fur-ther recovery in western Europe will progressively remove the need forfurther assistance from the United States Government. Moreover, if wepursue proper policies in international trade, it will promote a beneficialflow of goods to the United States and support foreign demand for ourproducts.

These deferred advantages, however, do not eliminate nor even reducethe present problem resulting from stimulated exports of goods while ourown markets are still not fully supplied. It is true that the total exportsurplus in the coming 6 months will probably not attain the average rateof 1947, even if our aid is utilized at a higher rate than last year. Thereason is that foreign countries will not be able to liquidate gold and dollarassets in anything like the amounts they did in 1947 because these resourceshave been greatly reduced; and the funds made available through private

36


sources, through the International Bank, and through the InternationalMonetary Fund are not likely to make up the difference. The excess ofexports over imports may, however, be expected to rise from the levelreached during the first half of this year, when operations under the Eco-nomic Cooperation Act had hardly begun.

Even more significant than the total is the composition of the bill ofgoods required. Earlier reports on the impact of foreign aid upon thedomestic economy have emphasized that the pressure upon a few keyspots is more troublesome than the impact would appear to be whenmeasured in aggregate dollar terms. This will continue to be the case,with an important difference between the impact upon agricultural sup-plies and the impact upon industrial supplies.

In the case of agricultural supplies, exports of wheat from this countryare now expected to be below the 480 million bushels exported during thepast crop year. This reflects the prospects of unusually good cereal cropsin western Europe this year compared with an extremely low yield lastyear. This easing of foreign pressure on our grain supplies comes at atime when our own 1948 wheat crop is estimated at a high figure of 1.2billion bushels (120 million below last year's record crop). Meanwhile,the preliminary outlook for corn offers hope of a record crop of 3.3 billionbushels compared with last year's 2.4 billion. In addition, most of theagricultural commodities which are expected to be shipped abroad in largerquantities this year than in 1947, such as cotton, tobacco, and some otherproducts, are available at home in adequate supply. Thus, the impact ofthe aid program in the agricultural area, with its important bearing upondomestic food prices, is unlikely to be as serious as it has been. Nonetheless,it will have a substantial continuing effect in view of the extraordinarilyhigh domestic demand.

In the case of some key industrial products, the foreign aid program willcontinue to exert great pressure against tight supply. Although majordecreases are expected in the total export of fats and oils, freight cars,electrical machinery and apparatus, petroleum products, and coal, the highdomestic demand for these products in relation to supply will require themost careful screening of exports.

The rate of steel exports during the remainder of this year, while lowerthan in 1947, is expected to be higher than in the first part of this yearbecause exports to western Europe are expected to increase more thanexports to the rest of the world will be reduced even with drastic controls.Agricultural machinery, in great demand at home, is not expected to beexported at higher rates in the second half of this year than in the firsthalf, although it will be exported at a higher rate than in 1947.

37


While increased production will make somewhat larger amounts ofsuch important commodities as steel, agricultural machinery, and fertilizeravailable for domestic use, it may be said in summary that the foreignaid program as a whole will exert a somewhat greater pressure upon thedomestic economy in the second half of this year than in the first half,although somewhat less than during 1947.

Defense demands and civilian supply

The original recommendations last January in the Budget Messagecalled for only a slight expansion of our national defense program. Thetotal authority to obligate funds for national defense during the fiscal year1948 was 10.4 billion dollars, and the Budget Message requested a totalauthorization for the fiscal year 1949 of 10.9 billion. This increase wasaccounted for mainly by the universal training program proposed at thattime and by a larger stockpiling program.

Unhappily, the course of events made it clear that a prudent regard formaintaining the peace called for expanded programs in all areas of nationaldefense. Following recommendations for an enlarged program, the Con-gress approved such expansion during the last session. For the fiscal year1949, total appropriations and contract authorizations in the amount ofabout 14.4 billion dollars have now been approved—about 3.5 billion dollarsabove the amount recommended last January. Included in this increasedprogram is 525 million dollars authorized for the stockpiling of strategicand critical materials. In addition to the defense program, about 100million dollars have been authorized for related expansion for the merchantshipbuilding program, and 84 million not obligated last year has beenextended. The largest increase in defense expenditures is accounted for bya very rapid stepping-up of the aircraft program. There will also be a sub-stantial increase in the personnel of the Armed Forces and in procurementfor the Army and the Navy.

These increased authorizations, it is true, in the main provide the basisfor future expansion, and will have relatively little effect on cash paymentsfor defense programs during the last half of this year. During the first halfof the calendar year 1948 cash payments in support of national defense wererunning at an annual rate of about 10.9 billion dollars. With the new pro-grams, it is estimated that during the second half of this year the annualrate of payments will increase by about 800 million dollars. (See appen-dix A, table 8.) Most of the additional cash payments will be made insubsequent years. Looking at the matter only for the short run, it mightbe thought that such an increase in expenditures for defense does not havevery significant consequences in an economy where the gross national prod-

38


uct is running at almost a 250 billion dollar level. There are, however, tworeasons why the impact on the national economy will be substantial.

The first reason is that the commitments involved in this stepping-up ofthe military establishment represent a rising trend. This does not meanthat new defense proposals will be made; whether or not that will be neces-sary no one can now say. It means simply that the program now under waywill involve an increasing rate of outlays over the next 3 years. Theplanning and contracting for these rising expenditures will have economicimpacts in advance of actual expenditures. They support anticipationsof high business volume and high consumer incomes. They equally sup-port anticipations of pressures upon the labor supply and shortages ofraw materials and key industrial products. Some of these effects are alreadybeginning to appear.

The second reason for the substantial impact of the defense programupon the domestic economy is that there is now little slack in the use ofour productive capacity. Particular industries of great importance to thedefense program are already severely overburdened, and particular materialsare in short supply.

On the side of materials, the program for the stockpiling of strategicand critical materials will give rise to important impacts. To carry out thisprogram, the Congress has to date provided funds and contract authori-zations totaling 800 million dollars. Of this amount, 500 million dollarswere in appropriations and 300 million in contract authorizations.

The big impact of stockpile procurement is yet to come; a major fractionof the funds available will not be spent until later years. Purchases thus farhave been limited, since the needed materials have been in short supplyeven for current industrial use. Actual payments for deliveries from newprocurement through June 30, 1948, were less than 100 million dollars.While there is no absolute certainty about the rate of stockpiling procure-ment in the future, the funds available are sufficient, if rapidly spent, tohave a sharp impact in the basic materials markets. The rate at whichthe balance of about 700 million dollars already authorized will be spentduring the next 12 months is still to be determined, but it will be steppedup considerably.

The direct requirements of the military, maritime, atomic energy, andforeign aid programs in the next 12 months will absorb significant per-centages of the prospective supply of such materials as copper, zinc, andlead. Attainment of the stockpile goals deemed necessary to our nationalsecurity would require setting aside additional amounts annually for severalyears. As it will not be possible to increase supplies of these materialssubstantially in the near future, the removal of considerable amounts ofthem from the market for stockpiling purposes would encroach upon the

39


level of industrial production at many points. One serious consequencewould be a substantial, and possibly in some instances drastic, rise inprices. Another would be the impairment of current civilian production.To hold the economic impact to the minimum consistent with satisfactorystockpiling progress, it will be necessary to keep the procurement programflexible, to give careful attention to its impact on other essential programsand to stimulate new production.

The shortages which the national defense program will in due course ac-centuate are not limited to materials marked for stockpiling. Aluminum isa case in point. In view of the increased requirements for aircraft, mili-tary requirements for aluminum in the fiscal year 1948-49 amount tomore than 4 percent of the supply. Further expansion of aluminum pro-duction draws heavily on the electric-power supply in regions where itis already short. Although electric-power capacity was greatly expandedduring the war, the peacetime load of a civilian population with steadywork and good incomes promptly took up the whole electric capacity andas a result an expansion program running several years ahead was launched.The electric-power shortage cannot easily be relieved by turning to fuel oiland natural gas, because of shortage of pipe and drilling equipment; nor byturning to coal, because of shortage of cars and generators.

Steel is another case in point. The principal voluntary allotmentsalready made or under consideration under Public Law 395 (military,atomic energy, housing, freight cars, barges, and oil and gas industry equip-ment), together with EC A and maritime program requirements, wouldabsorb in this fiscal year nearly a quarter of the total supply of steel millproducts and more than half the supply of some specific products suchas plates and pipes and tubing.

For steel and most of the other strategic materials, the task in hand isnot simply to assure adequate supplies for the defense program and a fewothers of top priority. Expanded allocations to specific programs, if effec-tively accomplished, reduce the remaining supply available for all otherneeds. Most consumers of steel outside the present and contemplatedvoluntary allocation categories will have less steel in the next 12 monthsthan they had during the past 12 months. Consumers who have beenable to acquire their own steelmaking facilities will be in a preferred posi-tion. Many of the uses of strategic materials not included in the pre-ferred programs are essential directly for the maintenance of civilian out-put, and indirectly for meeting our military and foreign aid commitments.These needs cannot be indiscriminately reduced. Nor can the fulfillmentof these needs, without great damage, be left to a scramble for supplies byunlimited bidding-up of prices, or handled on the basis of historical tradequotas bearing little relation to essentiality.

40


The instruments now available for the domestic allocation of commod-ities in short supply do not afford adequate safety in the face of presentand prospective pressures. There are, for example, provisions for the do-mestic allocation of antimony, tin and tin products, and mandatory powerunder the Selective Service Act to allocate steel for military requirementsand to assign priorities for materials and products procured for the militaryand atomic energy programs. These mandatory powers, however, applyto only a small portion of the demand for the materials which they cover.

Thus generally under the legislation now in force, only voluntary alloca-tion procedures are available to distribute the supply of scarce commodities.This results in two grave difficulties. The first of these difficulties is thatrapid progress toward our stockpiling goals would require curtailment ofdomestic civilian consumption to a greater extent than voluntary programscan accomplish. If either stockpiling or other procurement programsshould be substantially accelerated, there is serious doubt of the ultimateadequacy of existing measures to meet the problems of inflation, disorgan-ization of production, and harm to small business which would arise fromaggravated specific commodity shortages. The second difficulty is that, withthe weak tools now available, the orderly handling of essential stockpilingand procurement programs may be jeopardized in an effort to avoid dis-ruption of the general economy.

One further impact of the expanded defense program derives fromits manpower requirements. These will not be very great in 1948, but it isestimated that new defense needs will, within a year from now, call for theservices of about 1 million persons as additions to the armed forces, civilianemployees of the armed forces, and workers for producing military equip-ment. These manpower requirements of the defense program can onlyin part be drawn from new accessions to the labor force. There will arisenumerous labor shortages in some areas of the country. Some plants under-going a marked expansion will experience manpower shortages, particularlyof key skilled and professional personnel, such as tool and die makers,instrument makers, physicists, chemists, and aeronautical engineers. Thiswill cause disturbances in some spheres of civilian production, and upwardpressures on wages and other costs.

The impact of tax reduction

As shown in the discussion of government transactions on page 18, theconsolidated cash surplus of Federal payments over receipts during the fiscalyear 1948 amounted to 8.9 billion dollars, of which 7.6 billion came in thefirst half of the calendar year 1948. Under reduced taxes, it now appearsthat in the second half of the calendar year 1948 there will be only a small

41


surplus, if any, although a sharp rise in prices and incomes under the pressureof inflation might operate to increase Treasury receipts materially.

The drastic reduction in the surplus from the level prevailing during thefirst half of the calendar year 1948 is not due solely to tax reduction, butis due in part to increased expenditures, especially those resulting from theenlarged defense program. The decline in the surplus attributable to theadoption by the Congress of the Tax Revenue Act of 1948 would amount,over a full year's operation at present income levels, to about 5 billion dollars.This tax reduction will strengthen consumer expenditures. Taxpayers withnet incomes of $5,000 or less will receive a total tax reduction of about3 billion dollars; a total of 2 billion dollars of tax reduction will accrue tothose in the higher-income brackets. In the light of these figures, it seemsreasonable to estimate that the tax reduction bill will result in an increasein the annual rate of consumer spending of somewhere between 3 and4 billion dollars.

The tax reduction occurred at a time when the international situationimpelled us to adopt additional programs for national defense and foreignaid. It sharply reduces the large surplus at a time when inflationary forcesare still present and thereby removes our principal protection against thestrengthening of these forces.

42


III. The Issue Between Inflationand Stabilization

IN the preceding pages, the problem of inflation has stood at the centerof the picture. The upsurge of various elements in the price and in-

come structure has introduced unsettling factors which are clearly incom-patible with stable prosperity and increasing national security. At thevery heart of sound economic policies must be the desire to help achievegreater stability and more permanently workable relationships as rapidlyas possible.

From time to time since the war, there have been brief periods whenwe appeared to be moving toward such stabilizing relationships. Buteach time this prospect was soon upset by some new factor of curtailedsupply or expanded market demand which unleashed again the unsettlingforces of inflation. Effective adjustment policies have been hard to deviseand harder to get accepted and applied.

We appear now to be once more at a stage of renewed instability, withmany prices reaching for the easy dollars that a still undersupplied marketis ready to yield; with recent and prospective wage settlements contributingto the upward process; with market demand again being stimulated bythe accelerating procurement programs of foreign aid and national defense;and with continuing scarcities of numerous key materials. Tax reductionhas added to consumer and business demand in the market, but it is inca-pable of stimulating a proportionately larger flow of goods from our alreadyoverloaded plants, fully employed labor force, and still overstrainedsupply lines.

The presence of these inflationary factors does not mean that we are onthe threshold of an inflationary orgy of the "run-away" kind. Whilealarmists refer to our present currency as "printing press money," soberstudents do not see in the present monetary situation any real analogy withContinental and Confederate currency episodes or the more recent collapseof the currencies of numerous countries in Europe or elsewhere after bothWorld Wars.

Of course, the United States dollar has had its real value lowered in thecourse of the economic readjustments induced by World War II. And

43


there is no likelihood of a near-time restoration of that former value. Butthere is nothing sacred about the price marks of 1939 or 1926, and theattempt to restore them would probably create more hardship than itwould alleviate.

To be sure, we want to achieve reasonable steadiness of the dollar,although at a price level necessarily higher than in prewar times. But theprocess of monetary adjustment is only one ingredient, and in a sense only abyproduct, of adjusting relationships within the price-income structure soas to facilitate and maintain maximum production and employment. Thepractical question now is how these adjustments may be wrought, primarilyin the context of the bargaining and compromising through which theparties at interest work out their rival claims in a free economy, but subjectto the guiding influences of appropriate public policies.

In this process as it is now unfolding, there are complex forces somejworking to lessen and others to intensify inflationary pressures. In attempt-ing to judge what balance these competing forces may work out, we beginby examining some of the factors that reduce the pressure of inflation.Outstanding among these is the fact that, in many fields of production, thesupply situation is greatly improved.

One such development was dramatized by the Department of Agricul-ture crop report of July 9. It opened with these profoundly significantsentences:

Crop production in 1948 promises to surpass that of the outstanding year of1942, and the record set in 1946. * * * a record [corn] production of 3,329million bushels is now indicated. The wheat prospect 1,242 million bushels is animprovement of 4 percent over earlier forecasts and will be the second largest cropin our history. * * * Cotton acreage is 10 percent larger than in 1947.* * * All-crop prospects are reported above the average of the past ten yearsand as good as in 1946. Current estimates indicate an aggregate production about128 percent of the 1923-32 average, compared with 123 percent in 1942 and 126percent in 1946.

Despite our high degree of industrialization, the tremendous importanceof agriculture cannot be overlooked. The world shortage of foods andother products of agricultural origin, continuing up to this year, has had animmense inflationary impact upon the whole price structure through therelations that farm prices have to the cost of living and to industrial wages,prices, and profits. Although the full effects will not be felt for sometime, greater abundance in basic agricultural crops should be of signal aidin the checking of inflation and the progressive working out of reasonablystable relationships.

That end would not be promoted if the enlargement in supply of farmproducts were to coincide with some serious curtailment of demand toproduce a collapse of farmers5 incomes. Such a collapse shortly after

44


World War I spread to rural merchants and bankers, to manufacturersof farm equipment and consumer goods, and to other commodity markets.But the repetition of such a debacle today is precluded by a policy of farmincome supports, implemented by procedures worked out and tested overthe past twenty years, though not yet perfected.

A second factor which should significantly work against further inflationis the increase in industrial expansion. We appear to be nearing the end ofthe strong impact of war-created shortages of plant and inventory. Whileindustrial output has increased less rapidly than extremely favorable pro-duction conditions had led us to expect, it should progressively show theeffect of nearly 3 years of added capital investment upon a vast scale. Asan enlarged and modernized industrial plant gets shaken down and its crewstrained to maximum efficiency, domestic backlogs of orders will be workeddown, and the increased flow of final products will permit the great demandsupon the productive system to be met more easily and will ease the pressureon prices.

These favorable factors on the physical side are'reinforced by numerousindications of improved economic understanding and broader objectives onthe part of those who operate our business system. It cannot fairly be saidthat they have rushed blindly ahead in the boom spirit of past expansionaryperiods. A sense of caution has been attained by industrialists, merchants,and bankers with regard to inventories, credit expansion, and constructionplans. Some unions have applied moderation to their wage demands, andsome manufacturers and distributors have sought to hold prices againstfurther advances or have initiated reductions, as a means of doing somethingpositive to stem inflation.

If international tension lessens, the lightening of both the physical andpsychological impact on our economy, with its great productive potential,would sharply reduce inflationary pressure at important points. We mightthen rather promptly be put to the test to show whether our producersand distributors could make price and cost adjustments fast enough tocontinue employment and production without serious cutbacks.

In spite of the counterinflationary factors enumerated, it remains truethat inflation is still very much with us. The nature of this continuedinflation has been treated in detail in the preceding sections of this report.It can be summarized briefly as three interrelated phases of one complexprocess.

First, there is the fact that demand in most categories has been expand-ing and may expand further. Consumer demand is running high, particu-larly under the impact of tax reduction and wage increases. Rising resi-dential construction and heavy investment, fed by high profits, add tobusinesss demand. Government expenditures are rising. Thus the sum

793637°—48 5 45


total of effective demand of all types still continues to press against a supplythat increases only slowly. This excess of demand may not be as generalas it was when postwar shortages were at their peak. The inflationarypressure is perhaps more selective than it was, but it is still a major factorin the price situation.

Second, the inflationary effects have been multiplied through the price-wage spiral. Developments of the last few months have had a cumulativeeffect of great importance at the very base of our industrial structure. Therecent attempt to hold industrial wages and reduce prices of industrial goodshas evaporated. Substantial wage increases, which often have been made inorder to catch up with previous price increases, have been accompanied inturn or promptly followed by substantial rises in the prices in industrialgoods. Production costs are still rising, and while many businesses can passthem along in higher prices, there are others that are obviously squeezed.Capacity to pay for high-priced materials is not necessarily distributing themin the way most consonant with economic efficiency. Railroad freight andpassenger rates have been materially increased, and utilities in many in-stances have been granted advances by public utility commissions whileothers have requests for such advances pending. This upward movementof prices is linked on the one side to the third round of wage increases andlinked on the other to active talk of a fourth round.

The rising cost of living is imposing intense hardship upon millions ofindividuals who are not strategically located to participate in the upwardmovement. Meat prices continue to rise, while the prospectively largesupply of grain will have little power to enlarge the supply of meat through-out the remainder of this year and indeed may operate somewhat to reduceit. While improved grain stocks next year will have important effects onthe prices of livestock products, they cannot in the immediate future coun-teract the strong inflationary forces which control our markets.

Third, credit expansion, partly a cause and partly a result of inflation, stillpersists. The spiraling increase in prices and wages can continue only solong as business can replenish its working capital from bank credit orthrough the conversion of liquid assets.

Almost as significant in its disturbing effect as the statistically demon-strable evidences of inflation is the persistent uneasiness which it breeds, anuneasiness which could expand into a profoundly disruptive force if it isnot removed by dealing with the specific factors which are its causes. Thedeep significance and reality of this uneasiness in the presence of inflationwas clearly illustrated by the conditions surrounding the break in com-modity prices early in 1948. A tremor of uncertainty, even of fear, ranthrough the whole economy, and for a short time there were many who

46


thought that we were close to a serious and general downturn in employ-ment and production.

Fortunately, that particular break turned out to be corrective ratherthan disastrous. But this should not blind us to the fact that there werespecial circumstances, already referred to, which isolated its significance andwhich could not be counted upon to protect us under other circumstances.Besides the farm price-support program, which gave assurance to the busi-ness community at large, the break was shortly followed by other eventsin the economy which fortified optimistic business sentiment.

But we cannot ignore the prospect that unworkable relationships in theprice structure, necessarily the outgrowth of unconquered inflation, maylead to a break in some other sector of the economy where the consequenceswould not thus be isolated. If attendant developments which cannot beforeseen did not serve substantially to counteract it, this break well mightcarry our highly sensitive economy into a general recession of serious pro-portions.

In short, we have this very year had a significant warning while therehas still been opportunity to act in time. Far from being satisfied becausethe lack of action thus far taken has not yet reaped the ultimateconsequences of inflation, we should profit by this warning and vigorouslyseize the additional grant of time that circumstances have accorded to us.The most dangerous error that could overtake us as a nation would be toassume that the problem has disappeared, or that our efforts should beabated because we have thus far avoided serious reverses or because thebasic conditions for continued prosperity appear to be sound. It is typicalfor inflationary and speculative booms to collapse while business sentimentis still confident.

It is not enough to be satisfied with quick and crude adjustments bywhich our economy can "get by" from month to month or year to year,still under the momentum of forces engendered during the 4-year warperiod. No one can foretell precisely when some event or series of eventsmight touch off a change in the economic situation more rapidly than wewere prepared to deal with it. It is of ever-increasing importance thatthe policies and actions of private business, labor, agriculture, and Govern-ment should move toward economically sound relationships so that thepostwar boom may be succeeded by a sustained prosperity based on themaximum reasonable use of our productive resources.

In the Employment Act of 1946 the Congress declared the continuingpolicy of the Government to "coordinate and utilize all its plans, functions,and resources" to bring about and maintain maximum production andemployment and to preserve and strengthen our economy of free competitiveenterprise. This plan of action requires that we shall always look to the

47


independent factors in our business world to adjust their policies so intel-ligently that the imbalances which are inevitable in our highly dynamiceconomy shall be temporary and shall not accumulate until they destroybusiness stability.

The role of the Government as contemplated in the Employment Actordinarily is to develop its own activities and organize the policies whichaffect business in such a way as to facilitate these needed voluntary adjust-ments. But if economic maladjustments become so serious that the volun-tary action is clearly inadequate to halt threatening trends in the economy,the power of Government must be used where the President and theCongress deem necessary to forestall serious damage to the public interest.

The comprehensive wartime controls over business were rapidly removedafter the close of hostilities. Voluntary action has been increasingly reliedupon to maintain business activity at a high level without permitting seriousmaladjustments to arise. The files of our business journals show that wideattention has been given to the desirability as well as the need for everybusiness firm to adjust its own policies so that it may contribute its shareto stabilization. The attitude and effort of thousands of less conspicuousfirms deserve to be recognized along with the better publicized actionsof a few of our most important business corporations which have helddown or actually reduced prices in a boom market for the express purposeof furnishing leadership in an effort to halt the inflationary movement.

The same attitude has been exhibited by a large number of the mostimportant leaders of organized labor, who have earnestly and with somesuccess postponed or moderated the urgent demands of members of theirlabor unions for wage increases to meet the rising cost of living. Farmershave frankly expressed their uneasiness about the situation which was beingcreated by rising prices even though they have been beneficiaries thereof,but the nature of this industry gives them little opportunity to take posi-tive measures. Consumers have reserved large amounts of their savingsbonds and, despite the pressure of high prices, have made large annualadditions to current savings.

While this spreading sense of responsibility and of caution promisesmuch for the success of our economy in meeting problems of adjustmentin the future, the forces with which we now contend have proved to betoo strong for the countervailing efforts of individual factors in the busi-ness world. The workers have seen the cost of living continue to mount,and to them it seems that any restraint they have shown has only broughtthem sacrifice without corresponding benefits to the public. The businessfirms which have held down their prices can only feel that they havepermitted others to increase their profits, and they have not halted theinflation.

48


A real difficulty with the wholly voluntary solution is that it requiressimultaneous action by workers, businessmen, and consumers. But noindividual or group can have firm assurance that the inflation will bestopped. It is therefore necessary that the Government should have anduse powers in the interest of economic stability, to supplement the strengthof individual actions, to give them common direction, and to prevent theirdissipation through mutual conflict of purpose. Only with the supportof wise and vigorous Government action can the effectiveness of voluntaryactions be assured.

49


Appendix AThe Nation's Economic Budget

TablesPage

1. The Nation's Economic Budget 522. Consumer account 543. Business account 554. The export surplus and net foreign investment 565. Government cash receipts and payments to the public 576. Reconciliation of Budget receipts with cash receipts from the

public, fiscal year 1948 587. Reconciliation of Budget expenditures with cash payments to the

public, fiscal year 1948 588. Federal cash surplus, 1947 and 1948 599. Federal cash receipts from the public other than borrowing, 1947

and 1948 5910. Federal cash payments by function, 1947 and 1948 6011. Federal cash payments by type of recipient, 1947 and 1948 . . . . 6112. Reconciliation of cash payments to the public with Government

expenditures for goods and services 6313. Adjustments to receipts (or income) in the Nation's Economic

Budget 6314. Reconciliation of cash receipts with tax series arising from

current production of goods and services 64

51


The Nation's Economic BudgetExplanation of the tables

Table 1 presents the Nation's Economic Budget for the calendar year1947 and the first half of 1948.

TABLE 1.—The Nation's Economic Budget

Calendar year 1947 and January-June 1948

[Billions of dollars, current prices]

Economic group

CONSUMERS

Disposable income _Expenditures .

Saving (+) _ _ _ _

BUSINESS

Undistributed profits and additions toreserves

Gross private domestic investmentExcess of receipts (+) or investment

INTERNATIONAL

Net foreign investmentExcess of receipts (+) or investment

GOVERNMENT

(Federal, State, and local)

Cash receipts from the publicCash payments to the public

Excess of receipts (+) or payments

ADJUSTMENTS (To arrive at grossnational product)

For receipts—For paymentsStatistical discrepancy

Total gross national product

1947

Receipts

173.6

19.4

59.9

—17.9

O A

231.6

Expendi-tures

164.8

30.0

8.9

53.2

-25.2

231.6

Excess(+)or

deficit (-)

+8.8

-10.6

-8.9

+6.7

-17.9+25.2-3.4

January-June 1948 annualrates, seasonally adjusted i

Receipts

186.0

21.4

64.0

-21.1

-3.8

246.5

Expendi-tures

174.4

37.2

3.9

52.0

-21.1

246.5

Excess(+)or

deficit ( - )

+11.6

-15.8

-3.9

+12.0

-21.1+21.1-3.8



52


Nature of the accounts and sources

The Nation's Economic Budget is designed to give a general picture ofsignificant movements or changes in the economy, and their relation tothe economic decisions of consumers, business, and government. Theprincipal flows of income and expenditures, and the net additions to andabsorption of saving are interrelated in an overall way in the Budget.

The estimates of consumer receipts and expenditure, business receiptsand domestic investment, and net foreign investment are based on the in-come and product accounts prepared by the Department of Commerce.1

Government receipts and payments are based on cash receipts from andpayments to the public as estimated by the Bureau of the Budget.2 Thecash receipts and payments series is used because it gives a more completepicture of the immediate economic impact of Government operations thanother available series on Government expenditures.

The adjustments to receipts and expenditures are made to reconcilethe total of the accounts with the gross national product or expenditure.The latter includes only receipts or expenditures arising from the currentproduction of goods and services, while the accounts of consumers, business,and government, include certain other types of transactions. The natureof these adjustments is discussed more fully in the section, "Adjustments toreceipts and expenditures." A brief description of the accounts with ex-planatory and supplementary tables follows.

Consumer account

Table 2 below shows the principal sources of personal income, personaltaxes, and a breakdown of expenditures by important classifications. Con-sumer income includes the net profits of unincorporated business.

Personal saving is a residual derived by deducting expenditures fromdisposable income. Because of statistical imperfections, difficulties of ad-justing for seasonality, etc., too much significance should not be attachedto small variations in this figure. Expenditures for dwellings are con-sidered as a business investment rather than a consumer expenditure.

1 A number of the principal series comprised in the national income and product estimatesare shown in appendix C, tables 1 through 6 (by calendar years from 1929 through 1946and by quarters for 1947 and the first half of 1948). Those desiring more detailed informa-tion are referred to the National Income Supplement to the Survey of Current Business,published in July of 1947 and to the Survey of Current Business, July 1948.

2 See p. A121 of the Budget of the United States for fiscal year 1949.

53


T A B L E 2.—Consumer account



Eeceipts or expenditures 1947January-June1948, annualrates, season-

ally adjusted l

Receipts:Personal income

Salaries, wages, and other labor income 2_.Proprietors' and rental incomeDividends and personal interestTransfer payments3 . . .

Veterans < _ _Other..

Less: Personal tax and nontax paymentsEquals: Disposable income.

Expenditures:Durable goods _ __Nondurable goodsServices __

Total..

Saving

195.2121.946.015.611.77.34.4

21.6173.6

21.096.547.3

208.1128.751.116.711.66.25.4

22.1186.0

22.0102.450.1

164.!

"+8?!174.4

+11.6

i Estimates based on incomplete data.' Includes employer disbursements for wages and salaries, minus employee contributions for social

insurance, plus other labor income.3 Includes business transfers.< Includes military pensions, disability and retirement payments, mustering-out pay, unemployment,

self-employment, and subsistence allowances, terminal-leave bonds, and other miscellaneous payments.


Business account

The business account is shown in table 3. Business income includes un-distributed corporate profits, and the adjustment for corporate inventoryvaluation, plus capital consumption allowances for both corporate and non-corporate business. Because there is no information on noncorporate en-trepreneurial withdrawals, it is impossible to include an estimate of retainedearnings for unincorporated business in business income. On the otherhand, investment includes not only the investment of all business, but alsothe investment of individuals in homes. Business income and expendituresare therefore not entirely comparable.

The investment items shown in the business account do not show com-pletely the amount of funds required for financing. For example, in-vestment includes only that part of an increase in the value of inven-tory arising from an increase in physical volume, while the whole amountof the increase in the book value of inventories must be financed. Needsfor capital also arise in connection with the transfer of fixed assets, thoughsuch transfers are not reflected in the gross national product, and in connec-tion with an expansion of accounts receivable. On the other hand, someinvestment in equipment is financed through depreciation allowances andsome is charged to current expense. Agricultural equipment is frequently

54


financed out of farmers' current income and residential construction by theowner-occupant. Thus these investments do not give rise to financing re-quirements in the usual sense even though they do absorb saving.

For the corporations alone, financing sources and requirements are shownin table 30, appendix G.

TABLE 3.—Business account



Receipts or investmentJanuary-June1948, annual

Receipts:Corporate profits _..Less:

Corporate profits tax liabilities _Dividends.. _

Equals: Corporate undivided profitsPlus: Capital consumption allowance .__Less: Corporate inventory valuation adjustmenta

Equals: Undistributed profits (excluding inventory valuation adjust-ment) and additions to reserves

Domestic gross investment:Construction __ _. ._ _

Residential, nonfarmNonresidential _ _

Producers' durable equipmentChange in business inventories

Total investmentExcess of receipts (+) or investment (—)

37.2-15.8

1 Estimates based on incomplete data.2 The estimate of corporate profits for the second quarter of 1948 is that of the Councilof Economic Advisers.

3 This adjustment is required because corporate income is reckoned inclusive of changesin the book value of inventories, as is customary in business accounting, whereas only thevalue of the real change in inventories is counted as current output in the national product.

NOTE—Detail will not necessarily add to totals because of rounding.

International accountNet foreign investment, as included in the Nation's Economic Budget,

does not reflect the entire export surplus shown in table 3, page 16, ofthe text. It consists only of the portion financed by means that add tothis country's net claims abroad during the period under consideration.Gifts, grants, and other unilateral transfers, therefore, are not included.Government unilateral transfers, whether in cash or in kind, are includedin the Nation's Economic Budget as a Government payment; privateunilateral transfers are included in consumer expenditures.

In 1946 and 1947 these two types of unilateral transfers had a net valueof nearly 2.9 and 2.4 billion dollars, respectively. In 1948, however, thistotal, and consequently the difference between the total export surplus andnet foreign investment, is expected to become considerably greater owingto the large proportion of Government aid to foreign countries that willtake the form of grants rather than loans. As a result, net foreign invest-

55


merit is expected to remain much lower than in 1947, and the majorportion of the total export surplus will be included in the Governmentcomponent of the Nation's Economic Budget.

The composition of the total excess of exports of goods and services andthe means of financing it are shown in appendix C, table 31. The derivationof net foreign investment from this total is shown in table 4 below.

TABLE 4.—The export surplus and net foreign investmentCalendar year 1947 and January-June, 1948


January-JuneItem 1947 1948, annual

rates l

Surplus of exports of goods and services.— 11.3 8.0Less: Net unilateral transfers:

Government 1.8 3.5Private . .6 .6

Equals: Net foreign investment. 8.9 3.9



Government account

Table 5 provides a breakdown of the cash receipts and payments ofFederal and State and local governments which are combined in the Na-tion's Economic Budget. Tables 6 through 11 are supplementary tables onthe Federal budget. The first two of these show the derivation of cashreceipts and payments from budgetary receipts and expenditures. Table 8shows the Federal cash surplus and tables 9, 10, and 11 provide additionalanalytical material on cash receipts and payments, including estimates forthe second half of calendar year 1948.

a. Derivation of Cash Receipts and Payments from Budgetary Receiptsand Expenditures. The basic sources of information concerning FederalGovernment receipts and disbursements are Government Budget and Trustaccounts. Such accounts present the financial position and operations ofthe Government in accordance with conventional governmental accountingtechniques.

From the standpoint of depicting the current flow of funds to and fromthe Government, however, and hence the immediate economic impact ofGovernment operations, Federal receipts and expenditures as stated in con-ventional Budget and Trust accounts are deficient. In the first place, asis desirable for purposes of long-range financial control, they show receiptsand expenditures in many fields on an accrual rather than on a currentcash basis. Terminal-leave bonds issued to veterans, for example, are

56


recorded as a budgetary expenditure at the time of issue rather than atthe time they are redeemed although it is probably not until the lattermoment that their direct economic impact is felt. Secondly, conventionalBudget and Trust account data contain, in the aggregate, a considerableamount of double counting when considered from the standpoint of theGovernment as a whole. For example, transfers from the Treasury gen-eral fund to trust accounts are, in order to present a complete picture ofFederal financial operations, recorded both as expenditures and receipts.From the standpoint of the Government as a whole, however, the trans-action is purely one of intragovernmental accounting.

TABLE 5.—Government cash receipts and payments to the publicCalendar year 1947 and January-June 1948


Receipts or payments

Receipts:Federal .--...State and local *

Total receipts _ _ _

Payments:Federal.. _State and local » _.

Total payments

Surplus (+) or deficit (—):Federal. _State and local _

Total _

1947

46.913.1

59.9

41.112.1

53.2

+5.7+1.0

+6 7

January-June 1948

annual rates,seasonallyadjusted i

50.213.8

.64.0

37.614.4

52.0

+12.6—.6

12.0

i Estimate based on incomplete data.* Excludes Federal grants-in-aid.


In order to derive the Government Account in the Nation's EconomicBudget, therefore, it is necessary (i) to place the conventional data ona current cash basis, and (ii) to eliminate double counting. Tables 5 and6, on page 19 of the text, show the cash transactions of Federal and ofState and local governments on such a consolidated basis.

Tables 6 and 7 show a reconciliation of Federal Budget receipts andexpenditures with cash receipts from and payments to the public. A de-tailed reconciliation of Federal Budget and cash transactions appearsmonthly in the Treasury Bulletin. A fuller explanation of the differencesbetween budgetary and cash receipts and expenditures may be found in the1949 Budget of the United States (p. A121).

57


TABLE 6.—Reconciliation of Budget receipts with cask receipts from the public

Fiscal year 1948


ReceiptsFiscalYear1948 1

Net budget receipts _ ___Trust account receipts

Total recorded receipts

Less: Intragovernmental transactions:Payments to U. S. Treasury (miscellaneous receipts) by Government enterprisesTransfers from general fund to trust accountsInterest received by trust funds on investments in United States securitiesReceipts from sale of surplus vessels transferred to U. S. Treasury (miscellaneous receipts) but

also recorded as a trust account receipt and expenditureOther

Less: Recorded receipts-not paid in cash by the public:Deduction from Federal employees' salaries for retirement fundsOther.. . _

Equals: Cash receipts from the public* _

44.79.5

54.3

* Estimates based on incomplete data.2 Less than 50 million dollars.«Excludes borrowing.


TABLE 7.—Reconciliation of Budget expenditures with cash payments to the public

Fiscal year 1948


Expenditure or paymentFiscalYear19481

Budget expenditures. _ _Trust account expenditures i _ _

Total recorded expenditures __ _Clearing account for outstanding checks and telegraphic reports

Adjusted total, recorded expenditures _ ___Less: Intragovernmental transactions:

Payments to U. S. Treasury (miscellaneous receipts) by Government enterprises.Transfers from general fund to trust accountsInterest received by trust funds on investments in United States securitiesInvestments of trust funds and Government enterprises in United States securitiesReceipts from sale of surplus vessels transferred to U. S. Treasury, but also recorded as a trust

account expenditure „_.Other _ _ _.-_

Less: Recorded expenditures not paid out in cash:Deduction from employees' salaries for retirement fundsInterest on savings bonds (net increase in redemption value of outstanding issues)Terminal leave bonds issued _._

Plus: Cash payments not recorded as expenditures:Redemption of excess profits tax refund bonds and adjusted service certificatesTerminal leave bonds redeemed for cash __Redemption of non-interest-bearing notes by the International Bank and Monetary Fund..Expenditures of Government enterprises from proceeds of sales of obligations in the market.

Equals: Cash payments to the public

39.3

46.1.5

46.6

.74.2.8

3.0

.8

.2

.5

.2

(*)1.5.9.1

38.8

i Estimates based on incomplete data.* Less than 50 million dollars.


58


b. Supplementary Tables on Federal Cash Transactions. Table 8 showsthe Federal cash surplus for recent and current periods. The major sourcesof Federal revenues are shown in table 9. Table 10 analyzes Federal cashpayments according to major governmental function. Table 11 differsfrom table 10 by classifying cash payments not according to function butaccording to the major groups initially receiving such payments, so far ascan be done on the basis of the available data. Civilian salaries and wages,for example, are grouped in a single category, although in the functionaltable they are distributed among virtually all categories. Similarly, "pay-ments to business for purchases of goods and services" include a large vol-ume of purchases financed by grants from the Federal Government in sup-port of our foreign aid programs, although these would fall under "interna-tional affairs and finance" in the functional classification.

T A B L E 8.—Federal cask surplus

Calendar years 1947 and 1948

[Billions of dollars!

Receipts or payments

Receipts...Payments.

Surplus (+) or deficit ( - ) .

1947actual

46.941.1

+5.7

1948annual rates, seasonally

adjusted

January-June

preliminary

50.237.6

+12.6

July-Decemberestimate

44.740.8

+3.9


T A B L E 9.—Federal cash receipts from the public other than borrowing



Source 1947actual


adjusted

January-June

preliminary


Direct taxes on individuals *_Direct taxes on corporations..Employment taxes *Excises and customsMiscellaneous receiptsReceipts of trust accounts

21.09.1.7

7.74.73.6

23.011.5

.87.93.53.6

19.011.2

.88.02.13.7

Total cash receipts.. 46.9 50.2 44.7

i Includes personal income taxes and estate and gift taxes.* Excludes amounts transferred directly to trust accounts.


59


TABLE 10.—Federal cash payments by function



Payment

Budget accounts:National defense .International affairs and financeVeterans' services and benefits _ _ . _ _ _Interest on the public debtRefunds of receiptsOther _

Trust accountsExchange Stabilization Fund _ . . .Deduction from Federal employees' salaries for retirementClearing account for outstanding checks and telegraphic reports.Adjustment to daily Treasury statement basis

Total payments to the public

Addendum (included in above):Total payments relating to international affairs and

finance:Budget accountsForeign economic cooperation trust fundExchange Stabilization Fund '

Total . .

1947actual

12.96.16.63.82.65.32.61.4

- . 2.2

— 3

41.1

6.1

1.4

7.5

1948annual'rates, seasonally

adjusted

January-Junepreliminary

10.9i 4 9

6.63.92.45.53.3.3

- . 2.1

- . 2

37.6

4.9

. 3

5.2


11.7i 3 46.63.92.47.6

25 5.4

- . 3- . 6

40.8

3.42.5.4

6.3

1 Excludes payments of foreign economic trust fund, see addendum.2 Includes payments from foreign economic cooperation trust fund, see addendum.* Redemption of notes by International Monetary Fund of portion of United States subscription made

rom Exchange Stabilization Fund.


60


TABLE 11.—Federal cash payments by type of recipient



Payment

Individuals:Salaries and wages of Federal personnel:

Military (excluding terminal-leave pay to en-listed personnel)

Civilian»Allowances to dependents of military personnelReadjustment benefits, pensions, and other pay-

ments to veterans2

Social insurance beneficiariesLoans to home owners 8

Interest on the Federal debt --Refunds of taxes *Other*

TotalBusiness:

Payments for purchases of goods and servicesSubsidies and other payments to farmersLoans and investments *Interest on the Federal debtRefunds of taxes4 ._ _ ._Subsidy arising from postal deficit • _Home mortgage purchases from financial institutions.War-damage insurance claims and participants'

profit

TotalInternational:

Loans to foreign governments _Subscriptions to the International Monetary Fund

and BankMembership in other international organizations and

unilateral cash transfersTotal

State and local governments and public agencies:G ran ts-in-aidInterest on the Federal debtLoans

Total

Clearing account for outstanding checks and telegraphic reports

Total Federal cash payments to the public

1947

3.14.6.3

7.31.8

—.2.8

1.6.4

19.7

8.8.8.1

2.91.0.2.1

(8)13.9

3.6

1.8

.15.5

1.7

(8)1.8

.2

41.1


adjusted

January-Junepreliminary

3.04.3.3

6.21.8

- . 11.01.71.1

19.3

10.6.2

(8)2.9.7.3.1

14.7

1.0

.6

.11.8

1.6.1

(8)1.8

.1

37.6


3.34.6.3

5.92.0

- . 1.9

1.7.7

19.1

8 13.3.7

(8)2.9.7.6.4

18.5

.8

.6

.21.6

2.0.1

(8)2.2

- . 6

40.8

1 Civilian wages and salaries exclude payroll deductions for Federal employees' retirement benefitsand Post Office wages and salaries. Post Office wages and salaries are estimated at 1.2 billion dollars incalendar year 1947 and at annual rates of 1.2 billion and 1.5 billion in the first and second halves of calendaryear 1948, respectively. The total Federal civilian pay roll, including the Post Office, is estimated to be6.0, 5.8, and 6.2 billion dollars in the same periods.

2 Also includes cash terminal-leave pay to enlisted personnel, cashing of terminal-leave bonds, muster-ing-out pay, and payment of Government and national service life insurance benefits to veterans' bene-ficiaries.

* Repayments exceed loans.* Refunds to individuals include refunds to unincorporated business.* Consists of cash trust account payments other than payment of social insurance benefits and Govern-

ment and national service life insurance. Such items as repayments of personal funds of military andcivilian personnel located overseas which were deposited in trust accounts and payments of earnings toprisoners of war are included.

fl Includes payments of foreign economic cooperation trust fund for goods and services of 2.5 billiondollars.

7 Includes a small amount for subsidies to business.8 Less than 50 million dollars.* In cash payments to the public the Post Office is included on a net basis. The whole deficit is shown

here as a subsidy and included in the business category since the deficit arises primarily because of thesubsidy to mail other than first class.


793637°—48 6 61


Adjustments to receipts and expenditures

The adjustments to receipts and expenditures shown in table 1 recon-cile the sum of the accounts of consumers, business, government, and netforeign investment with the gross national product. The latter includesonly expenditures for the current production of goods and services. TheGovernment account, however, includes total Government cash payments,whether involving purchase of the current output of goods and services,purchases of existing assets, or merely transfers of purchasing power to cer-tain groups in the economy. Private transfers, such as gifts, have by andlarge not been taken into account. Receipts in the various accounts againinclude income arising from Government transfers and are not comparablewith income arising from transactions in goods and services.

The adjustments include transfer payments, purchase or sale of existingassets, and other transactions which must be deducted to arrive at the grossnational product. Details of the adjustments are shown in tables 12 and13. According to table 12, "Adjustments to expenditures," transfers toindividuals, including social-security benefits, veterans' bonuses, pensionsand allowances, and similar payments account for a large part of the total.Cash payments of interest on the Federal debt, which are also defined as atransfer of purchasing power, are a second large item. Loans to foreigngovernments or subscriptions to the International Fund or Bank are similarto domestic transfers since they involve an addition to the purchasing poweror ability of foreign countries to obtain goods from the United States.2 Inaddition to transfers of purchasing power, discrepancies in timing betweenthe time cash payment is made and the time production is directly affectedmust be eliminated.

Government transfer payments to individuals and interest paymentsmust be eliminated from receipts as well as payments. Receipts from thesale of surplus property must also be deducted since sales of surplus involveonly transfers of existing assets rather than current production. In addi-tion a number of adjustments must be made for the difference betweenthe time taxes accrue from current production and the time the Govern-ment records receipts. A summary of the adjustments to receipts is shownin table 13. Table 14 details the reconciliation between cash receiptsand the estimates of taxes used by the Department of Commerce in de-veloping estimates of gross national receipts and expenditures.

2 Sales of surplus property are included among the adjustments for a somewhat differentreason. Such sales are included as part of net foreign investment and since they do notinvolve current production, an offsetting entry must be made to arrive at the gross nationalproduct.

62


T A B L E 12.—Reconciliation of cash payments to the public with Government expenditures forgoods and services



Description

Cash payments to the public (Federal, State, and local)Less: Adjustments

Transfers to individuals ....Tax refunds _Cash interest payments to the public _Transfers to business> _Loans to foreign governmentsSubscriptions to the International Bank and Monetary FundSales of surplus abroad 3

Adjustment for Government enterprises * _Miscellaneous trust account payments. _ _Adjustments for time lags5.Noncash expenditures for goods and services9

Plus: Clearing account for outstanding checks and telegraphic reports-

Total adjustments _ _

Equals: Government expenditures for goods and services ._Plus: Expenditures of consumers, business and net foreign investment.Equals: Gross national product or expenditure __

1947

63.2

11.12.64.1.63.61.81.0.2.8.7

-1.5-.2

25.2

28.0203.7231.6

January-June 1948

annualrates,

adjusted i

52.0

11.02.44.4

.61.0

.21.0

- . 1-1 .0- . 1

21.0

31.0215.6246.5

1 Estimates based on incomplete data.2 Includes Government subsidies, domestic sales of consumer-type surplus property, and capital trans-

actions. Domestic sales of consumer-type surplus property are deducted because they are included inconsumer expenditures for goods and services.

8 Sales of surplus property abroad are deducted because they are included in net foreign investment.The figure shown above does not correspond with miscellaneous receipts for sale of surplus abroad sincethe figure shown in this table includes sale of goods on credit.

4 Includes net expenditures of Government enterprises which do not represent capital formation.5 Includes adjustments necessary to bring payments into conformity with the current output of goods

and services. Net receivables and prepayments are deducted, and an adjustment made for military paycertificates, issue of special currency, etc.

• Includes contributions of Government and Government employees to retirement funds and Govern-ment contributions to national service life and Government life insurance.


T A B L E 13.—Adjustments to receipts {or income) in the Nation's Economic Budget



Description

252.9

11.14.4

- . 12.5

17.93.4

231.6

January-June,1948 annual

rates, seasonallyadjusted 1

271A

11.04.6

- . 35.8

21.13.8

246.5

Total receipts (or income) __Less: Adjustments

Receipts of Government transfer paymentsReceipts of Government interest payments 3

Subsidies less current surplus of Government enterprisesAdjustments to Government cash receiptss

Total adjustmentsLess: Statistical discrepancyEquals: Gross national receipts

* Estimates based on incomplete data.* These figures do not a^ree with cash interest payments by Government (table 12) since net interest

payments are included in consumer income.1 These adjustments, which reconcile cash receipts from the public with the tax series used in estimating

business and personal income, are shown in table 14.


63


T A B L E 14.—Reconciliation of cash receipts with tax series arising from current productionof goods and services


Receipts 1Q47

59.9

- 1 . 41.82.8.3.4.3

1.5

57.4

January-June1948, annual

rates seasonallyadjusted»

64.0

1.43.41.5

.a.2

.11.0

58.2

Cash receipts from the publicLess:

Excess of business tax receipts over liabilitiesExcess of personal tax receipts over paymentsReceipts from sales of domestic surplus propertyReceipts from sales of foreign surplus propertyOther receipts from abroad2

Miscellaneous trust account receiptsPlus: Noncash receipts8

Equals: Tax receipts arising from current production of goods and serv-ices

i Estimates based on incomplete data.* Primarily reimbursable lend-lease.* Includes contributions of Government and Government employees to retirement funds, and Govern-

ment contributions to national service life and Government life insurance funds.


64


Appendix BThe Distribution of Consumer Income and

Ownership of Liquid and Other Assets

TablesPage

1. Share of total money income received by each tenth of theNation's spending units when ranked by size of income, 1946and 1947 67

2. Distribution of families and spending units by income level,before and after Federal income tax, 1947 68

3. Distribution of spending units by income level and type of in-come change, from 1946 to 1947 70

4. Selected components of saving, 1946 and 1947 715. Proportion of liquid assets held by spending units and family

units in early 1948, by income level 716. Distribution of spending units by size of liquid asset holdings

in early 1947 and 1948 727. Proportion of spending units reducing liquid assets in 1947, by

purpose of withdrawal and by income level 738. Distribution of spending units holding various types of assets, by

type of asset held in early 1948 and by income level 73

65


Distribution of Consumer Income and Owner-ship of Liquid and Other Assets

The following appendix is intended to supplement the text section,"Consumer income, expenditure, and saving," page 6, mainly by pre-senting factual material from which the conclusions of the text are drawn.Topics relate to changes in the equality of the distribution of incomebetween 1946 and 1947, the distribution of income before and after incometax, income increases and decreases between 1946 and 1947, saving anddissaving, and the distribution of ownership of liquid and other assets byconsumers.

Equality of the distribution of income

The degree of equality in the distribution of money income has remainedsubstantially unchanged between 1946 and 1947, according to a survey ofconsumers made early in 1948.1 This is indicated by the fact that whenthe Nation's spending units are ranked according to their incomes, fromlowest incomes to highest, the proportion of the total money income ofthe Nation going to each tenth of the spending units has remained almostconstant.2 This is shown in the following table:

The stability of the above distributions between 1946 and 1947 is incontrast to the significant decrease in income concentration from 1935-36and 1941 to 1946 described in the Economic Report of January 1948. Thereasons for the increase in the degree of equality over the war period ha venot been completely analyzed but the following factors were probably themost important: (1) The decrease in unemployment and underemploy-ment, (2) the increase in the number of families with more than oneearner, (3) the rise in farm income relative to the total, and (4) thenarrowing of wage differentials.

1 The 1948 Survey of Consumer Finances conducted for the Board of Governors of theFederal Reserve System by the Survey Research Center, of Ann Arbor, Mich. This surveywas made for the third consecutive year. Extensive data on distribution of income, liquidasset holdings, consumer purchases of durable goods, etc., drawn from these surveys havebeen published in the Federal Reserve Bulletin during the last 3 years.

2 A spending unit consists of related persons who live together and pool their incomesfor their major items of expense.

66


TABLE 1.—Share of total money income received by each tenth of the Nation's spending unitswhen ranked by size of income, 1946 and 1947 l

Spending units ranked from lowest to highest income

Lowest tenth..Second tenth __Third tenth 2Fourth tenth... _ _Fifth tenthSixth tenthSeventh tenthEighth tenthNinth tenth.— _Highest tenth 2..._ _

Percent of total money income before taxes

By tenths

1946

135679

10121532

194' 1

134

7q

101?1533

Cumulative

1946

149

152231415368

100

1947

148

14?,130405?67

100

1 Income data for 1947 are based on interviews in January-March 1948; for 1946 on interviews in January-March 1947. It is possible that the proportion of income received by the highest tenth of income receiversis underestimated by several percentage points in all years. Samples of approximately 3,000-3,500 spend-ing units have been used in these surveys; owing to the dispersion of higher incomes it cannot be expectedthat a completely representative sample of the highest dollar incomes was obtained.

2 The slight change in concentration in these deciles may be due to sampling variations.Source: Based on data from the 1948 Survey of Consumer Finances, conducted for the Board of Governors

of the Federal Reserve System by the Michigan Survey Research Center. The methods used in the surveyare described in the Federal Reserve Bulletin, June 1948, p. 643.

Between 1946 and 1947, some of the reasons for the previous trendtoward an increased degree of equality continued, such as a continuedrise in farm incomes and a further increase in employment. In the lightof the development during previous years, it might have been expected thatthis trend would result in a continued improvement in the income distribu-tion. However, the Survey of Consumer Finances indicates that the dis-tribution of income by deciles has remained the same. An explanationmay be that the favorable effect of employment conditions was offset bythe unfavorable effects of inflation. Inflation per se tends to increase theinequality of income distribution, since many families, particularly in thelower brackets, have relatively or entirely fixed incomes.

Distribution of income before and after tax, 1947

The distribution shown above and the distributions shown for 1946 inthe Economic Report of January 1948 relate to money income before tax.For some purposes, however, it is of more interest to know the distributionof income after tax. Until the present, data have been inadequate topresent reliable distributions on an "after tax" basis. Through the co-operation of several agencies, distributions of families and of spendingunits by income level, before and after Federal income tax, are now presentedfor 1947 in table 2.

Families as well as spending units are included in table 2 for the sake ofcomparability with distributions for other years and from other sources.The family consists of related persons living in the same dwelling (persons

67


living alone are considered as separate families), and may comprise morethan one spending unit if some of the members of the family manage theirincome separately.

TABLE 2.—Distribution of families and spending units, by income level, before and after Federalincome tax,1 1947

Money income class

Percent of familiesand single indi-viduals

Beforetax

Aftertax

Percent of spendingunits

Beforetax

Aftertax

Under $1,000. „$1,000 to $1,999.$2,000 to $2,999.$3,000 to $3,999.$4,000 to $4,999.$5,000 to $7,499.$7,500 and over.

15252517

i Estimated 1947 Federal income tax liability, excluding the tax on capital gains.

Source: See table 1.

Technical notes to Table 2

Preliminary investigations indicate that the survey data as presented in table 2are sufficiently reliable to show the approximate effect of Federal income-tax lia-bilities on the distribution of families by income level. In this connection, it shouldbe mentioned that the tax liability was not based directly on information obtainedin interviews or on tax returns, but on an estimate of the 1947 tax liability madefrom comprehensive data concerning family composition and income assembled inconnection with the Survey of Consumer Finances. Further work must be com-pleted to relate the distribution after tax to the adjusted distribution before taxfor 1947 (see Table 2—a below), and to determine more precisely the effect ofthe tax on the concentration of income.

Study of available prewar data on the distribution of taxes by income level isalso under way with the object of presenting in a future report a comparison ofthe effect of the Federal income-tax on the distribution of income between a currentand a prewar year.

The distribution of families before taxes shown above is not comparable withthat presented for 1946 on page 19 of the Economic Report of January 1948. The1946 distribution was based on survey data which had been adjusted in such a wayas to make it agree with certain independently determined national aggregatesof income and of family numbers. For purposes of comparison, both adjusted andunadjusted distributions are shown below for 1946 and 1947:

68


TABLE 2—a.—Distribution of families by income level, adjusted and unadjusted basis, in 1946and 1947

Money income before taxes

Percent of families

1946

Surveydata

Adjustedsurveydata*

1947

Surveydata

AdjustedsurveydataJ

Under $1,000...$1,000 to $1,999.$2,000 to $2,999.$3,000 to $3,999.$4,000 to $4,999.$5,000 to $7,499.$7,500 and over.

All units.

11161817121610

100 100 100 100

* Revised.3 Preliminary.

For a description of the methods of adjustment for 1946 and 1947 incomes, seethe January Economics Report, page 102. As stated in that report, the estimatednumber of families and single individuals in the civilian noninstitutional populationon December 31, 1946, was 43,330,000. The comparable figure for December 31,1947, is 44,620,000, according to a preliminary estimate. Total civilian money in-come was 165.7 billion dollars in 1946 and 185.5 billion dollars in 1947, accordingto recently revised data. The percentage expansion of the distributions after adjust-ment for population coverage was 17 percent in 1946 and 10 percent in 1947.The adjusted distributions for both 1946 and 1947 are preliminary, since both theincome aggregates and population numbers are subject to further revision.

Table 2 shows that about two-thirds of families (including single indi-viduals) had money incomes under $4,000 before taxes and 31 percent hadmoney income below $2,000. After payment of taxes, there was an in-crease in the number of families in all income brackets under $4,000 and adecrease in all brackets above this. Nearly three-fourths of the familieshad incomes of less than $4,000.

Increases and decreases in income, 1946-47

Although there was a general rise in personal incomes between 1946 and1947, many families did not share in the increase. Of the spending unitshaving increases in income, only 26 percent were in the under $2,000 group,which includes 36 percent of total spending units. Only 50 percent were inthe under $3,000 group, which accounted for 59 percent of the spendingunits. Thus income increases were somewhat more frequent in the higherincome groups in relation to the number of people in those groups.1

1 In evaluating table 3 it should be remembered that spending units have been groupedaccording to income received in 1947. Units with income increases between 1946 and 1947are now classed according to the higher incomes received in 1947, while units whose incomedecreased are'classed according to the lower income to which they moved. Thus thebasis of classification exaggerates somewhat the impression that income increases weremore concentrated at levels above $2,000 or $3,000.

69


Units with relatively fixed incomes are found most frequently in thelower income brackets. The proportion of persons in the lower bracketswhose income is fixed, such as pensioners and annuitants, widows, etc., hasundoubtedly increased over the war period and during the subsequentinflation. The income of low-wage earners and marginal farmers hasincreased in relation to that of retired persons and those receiving Govern-ment stipends or allowances, changing the composition of the lowest in-come groups.

TABLE 3.—Distribution of spending units by income level andto 1947 i

1947 money income before taxes

Under $1,000$1,000 to $1,999 -$2,000 to $2,999$3,000 to $3,999$4,000 to $4,999$5,000 to $7,499 .$7,500jand over _

All units

Total

142223171095

100

type of income change, from 1946

Percent of spending units

Change in income, 1946 to 1947

Increase inincome

818242012126

100

Sameincome

20232316684

100

Decrease inincome

18272215864

100

i Based on changes in amount of annual income received as reported by spending units in early 1948.Income which had not changed by more than 5 percent in either direction was considered to "remain thesame."


Saving and dissavingIn 1947, almost three-fourths of all spending units saved, while one-

fourth spent in excess of income. The proportion of families dissaving wasnot very different from that of 1946, but the amounts involved increasedconsiderably. Since saving on the part of people who saved remainedfairly constant, net saving declined between 1946 and 1947. (See ap-pendix C, table 5.) Saving took the principal forms of an increase incurrency and bank deposits, life insurance, corporate securities, and inhomes and other direct investments. Purchasers of durable goods suchas automobiles are not considered as saving. Dissaving was mainly in theform of an increase in consumer debt and decreases in holdings of liquidassets such as Government bonds and bank deposits. The amounts ofselected components of personal saving or dissaving in 1946 and 1947 wereas follows:

70


T A B L E 4.—Selected components of saving) 7946 and 7947


Item of saving

Amount ofsaving

1946

+10.4- 3 . 2- . 4+.4

+3.4- 3 . 3- 1 . 6- 1 . 9+3.9

1947

+4.4+.2+.3

+1.0+3.3

- 3 . 8- 2 . 2- l .C+5.8

Currency and bank deposits *U. S. Government securities l

State and local government securities 2.Corporate and other securities2

Private pension and insurance reservesLiquidation of debt:

Mortgage debt 3 _Installment debt4

Other consumer debt«Nonfarm dwellings «

1 Excludes holdings by unincorporated business and trusts.2 Includes holdings by unincorporated business and trusts.3 Debt on 1- to 4-family non-farm-residential structures.4 Installment sale credit and installment loans.8 Single-payment loans, charge accounts, and sale credit.8 Construction of 1- to 4-family nonfarm dwellings, less net acquisition of properties by non-individuals.

Also includes a small amount of construction by nonprofit institutions.

NOTE.—Minus items indicate dissaving.Sources: Board of Governors of the Federal Reserve System (currency and bank deposits, U. S. Govern-

ment bonds, installment debt, andfother consumer debt).Securities and Exchange Commission (insurance, reserves, State and local and corporate securities,

mortgage debt, and nonfarm dwellings).

Ownership of liquid and other assets

The accumulation of liquid assets is only one form of saving, but, asthe text of this report states, it is the form of saving which is most clearlyanti-inflationary. Furthermore, a cushion to future downward fluctuationsin demand is provided by a wide dispersion of liquid-asset holdings amongall groups of the poulation and all income levels. The distribution of liquidassets by income level is at present very unequal, although substantialamounts are held by families at every level. As shown in table 5, 31 per-cent of the families whose incomes were less than $2,000 had only 13 percentof the liquid assets in 1947.

T A B L E 5.—Proportion of liquid assets held by spending units and familyincome level *

1947 annual money income before taxes

Under $1,000 _ .$1,000 to $1,999$2,000 to $2,999$3,000 to $3,999$4,000 to $4,999$5,000 to $7,499$7,500 and over _

All units

Family units

Percentof families

1318201711138

100

Percentof liquid

assets held

589

109

1940

100

units in early 7948, by

Spending units

Percent ofspending

units

142223171095

100

Percentof liquid

assets held

61012139

1634

100

* The 1947 income data and early 1948 liquid assets data are based on interviews in January-March 1948.For comparable spending unit data in early 1947 and 1946, see the Federal Reserve Bulletin, July 1947,table 14, p. 801. Comparable family unit data are presented in table 18, p. 802.


71


The proportion of spending units with no liquid assets increased from 24to 27 percent between 1947 and 1948, and the proportion with no assets orless than $200 worth of assets increased from 38 to 42 percent. In early1948, 55 percent of spending units had less than $500 in liquid assets, asshow in Table 6.

TABLE 6.—Distribution of spending units by size of liquid asset holdings in early 1947 and 1948

Amount of liquid assets iPercent of spending units

1947

24141214147753

100

$470. $890

1948

27151312126654

100

$350$820

None. _. .$1 to $199._$200 to $499$500 to $999$1,000 to $1,999...$2,000 to $2,999._.$3,000 to $4,999...$5,000 to $9,999...$10,000 and over.

All units. _

Median holdings of all unitsMedian holdings of units with assets .

i Includes all types of U. S. Government bonds, checking accounts, and savings accounts in banks andsavings and loan associations, postal savings, and shares in credit unions.


Table 7 presents an analysis of decreases in asset holdings over the pastyear. The main reasons for decreasing asset holdings are shown for threeincome ranges, under $2,000, $2,000 to $5,000, and $5,000 and over. Pur-chases of nondurable consumer's goods and services (living-expense items)were given as the sole reason for reducing liquid assets by 70 percent of theunder $2,000 groups, and by 48 percent of the $2,000 to $5,000 incomegroup. Of those having over $5,000 income, living-expense items were lessimportant than acquisition of durable goods, homes, and other investments.Thus, in a large proportion of cases in the upper income groups, liquidassets were converted into other types of saving.

72


T A B L E 7.—Proportion of spending units reducing liquid assets in 1947, by purpose of withdrawaland by income level

1947 mouey income before taxes

Under $2,000...$2,000 to $4,999.$5,000 and over

All units.

Percent of spending units reducing liquid assets

All pur-poses

100100100

100

Non-durable

goods andservicesl

54

Auto-mobiles

and otherdurablegoods

13

Houses andinvest-ments *

13

Severalpurposes8

162332

20

i Includes living expenses, emergencies and sickness, repair of houses, and other nondurable consumption(repairs of automobiles and other durable goods, purchase of luxury goods, moving, travel, amusement,education, and taxes).

*Includes purchases of real estate, investment in business or securities, and repayment of debt.3 The distribution of spending units reducing liquid assets for several purposes is as follows:

PercentNondurable consumers goods, etc., and durable goods 8Nondurable consumers goods, etc., and houses and investments 5Durable goods and houses and investments 4Other combinations 3

Total . . . . 20


Table 8 presents data on ownership of various types of non-liquid assetsin early 1948 by income groups. The ownership of almost all types ofassets increases as income rises, with the exception of homes. The pro-portion of persons owning homes appears to be larger in the under $1,000group than in the $1,000 to $2,000 to $3,000 intervals. In the lowestincome group, only 45 percent of spending units have life insurance andonly 44 percent own any kind of liquid assets.

T A B L E 8.—Distribution of spending units holding various types of assets, by type of asset held inearly 7948 and by income level

1947 money income before taxes

Under $1,000$1,000 to $1,999...$2,000 to $2,999. _.$3,000 to $3,999...$4,000 to $4,999...$5,000 to $7,499...$7,500 and over-

All units...

Percent of spending units holding assets

Liquidassets 1

73

Life in-surance

Automo-bile

50

Home2

43

Unincor-poratedbusiness

Stocksand

bonds3

3558

1021

i Checking accounts and savings accounts in banks and saving and loan associations, postal savings, andshares in credit unions, and U. S. Government bonds.

8 Percent of non-farm population occupying their own homes.* Excluding U. S. Government bonds.Source: See table 1.

73


Appendix CStatistical Tables Relating to Employment,

Production, and Purchasing Power

CONTENTSNational Income: Page

1. Gross national product or expenditure, 1929-48 772. Disposition of gross national product, 1939-48 783. National income by distributive shares, 1929-48 794. Personal income, 1929-48 805. Disposition of personal income, 1929—48 816. Per capita disposable income in current dollars and 1947 dollars, 1929-48. 82

Employment and Wages:7. Labor force, 1929-48 838. Number of wage and salary workers in nonagricultural establishments,

1929-48 849. Average gross weekly earnings in selected industries, 1929-48 85

10. Average hourly earnings in selected industries, 1929-48 86Production and Business Activity:

11. Physical production index, 1929-48 8712. Industrial production index, 1929-48 8813. New construction activity, 1929-48 8914. Business expenditures for new plant and equipment, 1929—48 9015. Business inventories and sales, 1939-48 9116. Sales, stocks, and outstanding orders at 296 department stores, 1939-48.. 92

Prices:17. Consumers' price index, 1929-48 9318. Wholesale price index, 1929-48 9419. Index of prices received and of prices paid by farmers and parity ratio,

1929-48 95Money, Banking, and Credit:

20. Consumer credit outstanding, 1929-48 9621. Loans and investments of all commercial banks, 1929-48 9722. Adjusted deposits of all banks and currency outside banks, 1929-48.... 9823. Estimated ownership of Federal securities, 1939-48 99

Corporate Profits and Finance:24. Profits before and after taxes, all private corporations, 1929-48 10025. Profits after taxes, 629 large private industrial corporations, by industry

groups, 1939-48 101

75


Corporate Profits and Finance—Continued Page26. Relation of profits before and after taxes to sales, private corporations

excluding finance, insurance, and real estate, 1946—48 10227. Relation of profits before and after taxes to investment, private manufac-

turing corporations, by industry groups, 1947 10328. Relation of profits before and after taxes to sales, private manufacturing

corporations, by industry groups, 1947 10429. Relation of profits before and after taxes to investment and to sales, all

private manufacturing corporations, by size classes, 1947—48 10530. Sources and uses of corporate funds, 1946—48 106

International Transactions:31. The international transactions of the United States, 1946-48 10732. United States Government aid to foreign countries, 1946-48 10833. United States merchandise exports, including reexports, by continents,

1936-38 quarterly average and 1947-48 10934. United States general merchandise imports, by continents, 1936-38

quarterly average and 1947-48 11035. United States merchandise exports, by economic classes, 1936-38 quar-

terly average and 1947-48 I l l36. Indexes of quantity and unit value of United States merchandise exports,

by economic classes, 1936-38 quarterly average and 1947-48 11237. United States imports for consumption, by economic classes, 1936-38

quarterly average and 1947-48 11338. Indexes of quantity and unit value of recorded United States imports for

consumption, by economic classes, 1936-38 quarterly average and1947-48 114

Summary:39. Changes in selected economic series since 1939 and since the first half of

1947 115

76


Statistical Tables Relating to Employment, Produc-tion, and Purchasing Power

TABLE 1.—Gross national product or expenditure, 7929-48x


PeriodGross

nationalproduct

Personalconsump-

tion ex-penditures

78.8

70.861.249.246.351.9

56.262.567.164.567.5

72.182.390.8

101.6111.4

122.8147.4164.8

Gross pri-vate do-

mestic in-vestment

15.8

10.25.4

. 91.32.8

6.18.3

11.46.39.0

13.017.29.34.66.4

9.226.530.0

Net foreigninvestment

0.8

. 7

. 2

. 2

. 2

. 4

- . 1- . 1

. 11.1

. 9

1.51.1

- . 2- 2 . 2- 2 . 1

-1 .44.78.9

Govern-ment pur-chases of

goods andservices

1929.

19301931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.

1947—First halfSecond half .

1948—First half 2

1947—First quarterSecond quarter..Third quarter.,.Fourth quarter..

1948—First quarterSecond quarter2.

103.8

90.975.958.355.864.9

72.282.590.284.790.4

100.5125.3159.6192.6212.2

213.4209.3231.6

Annual rates, seasonally adjusted

227.4235.9

246.5

226.4228.3227.9243.8

246.0247.0

161.2168.4

174.4

158.1164.2165.6171.1

172.3176.5

29.530.5

37.2

32.626.425.635.4

40.434.0

9.58.3

3.9

8.810.28.48.2

3.94.0

8.5

9.2

8.18.0

9.911.711.612.813.1

13.924.759.788.696.5

82.830.828.0

27.328.7

31.0

26.927.628.329.0

29.432.5

1 The figures for 1944-48 are based on the revised series of national income and product of the Departmentof Commerce. For detail, see the Survey of Current Business, July 1948.


NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

793637° 77


TABLE 2.—Disposition of gross national product, 1939-481

Period

Total

nationalproduct

Disposition of gross national product

Export surplus of goods andservices3

TotalFinancedby Gov-ernment

aid

Financedby othermeans

Govern-mentwar or

nationaldefenseexpendi-

tures

Productfor

domesticcivilian

use

1939

19401941 _1942.1943.1944

194519461917

Annual rates:1947—First half

Second half

1948~-First half *

1947—First quarterSecond quarter..Third quar ter- .Fourth quarter..

1948—First quarterSecond quarter 4.

1939..

1940..1941..1942..1943..1944..

1945..1946..1947..

1947—First half....Second half..

1948—First half «...

1947—First quarter..._Second quarter.Third q u a r t e r -Fourth quarter-

1948—First quarterSecond quarter *

90.4

100.5125.3159.6192.6212.2

213.4209.3231.6

227.4235.9

246.5

226.42?8.3227.9243.8

246.0247.0

Billions of dollars

1.1

1.72.36.1

10.712.0

5.77.5

11.3

11.810.7

8.1

11.212.510.910.5

7.98.2

(3)

0.11.36.4

12.814.0

7.75.15.7

6.64.8

5.3

5.28.06.82.9

5.84.7

1.1

1.61.0

- . 3- 2 . 1- 2 . 0

- 2 . 02.55.6

5.35.9

2.8

6.04.54.17.6

2.13.5

1.2

2.212.843.267.173.7

67.215.910.0

10.29.8

9.6

9.410.99.2

10.3

9.310.0

Percentage of total

88.1

96.6110.2110.3114.812G.5

140.5185.9210.3

205.4215.4

228.8

205.8204.9207.8223.0

228.8228.8

100.0

100.0100.0100.0100.0100.0

100.0100.0100.0

100.0100.0

100.0

100.0100.0100.0100.0

100.0100.0

1.2

1.71.83.85.65.7

2.73.64.9

5.24.5

3.3

4.95.54.84.3

3.23.3

(')

0.11.04.06.66.6

3.62.42.5

2.92.0

2.2

2.33.53.01.2

2.41.9

1.2

1.6.8

—.2- 1 . 1- . 9

- . 91.22.4

2.32.5

1.1

2.72.01.83.1

.91.4

1.3

2.210.227.134.834.7

31.57.64.3

4.54.2

3.9

4.24.84.04.2

3.84.0

97.5

96.187.969.159.659.6

65.888.890.8

90.391.3

92.8

90.989.891.291.5

93.092.6


2 U. S. Government transfers to foreign countries are included in the export surplus and are excludedfrom the Government war or national defense expenditures.

3 Less than $50,000,000.* Estimates based on incomplete data.* Percent not shown because dollar figure was less than $50,000,000.

NOTE.—Detail will not necessarily add to totals because of rounding.Sources: Department of Commerce and Bureau of the Budget.

78


TABLE 3.—National income by distributive shares, 1929-48!


Period

Proprietors' and rentalincome

Corporate profits and inven-tory valuation adjustment

Corporate profits

111

1929-

1930..1931..1932-1933-1934-

1935-1936-1937.1938-1939-

1940-1941..1942-1943..1944-

1945-1946-1947..

87.4

75.058.941.739.648.6

56.864.773.667.472.

81.103.8136.5168.3182.4

181.179.3202.5

50.8

46.539.530.829.34.1

37.142.47.44.47.8

51.864.384.7109.1121.1

122.9117.3127.5

19.7

15.711.87.47.28.7

12.112.615.414.014.7

16.320.828.132.134.1

36.041.846.0

8.3

7.05.33.22.94.3

5.06.16.66.36.8

7.79.6

12.114.115.4

16.820.423.2

5.7

3.92.91.72.32.3

4.93.95.64.44.5

4.96.9

10.611.811.9

12.314.615.6

5.8

4.83.62.52.02.1

2.32.3.13.33.5

3.64.35.46.6.

7.06.7.1

10.3

6.61.6

-2 .0-2 .0

1.1

3.04.96.24.35.8

9.214.619.823.724.0

19.816.824.

3.3- . 8

-3 .0.2

1.7

3.25.76.23.36.5

9.317.221.124.524.3

20.421.829.8

1.4

.8

.5

.4

1.01.41.51.01.5

2.97.8

11.714.213.5

11.69.0

11.7

8.4

2.5-1 .3-3 .4- . 41.0

2.34.34.72.35.0

6.49.49.4

10.410.8

8.712.818.1

0.5

3.32.41.0

- 2 . 1- . 6

- . 2- . 7

1.0- . 7

- . 1-2 .6-1 .3- . 8- . 3

-5 .0- 5 . 1


1947—First half...Second half _

1948—First half '

1947—First quarterSecond quarterThird quarterFourth quarter

1948—First quarterSecond quarter ' . . .

198.3206.7

216.3

197.3199.3200.6212.8

215.5217.1

125.2129.9

134.0

125.0125.3127.6132.2

134.0134.0

45.546.5

51.1

46.444.644.448.6

50.651.6

22.623.9

25.5

22.522.723.024.7

25.026.0

15.915.4

18.1

16.914.914.316.5

18.018.1

7.07.3

7.5

7.07.07.17.4

7.57.5

23.525.9

26.6

21.825.224.327.5

26.326.9

28.930.8

30.5

28.928.829.132.4

31.429.5

11.412.1

11.9

11.411.311.412.7

12.211.5

17.518.7

18.6

17.517.517.719.7

19.218.0

-5 .4-4 .9

-3 .9

-7 .1-3 .6-4 .8-4 .9

-5 .1-2 .6

6.5

6.25.95.45.04.7

4.54.54.44.34.2

4.14.13.93.43.1

3.03.44.3

4.24.5

4.6

4.14.24.44.5

4.64.6


2 National income is the total net income earned in production by individuals or businesses. The conceptof national income currently used differs from the concept of gross national product in that it excludesdepreciation charges and other allowances for business and institutional consumption of durable capitalgoods.

3 Includes wage and salary receipts and other labor income (see appendix C, table 4), and employer andemployee contributions for social insurance.

* Net income after inventory valuation adjustment. This adjustment was —1.2 billion dollars in 1947,—1.2 billion (annual rate) in fourth quarter of 1947, and —0.7 billion (annual rate) in the first half of 1948.

8 Federal and State income and excess-profits taxes.6 Less than $50,000,000.» Estimates based on incomplete data; profits by Council of Economic Advisers and all others by Depart-

ment of Commerce.

NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce (except as noted).

79


TABLE At.—Personal income, 1929-48 *


Period

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.19431944.

194519461947.

1947—First half

Second half

1948-Firsthalf*

1947—First quarterSecond quarterThird quarter..Fourth quarter

1948—First quarterSecond quarter

Totalpersonalincome

85.1

76.264.849.346.653.2

59.968.474.068.372.6

78.395.322.2

149.4164.5

170.3178.1195.2

Salaries,wages,

and otherlabor

income2

50.5

46.239.230.529.133.8

36.742.145.942.845.6

49.561.581.2

104.4116.1

116.7111.4121.9

Proprie-tors' and

rentalincome 3

Dividendsand

personalinterestincome

19.7

15.711.87.47.28.7

12.112.615.414.014.7

16.320.828.132.134.1

36.041.846.0

13.3

12.611.19.18.28.6

8.610.110.38.79.2

9.49.99.7

10.010.6

11.413.515.6

Transferpayments

1.5

1.52.72.22.12.2

2.43.52.42.83.0

3.13.13.23.0

6.211.411.7

Nonagri-culturalpersonalincome4

76.8

70.060.146.243.049.5

53.462.866.562.166.3

71.586.1

108.7134.3149.0

154.3159.4174.9


190.3199.9

208.1

190.9189.6196.7203.1

207.3208.8

119.1124.7

128.7

119.0119.2122.3127.1

128.6128.7

45.546.5

51.1

46.444.644.448.6

50.651.6

15.116.0

16.7

14.915.315.816.1

16.616.8

10.612.8

11.6

10.710.514.311.2

11.511.7

169.8179.8

184.8

169.4170.2177.8181.8

184.4185.2


2 Differs from "compensation of employees" in appendix C, table 3, in that it excludes employer andemployee contributions to social insurance. Includes wage and salary receipts and other labor income-compensation for injuries, employer contributions to private pension and welfare funds, pay of militaryreservists not on full-time active duty (pay for full-time active duty included in military wages and salaries),directors' fees, jury and witness fees, compensation of prison inmates, Government payments to enemyprisoners of war, marriage fees to justices of the peace, and merchant marine war-risk life and injury claims.

a See appendix C, table 3, for major components.* Equals personal income exclusive of net income of unincorporated farm enterprises, farm wages, agri-

cultural net rents, agricultural net interest, and net dividends paid by agricultural corporations.« Estimates based on incomplete data.


Source: Department of Commerce.

80


TABLE 5.—Disposition of personal income, 1929—48l

Period

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.

1947—First half.-.Second half _

1948—First half K

1947—First quarterSecond quarter-Third quarter—.Fourth quarter..

1948—First quarterSecond quarter?

Personalincome

Less: Per-sonal taxand non-tax pay-ments

Equals:Dispos-

ablepersonalincome

Less: Per-sonal con-sumptionexpend-itures

Equals:Personal

netsaving

190.3199.9

208.1

190.9189.6196.7203.1

207.3208.8

Billions of dollars

85.1

76.264.849.346.653.2

59.968.474.068.372.6

78.395.3

122.2149.4164.5

170.3178.1195.2

2.6

2.51.91.51.51.6

1.92.32.92.92.4

2.63.36.0

17.818.9

20.918.921.6

82.5

73.763.047.845.251.6

58.066.171.165.570.2

75.792.0

116.2131.6145.6

149.4159.2173.6

78.8

70.861.249.246.351.9

56.262.567.164.567.5

72.182.390.8

101.6111.4

122. 8147.4164.8

3.7

2.91.8

-1 .4-1 .2- . 2

1.83.63.91.02.7

3.79.8

25.430.034.2

26.611.88.8

Net sav-ing as

percent ofdispos-

ableincome


21.322.0

22.1

21.221.421.722.2

23.221.0

169.0178.0

186.0

169.7168.2175.0180.9

1«4.1187.8

161.2168.4

174.4

158.1164.2165.6171.1

172.3176.5

7.99.6

11.6

11.64.19.49.7

11.811.3

4.5

3.92.9

-2 .9-2 .7

3.15.45.51.53.8

4.910.721.922.823.5

17.87.45.1

4.75.4

6.2

6.82.45.45.4

6.46.0

1 The figures for 1944-48 are based on the revised series of national income and product of the Depart-ment of Commerce. For detail, see the Survey of Current Business, July 1948.




81


TABLE 6.—Per capita disposable income in current dollars and 1947 dollars, 1929-48

Period

1929 _ . _

1930193119321933 _.1934

1935.19361937 _-19381939

1940 _ -1941 _.1942 _ __ ._ _.19431944

1945 _19461947

1947—First halfSecond half

1948—First half •

1947—First quarterSecond quarter _ _Third quarterFourth quarter

1948—First quarterSecond quarter ' _ _ _ _ _

Disposablepersonalincome(billions

of dollars)i

82.5

73.763.047.845.251.6

58.066.171.165.570.2

75.792.0

116.2131.6145.6

149.4159.2173.6

Annualrates,

seasonallyadjusted

169.0178.0

186.0

169.7168.2175.0180.9

184.1187.8

Population(thou-

sands) *

121,770

123,077124,040124,840125, 579126,374

127, 250128,053128.825129, 825130, 880

131, 970133. 203134, 665136, 497138,083

139, 586141. 235144,034

143,385144,807

146,035

143, 049143,702144, 411145,150

145, 733146,325

Consumers'price index,1947*100

76.9

75.068.361.358.060.1

61.662.264.563.362.4

62.966.173.277.678.8

80.787.5

100.0

Not ad-justed forseasonal

variation •

97.6102.4

106.2

96.998.2

101.0103.8

105.3107.1

Per capita disposablepersonal income

Currentdollars

678

599508383360408

456516552505536

574691863964

1,054

1,0701,1271,205

1947dollars *

882

799744625621679

740830856798859

9131,0451,1791,2421,338

1,3261,2881,205

Annual rates, seasonallyadjusted

1,1791,229

1,274

1,1861,1701,2121,246

1,2631,283

1,2081,200

1,200

1,2241,1911,2001,200

1,1991,198

1 The figures for 1944-48 are based on the revised series of national income and product of the Depart-ment of Commerce. For detail, see the Survey of Currerif Business, July 1948.

2 Estimated population of continental United States, including armed forces overseas; annual data as ofJuly 1 and quarterly and semiannual data as of middle of period, interpolated from published monthlyestimates.

3 Current dollars divided by the consumers' price index on the base 1947=100 to give a rough measure ofchanges in buying power of disposable income.

* A small part of the increase may be seasonal.* Estimates based on incomplete data.

Sources: Department of Commerce (disposable income and population) and Department of Labor (con-sumers' price index.)

82


TABLE 7.—Laborforce, 7929-48

[Thousands of persons, 14 years of age and over]

Period

Monthly average:1929

19301931193219331934-

193519361937 _-19381939

1940194119421943 .-_-1944

194519461947.


1948—First half

1947—JanuaryFebruaryMarchAprilMay _JuneJulyAugustSeptember _OctoberNovember

1948—JanuaryFebruaryMarchApril . _MayJune

Totallabor force(including

armedforces)

49,440

50,08050,68051,25051,84052,490

53,14053, 74054,32054,95055,600

56,03057, 38060,23064,41065,890

65,14060,82061,608

60,92062, 297

61,770

59,51059,63059,96060,65061,76064,00764,03563,01762,13062,21961,51060,870

60. 45561,00461,00561.76061,66064, 740

Armedforces

260

260260250250260

270300320340370

3901,4703,8208,870

11, 260

11, 2803,3001,440

1,5511,328

1,240

1,7201,6201,5701,5301,4701,3981,3711,3521,3461,3271,2941,280

1,2421,2261,2361,2371,2381,260

Civilian labor force

Totalcivilian

laborforce

49,180

49,82050,42051,00051, 59052,230

52, 87053,44054.00054,61055, 230

55,64055, 91056,41055, 54054,630

53,86057,52060,168

59,36860,969

60, 531

57,79058,01058,39059,12060,29062,60962,66461,66560,78460,89260, 21659,590

59,21459, 77859,76960,52460, 42263,480

Employment

Total

47,630

45,48042,40038, 94038,76040,890

42,26044, 41046. 30044,22045, 750

47,52050,35053, 75054,47053,960

52, 82055, 25058,027

57,00959,044

58,317

55,39055,52056,06056,70058,33060,05560,07959,56958,87259,20458,59557,947

57,14957,13957,32958,33058,66161,296

Nonagri-cultural

37,180

35,14032,11028, 77028, 67030, 990

32,15034, 41036,48034, 53036, 140

37, 98041. 25044,50045,39045,010

44, 24046, 93049,761

49,03350,488

50,753

48,89048,60048,82048,84049,37049,67850,01350, 59450,14550,58350,60950,985

50,08950,36850, 48250,88350,80051,899

Agricul-tural

10,450

10,34010,29010,17010, 0909,900

10,11010, 0009,8209,6909,610

9,5409,1009,2509,0808,950

8, .5808,3208,266

7,9768,556

7,564

6,5006,9207,2407,8608,960

10,37710,0668,9758,7278,6227,9856,962

7,0606,7716,8477,4487,8619,396

Unem-ployment

1,550

4,3408,020

12, 06012,83011,340

10,6109,0307,700

10, 3909,480

8.1205,5602,6601,070

670

1,0402,2702,141

2,3591,924

2,214

2,4002,4902,3302,4201,9602,5552,5842,0961,9121,6871,6211,643

2,0652,6392,4402,1931,7612,184

NOTE.—Detail will not necessarily add to totals because of rounding.Sources: Department of Labor (1929-39) and Department of Commerce (1940-48).

83


TABLE 8.—Number of wage and salary workers in nonagricultural establishments, 7929—48 *

[Thousands of employees]

Period

Monthly average:1929.

1930..1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.1941.1942.1943..1944.

1945.1946.1947_

1947—First half..Second half

1948: First half *..1947—January

February-MarchApril.May.JuneJulyAugustSeptember..OctoberNovember..December..

1948—January. _.February-MarchAprilMayJune3

Totalwageand

salarywork-

ers

31,041

29,14326,38323,37723.46625,699

26.792

1,71828,90230,287

32,03136,16439,69742,04241,480

40,06941,49443, 970

43,33744,603

44,550

43,06343,16943,41043, 22143,34543,81643, 68644,12544, 51344, 75844,91845,618

44,60344, 27944, 59944,29844,60944, 913

Manufacturing

Total

10,534

9,4018,0216,7977,2588,346

8,9079,65310,6069,25310,078

10,78012,97415,05117, 38117, 111

15, 30214,51515,901

15, 71316,089

16,103

15, 67"15,78315, 82615, 75015, 56915, 67215, 58015, 96216,17516,20916, 25616,354

16,26716,18316,26915,94515,89316,058

Dur-ablegoods

4,357

4,9756,4858,179

10,29710,200

8,4777,1808,055

8,0228,088

8,176

7,9498,0308,0718,0687,9628,0507,8747,9878,0708,1268,1948,274

8,2568,1678,2588,1598,1138,102

Non-dur-ablegoods

()5,720

5,8056,4886,8737,0846,91f

6,8257,3357,846

8,002

7,927

7,7287,7537,7557, 6827,6077,6227,7067,9758,1058,0838,0628,080

8,0118,0168,0117,7867,7807,956

Min-ing

1,078

1,000864722735874

888937

1,006882845

91694'

826852911

90691

908

91090:906881910919890923921922923925

92291-922820933936

Con-tractcon-

struc-tion

Trans-porta-tionand

publicutil-ities

1,497

1,3721,214970809862

91:1,1451,1121,0551,150

1,2941,7902,1701,5671,094

1,1321,6611,921

1,7812,06r

1,929

1,1,6681,7091,7981,8651,9572,0432,0962,1072,0992,0461,978

1,8711,7311,8051,9332,0492,182

3,907

3,6753,2432,8042,6592,736

2,7712,9563,1142,8402,912

3,0133,2483,4333,6193,798

3,8724,0234,059

4,0034,116

4,030

4,0184,0164,0273,8453,9814,1294,1554J634,1344,0974,0774,071

4,0204,0194,0323,9774,0414,092

Trade Fi-nance

6,401

6,0645,5314,9074, "5,552

5,6926,0766,5436,4536,705

7,0557,5677,4817,3227,399

7,6858.8209,450

9,2339,667

9,596

9,1609,1439,2369,2559,2779,3249,3169,3569,4719,6849,88610,288

9,6229,5209,5999,5749,6159,648

1,431

1,31,31,2701, 2251,247

1,2621,3131,3551,3471,382

1,4191,4621,4401,4011,374

1,3941,5861,656

1,6371,675

1,702

1,6261,6281,6381,6361,6431,6501,6751,6881,6681,6711,6731,676

1,61,61,6971,7041,7161,727

Serv-ice

3,127

3,0842,9132,6822,6142,784

2,8833,0603,2333,1963, 228

3,3623, 5543,7083,7863,795

3,8914,4304,622

4,5844,660

4,725

4,5274,5614,5654,5524,5904,7114,6864,6194,6344,6624,6704,688

4,7234,7304,7294,7684,7384,663

Fed-eral,State,andlocalgov-ern-

ment

3,066

3,1493,2643,2253,1673,298

3,4773,6623,7493,8763,987

4,1924,6225,4316,G496,026

5,9675,6075,450

5,4835,417

5,557

5,4555,4635,5035,5045,5105,4545,3415,3185,4035,4145,3875,638

5,4985,4925,5465,5775,6245,607

1 Includes all full- and part-time wage and salary workers in nonagricultural establishments who workedor received pay during the pay period ending nearest the 15th of the month. Excludes proprietors, self-employed persons, domestic servants, and personnel of the armed forces. Not comparable with estimatesof nonagricultural employment of the civilian labor force reported by the Department of Commerce (ap-pendix C, table 7) which include proprietors, self-employed persons, and domestic servants; which countpersons as employed when they are not at work because of industrial disputes, bad weather, or temporarylay-off; and which are based on an enumeration of population, whereas the estimates in this table are basedon reports from employing establishments.

»Not available.* Preliminary.NOTE. Detail will not necessarily add to totals because of rounding.Source: Department of Labor.

84


TABLE 9.—Average gross weekly earnings in selected industries, 1929—48

Period


1930. — -193119321933._- — -1934

19351936 — .193719381939

1940-19411942 —19431944

1945.1946 —1947


1948—First half.

1947—JanuaryFebruary...MarchAprilMayJune. _July __-AugustSeptember.OctoberNobember.December..

1948—January—_February.MarchAprilMay 7June 7

Manufacturing

Total

$25.03

23.2520.8717.0516.7318.40

20.1321.7824.0522.3023.86

25.2029.5836.6543.1446.08

44.3943.7449.25

47.8950.61

52.02

47.1047.2947.6947.5048.4449.3348.9849.1750.4751.0551.2952.69

52.0751.7552.0751.7151.7652.81

Dur-able

goods

()$16.2116.4318.87

21.5224.0426.9124.0126.50

28.4434.0442.7349.3052.07

49.0546.4952.45

50.7854.12

55.19

49.6049.7450.3050.3451.7252.9952.1952.4654.0654.6954.8656.48

55.4654.7755.2554.8754.6556.14

Non-dur-able

goods

()

A16.8918.0519.1119.9421.5321.0521.78

22.2724.9229.1334.1237.12

38.2941.0245.87

44.7746.96

48.64

44.4744.6744.8944.4044.8845.3145.6145.7846.8047.2947.5648.72

48.4548.5648.6648.2648.6149.29

Bitum-inouscoal

mining

$25.72

22.2117.6913.9114.4718.10

19.5822.7123.8420.8023.88

24.7130.8641.6241.6851.27

52.2558.0366.86

64.4169.20

5 68.92

69.5465.3064.9054.1465.5167.0954.8770.2371.1971.9171.7775.22

75.7870.5474.84

«49.3374.09

Privatebuild-ing con-struc-tion

()

I$22.9724.5127.0130.1429.1930.39

31.7035.1441.8048.1352.18

53.7356.24

60.9565.58

s 66.99

59.9758.9261.2360.5362.38

63.3066.9765.2266.1464.5567.31

66.2866.3166.8967.3168.15

Class Isteamrail-roads

$28.49

27.7626.7623.3423.0924.32

26.7628.0129.2030.2630.99

31.5534.2538.6543.6846.06

45.69< 51.22

54.17

52.3856.03

52.7054.1052.4352.0351.3051.7251.1651.6857.4758.4458.3859.02

60.5458.94

Tele-phone

()$29.8131.5831.94

32.4432.7433.9736.3038.39

()44.0444.96

40.8647.92

8 48.26

43.3743.3142.51

0 32.268 38.1345.5846.5146.9248.0248. 7749.4447.83

48.2047.8247.3148.3949.59

Whole-sale

trade

$27.7226.1126.37

26.9328.5329.9429.4829.85

32.3235.5639.4042.29

44.0748.0652.40

51.2253.55

« 55. 46

50.0550.8750.8051.1351.5752.8852.2252.0553.6553.6854.7054.97

54.3655.8755.1755.7656.13

Retailtrade

Hotels(year

round) *

()$20.7119.1819.86

19.9620.6821.7321.1421.17

21.1721.9423.2424.8826.58

28.3132.5536.67

35.9837.43

»38.79

35.0235.2735.3135.9336.5037.8237.9938.1437.0636.7437.1437.51

37.6238.3338.8939.2739.84

8$14.2512.7913.17

13.5713.9714.7814.9315.25

15.5216.0917.6220.2122.65

24.5326.9529.65

29.1930.10

•31.20

28.6228.9129.0929.4129.2329.8529.3629.5029.8630.4530.5430.89

30.5531.1930.9631.5931.70(*)

i Money payments only; additional value of room, board, uniforms, and tips are not included,a Not available.s Not available. New series, beginning April 1945; includes only employees subject to provisions of the

Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.* Annual average includes retroactive pay increases not included in the monthly averages.8 Average for 5 months.« Data for these months reflect work stoppages.' Preliminary.

NOTE.—Data are for production workers in manufacturing and mining and for all employees in otherindustries.

Source: Department of Labor

85


TABLE 10.—Average hourly earnings in selected industries, 1929-48

Period

Manufacturing

TotalDura-

blegoods

Non-dura-ble

goods

Bitu-minous

coalmining

Privatebuilding

con-struc-tion

Class Isteamrail-

roads

Tele-phone

Whole-sale

tradeRetailtrade

Hotels(year

round)1

Monthly average:1929.. ._

1930..1931..1932..1933..1934..

1935..1936..1937..1938..1939..

1940..1941..1942..1943..1944.

1945.1946.1947.


1948—First half

1947—JanuaryFebruary. _.MarchApril __.MayJuneJulyAugustSeptember.OctoberNovember-December. _

1948—JanuaryFebruaryMarchAprilMay 6

June 8.

$0.566

.552

.515

.446

.442

.532

.550

.556

.624

.627

.633

.661

.729

.853

.9611.019

1.0231.0841.221

1.1881.253

1.296

1.1611.1701.1801.1831.2071.2261.2301.2361.2491.2581.2681.278

1.2851.2871.2891.2921.3011.319

()$0.497

.472

.556

. 577

.586

.674

.724

.808

.9471.0591.117

1.1111.1561.292

1.2521.331

1.362

1.2241.2291. 2361.2431.2781.3031.3051.3121.3311.3371.3461.354

1.3551. 3521.3521. 3571.3651.390

()$0. 420.427.515

.530

.529

.577

.584

.582

.602

.640

.723

.803

.861

.9041.0121.145

1.1191.172

1.223

1.0941.1071.1191.1221.1301. 1401.1501.1581.1651.1751.1851.196

1.2101.2171.2201.2191.2311.242

$0,681

.684

.647

.520

.501

.673

.745

.794

.856

.878

.9931.0591.1391.186

1.2401.4011.633

1.4851.804

81. 836

1.4911.4911.4841.4831.4701.4891.7401.7871.8191.7981. 8*11.826

1.8471.8261.8421.8231.841

()$0. 795

.815

.824

.903

.908

.932

.9581.0101.1481.2521.319

1.3791.4781.681

1.6261.726

51.809

1.5941.5981.6101.6341.6561.6611. 6C91.6891.7181.7381.7651.774

1.7811.8061.8051.8181.833

$0.636

.644

.651

.600

.595

.602

.651

.659

.676

.712

.714

.717

.751

.824

.897

.942< 1.116

1.170

1.1291.212

1.1311. 1511.1301.1191.1201.1221.1171.1211.2441. 2331.2831.272

1.2791.3021.262(2)

8

88(2)(

$0. 774.816.822.827.820.843.870.911

1.1241.199

1.1631.230

1.240

1.1321.1411.1241.1741.1891.2181.2111.2151.2301.2411.2541.229

1.2411. 2381.2231.2421.255

$0.648.667.698.700.715

.739

.793

.860

.933

1.0291.1441.258

1.2321.283

«1.339

1.1971. 2301.2311.2291.2411.2621.2571.2581. 2811.2891.3141.300

1.3091.3431.3341.3461.363

()$0. 528

.521

.522

.551

.543

.536

.542

.568

.614

.670

.724

.773

.878

.991

.9711.012

5 1.051

.953

.957

.960

.974

.985

.9961.0031.0031.0121.0131.0251.016

1.0441.0501.0441.0551.064

()$0. 273

.279

.287

.308

.315

.324

.332

.348

.386

.451

.505

.550

.612

.661

.647

.675

.654

.642

.642

.643

.650

.652

.660

.672

.684

.687

.693

.695

.695

.695

.699

.710

1 Money payments only; additional value of room, board, uniforms, arid tips are not included.3 Not available.' Not available. New series, beginning April 1945 includes only employees subject to provisions of the

Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.* Annual avorai^ includes retroactive pay increases not included in the monthly averages.8 Average for 5 months.• Preliminary.NOTE.—Data are for production workers in manufacturing and mining and for all employees in other

industries.Source: Department of Labor.

86


TABLE 11.—Physical production index, 1929-48

[1935-39=100, seasonally adjusted]

Period

Weights iTotalNonagricultural .

1929

19301931193219331934

1935193619371938 -1939

1940 -_1941194219431944

194519461947


1948—First half *

Totalproduc-

tion

100.0

113

9886717475

8899

11194

109

121152184205201

181165177

(2)(2)

(2)

Agricul-tural pro-duction

20.6

97

951041019379

9685

108105106

110114128125130

129134129

(3)(3)

(3)

Nonagricultural production

Total

79.4100.0

117

9982636975

8510311191

110

124161199226220

195174190

188191

195

Minerals

4.96.2

107

9380677680

8699

11297

106

117125129132140

137134149

147152

153

Manu-factures

50.864.0

110

9074576874

8710411387

109

126168212258252

214177194

193195

199

Con-struction

7.69.6

180

153124795358

69101106101123

13318220211260

68127143

134153

160

Trans-portation

12.916.2

117

10489737683

8810111095

106

116142180214224

217198209

208208

206

Electricand gas ,utilities

3.24.0

82

8278717278

8597

106100112

123141159184193

190192219

218221

247

1 Computed from the Depar tment of Commerce data of national income. The weight factors are per-centages of the national income for each industry to the to ta l for the 6 industries. The weight for construe-tion has been adjusted to include force account a n d other construction done outside of the contract con-struction industry, the weights for other industry groups to exclude such construction.

2 Not available. See footnote 3.3 Because of the extreme seasonal nature of agricultural crop production, only an annual index has been

computed.* Estimates based on incomplete data .

Sources: Based on the following data:Agricultural production.—Department of Agriculture index of farm outfjut which measures the physi-

cal volume of farm production for human use.Minerals.— Federal Reserve index of mineral production.Manufactures.—Federal Reserve index of manufacturing production.Construction.— Department of Commerce value of new construction activity deflated by their index

of construction costs and converted into relatives with 1935-39 as 100.Transportation.—Department of Commerce index of transportation. The figures for 1947 and first

half of 1948 are estimated by the Board of Governors of the Federal Reserve System on the basis oftransportation data .

Electric and gas utilities.—Based on the following series- Electric power generated for public use asreported by the Federal Power Commission, and sales of gas to consumers as reported by the AmericanGas Association. The two series are converted into relatives with the average for the period 1935-39as 100. The relative scries are combined into an index of public utility production with electric powergiven a weight of 73 and gas 27, the respective percentages of the revenues by each of the utilities to thetotal revenues produced by both in the base period 1935-39.

87


TABLE 12.—Industrial production index, 1929-48

[1935-39=100, seasonally adjusted]

Period


19301931193219331934 . .

1935 -1936193719381939

19401941 _194219431944 _ _

1945 _19461947


1948—First half* . .

1947—JanuaryFebruaryMarchAprilMay . .JuneJulyAugustSeptemberOctoberNovember _December

1948—JanuaryFebruaryMarchApril . . .MayJune 1

Totalindustrialproduction

110

9175586975

8710311389

109

125162199239235

203170187

187187

192

189189190187185184176182187190192192

193194191188191192

Manufactures

Total

110

9074576874

8710411387

109

126168212258252

214177194

195193

198

196197198194191191183188192197199198

200201200195197198

Durable

132

9867415465

8310812278

109

139201279360353

274192220

221218

224

221222225222218219207210217223224229

229226229217220222

Nondurable

93

8479707981

9010010695

109

115142158176171

166165172

173172

178

176176175172170168163169172176179173

178180177177178178

Minerals

107

9380677680

8699

11297

106

117125129132140

137134149

147152

153

146146148143151148140150153155155156

154155142147162158


Source: Board of Governors of the Federal Reserve System.

88


TABLE 13.—New construction activity, 1929-48

[Millions of dollars]

Period

1929.

1930.1931.1932.1933.1934.

1935.1936.1937.1938.1939.

1940.19411942.1943.1944.

1945.1946.1947.

1947—First half....Second half

1948—First half....

1947—JanuaryFebruaryMarch..AprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

1948—JanuaryFebruaryMarchAprilMayJune.

Totalnewcon-

struc-tion i

9,873

8,0425,9673,2902,3762,805

3,2304,8365,4875,1866,307

7,04210,49013,4127,7844,136

4,80810,45813, 977

Private construction

Totalpri-vate

Resi-dentialbuild-

ing(non-farm)

7,476

5,2653,3751,4671,0121,235

1,6762,5503,3903,0763,808

4,3905,4263,0071,7441,823

2,7168,253

10,893

Non-resi-

dentialbuild-ings

2,797

1,4461,228

462278361

6651,1311,3721,5112,114

2,3552,7651,315

650535

3,1835,260

2,822

2,0991,104

499404455

472712

1,088764785

1,0281,486

635232350

1,0143,3463,131

Pub-lic

util-

andfarm

1,857

1,7201,043

506330419

539707930801909

1,0071,1751,057

1,0181,7242,502

Public construction

Totalpub-

lic

2,397

2,7772,5921,8231,3641,570

1,5542,2862,0972,1102,499

2,6525,06410, 4056,0402,313

2,0922,2053,084

By source offunds

Fed-eral

237

338451510552720

1,2621,154

9891,257

1,3973,8539,5445,6141,912

1,5581,0741,175

Stateandlocal

2,160

2,4392,1411,313812850

7261,024943

1,1211,242

1,2551,211861426401

5341,1311,909

By type ofconstruction

Mili-taryandfed-

erallyfi-

nancedindus-trial

19

2940343858

39333974148

5492,9008,4534,2181,344

1,160272229

High-ways

1,254

1,5051,351

961809

709927902858867

882800616420346

7721,233

Otherpub-

lic

1,124

1,2431,201

828517686

,1561,178,484

,221,364,336

1,402623

5461,1611,622

5,6778,300

7,684

873823859928

1,0321,1621,2641,3641,4231,4971,4321,320

1,1571,0091,1661,3021,4451,605

4,4326,461

6,064

703662679713790885966

1,0421,0861,1291,1411,097

948837940

1,0151,1061,218

Totals for period,

1,9353,325

3,100

300280285310355405455500540590630610

500400475525575625

1,5041,627

1,651

275258241238242250254260267275287284

273265266263278306

9931,509

1,313

128124153165193230257282279264224203

175172199227253287

not adjusted for seasonal

1,2451,839

1,620

170161180215242277298322337368291223

209172226287339387

518657

533

83817684901041121201211289977

71557194111131

7271,182

1,087

8780104131152173186202216240192146

138117155193228256

102127

87

181515191817212323241917

151213151517

426807

558

3936507610012513714915917811965

56415798136170

717905

975

113110115120124135140150155166153141

119156174188200

i Excludes construction expenditures for crude petroleum and natural gas drilling, and, therefore does notagree with the new-construction expenditures in the gross national product.

a Excludes farm and public utility; for 1929-32 includes negligible amount of public industrial and commer-cial building not segregable.

NOTE.—Detail will not necessarily add to totals because of rounding.Source: Departments of Commerce and Labor.

89


TABLE 14.—Business expenditures for new plant and equipment, 1929-48


Period

1929

19301931193219331934 _

1935 .1936193719381939

1940 _1941194219431944 .

194519461947

9,165

7,6104,7122,6082,1373,080

3,7385,0776,7304,5205,200

6.4908,1906,1104 5305,210

6,63012,04016, 200

1947—First half

Second half

1948—First half«

1947—First quarter ___Second quarterThird quarterFourth quarter

1948—First quarterSecond quarter f i

Third quarter 8

Total i

Manufacturing and mining

Total

3,596

2,5411,435

930992

1,460

1,7902,4503,3301,8302,310

3,1404,0803. 1702,6102,890

3,6506,4708,150

Manu-factur-

ing

(3)

(3)(3)(3)(3)

(3)

(3)(3)(3)(3)1,930

2. 5803,4002. 7602.2502,390

3,2105,9107,460

Mining

(3)

(3)

(3)(3)(3)(3)

(3)(3)(3)(3)

380

560680410360500

440560690

Transportation

Rail-road

840

S65360164101218

166306525238280

440560540460580

550570910

Other

(4)

(4)(•)

(4)(4)(4)

(4)(4)(4)

280

390340260190280

320660800

Electricand gasutilities

(4)

(4)

(4)(4)(4)(4)

(4)

(4)(4)(4)

480

550710680540490

6301,0401,900

Com-mercial

andmiscella-neous 2

4,729

4,2042,9171,5141,0441,402

1,7822,3212,8752,4521,850

1,9802.4901,470730970

1,4803,3004,430

Annual rates, not adjusted for seasonal

14, 20018,180

17, 720

12, 64015, 76016,56019,800

16,68018, 76018, 280

7,2209,100

8,340

6.4008,0408,200

10,000

7,9208, 7608,120

6,6008,320

7,620

5,8007,4007,4809,160

7,2008,0407,400

620780

720

600640720840

720720720

7601,060

1,240

640880920

1,200

1,0801,4001,520

820780

780

720920800760

720840680

1,5602,240

2,220

1,3201,8002,0002,480

2,0002,4402,600

3,8605,000

5,140

3,6004,1204,6405,360

4,9605,3205,360

1 Excludes agriculture.2 Includes trade, service, finance, and communication for all years shown. Also includes prior to 1939,

transportation other than railroad, and electric and gas utilities not available separately for those years.3 Not available separately for years prior to 1939.* Included in commercial and miscellaneous prior to 1939.6 Estimates for second and third quarters of 1948 were based upon anticipated capital expenditures of

business.

NOTE.—These figures do not agree with the totals included in the gross national product estimates of theDepartment of Commerce, principally because the latter cover agricultural investment and also certainequipment and construction outlays charged to current expense. Figures for 1929-44 are Federal ReserveBoard estimates based on Securities and Exchange Commission and other data. Detail will not neces-sarily add to totals because figures are rounded to the nearest 10,000,000.

Sources: Securities and Exchange Commission and Department of Commerce (except as noted).

90


TABLE 15.—Business inventories and sales, 1939-48

Period

1939

19401941194219431944

194519461947

1947—First halfSecond half...

1948—First half«._._

1947—JanuaryFebruaryMarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

1948—JanuaryFebruaryMarchApril eMay •

Manufacturing i

Millions of dollars

Inven-tories 3

11, 516

12, 87317, 02419, 22119, 89719,122

17, 92423. 43528, 020

26, 47928, 020

29, 438

24, 21324, 83125, 39825, 85326, 44026, 4/926, 84627, 05127,05527, 39727, 62728,020

28, 49128, 75729, 05329,14929, 438

Sales *

5,112

5,8598,172

10, 34612, 60313, 402

12, 37112, 02015, 671

14, 94816, 396

16, 923

14, 45314,17515, 54615, 39815, 04915, 06514, 36215, 25816, 59718, 08116, 55617, 524

16, 54916, 20818,10017, 21216, 547

Ratio ofinven-tories

to sales

2.25

2.202.081.861.581.43

1.451.951.79

1.771.71

1.74

1.681.751.631.681.761.761.871.771.631.521.671.60

1.721.771.611.691.78

Wholesale 2

Millions of dollars

Inven-tories 3

3,609

3, 7934.7294,0133,9864,024

4.3085,9947,577

6,8647,577

8,071

6,2486,4446,6116,7786,7376,8646,7266,8866,9976,9437,3497,577

7,6187,7548,0548,0498,071

Sales *

4,606

5,1476,9647,7698,2748,617

8,78210, 95812, 915

12, 57213, 306

13, 809

12, 68312,99612, 62712, 21812, 36912, 54112, 40312, 52313, 26313, 61514, 33313, 697

14, 09613, 99313, 42613, 68413, 847


to sales

0.78

.74

.68

.52

.48

.47

.49

.55

.59

.55

.57

.58

.49

.50

.52

.55

.54

.55

.54

.55

.53

.51

.51

.55

.54

.55

.60

.59

.58

Retail 2

Millions of dollars

Inven-tories 3

5,502

6,0117,6207,8747, 3507,396

7,50211, 04912, 953

11, 94812, 953

13, 753

11, 42711, 65311, 83211,97411, 77211,94811, 9^511,94412,07312, 43512, 62112, 953

13,38413, 75114, 04013, 90713, 753

Sales *

3,504

3,8664,6244,7965,3075,790

6,3818, 3559,810

9,46910,152

10, 566

9,0979,2859,3999,6109,6819,7439,7309,621

10,16210, 25810. 48510, 653

10, 44510, 38110, 56510, 84110, 599


to sales

1.57

1.551.651.641.381.28

1.181.321.32

1.261.28

1.30

1.261.261.261.251.221.231.231.241.191.211.201.22

1.281.321.331.281.30

1 Not adjusted for seasonal variation.2 Adjusted for seasonal variation,s Book value, end of period.4 Monthly average shown for year and half year and total for month.8 Average of 5 months.6 Preliminary.NOTE.—Manufacturing inventories and sales, and retail inventories are recently revised series; revisions

for wholesale are to be completed in the near future. The inventory figures in this table do not agree withthe estimates of "change in business inventories" included in the gross national product since they coveronly manufacturing and trade rather than all business, and show inventories in terms of current book valuewithout adjustment for revaluation.

Detail will not necessarily add to totals because of rounding.

Source: Department of Commerce (Office of Business Economics).

91


TABLE 16.—Sales3 stocks, and outstanding orders at 296 department stores, 1939-48

Period


19401941194219431944

194519461947


1948—First half

1947—JanuaryFebruaryMarch _ _April _MayJune _-JulyAugustSeptember _OctoberNovemberDecember

1943—JanuaryFebruaryMarchApril -MayJune3

Millions of dollars *

Sales(total formonth)

128

136156179204227

255318336

300373

316

256250331321336304253274341367416584

271263355331339337

Stocks(end ofmonth)

344

353419599508534

563714823

817828

887

770835866849816768732789823912942770

789878941938919857

Outstand-ing orders

(end ofmonth)

108194263530560

729909553

488619

466

620606489388353470603622676663605544

633575420356339471

Ratio ofstocksto sales

2.69

2.602.693.352.492.35

2.212.252.45

2.722.22

2.81

3.013.342.622.642.432.532.892.882.412.492.261.32

2.913.342.652.832.712.54

Ratio ofordersto sales

0.791.241.472.602.47

2.862.861.65

1.631.66

1.47

2.422.421.481.211.051.552.382.271.981.811.45.93

2.342.191.181.081.001.40

Ratio oforders

to stocks

0.31.46.44

1.041.05

1.291.27.67

.60

.75

.53

.81

.73

.56

.46

.43

.61

.82

.79

.82

.73

.64

.71

.80

.65

.45

.38

.37

.55

1 Not adjusted for seasonal.»Not available.8 Estimates based on incomplete data.

NOTE.—These figures represent retail sales, stocks, and outstanding orders as reported fcy a sample of296 of the larger department stores located in various cities throughout the country and are not estimatesof total sales, stocks, and outstanding orders for all department stores in the United States. Data are notavailable prior to 1939.| i Detail will not necessarily add to totals because of rounding.

ffSource: Board of Governors of the Federal Reserve System.

92


TABLE 17.—Consumers' price index, 1929-48

For moderate-income families in large cities

[1935-39=100]

Period All items

Monthly averager1929

193019311932....19331934..

19351936-.193719381939

1940 -1941194219431944

194519461947

1947—First half—Second half.

1948—First half—

1946—June

1947—JanuaryFebruary.MarchAprilMayJuneJulyAugustSeptemberOctoberNovemberDecember

1948—JanuaryFebruaryMarch. . __April.. ..__MayJune

122.5

119.4108.797.692.495.7

98.199.1

102.7100.899.4

100.2105.2116.5123.6125.5

128.4139.3159.2

155.4163.0

169.1

133.3

153.3153.2156.3156.2156.0157.1158.4160.3163.8163.8164.9167.0

168.8167.5166.9169.3170.5171.7

Food

132.5

126.0103.986.584.193.7

100.4101.3105.397.895.2

96.6105.5123.9138.0136.1

139.1159.6193.8

187.0200.7

208.3

145.6

183.8182.3189.5188.0187.6190.5193.1196.5203.5201.6202.7206.9

209.7204.7202.3207.9210.9214.1

Apparel

115.3

112.7102.690.887.996.1

96.897.6

102.8102.2100.5

101.7106.3124.2129.7138.8

145.9160.2185.8

183.4

188.1

195.7

157.2179.0181.5184.3184. 9185.0185.7184.7185.9187.6189.0190.2191.2

192.1195.1196.3196.4197.5196.9

RentFuel, elec-

tricity,and ice

141.4

137.5130.3116.9100.794.4

94.296.4

100.9104.1104.3

104.6106.2108.5108.0108.2

108.3108.6111.2

109.0113.4

116.4

108.5

108.8108.9109.0109.0109.2109.2110.0111.2113.6114.9115.2115.4

115.9116.0116.3116.3116.7117.0

112.5

111.4108.9103.4100.0101.4

100.7100.2100.299.999.0

99.7102.2105.4107.7109.8

110.3112.4121.1

117.7124.6

130.8

110.5

117.3117.5117.6118.4117.7117.7119.5123.8124.6125.2126.9127.8

129.5130.0130.3130.7131.8132.6

Housefurnish-

I l l . 7

108.998.085.484.292.8

94.896.3

104.3103.3101.3

100.5107.3122.2125.6136.4

145.8159.2184.4

181.5187.4

193.9

156.1

179.1180.8182.3182.5181.9182.6184.3184.2187.5187.8188.9191.4

192.3193.0194.9194.7193.6194.8

Miscel-laneous

104.6

105.1104.1101.798.497.9

98.198.7

101.0101.5100.7

101.1104.0110.9115.8121.3

124.1128.8139.9

138.3141.6

147.0

127.9

137.1137.4138.2139.2139.0139.1139.5139.8140.8141.8143.0144.4

146.4146.4146.2147.8147.5147.5

Source: Department of Labor.

793637° 93


TABLE 18.— Wholesale price index, 1929-48

[1926=100]

Period

Average:1929

1930 .1931193219331934

1935193619371938 - , -1939 _

1940 -1941194219431944

1945 - -19461947


1948—First half. _ __

1946—June _.

1947—January - - -FebruaryMarch _ _ _ _ _AprilMayJune - -JulyAugust _.SeptemberOctoberNovember _December

1948—JanuaryFebruaryMarchAprilMay.June

All

com

mod

itie

s

95.3

86.473.064.865.974.9

80.080.886.378.677.1

78.687.398.8

103.1104.0

105.8121.1152.1

146.7157.2

163.5

112.9

142.0145.2150.0148.0147.3147.7150.6153.7157.4158.5159.6163.2

165.7160.9161.4162.8163.9166.2

Far

m p

roduct

s

104.9

88.364.848.251.465.3

78.880.986.468.565.3

67.782.4

105. 9122 6123.3

128.2148.9181.2

174.7187.3

190.4

140.1

165.0170.4182.6176.9175. 4177.8181.4181.6186.4189.7187.9196.7

199.2185.3186.0186.7189.1196.0

Foo

ds99.9

90.574.661.060.570.5

83.782.185.573.670.4

71.382.799.6

106.6104.9

106.2130.7168.7

161.8175.4

176.9

112.9

156.6162.3167.9162 4159.6161.8167.1172.3179.2177.7177.9178.4

179.9172.4173.8176.7177.4181.4

s

91.6

85.275.070.271.278.4

77.979.685.381.781.3

83.089.095.596.998.5

99.7109.5135.2

131.0139.3

148.5

105.6

128.4129.4131.7132.4132.3131.6133.5136.2138.3140.1142.1145.5

148.3147.6147.7148.7149.0149.5

Other than farm products and foods

1If-a

S

109.1

100.086.172.980.986.6

89.695.4

104.692.895.6

100.8108.3117.7117.5116.7

118.1137.2182.4

173 8191.1

189.8

122.4

176.2174.1175.1172.1171.5173.8179.1182.8185.6193.1202.5203.4

200.3192.8185.4186.1187.5186.8

!

I

I90.4

80.366.354.964.872.9

70.971.576 366.769.7

73.884 896.997.498.4

100.1116.3141.7

139.7143.6

149.5

109.2

138.2139.5140.5140 3139.9139 9140.5141.8142.4143.4145.2148.0

148.4148.9149.8150.3150.2149.6

f'l•oSc a«S

•—i bl.

83.0

78.567.570.366.373.3

73.576.277.676.573.1

71.776.278.580.883.0

84.090.1

108.7

101.2115.8

131.5

87.8

97.798.2

100.7103.2103.4104.0109.0112.6114 2116.1118.2124.6

130.0130.8130.9131.6132.6133.1

3<x>e^^ wa fl0CST3

l a

100.5

92.184.580.279.886.9

86.487.095.795.794.4

95.899.4

103.8103.8103.8

104.7115.5145.0

140.8149.1

156.4

112.2

139.0139.6141.1141.3141.9142.0143.1148.5150.1150.5150.8151.5

154.3155.3155.9157.2157.1158.7

4aBtea1ffl

95.4

89.979.271.477.086.2

85.386.795.290.390.5

94.8103.2110.2111 4115. 5

117.8132.6179.7

175.2183.8

194.6

129.9

170.2174.8177.5178 1176.2174. 1175.5179.6183.4185.8187.7191.0

193.3192.7193.1195.0196.4196.8

T3 „S3 +2o3 a

ifH94.0

88.779.373.972.175.3

79.078.782.677.076.0

77.084.4H5.594.995.2

95.2101.4127.3

128.5126.3

136.0

96.4

128.3129.3132.2133.5127.1120.8118.8117.5122.3128.6135.8135.0

138.8134.6136.1136.2134.7135.7

.9

!§>

W

94.3

92.784.975.175.881.5

80.681.789.786.886.3

88.594.3

102. 4102.7104.3

104.5111.6131.1

128.7133.4

142.2

110.4

126.5128.3129.0129. 1129.5129.7129.8129.9131.3132.4137. 5139.4

141.3141.8142.0142.3142.6143. 4

|

I182.6

77.769.864.462.569.7

68.370.577.873.374.8

77.382.089.792 293.6

94.7100.3115.5

114.1116.6

121.5

98.5

110.9111.7115.6116.1116.9113 5113.2113.1115.9117.1118.8121.5

123.6120.1120 8121.8121.5121.4

Source: Department of Labor.

94


TABLE 19.—Index of prices received and of prices paid by farmers and parity ratio, 7929-48

[1910-14 = 100]

Period

Monthly average:1929.

1930.—19311932.19331934

19351936.193719381939

19401941194219431944

194519461947

1947—First half..Second half.

1948—First half...

1947—JanuaryFebruary.MarchAprilMayJuneJulyAugustSeptemberOctober .__.NovemberDecember

1948—JanuaryFebruaryMarchAprilMayJune

Pricesreceived i

149

12890687290

1091141229795

100124159192195

202233278

270286

291

260262280276272271276276286289287301

307279283291289295

Prices paid(includinginterest and

taxes)

167

160141124120129

130127133126124

125132150162169

172193231

225238

249

215221226229228230230234238239241245

251248247249250251

Parityratio a

89

8064556070

8490927777

8094106119115

117121120

120120

117

121119124121119118120118120121119123

122112115117116118

1 August 1909 to July 1914=100.2 Ratio of prices received to prices paid (including interest and taxes).Source: Department of Agriculture.

95


TABLE 20.—Consumer credit outstanding, 1929-48


End of period

1929

19301931_ _19321933. _1934

19351936..._19371938.1939

1940194119421943 __1944

19451946 _.1947

1947—January...February..MarchAprilMayJuneJulyAugustSeptemberOctober...November.December.

1948—January.. _February..MarchAprilMayJune ?

Totalconsumer

credit

7,637

6,8295,5264,0933,9194,396

5,4396,7967,4917,0647,994

9,1469,8956,4785,3345,776

6,63810,16613,385

10,02410, 01910,37910, 63110, 93411,23011,30211,43311, 68212, 05512,63613,385

13, 05812, 94513,39113, 59913,80414,100

Instalmentcredit i

3,167

2,6962,2121,5261,5951,867

2,6273,5263,9713,6124,449

5,4485,9202,9481,9572,034

2,3653,9766,156

4,0484,1564,3294,5364,7394,9195,0455,1795,2905,4635, 7336,156

6,1866,2496,4986,7376,9577,200

Chargeaccounts

1,749

1,6111,3811,1141,0811,203

1,2921,4191,4591,4871,544

1,6501,7641,5131,4981,758

1,9813,0543,612

2,7642,6022,7682,7822,8352,8872,7862,7552,8643,0293,3093,612

3,2403,0673,2813,2653,2553,300

Otherconsumer

credit 2

2,721

2,5221,9331,4531,2431,326

1,5201,8512,0611,9652,001

2,0482,2112,0171,8791,984

2,2923,1363,617

3,2123,2613,2823,3133.3603,4243,4713,4993,5283,5633,5943,617

3,6323,6293,6123,5973,5923,600

1 Includes automobile and other sale credit and repair and modernization loans insured by Federal Houseing Administration.

2 Includes single-payment loans of commercial banks and pawnbrokers and service credit.3 Estimates based on incomplete data.


Source: Board of Governors of the Federal Reserve System.

96


TABLE 21.—Loans and investments of all commercial banks, 1929-48


End of month

1929—Junel

1930—-June l1931—June»1932—June1 . - -1933—June *1934—June1

1935—June1

1936—December1937—December ._1938—December1939—December.

1940—December1941—December1942—December1943—D ecember1944—December _. - _

1945—December . ,

1946—JuneDpinpmbfir

1947—JuneDecember _ _. _

1948—June*

Totalloans

and invest-ments

49.4

48.944.936.130.432.7

34.639.538.338.740.7

43.950.767.485.1

105.5

124.0

119.4114.0

112.8116.3

114.1

Loans

35.7

34.529.221.816.315.7

14.916.417.116.417.2

18.821.719.219.121.6

26.1

27.131.1

33.738.1

39.7

Investments

Total

13.7

14.415.714.314.017.0

19.723.121.222.323.4

25.129.048.266.083.9

97.9

92.382.9

79.178.2

74.4

U. S. Gov-ernment

obligations

4.9

5.06.06.27.5

10.3

12.715.314.215.116.3

17.821.841.459.877.6

90.6

84.574.8

70.569.2

65.0

Othersecurities

8.7

9.49.78.16.56.7

7.07.87.17.27.1

7.47.26.86.16.3

7.3

7.88.1

8.59.0

9.4

1 Complete end-of-year figures are not available for years prior to 1936.2 Estimates by Council of Economic Advisers.


Source: Board of Governors of the Federal Reserve System (except as noted).

97


TABLE 22.—Adjusted deposits of all banks and currency outside banks, 1929-48


End of period

1929

193019311932 —19331934 —

1935 . .19361937 -_19381939 —

19401941194219431944

1945

1946—JuneDecember

1947—JuneDecember.. __

1948—June4

Totaldepositsadjusted

andcurrencyoutsidebanks

54.7

63.648.345.442.548.0

52.2y 57.4

56.659.064.1

70.878.299.7

122.8151.0

175.4

171.2167.1

165.5171.4

167.5

U.S.Govern-

mentdepositsl

0.2

.3

.5

.51.01.7

.91.0.8.9.8

.81.98.4

10.420.8

24.6

13.43.1

1.41.5

2.2

Other deposits and currency outsidebanks

Total

54.5

53.247.944.941.546.3

51.356.455.858.163.3

70.076.391.3

112.4130.2

150.8

157.8164.0

164.1170.0

165.3

Demanddeposits

adjusted 2

22.8

21.017.415.715.018.5

22.125.524.026.029.8

34.939.048.960.866.9

75.9

79.583.3

82.187.1

82.6

Timedeposits3

28.2

28.726.024.521.723.2

24.225.426.226.327.1

27.727.728.432.739.8

48.5

51.854.0

55.756.4

57.1

Currencyoutsidebanks

3.6

3.64.54.74.84.7

4.95.55.65.86.4

7.39.6

13.918.823.5

26.5

26.526.7

26.326.5

25.6

i Beginning with December 1938, includes U. S. Treasurer's time deposits, open account.* Includes demand deposits, other than interbank and U. S. Government, less cash items in process of

collection.' Include? deposits in commercial banks, mutual savings banks, and postal savings system.< Estimates by Council of Economic Advisers.


Source: Board of Governors of the Federal Reserve System (except as noted).

98


TABLE 23.—Estimated ownership of Federal securities, 1939-48

[Billions of dollars—par values1 ]

End of period

1939—December1940—December1941—December _1942— December1943—December1944— December1945—December _ _1946—December..1947— necember1948—June9

Gross debt and guaranteed obligations outstanding

Total

47.650.964.3

112 5170.1232.1278.7259.5257 0252.4

Held byU. S. Gov-ernmentagencies

and trustfunds

6.57.69.5

12 216.921.727.030.934.435.8

Total

41.143.354.8

100.3153. 2210.4251 7228.6222.6216.6

Stateandlocal

govern-ments 2

0.4.5.7

1 02.14.36.56.37.37.2

Held

Com-mercialbanks3

15.917.321.441 159.977.790.874.568 765.0

by public

FederalReservebanks

2.52.22.36 2

11.518.824.323.322.621.4

Nonbankprivate

financialcorpora-

tions andassocia-tions *

12.012.516.327 441.256.065.359.557.556.3

Indi-vid-

uals*

10.410.914.124 538.453.564.864.966.666.8

1 United States sayings bonds, series A-D, E, and F, are included at current redemption values.3 Includes trust, sinking, and investment funds of State and local governments and their agencies, and

Territories and insular possessions.3 Includes commercial banks, trust companies, and stock savings banks in the United States and in Terri-

tories and insular possessions. Figures exclude securities held in trust departments.* Includes insurance companies, mutual savings banks, savings and loan associations, dealers and brokers

and investments of foreign balances and international accounts in this country. Beginning with December1946, includes investments by the International Bank for Reconstruction and Development and Inter-national Monetary Fund in special non-interest bearing notes issued by the U. S. Government. Begin-ning with June 30, 1947, includes holdings of Federal land banks.

4 Includes partnerships and personal trust accounts.* Estimates based on incomplete data.

NOTE.—Detail will not necessarily add to totals because of roundingSource: Treasury Department.

99


TABLE 24.—Profits before and after taxes, all private corporations, 1929—48


Period

Corporateprofitsbeforetaxes

Corporatetax

liability 1

Corporate profits after taxes

Total Dividendpayments

Undis-tributedprofits

1929.

1930.1931.193219331934

1935.1936.1937.1938.1939.

1940.1941.1942.1943.1944.

1945.1946.1947.


1948—First half 3

1947—First quarter...Second quarter.Third quarter..Fourth quarter.

1948—First quarter...Second quarter

9.8

3.3- . 8

-3 .0.2

1.7

3.25.76.23.36.5

9.317.221.124.524.3

20.421.829.8

28.930.8

30.5

28.9

29.132.4

31.429.5

1.4

.5

.4

.5

.7

1.01.41.51.01.5

2.97.8

11.714.213.5

11.69.0

11.7

8.4

2.5- 1 . 3-3 .4- . 41.0

2.34.34.72.35.0

6.49.49.4

10.410.8

8.712.818.1

5.8

5.54.12.62.12.6

2.94.64.73.2

4.04.54.34.54.7

4.75.6


11.412.1

11.9

11.411.311.412.7

12.211.5

17.518.7

18.6

17.517.517.719.7

19.218.0

7.0

7.4

6.46.7

7.1

7.37.5

2.6

- 3 . 0- 5 . 4-6 .0- 2 . 4- 1 . 6

- . 6- . 3

2.44.95.15.96.1

4.07.2

11.2

10.911.7

11.2

11.110.810.812.6

11.910.5

i Federal and State corporate income and excess profits taxes.a Minus 8 million dollars.» Estimates based on incomplete data; second quarter by Council of Economic Advisers.

NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce (except as noted).

100


TABLE 25.—Profits after taxes, 629 large private industrial corporations, by industry groups,1939-48+


Period

Manufacturing and mining

Number of companies

1939

1940-..1941 -1942 _ __1943....1944..

1945 _,19461947 -


1947—First quarter.Second quarterThird quarterFourth quarter

1948—First quarter. . . .

629 47 15 77 49

1,465

1,8182,1631, 7691,8001,896

1,9252, 5453,670

146

278325226204194

188283437

115

158193159165174

163171334

223

242274209201222

243130417

102

173227182180190

169127205

119

133153138128115

108136198

151

148159151162175

199356354

45

112174152186220

223281

186

194207164170187

187273345

Totals for period, not adjusted for seasonal

1,7381,933

871

1,033

1,030

80

134

160187136149147

154302370

226212

126100100112

121

153182

708377105

87

199218

94105103115

130

102103

49535746

61

93104

47464559

49

109130

51585971

62

162193

986485108

83

199281

89110121160

196

175169

88878188

90

188183

96929390

93

74

122

132152161171184

203321

134160

637180

57

1 Profits after Federal and State income and excess-profits taxes.2 Includes 29 companies engaged in wholesale and retail trade (largely department stores), 13 in the amuse-

ment industry, 21 in shipping and transportation other than railroads (largely air lines), and 11 companiesfurnishing scattered types of service.

Source: Compiled by the Board of Governors of the Federal Reserve System and based on published re-ports of various industrial corporations.

101


TABLE 26.—Relation of profits before and after taxes to sales, private corporations excludingfinance, insurance, and real estate, 7946-48

Industry group

Profits before taxes as percentof sales

1946 1947 1948, firstquarter i

Profits after taxes as percentof sales

1946 1947 1948, firstquarter l

All industries, excluding financeinsurance, and real estate

Mining..- _Manufacturing

Metal industries _Other manufacturing _.

Wholesale and retail tradeTransportationCommunications and public utilitiesAll other industries2 _.

7.9 8.6 4.6 5.2 5.2

11.58.75.8

10.05.65.0

18.59.0

14.910.311.19.94.87.2

15.78.3

16.010.211.09.85.04.7

16.77.5

8.25.12.96.03.32.5

11.25.3

10.56.26.66.12.84.29.64.9

11.36.26.56.12.92.8

10.24.4

1 Estimates based on incomplete data.2 Includes agriculture, forestry and fisheries, and contract construction.Source: Department of Commerce.

102


T A B L E 27.—Relation of profits before and after taxes to investment, private manufacturingcorporations, by industry groups, 7947

Industry group

Ratio of profits (annual rate) to stockholders'equity

1947total

Firstquarter

Secondquarter

Thirdquarter

Fourthquarter

All private manufacturing corporations

Food ..__Tobacco manufacturesTextile mill productsApparel and finished textilesLumber and wood productsFurniture and fixturesPaper and allied productsPrinting and publishing (except newspapers)Chemicals and allied products. _Products of petroleum and coalRubber productsLeather and leather products 'Stone, clay, and glass productsPiimary n on ferrous metal industriesPrimary iron and steel industriesFabricated metal productsMachinery (except electrical and transportation)Electrical machinery..Transportation equipment (except motor vehicles).Motor vehicles and partsInstruments; photographic and optical goods;

watches and clocks __Miscellaneous manufacturing (including ordnance).


FoodTobacco manufactures __Textile mill productsApparel and finished textilesLumber and wood productsFurniture and fixturesPaper and allied productsPrinting and publishing (except newspapers)Chemicals and allied products. ____Products of petroleum and coalRubber productsLeather and leather products _ _._Stone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industriesFabricated metal productsMachinery (except electrical and transportation)...Electrical machineryTransportation equipment (except motor vehicles).Motor vehicles and partsInstruments; photographic and optical goods;

watches and clocksMiscellaneous manufacturing (including ordnance) _

Before Federal taxes

24.7

29.516.230.631.434.928.933.828.825.118.824.223.822.719.319.228.025.830.54.8

28.2

22.624.3

28.0

32.414.840.036.036.432.841.635.231.616.828.434.424.424.423.632.027.632.47.2

29.2

24.026.8

25.2

28.015.231.228.435.632.838.430.824.819.224.421.625.221.618.428.429.232.06.0

28.4

23.224.4

24.0

30.817.226.434.034.828.832.830.022.421.218.820.821.615.218.027.224.028 03.6

27.2

20.826.4

After Federal taxes

15.1

17.49.8

18.418.522.017.320.817.415.514.012.213.813.711.611.717.015.418.4

.415.8

14.114.0

16.8

18.88.8

24.021.222.420.025.621.619.212.416.420.414.414.814.419.616.420.03.2

16.8

14.815.2

15.6

16.49.2

18.816.022.420.023.618.815.214.48.4

12.815.613.211.217.217.619.22.0

16.8

14.414.8

14.8

18.410.815.620.821.617.620.418 814.015.68.8

12.013.28.8

10.816.414.416.8

15.6

12. 816.0

24.8

28. 018.832.829.238.027.630.418.024.421.626.820.821.620.819.228.024.833.22.0

32.0

25.619.6

15.2

16.811.219.617.224.815.618.89.6

15.216.416.011.612.810.412.017.214.420.0

- 3 . 616.4

15.610.0

Sources: Federal Trade Commission and Securities and Exchange Commission.

103


TABLE 28.—Relation of profits before and after taxes to sales, private manufacturing corporations,by industry groups, 1947-48

Industry group

Profits in cents per dollar of sales

1947total

Firstquarter

Secondquarter

Thirdquarter

Fourthquarter


FoodTobacco manufactures.-Textile mill products _Apparel and finished textilesLumber and wood productsFurniture and fixturesPaper and allied productsPrinting and publishing (except newspapers)._Chemicals and allied productsProducts of petroleum and coalRubber productsLeather and leather products..Stone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industriesFabricated metal products __ _Machinery (except electrical and transportation)Electrical machineryTransportation equipment (except motor vehicles).Motor vehicles and partsInstruments; photographic and optical goods;

watches and clocks _._ __Miscellaneous manufacturing (including ordnance).


FoodTobacco manufacturesTextile mill products. _Apparel and finished textilesLumber and wood productsFurniture and fixtures.Paper and allied productsPrinting and publishing (except newspapers)Chemicals and allied productsProducts of petroleum and coalRubber products .Leather and leather productsStone, clay, and glass productsPrimary nonferrous metal industriesPrimary iron and steel industries. _Fabricated metal productsMachinery (except electrical and transportation)...Electrical machineryTransportation equipment (except motor vehicles) .Motor vehicles and partsInstruments; photographic and optical goods:

watches and clocksMiscellaneous manufacturing (including ordnance).

11.0

7.16.7

13.77.8

18.110.117.410.114.214.68.77.4

13.114.610.912.112.110.42.8

10.7

12.510.8


12.4

8.16.8

15.88.8

19.511.219.612.616.913.810.810.113.916.213.614.113.211.05.0

11.2

13.512.2

11.1

7.06.1

13.77.6

18.311.118.111.314.214.48.77.2

13.914.810.112.112.810.33.6

10.4

12.010.8

10.6

7.36.8

12.07.9

16.810.116.810.713.415.56.86.7

12.411.610.111.511.59.92.4

10.3

12.012.1

After Federal taxes

6.7

4.24 .18.24.6

11.46.0

10.76.18.7

10.94.44.37.98.86.67.47.26.3

.36.0

7.86.2

7.5

4.74.19.55.2

12.16.8

12.07.8

10.410.16.25.98.29.78.28.67.96.82.26.4

8.37.0

6.8

4.13.78.24.3

11.46.8

11.26.98.7

10.83.04.28.59.06.27.47.86.11.16.1

7.56.5

6.5

4.34.27.24 8

10.56.1

10.36.78.2

11.43.23.97.66.86.16.96.96.0

. 15.9

7.57.3

10.1

6.37.3

13.16.9

17.98.3

15.15.9

12.414.68.85.9

12.415.69.8

11.111.110.4

.910.7

12.78.4

6.2

3.74.37.94.1

11.74.79.33.17.8

11.35.23.37.49.76.16.86.56.3

- 1 . 65.6

7.84.3

Sources: Federal Trade Commission and Securities and Exchange Commission.

104


TABLE 29.—Relation of profits before and after taxes to investment and to sales, all privatemanufacturing corporations, by size classes, 1947—48

Assets class(thousands of

dollars)

All sizes

Ito249250 to 999-1,000 to 4,9995,000 to 99,999100,000 and over.__

All sizes

1 to 249.250 to 9991,000 to 4,9995,000 to 99,999.100,000 and over. . .


1947

TotalFirstquar-

ter

Secondquar-

ter

Thirdquar-

ter

Fourthquar-

ter

After Federal taxes

1947

TotalFirstquar-

ter

Secondquar-

ter

Thirdquar-

ter

Fourthquar-

ter

1948,first

quar-ter i

Ratio of profits (annual rate) to stockholders' equity

24.7

24.429.230.627.320.3

28.0

26.835.238.831.220.8

25.2

28.430.832.428.419.6

24.0

30.030.028.426.019.6

24.8

10.022.425.227.624.0

15.1

14.816.918.216.512.9

16.8

16.420.423.218.813.2

15.6

18.018.019.617.212.4

14.8

19.217.617.215.612.4

15.2

3.612.014.016.815.6

(2)

(2)

Profits in cents per dollar of sales

11.0

6.58.8

10.711.911.4

12.4

7.610.513.013.312.2

11.1

8.09.3

11.211.911.0

10.6

7.89.1

10.311.310.8

10.1

2.66.58.3

11.111.7

6.7

3.95.16.37.27.2

7.5

4.76.17.98.07.8

6.8

5.15.46.77.26.9

6.5

5.05.46.26.86.8

6.2

1.03.54.76.77.6

7.2

2.04.96.07.18.7

1 Estimates based on incomplete data.2 Not available.Sources: Federal Trade Commission and Securities and Exchange Commission.

105


TABLE 30.—Sources and uses of corporate funds, 7946—48


Use or source of funds

Plant and equipment outlaysInventories (increase in book value)Increase in customer financing __Net repayment of trade debtNet repayment of short-term bank loansNet repayment of RFC loansReduction in liability for Federal income tax

Total uses of funds.. _...

Sources:Internal sources:

Funds retained from operations:Depreciation reserves..Retained net earnings and depletion allowances.

Reduction in cash and U . S . Government securities.Reduction in other current assets

External sources:Increase in bank loans:

Short-termLong-term __ __.

Increase in mortgage loansNet new security issues:

BondsStocks..

Increase in liability for Federal income taxIncrease in trade debtOther net sources.

Total sources of funds

Discrepancy (uses less sources)

1946

11.67.55.4

.22.5

27.2

4.16.36.4.7

1.91.4.6

1.01.3

3.00

26.7

.5

1947

15.07.25.6

.1

27.9

4.510.6

.3

.1

1.61.3.6

3.11.32.42.2.5

28.5

- . 6

1948, firsthalfi

8.42.8.8

c>

.10

12.7

2.44 6.0

.2

.2

0.4

2.1.5.5

.3

12.6

.1

1 Estimates of total for half year based on incomplete data; not adjusted for seasonal variation.2 Net increase of such debt; see sources.3 Net increase of such liability: see sources.* Estimate based on preliminary first quarter data.5 Net repayment of such debt; see uses.« Net reduction of such liability; see uses.

Sources' Department of Commerce estimates based on Securities and Exchange Commission and otherfinancial data.

106


TABLE 31.— The international transactions of the United States, 1946—48


Item

Exports of goods and serv-ices:

Recorded goods 2

Other goods 5

Total goodsServicesIncome on investments..

Total exports

Imports of goods and serv-ices:

Recorded goodsOther goods

Total goods _ServicesIncome on investments..

Total imports

Surplus of exports of goodsand services:

Recorded goodsOther goods.. _

Total goodsServicesIncome on investments. .

Total surplus of ex-ports. .

Means of financing:Net liquidation of gold

and dollar assets by:Foreign countriesInternational Mon-

etary F u n d . .Loan disbursements by

International BankNet United States pri-

vate capital outflow toforeign countries

Net U. S. Governmentloans

Net U. S. Governmentunilateral transfers

Net private unilateraltransfers. .

Total means of financ-ing . . .

Errors and omissions

1946

10,1881,686

11,8742,272

820

14, 966

4,908260

5,1681,783

216

7,167

5,2801,426

6,706489604

7,799

1,968

335

2,774

2,279

598

7,954-155

1947

Total

15,338718

16,0562,6111,074

19, 741

5,733338

6,0712,165

227

8,463

9,605380

9,985446847

11, 278

4,514

464

297

727

3,900

1,812

568

12, 282-1,004

Firstquarter

3,775179

3,954650212

4,816

1,41295

1,50746451

2,022

2,36384

2,447186161

2,794

1,197

301

854

444

145

2,941-147

Secondquarter

4,185123

4,308726243

5, 277

1,449113

1,56253255

2,149

2,73610

2,746194188

3,128

1,144

56

92

207

1,538

457

119

3,613-485

Thirdquarter

3,716159

3,875675251

4,801

1,32330

1,35367447

2,074

2,393129

2,5221

204

2,727

856

148

142

98

1,201

492

138

3,075-348

Fourthquarter

3,662257

3,919560368

4,847

1,549100

1,64949574

2,218

2,113157

2,27065

294

2,629

1,317

260

63

121

307

419

166

2,653- 2 4

1948

Firstquarter

3,318368

3,686547217

4,450

1,794141

1,93549456

2,485

1,524227

1 75153

161

1,965

368

132

103

230

606

842

159

2,440-475

Secondquarter i

3,328332

3,660560260

4,480

1,625165

1,79056570

2,425

1,703167

1,870e

190

2,055

640

20

50

185

230

945

145

2,215-160

1 Estimates based on incomplete data.2 Figures for recorded exports of goods in 1946 and 1947 have been adjusted to include goods shipped to

United States armed forces abroad for distribution to civilians in occupied areas in order to make themcomparable with figures for 1948. Such shipments are included in exports as recorded by the Bureau ofthe Census in 1948 but were not so included in prior years.

3 Includes goods sold to or bought from other countries that have not been shipped from or into the UnitedStates customs area and other adjustments.

NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

107


TABLE 32.—United States Government aid to foreign countries, 1946—48


Type of aid

A. Unilateral payments:Straight lend-lease _UNRRAPost-UNRRACivilian supplies for occupied

areas . . .European recovery program.Greek-Turkish aid._._Chinese aidInternational Refugee Organ-

izationsTransfers to Philippines ._Interim aidOther

Total unilateral payments...Less: Unilateral receipts..

Equals: Net unilateral pay-ments.

B. Long-term loans and invest-ments:

Lend-lease credits _ .Surplus property, including

ship salesExport-Import BankUnited Kingdom loanInvestment in International

Bank . . . .Investment in International

Monetary FundOther

Total, long-term loans and in-vestments

Less: Repayments—

Equals: Net long term loansand investments, includ-ing International Bankand International Fund...

Less: Investments in Interna-tional Bank and Interna-tional Fund

Equals: Net long term loansand investments, exclud-ing International Bankand International Fund_._

0. Short-term loans (net):

Net unilateral payments and loansand investments, excluding Inter-national Bank and InternationalFund

1946

2091,524

539

15

60

170

2,517238

2,279

600

841945600

317

512

3,32090

3,230

322

2,908

-134

5,053

Total

543245

980

74

179612

305

2,272460

1,812

2

274796

2,850

318

2,74580

7,065174

6,891

3,063

3,828

72

5,712

Firstquarter

285

219

18

101

623179

444

96280500

159

2,74528

3,80851

3,757

2,904

853

1

1,298

1947

Secondquarter

2092

240

20

113

584127

457

60249950

159

49

1,467,34

1,433

159

1,274

264

1,995

Thirdquarter

4998

306

38

1538

33

57785

492

1

5361

1,300

1

1,41640

1,376

1,376

-175

1,693

Fourthquarter

145

215

36

2201258

48869

419

1

65206100

2

37449

325

325

- 1 8

726

1948

Firstquarter

45

340

85

3313

34229

88745

842

234170300

2

70646

660

660

—54

1,448

Secondquarter^

(2)

8(2)

2}

*)2)

1,02075

945

! 33

(2)

25525

230

230

1,175

i Estimates based on incomplete data,a Not available.NOTE.—Detail will not necessarily add to totals because of rounding.Source: Department of Commerce.

108


T A B L E 33.—United States merchandise exports, including reexports, by continents, 1936-38quarterly average and 1947—48

Period

Total mer-chandiseexports,

includingreexports

NorthAmerica

SouthAmerica Europe Asia

Australiaand

OceaniaAfrica

Millions of dollars

1936-38 Quarterly average

1947 Quarterly average. - .First quarter. _Second quarterThird quarterFourth quarter

1948—First quarterSecond quarter i . . .

1936-88 Quarterly average,

1947 Quarterly average...First quarterSecond quarterThird quarterFourth quarter

1948—First quarterSecond quarter i . . .

742

3,8363,7754,1853,7163,662

3,3183,328

183

957906

1,013900

1,010

789921

69

588571648560574

549534

311

1,4211,4841,5711,3921,235

1,2091,080

125

582567649564550

532552

23

8064749786

4235

Percentage of total

100.0

100.0100.0100.0100.0100.0

100.0100.0

24.7

25.024.024.224.227.6

23.827.7

9.3

15.315.115.515.115.7

16.516-0

41.9

37.139.337.537.533.7

36.432.5

16.8

15.215.015.515.215.0

16.016.6

3.1

2.11.71.82.62.3

1.31.1

32HI

205183230202206

197206

4.3

m5.34.85.55.45.65.96.2

1 Based on actual figures for April and May and estimates for June.

NOTE.—Data in this table cover all merchandise shipped from the United States customs area to foreigncountries including, in 1947 and 1948, goods destined to United States armed forces abroad for distributionin occupied areas as civilian supplies.



793637°— 4 8 - 109


TABLE 34.— United Slates general merchandise imports, by continents, 1936-38 quarterlyaverage and 7947-48

PeriodTotal

generalimports

NorthAmerica

SouthAmerica Europe Asia

Australiaand

OceaniaAfrica

Millions of dollars

1936-38—Quarterly average.

1947—Quarterly averageFirst quarterSecond quarter..Third quarter.Fourth quarter


1936-38—Quarterly average

1947—Quarterly averageFirst quarterSecond quarterThird quarterFourth quarter

1948—First quarterSecond quarterx

622

1,4331,4121,4491,3231,549

1,7941,625

150

536495568521560

605613

81

309309291276360

423328

177

204187195213225

264247

187

262303269205273

337312

10

3947542530

4825

Percentage of total

100.0

100.0100.0100.0100.0100.0

100.0100.0

24.1

37.435.139.239.436.2

33.737.7

13.0

21.621.920.120.923.2

23.620.2

28.5

14.213.213.516.114.5

14.715.2

30.1

18.321.518.615.517.6

18.819.2

1.6

2.73.33.71.91.9

2.71.5

17

82697483

100

116100

2.7

5.74.95.16.36.5

6.56.2

* Based on actual figures for April and May and estimates for June.NOTE.—Data in this table cover all merchandise received in the United States customs area from foreign

countries. General imports include merchandise entered immediately upon arrival into merchandisingchannels, plus entires into bonded customs warehouses. Detail will not necessarily add to totals becauseof rounding.


no


TABLE 35.—United States merchandise exports, by economic classes, 1936-38 quarterly average and1947-48

Period


1947— Quarterlv averageFirst quarterSecond quarterThird quarterFourth quarter

1948— First quarter.Second quarter i

1936-38—Quarterly average.—

1947—Quarterly averageFirst quarter _.Second quarter.Third quarterFourth quarter

1948—First quarter. _..Second quarter *

Total mer-chandiseexports

Crudematerials

Crudefoodstuffs

Manufac-tured

foodstuffs

Semimanufac-

tures

Finishedmanufac-

tures

Millions of dollars

731

3,7903.7134,1403,6833,624

3.2873,295

167

400430431352389

329338

34

332322333347324

315241

42

444452490457376

352388

130

446384485478438

381365

358

2,1682,1242,4012,0492,098

1,9101,964

Percentage of total

100.0

100.0100.0100.0100.0100.0

100.0100.0

22.8

10.611.610.49.6

10.7

10.010.3

4.7

8.88.78.09.48.9

9.67.3

5.7

1£211.812.410.4

10.711.8

17.8

11.810.311.713.012.1

11.611.1

49.0

57.257.258.055.657.9

58.159.6

i Based on actual figures for April and May and estimates for June.

NOTE.—Data in this table cover all merchandise shipped from the United States customs area to foreigncountries, including in 1947 and 1948, goods destined to United States armed forces abroad for distributionin occupied areas as civilian supplies.



I l l


TABLE 36.—Indexes of quantity and unit value of United States merchandise exports, by economicclasses, 1936-38 quarterly average and 1947-48

[1936-38=100]

Period




1936--38— Quarterly average.

1947—Quarterly averageFirst quarter _Second quarter _Third quarter . . _Fourth quarter

1948—First quarterSecond quarter i

Total mer-chandiseexports

Crudematerials

Crudefoodstuffs

Manufac-tured

foodstuffs

Semi-manufac-

tures

Finishedmanufac-

tures

Quantity indexes

100

275281299260249

220222

100

123130127101no8788

100

391425414401336

318255

100

482494523504389

364410

100

203189221213191

160153

100

332341367303307

275283

Unit value indexes

100

1S8181189194199

204203

100

195197203208210

227229

100

247221235252281

289275

100

218217222215229

229224

100

169157169173177

184183

100

182174183189191

194194

i Based on calculated indexes for April and May and estimates for June.

N O T E . The indexes of quantity are a measure of changes in the total volume of trade after the influence onvalues of changes in average prices has been eliminated. The indexes of unit value provide a measure ofchanges in the average prices at which trade transactions are reported in official foreign trade statistics,including changes in average prices that result from changes in the commodity composition of trade. Theindexes for 1947 and 1948 are based on data which include goods destined to the United States armed forcesabroad for distribution to civilians in occupied areas.



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TABLE 37.—United States imports for consumption, by economic classes, 1936-38 quarterlyaverage and 1947—48

Period



1948—First quarterSecond quarter l


1947—Quarterly averageFirst quarterSecond quarter -Third quarterFourth quarter

1948—First quarterSecond quarter l -

Total im-ports for

sonsumptionCrude

materialsCrude food-

stuffsManufac-

turedfoodstuffs

Semi-manufac-

tures

Finishedmanufac-

tures

Millions of dollars

615

1,4101,3951,4091,3221,516

1,7691,612

190

436460453389440

571459

85

254288227201300

346275

95

164134182169171

161183

126

311281312310343

396382

120

246231236254262

295313

Percentage of total

100.0

100.0100.0100.0100.0100.0

100.0100.0

30.9

30.933.032.229.429.0

32.328.5

13.8

18.020.616.115.219.8

19.617.1

15.4

11.69.6

12.912.811.3

9.111.4

20.5

22.020.122.123.422.6

22.423.7

19.5

17.416.616.719.217.3

16.719.4

1 Based on actual figures for April and May and estimates for June.

NOTE.—Data in this table cover all merchandise received in the United States customs area from foreigncountries. Imports for consumption include merchandise entered immediately upon arrival into merchan-dising or consumption channels, plus withdrawals from bonded customs warehouses for consumption.



113


TABLE 38.—Indexes of quantity and unit value of recorded United Slates imports for consumption, byeconomic classes, 1936-38 quarterly average and 1947—48

[1936-38=100]

Period

1936-38—Quarterly average....

1947—Quarterly averageFirst quarter.Second quarter.Third quar ter . .Fourth quarter

1948—First quarter ~Second quarter*



1948—First quarterSecond quarter i

Total im-ports for

onsumptionCrude

materialsCrude food-

stuffsManufac-

turedfoodstuffs

Semi-manufac-

tures

Finishedmanufac-

tures

Quantity indexes

100

109113107102115

126113

100

130138133120134

157125

100

961168578

107

11994

100

8373878687

8188

100

130126129126140

154142

100

8486808386

9397

Unit value indexes

100

211201214211215

227232

100

176175179170172

191194

100

311293314302330

342344

100

208195220208206

210218

100

191177193196194

205214

100

245226245256255

266269

i Based on calculated indexes for April and May and estimates for June.NOTE.—The indexes of quantity are a measure of changes in the total volume of trade after the influence

on values of changes in average prices has been eliminated. The indexes of unit value provide a measureof changes in the average prices at which trade transactions are reported in official foreign trade statistics,including changes in average prices that result from changes in the commodity composition of trade.



114


T A B L E 39.—Changes in selected economic series since 1939 and since the first half of 1947

Source:Appendix C

tablenumber

Economic series1946

232218294522235

247245245227437

2101501091041211308724

18324318515415112615815617615112616621715142619088232

203166201

235238238140168159104157228186135245156

157127335256147600

Total

256244333989214

279267269247326

2251401111091271388623

206280208173162122173172202158141222286249399275123312

243210235

307280280160204185107197277240166293186

156167458362182933

1939=100

1947

Firsthalf

252239328

1,056208

274262262241293

2201411101081251368325

201270201170(i)(i)

171172203159139180233183383218100273

230190217

292273270156196183105190268230161284181

156141445350174908

Secondhalf

261250339922219

285272275254356

2291401121101291408920

212290216177

(i)(i)174172200158143263339315415332147350

243210235

321289290164211187109204287249171301192

156167474374184975

1948,firsthalf

273258413433237

298280287265430

2381401111101281407923

218289220183

(i)

0)177176206163144244318293421289130341

256224250

33130030217021919511221229225118330fi201

1521764693721?5933

Percentchange,1947,first

half, to1948,firsthalf

+8.3+7.9+25.9-59.0+13.9

+8.8+6.9+9.5+11.0+46.8

+8.2—.7+.9+1.9+2.4+2.9-4.8-8.0

+8.5+7.0+9.5+7.6

+3.5+2.3+1.5+2.5+3.6+35.6+36.5+60.1+9.9+32.6+30.0+25.0

+11.3+17.9+15.2

+13.4+9.9+11.9+9.0+11.7+6.6+6.7+11.6+9.0+9.1+14.4+7.7+11.0

-2.6+24.8+5.4+6.3

+ 1 2 . 1+ 2 . 8

11..

12..

13.

14.

15.

15.

17.

18.

19..

20.24.

Gross national productPersonal consumption expendituresGross private domestic investmentNet foreign investment . .-Government purchases of goods and

services.National income.._ _

Compensation of employeesPersonal income

Disposable personal incomePersonal net saving _

Per capita disposable personal income:Current dollars1947 dollars

Labor force, including armed forcesCivilian labor force

Employment _NonagriculturalAgricultural

Unemployment _Average gross weekly earnings:

Manufacturing _Bituminous coal miningPrivate building constructionRetail trade

Physical production: total _AgricultureNonagriculture

Industrial production index: totalDurable manufactures.Nondurable manufacturesMinerals

New construction: totalPrivate

ResidentialNonresidentialPublic utility and farm

PublicBusiness expenditures for new plant and

equipment.Inventories, end of period:

Manufacturing _.Wholesale -Retailss:Manufacturing _WholesaleRetail _.

Consumers' price index: all itemsFoodApparelRent

Wholesale price index, all commoditiesFarm productsFoodsOther than farm products and foods

Prices received by farmers - . .Prices paid by farmers (including interest

and taxes).Parity ratioConsumer credit outstanding .end of period.Corporate profits before taxesCorporate profits after taxes

Dividend paymentsUndistributed profits

i Bfcau& of the extreme seasonal nature of agricultural crop production, oniy an annual index has beencomputed.

Sources: Appendix C, tables as indicated above. Data have been converted to the base 1939=100.

For sale by the Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.Price 30 cents

115


ERP 1948 Midyear

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