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Mid r Economic Report of the President TRANSMITTED TO THE CONGRESS July 1948 THE MIDYEAR ECONOMIC REPORT OF THE PRESIDENT To the Congress, July 30, 1948 Together with a report THE ECONOMIC SITUATION AT 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 the Congress. This is supplementary to the Economic Report of the President of 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 the Council of Economic Advisers, members of the Cabinet, and heads of independent agencies. Together with this report, I am transmitting a report, The Economic Situation at Midyear 1948, prepared for me by the Council of Economic Advisers in accordance with section 4 (c) (2) of the Employment Act of 1946. Respectfully, III Contents T 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 by the Council of Economic Advisers). 1948 (a report to the President To the Congress of the United States: N January 14, 1948, I transmitted to the Congress my annual Economic Report under the Employment Act of 1946. At the present stage in economic affairs it is again desirable that the Congress and the country be presented with an up-to-date survey of the economic situation, the difficulties it presents, and the solutions called for. This Midyear Economic Report is transmitted to the Congress for that purpose. O A Time for Action I N the years since the end of hostilities in World War II, the American economy has offered an impressive display of inherent strength and elasticity. More than 10,000,000 veterans have been smoothly absorbed into the activities of the business world. Month after month, the labor force has been employed at a level which but few were willing to forecast. In spite of high living costs, our people continue to enjoy high standards of living. The income of American consumers, and the resources of American business, furnish the basis for sustained markets. Our financial condition is strong. A national debt of tremendous size has been managed so skillfully that we are prone to treat too lightly the problems which it still offers. But our present prosperity should not blind us to the growing threats to our well-being. Repeatedly, I have called attention to the developing inflationary conditions which endanger both our domestic strength and our place in world affairs. In addition, recent events have forced us into a 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 special session, I again advised the Congress of the dangers that we face, and made recommendations to meet them. I must emphasize that the course of inflation does not run according to any set schedule. Until the very eve of an economic collapse many people are apt to grow more and more confident about the soundness of the economy and the indefinite continuance of the boom. It may not be true that "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 will not happen if we neglect action to control the boom. For 2 years, it has been asserted that if matters were left alone there would be 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 practicable means. But, historically, no important inflation has been cured in that manner. Nor has this one, despite the fact that every factor of high profits, heavy market demand, and large funds available for investment has been favorable to the expansion of production. The policy proclaimed in the Employment Act requires us to devise and adopt positive measures to stop this inflation and secure relative stabilization. It is not too late for preventive measures, and we are not yet'forced by the tragic consequences of depression to adopt measures which would interfere with our free economy far more than would any or all of the measures I have proposed. I realize that the anti-inflationary program I have offered will impede some business plans, will curb some profit opportunities, and may limit some wage advances. It is of the very essence of a plan to counteract inflation that this be done. All groups will ultimately benefit when it is done. The Economic Situation in Summary T HE recommendations that I have made for dealing with inflation are 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 where this situation may lead us if we do not act in time. Below I summarize what seem to me to be the points of greatest significance in this situation and this analysis. A more detailed examination of the facts, and a more extended analysis, is contained in a report on The Economic Situation at Midyear 1948, prepared for me by the Council of Economic Advisers, which I am transmitting to the Congress along with this Midyear Economic Report. Employment in the first half of this year ran continuously above the level 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 year earlier. June civilian employment set a new record of 61.3 million. Industrial production reached a new postwar peak in February and, after the work stoppage in coal mining, approached it again in June. Improved industrial relations and high business confidence reinforced by increased Government commitments for foreign aid and defense give promise of continuing high-level output for the rest of the year. Agricultural production ran below the level of the first half of last year because smaller numbers of livestock and tight feed supplies have reduced the output of most livestock products. At midyear, our second largest wheat crop was being harvested, and generally favorable crop reports were highlighted by an indicated production of over 3.3 billion bushels of corn—a new record. While such a crop could not remedy the meat shortage during the rest of this year, it would provide the basis for more ample supplies of livestock products in 1949 and thereafter. Gross national product reached a new high of 246.5 billion dollars per year during the first half of 1948, reflecting some increase in production but mostly the rise in prices. Consumer income ran at an annual rate of about 208 billion dollars, compared with 195 billion in 1947. Consumer income after taxes increased from a rate of 174 billion dollars to a rate of 186 billion. Consumer expenditure, as a result of some buyer hesitation in the first quarter, increased less than disposable income, leaving a small increase in net consumer saving. The distribution of income, according to the most recent data, has changed but little since 1946. A survey of families, however, showed half the Nation's consumer spending units falling substantially behind in the race of incomes with living costs during 1947. One-fourth of the family units spent more than they earned. Low-income people were spending past savings predominantly for current expenses, higher-income people more often spending theirs for durable goods or converting them into residential or 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 exceptionally high since the war; plant construction expenditures have increased less strikingly. Present indications are that such outlays will continue high throughout the rest of the year. Nonfarm inventories increased markedly during the first quarter of the year, when sales lagged, but leveled off in the second quarter as sales picked up. Profits exceeded last year's average, reflecting high prices for a high volume of output. First quarter data, however, indicated a drop in profits of small manufacturing firms. Residential construction is expected to increase the total supply of dwelling 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 of 1947, in part reflected decreases in exports and increases in imports in our trade with all continents. The foreign aid program will increase our surplus of exports during the rest of the year. The Federal cash surplus during the first half of 1948 amounted to 7.6 billion dollars. Receipts ran 7 percent higher than last year, payments 9 percent lower. The reduction in income taxes and the increase in expenditures for defense and foreign aid will virtually eliminate the surplus for the second half year. The Federal debt was reduced about 5 billion dollars during the first half of the year, bringing it down to 252 billion dollars. State and local government expenditures have overtaken revenues, and deficits are likely to increase. Prices rose after a decline in February. Many farm prices regained or surpassed their earlier levels and industrial prices resumed their climb. By midyear, price increases appeared to be accelerating. The index of consumers' prices has now reached an all-time high. Wages continued the third round of increases that began last fall though interrupted by the break in commodity prices. Most of the third round increases have roughly corresponded to the rise in cost of living since the previous contract. Foreign aid and defense expenditures during the present fiscal year will increase pressure on the domestic economy. New defense expenditures will not be great during the next few months, but will rise thereafter. Both programs have a special impact upon such short-supply items as steel, other metals, and farm machinery, and will draw increasingly upon our already fully employed labor force. More adequate allocation authority is needed if we are to avoid progressively more serious disruptive effects of these programs upon supplies, prices, and the organization of production. The reduction in income taxes will reduce Federal revenues by about 5 billion dollars at the same time that expenditures will be substantially increasing under the new programs. The deflationary influence of recent Government cash surpluses will thus be replaced by the inflationary influence of additional expenditures on the part of consumers whose tax burdens are reduced. The general outlook as to inflation shows conflicting influences. On the one side, the supply situation in a number of industries is improved over a year ago. Bountiful crops are in prospect. Postwar expansion programs are nearing completion in many lines of production, and we should experience a gradual increase in output from an enlarged and modernized industrial plant. Commendable caution continues to be shown by business in avoiding speculative overexpansion, and many leaders in both industry and labor can be applauded for the conscious restraint they have exhibited in their pricing policies and wage demands. The immediate situation is dominated, however, by three interacting processes making for continued inflation. First, consumer demand for goods and services, business demand for investment goods, and demands arising from expanding Government defense and foreign aid programs press strongly upon production. Second, we are currently in the midst of a round of substantial wage and price increases in major basic industries. These developments foreshadow continuing and ramifying effects on cost structures and prices in many related lines of production, on the cost of living, and on further wage demands. Third, credit expansion, partly a cause and partly a result of inflation, still persists. The facts add up to a clear and disconcerting conclusion. In spite of some favorable factors, we are in the very midst of gathering inflationary forces, which day by day are imposing additional hardships upon countless families, and day by day are undermining the foundations of the remarkably high level of postwar prosperity that we have thus far maintained. The hard facts of today leave no room for complacency. Though most people are optimistic about the immediate business outlook, lasting prosperity is not assured. Even in the midst of the present prosperity, the average American sees that the value of his accumulated savings has declined, and that many of his neighbors living on pensions or fixed salaries are actually worse off than they were a year ago. Looking abroad, we see that, despite great progress, many countries are still far below the living standards needed for sustained production and are dependent on outside help for any hope of further advance. We must be on our guard lest our national prosperity and security be undermined by inflation at home or by misery abroad. Our American prosperity depends in part on world events, but far more on our own action or inaction right here at home. More than 90 percent of 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 beset our path. Despite my repeated warnings and recommendations, we have not adopted adequate legislation for controlling inflation. The failure to control inflation effectively in the past makes it increasingly urgent that we adopt and apply vigorous measures to guide us safely from the uneven postwar boom to an era of sustained and stable prosperity. We are now challenged to carry out the pledge to the American people contained in the Employment Act of 1946 that it shall be the policy of our Government to "utilize all its plans, functions, and resources * * * to promote maximum employment, production, and purchasing power/5 in an economy of free competitive enterprise. It is no less important to take action to forestall a business collapse than it is to use Government measures to overcome a depression once it has arrived. Our success in this effort is essential for the reconstruction of a peaceful 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 taken now. I therefore urge the Congress to take strong, positive action to control inflation. I have reexamined the anti-inflation program I proposed to the Congress 8 months ago. In its essentials that program is as sound now as it was then. It has been revised and strengthened in the light of changing circumstances. The program I now propose is as follows: First, I recommend that an excess-profits tax be reestablished in order to provide a Treasury surplus and provide a brake on inflation. Second, I recommend that consumer credit controls be restored in order to hold down inflationary credit. Third, I recommend that the Federal Reserve Board be given greater authority to regulate inflationary bank credit. Fourth, I recommend that authority be granted to regulate speculation on the commodity exchanges. Fifth, I recommend that authority be granted for allocation and inventory control of scarce commodities which basically affect essential industrial production or the cost of living. Sixth, I recommend that rent controls be strengthened, and that adequate appropriations be provided for enforcement, in order to prevent further unwarranted rent increases. Seventh, I recommend that stand-by authority be granted to ration those few products in short supply which vitally affect the health and welfare of our people. On the basis of present facts, and unless further shortages occur, this authority might not have to be used at all. Eighth, I recommend that price control be authorized for scarce commodities which basically affect essential industrial production or the cost of living. I have said before, and I repeat, that many profit margins have been adequate to absorb wage increases without the price increases that have followed. Rising wages and rising standards of living, based on increasing productivity and a fair distribution of income, is the American way. Noninflationary wage increases can and should continue to be made by free collective bargaining. Where the Government imposes a price ceiling, wage adjustments which can be absorbed within the price ceiling should not be interfered with by the Government. The Government should have the authority, however, to limit wage adjustments which would force a break in a price ceiling, except where wage adjustments are essential to remedy hardship, to correct inequities, or to prevent an actual lowering of living standards. The measures I have recommended make up a balanced program to attack high prices. They are all necessary to check rising prices and safeguard our economy against the danger of depression. If they are made the first order of business by the Congress, as they should be, they can be promptly enacted. Every week of delay will mean additional hardship for the American people. THE ECONOMIC SITUATION AT MIDYEAR 1948 A REPORT TO THE PRESIDENT BY THE COUNCIL OF ECONOMIC ADVISERS Contents Page I. EMPLOYMENT, PRODUCTION, AND PURCHASING POWER The course of employment The course of production Production prospects The flow of goods and purchasing power Consumer income, expenditure, and saving Business investment, income, and financing International transactions Government transactions Summary: the Nation's Economic Budget II. PRICES, WAGES, AND THE IMPACT OF THREE GOVERNMENT ACTIONS The course of prices The course of wages The impact of three Government actions Foreign aid and domestic supply Defense demands and civilian supply The impact of tax reduction III. T H E ISSUE BETWEEN INFLATION AND STABILIZATION 1 1 2 3 5 6 10 15 18 22 27 27 31 35 35 38 41 43 APPENDIXES A. The Nation's Economic Budget B. The Distribution of Consumer Income and Ownership of Liquid and Other Assets C. Statistical Tables Relating to Employment, Production, and Purchasing Power 793637°—48 2 III 51 65 74 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, The Economic 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, and Purchasing Power E enter the second half of 1948 with our labor force fully employed, with total production high, and with inflationary pressures continuing. A review of some major economic events of the first half of 1948 will indicate where we stand and what trends can be foreseen. W THE COURSE OF EMPLOYMENT The employment situation has continued strong, with the demand for labor so active that a relatively large inflow of additional workers was readily absorbed. There were about 850,000 more workers in the labor force in the first half of 1948 than a year ago, nearly double the rise that would have been expected on the basis of population changes and prewar trends. This increase was due mainly to the abundance of job opportunities at good wages, but it also appears that the pressure of living costs induced many housewives and teen-agers to seek jobs. Total nonagricultural employment rose to record peacetime levels, while agricultural employment was somewhat below 1947. In June, civilian employment 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" becomes a floor to be protected by every means possible in the future, no longer an objective that the faint-hearted said our business enterprise could not attain. With more than 61 million in civilian employment, the unemployment figures have continued low. There were 2.2 million persons unemployed in June of this year, compared with 2.6 million in June 1947. While some workers in certain areas had difficulty in finding suitable work, there has been no general unemployment problem. In fact, some employers have continued to have trouble in securing the types of labor they needed. The broad underlying demand for additional workers has been felt in almost all major lines. Construction has been setting the pace, but significant gains have occurred also in manufacturing, finance, and services. Employment in mining, transportation and public utilities, and government has changed little. (See appendix G, table 8.) 1 On the other hand, the leather industry experienced a greater than usual seasonal downturn this spring, followed by a substantial recovery in June. Employment in the rubber industry has been declining steadily, averaging about 10 percent below the first half of 1947. CHART 1 LABOR FORCE Civilian 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 TOTAL LABOR FORCE 60 40 20 1946 1947 1948 * 14 YEARS OF AGE AND OVER. SOURCE: DEPARTMENT OF COMMERCE. THE COURSE OF PRODUCTION Total production has maintained very high levels. The output of industrial goods (including minerals and manufactured goods) for the 6 months was not quite 3 percent above the 1947 average level. (See chart 2 and appendix C, tables 11 and 12.) As to particular industries, the volume of construction and the output of electric and gas utilities have both been running considerably higher than last year. Transportation just about equaled the levels of a year ago. Basic industries such as steel, chemicals, and construction have operated close to present capacities. The petroleum 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, in combination with declining numbers of livestock, led to reduced marketings of livestock products in the first half of 1948. The total volume of farm marketings in the first half of this year was about 7 percent below the level of a year earlier. The output of goods would have been even higher but for certain specific shortages—notably of fuel, electric power, freight cars, and steel. These shortages continue to impede expansion, but there has been some improvement over 1947. While industrial disputes, particularly in coal mining, reduced output considerably in March and April, the return of coal mining to normal operation has resulted in a substantial improvement in industrial output during May and June. By midyear, industrial production approximately regained the postwar peak reached in February. The fragmentary evidence available indicates some improvement in labor productivity during the first half of 1948. PRODUCTION PROSPECTS The heavy demands of consumers, business, government, and foreign buyers for the output of American farms and industries emphasize the urgent need to expand production. The production outlook for the coming half year is good, but not significantly better than in the last half of 1947 or the first half of this year. Since we are currently operating at maximum employment and maximum capacity in most fields, any further increase in production is dependent largely upon increased efficiency and improved technology. Such gains cannot be very great in the short span of a few months or a single year. Other factors such as weather, industrial relations, and business psychology are likely to have a far more influential short-run effect. On these counts, the immediate prospect seems promising. Industrial relations, while disturbed in some industries, promise to be better than they were in the first half of the year, particularly since relatively few major wage contracts come up for negotiation in the late summer and fall. Forward commitments under the foreign aid and defense programs, added to the vigor of the domestic market, give confidence to merchants, manufacturers, and bankers. In June 1948, there were 2.2 million more persons working in nonagricultural employment than a year ago. The flow of materials, while still not adequate in the durable goods fields, should permit production to proceed with fewer interruptions than we have witnessed during the past CHART 2 INDUSTRIAL PRODUCTION Industrial production has remained fairly steady since last September. PERCENT OF 1 9 3 5 - 3 9 AVERAGE, SEASONALLY ADJUSTED TOTAL INDUSTRIAL PRODUCTION •00 I I I I I I I I I I I I I I I I I 1946 I I I I I t I I I 1947 I I I I 1948 NONDURABLE MANUFACTURES 100 I I I I 100 I I I 1 yi I I I I I I 1946 1 I I t I I I I I I I I t I I I I I 1 I 1 1 1 1 I 1947 I 1 1 I SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. 1 1 I I L__L_L_t— I I t I 1948 100 1 I i ^ year. There is a likelihood that nonagricultural production in the second half 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 crop prospects are excellent. If the favorable weather we have enjoyed so far this season should continue, we may hope for a record-breaking corn crop and a general level of crop production rivaling 1946, the best previous year. Animal products present a different picture. The number of cattle on farms and ranches has been declining since 1945. Dairy-cow numbers are 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 was down 3 percent. The numbers both of laying hens and of young chickens are lower than a year ago. The combination of the reduced livestock population and the continuing tight feed supply means inevitably that the output of most livestock products will continue to run less than last year, until some months after the new corn crop comes in this fall. Favorable crops may more than offset the unfavorable livestock prospect to make the total output of our farms somewhat higher than last year. But in the case of crops especially, much of this year's production does not come to market until next year. A bumper corn crop may even reduce this year's meat production by encouraging holding animals over for heavier feeding. Consequently farm marketings, in physical terms, will continue to run less than a year ago. For 1948 as a whole, they will probably be down 3 or 4 percent. Domestic consumption of food for 1948 will show about the same decrease, around 3 percent on a per capita basis. Food exports will be down somewhat, but the reduction will be chiefly in cereals and, to a smaller degree, in edible fats and oils. Meat and most other livestock products, the shortage of which will be most keenly felt in coming months, have been exported in only relatively minor amounts. Domestic food consumption will continue above prewar levels. But in relation to postwar levels of demand we must expect, during the remainder of 1948, a relatively tight supply of food, which is the largest component in 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 half of 1947, and 235.9 billion during the second half, rose to an annual rate of 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 the accounts of consumers, domestic business, international transactions, and government. Consumer income, expenditure, and saving Consumer income. Personal income, which expanded at an annual rate of 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 billion dollars. (See appendix C, table 4.) Employment and wage rates continued 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 Current dollars Period 1939__. 1946 . . Annual rates, seasonally adjusted: 1947—First half Second half._ __ _ ______ 1948—First half 2 ._ _ 1947 dollars» 536 1,127 859 1,288 1,179 1,229 1,274 1,208 1,200 1,200 * Deflated by the consumers' price index, which does not fully reflect changes in the cost of living of all groups 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 in previous 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 stated in earlier reports. No measurable change occurred in the first half of this year, 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 of consumer income becomes increasingly important. Of particular significance is the progressive deterioration in the economic position of those individuals and families whose dollar incomes have fallen far behind in the race with rising prices. Comprehensive statistics on income distribution for the first half of this year are not available. A survey comparing 1946 and 1947 showed that 30 percent of all families (spending units) had no appreciable increase in dollar incomes and almost 20 percent suffered a reduction, during a period when consumer prices increased nearly 15 percent. While the disappearance of large-scale unemployment and the increase in the number of gainfully employed persons per family tended to narrow the disparity among incomes during the war period and immediately thereafter, this trend has been arrested more recently. As there are relatively more people with fixed incomes in the lower income brackets than in the higher brackets, the favorable effects of full employment upon the distribution of income have been offset by the unfavorable effects of inflation during the past year. Of the family units whose dollar incomes remained stationary between 1946 and 1947, according to the same survey, two-thirds were in income brackets of $3,000 or less. (See appendix B, table 3.) In addition, old people were found more frequently among those with stable or declining incomes than among those with increasing incomes. Consumer expenditures. Consumer expenditures were at an annual rate of about 174 billion dollars during the half year, compared with about 168 billion during the second half of 1947. The increase was slightly less than the increase in income after taxes, indicating a small increase in saving. The first quarter of 1948 was a period of consumer hesitation, in which purchasing of both durables and nondurables lagged. In the second quarter, there was a general strengthening of consumer demand. This reaction was due only in minor degree to price adjustments, and resulted mainly from a general feeling that prices were again headed upward and that scarcities might develop from the unsettled international situation. Tax reduction exerted some further stimulating effect, although the full effect on consumer 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 rate of net consumer saving since the war years. They have pointed out that as consumers spent an increasing proportion of their incomes, they contributed to 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 order to prevent serious impairment of their standard of living. Estimates for the past 12 months seem to indicate that the postwar downward trend of saving has been interrupted, although the nature of the statistical methods by which these estimates are derived is such that no great importance can be attached to small changes in percentages. (See chart 3 and appendix G, table 5.) An appraisal of the significance of this change requires an analysis of the composition of saving and dissaving. The estimates include in saving such items as the purchase of homes and noncorporate business investment, and it is chiefly into these categories that the increasing volume of saving appears to be flowing. The rate of accumulation of liquid assets—cash, bank deposits, and Government bonds—may actually have decreased. (See appendix B, table 4.) It is savings of this latter type that are most clearly anti-inflationary. Furthermore, aggregate figures of net consumer saving do not reveal the numbers of families who spend more than they earn. The rise in the cost of living is causing this practice among many low-income families, as well as many large families and families of fixed income in the middle-income groups. In the immediate postwar period, spending in excess of income was CONSUMER INCOME, SPENDING, AND SAVING Consumer income half of rose * more than spending in the first 1948 BILLIONS OF DOCLARS 250 DISPOSABLE PERSONAL INCOME (PERSONAL INCOME LESS TAXES) 200 BILLIONS OF DOLLARS^ 250 - - 200 DISPOSABLE INCOME >. 150 B1- - - 150 iB^finSBBi 100 50 0 §•• 1 HHHI •111 • I•H •i 1941 1942 1943 1944 resulting in an increase in saving. 1945 1946 - I 00 - 50 S883S8S t i 1947 1948 PERCENT 30 10 - ~ 1941 1942 1943 * ANNUAL RATES, SEASONALLY ADJUSTED SOURCE: DEPARTMENT OF COMMERCE. 1944 1945 1946 !947 1948 10 concentrated among families with incomes of $3,000 or less. More recently, as durable goods have become available, an increasing number of families with 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 current earnings 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. This is 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 billion were in the control of trust funds, and about 150 billion in the hands of individuals. The equity of individuals in private insurance is now over 51 billion dollars, compared with 27 billion at the end of 1939, while the equity in the Government social-security funds has risen from only 6 billion dollars to over 33 billion now. Between 1946 and 1947, there was a small increase in the proportion of the population owning no liquid assets at all. The median size of the holdings of all spending units was $350 in early 1948, compared with $470 in 1947. As shown in appendix B, table 8, less than one-half of persons with incomes under $1,000 had either liquid assets or life insurance, and 42 percent of the Nation's spending units had no liquid assets or less than $200 worth of liquid assets, early this year. Declines in liquid asset holdings or increases in debt should not be interpreted as indicating distress in all cases. In fact, the largest reduction in liquid assets has been made by families in the middle and high-income brackets. However, available data indicate that families in the lowerincome groups in 70 percent of the cases reduced their liquid assets for the purchase of nondurable goods and services, while in the upper-income groups the purchase of houses and other investments were a particularly important component. Thus to a considerable extent the assets at the lower end of the income scale are being dissipated by current living expenses, while those in the upper-income groups are being converted into other types 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 June 1948, the total amount of consumer credit outstanding reached the record total of 14 billion dollars, almost 3 billion higher than a year ago. (See appendix C, table 20.) Although the amount of outstanding consumer credit is not large in comparison with the current level of consumer incomes, the rapid expansion of consumer credit continues to add to inflationary pressures. Business investment, income, and financing Business investment as a whole absorbed an even greater share of the total national output of goods and services in the first half of this year than in 1947. The expansion, improvement, and replacement of productive facilities and housing, and the enlargement of business working capital to support record levels of output and sales, continued to swell the demand for goods and services in competition with the demands of consumers, Government, and the export market. While postwar replenishment of depleted inventories is by and large accomplished, and productive capacity has been adequately expanded in a large number of industries, there is no general speculative overexpansion of inventories, plant and equipment, or housing. All indications for the remainder of this year at least are that the volume of business investment will continue more than adequate to make the total demand for goods and services match the supply at current prices. Shortages and inflation will continue to be the dominant concern. This will be true even if inventory policies remain cautious and nonspeculative. Plant and equipment. A decade and a half of subnormal business expansion, resulting in part from depression and war, set the stage for heavy postwar business investment. The upward trend brought plant and equipment outlays to a peak in the latter part of 1947. In the first 6 months of 1948, such outlays totaled 8.9 billion dollars. This represented an annual dollar rate nearly double that of 1929, 25 percent above the first half of 1947, and 3 percent below the second half. (See appendix C, table 14.) The postwar plant and equipment boom has shown significant changes of pattern. During the first stages of reconversion, the intense pressure to replace facilities and to restore civilian output took precedence over the introduction of innovations. More recently, there has been increasing emphasis upon cost reduction and the substitution of new products and techniques. As table 2 shows, expenditures for equipment alone have accounted for an exceptionally high portion of total plant and equipment outlays and of gross national product in the postwar period. Plant construction expenditures, on the other hand, are now smaller relative to gross national product than in any year from 1920 through 1931. Some of this increased emphasis on equipment reflects a long-standing trend. Some reflects the fact that plant construction costs have risen much farther above prewar levels than equipment prices. At midyear, the short-run outlook is for continued high outlays on plant and equipment. The foreign aid and defense programs, though slow to affect requirements for capital goods, have firmed up business confidence and have extended expansion plans further into the future. Unfilled orders 10 of equipment producers, while substantially lower than in the middle of last year, are still unusually high in relation to sales and are being whittled down very slowly. Conditions in individual industries vary, but the overall rate of investment in plant and equipment seems limited not so much by demand or funds as by the supply of materials. Surveys of business intentions indicate that the dollar rate of plant and equipment investment in the second half of 1948 will be about the same as in the second half of 1947 and the first half of 1948. The longer-range outlook is less clear. Whether or not the present rate of plant and equipment investment is larger than could or should continue over the long run is a question to be answered only by a comprehensive and dettailed analysis of long-term needs. The Council of Economic Advisers is now making such a study. TABLE 2.—Private outlays for new nonfarm plant and equipment as percent of gross national product Percent of gross national product Period 1919-29 average-1929. .,__ 1930-39 average-. 1933 1940-45 average._ 1946 . 1947 1948: First half i_ Total plant and equipment Industrial, commercial, and public utility new construction 7.9 9.2 5.7 3.9 3.8 7.5 8.8 9.0 3.0 3.5 1.5 1.0 .8 2.0 2.0 2.0 Nonfarm producers' durable equipment 4.9 5.7 4.2 2.9 3.0 5.5 6.8 7.0 i Preliminary estimates based on rate of increase from 1947 to the first half of 1948 in the plant and equipment expenditures made jointly by the Securities and Exchange Commission and the Department of Commerce. (See appendix C, table 14.) NOTE.—The plant and equipment expenditures on which the percentages in this table are based differ from the Securities and Exchange Commission-Department of Commerce series primarily because certain plant and equipment outlays charged to current account are included in the former and excluded from the latter series. Source: Department of Commerce (1919-47). Business inventories. During the first quarter of 1948, the book value of nonfarm business inventories increased about 3.8 billion dollars, compared with 4.4 billion in the first quarter of 1947. Allowing for seasonal factors, the increase in physical volume amounted to about 1.7 billion dollars or an annual rate of nearly 7 billion. Stocks of finished goods increased not only at the retail level, but also in the hands of producers. The principal 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 and the restriction of some supplies terminated the rise in the volume of nonfarm inventories, and such stocking-up as had occurred earlier in the 11 year was overtaken by rising sales. The total physical volume of nonfarm inventories, adjusted for seasonal variation, showed practically no change. Present business policies and expectations indicate the reestablishment of a moderately rising trend. But although business sentiment has improved, caution in forward buying has continued. There is little indication that inventories generally are either excessive or deficient in relation to current sales levels, though they would soon become excessive if sales should decline materially. Business income. Profits for the first half of 1948 were at levels above the average of 1947, the previous peak year. Preliminary data for the first half year indicate that corporate profits before taxes were at a seasonally adjusted annual rate of about 30.5 billion dollars, compared with 29.8 billion in 1947 and a seasonally adjusted annual rate of 32.4 billion in the fourth quarter of that year. Corporate profits after taxes thus far in 1948 have been at an annual rate of 18.6 billion dollars, compared with 18.1 billion in 1947 and 19.7 billion after seasonal adjustment in the fourth quarter. (See appendix G, table 24.) These profits after taxes in 1948 represented a return of about 9 percent on net worth and about 5 percent on sales, compared with about 9.5 percent on net worth and about 5 percent on sales in 1947. The net income of unincorporated business and the professions in the first half of 1948 was at an annual rate of 26.2 billion dollars, compared with 24.4 billion for 1947 as a whole and an annual rate of 25.9 billion in the fourth quarter. (See appendix C, table 3.) In addition net farm income was running at an annual rate of 18.1 billion dollars during the first half of this year, compared with about 15.6 billion for 1947 as a whole and an annual rate of 16.5 billion in the fourth quarter. These estimates of net farm income reflect an unusually large statistical adjustment for changes in farm inventories on account of the small corn corp and the reduction in numbers of livestock last year. Net income actually realized by farm operators during the first half of 1948 (without allowing for changes in inventories) is estimated to have run slightly below the 18-billion-dollar record level of 1947. The sharp price advances during the second half of 1947 and the maintenance this year of high levels of production and sales despite unusually bad weather conditions and work stoppages in some critical areas have accounted for the high level of profits thus far in 1948. With the outlook bright 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 of small manufacturing corporations in the first quarter of this year, while profit ratios for the largest corporations rose. Average profits after taxes 12 of manufacturing corporations with assets under $250,000 dropped from 3.9 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 principal ways in which corporations used their funds during the first half of 1948, and also the principal sources from which these funds were obtained. Corporate outlays for plant and equipment and for the expansion of inventories and customer financing amounted to about 12 billion dollars in the first half of this year. This represents outlays at a rate somewhat CHART 4 SOURCES AND USES OF CORPORATE FUNDS Internal sources, mainly retained net earnings and depreciation reserves, continued to supply the major part of corporate financial requirements during the first half of 1948. BILLIONS OF DOLLARS 6 8 14 10 USES SOURCES RETAINED NET EARNINGS AND: DEPLETION ALLOWANCES NET NEW SECURITY 0THER* lllllllllllllllllllll CASH AND U. S. SECURITIES J * SEE APPENDIX C, __J 1 TABLE 3O. SOURCES: DEPARTMENT OF COMMERCE (PRELIMINARY ESTIMATES BASED ON SECURITIES AND EXCHANGE COMMISSION AND OTHER FINANCIAL DATA). lower than for the year 1947 as a whole. A small decline in the use of funds for expanding inventories and a large decline in the rate of expansion of customer financing more than offset the increase in expenditures on plant and equipment. It is significant that the major source of corporate funds has continued to be those sums retained from current receipts as offsets to depreciation and depletion charges and as undistributed net earnings. Indications are that this source will be even more important in 1948 as a whole than during last year. Net new security issues during the half year, amounting to 2.6 billion dollars, 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 prevailed last 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 low by prewar standards, the average ratio for the whole postwar period to date has not been. Moreover, corporate equity/debt ratios in general still compare quite favorably with those prevailing in prewar periods. As a corollary of the high degree of internal financing through retained earnings and additions to depreciation reserves, and of the volume of security issues, the use of corporate reserves of cash and securities represented a relatively minor source of financing during 1947 and during the first half of 1948. There was no net expansion of bank credit to corporations as a group in the first half of 1948. The total of such loans outstanding showed a decrease for the half year, in contrast with a small increase during the first half of 1947. In appraising this decline in corporate use of bank credit, however, the high rate of expansion of such credit in the latter part of 1947 must be borne in mind. (See appendix G, table 21.) While there are disparities in the ease with which businesses of different types and sizes can acquire funds, the overall picture does not indicate a present or impending insufficiency of such funds so long as the fundamental business outlook remains good. If that outlook becomes less favorable, the originating point of the downturn is likely to be found elsewhere than in the availability of funds. Residential construction. About 450,000 new residential units in new buildings were started during the half year. Counting also conversions and alterations, more than a million units will probably be added to the residential supply during 1948. This volume of residential construction is already straining the capacities of the construction industry in many areas and of producers of some construction materials, and is unquestionably competing with other primary national needs. (See appendix C, table 13.) This situation highlights what has become the chronic necessity of developing and applying new methods and substitute materials to the house-building industry. On the demand side, a distinction needs to be drawn between essential need and capacity to pay current costs. The basic housing needs of a growing population in the face of a serious and cumulative shortage would be sufficient to sustain the present level or even a higher level of home building for many years to come. But only a few years at most would be required to saturate the demand of those who can acquire houses at current costs, and that saturation would portend a serious downswing in lesidential construction. The unusually high level of current demand 14 for houses has combined with the unique character of the building industry to push homebuyers' costs far more above those prevailing after World War I than consumer incomes have risen in the same time span. During the past year, the average price of new houses has risen about 20 percent, while average family income after taxes was only about 8 percent higher during the first half of 1948 than during the same period in 1947. Another way of looking at the effect of high residential prices on the economy is to examine the trend in outstanding mortgage debt on one- to four-family residential properties. This type of mortgage debt has risen about 65 percent since the end of 1945, while nonfarm family incomes after taxes have risen only about 25 percent and the number of dwelling units has increased less than 10 percent. It is highly significant that the volume of new mortgages of less than $20,000 placed since 1945 amounts to approximately 26 billion dollars, which is about 80 percent of the face value of 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 properties has been placed on the basis of current prices. Even at the high level of current incomes, high housing costs have imposed excessive burdens on many families. These burdens, hard to carry in good times, would impose a serious strain indeed with any downturn in employment or incomes. The problem of housing costs is important in the short run, and of central significance to the longer-range aspects of general economic stability. Farm investment and finance. Production and domestic sales of farm machinery have continued to expand. Wheel-type tractor production for 1948 as a whole is expected to exceed the record 1947 production by at least 20 or 30 percent. Demand for most types of farm tractors and some other machinery and equipment items continues to outrun supply, but the situation is more spotty than a year ago and for many items production has caught up with demand at present prices. The progress of construction on farms reflects the higher incomes of farm families. Preliminary indications are that the boom in farm real estate has tended to level out in most regions, following the break in commodity prices early this year. The amount of farm mortgages recorded in the first quarter of 1948 was slightly larger than in the first quarter of 1947, but the number of new mortgages decreased. Total farm mortgage debt is still much below prewar levels. Non-real-estate loans to farmers, however, apparently are continuing to expand in response to the higher level of farm costs. International transactions The net foreign investment component of the Nation's Economic Budget dropped 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 the portion of the excess of exports over imports of goods and services that is financed by loans and investments and by net liquidation of foreign dollar assets and gold. It does not include the portion financed by gifts and other unilateral transfers made by the United States Government and the general public. When these are included, the decline was much less: from an annual rate of 10.5 billion dollars to about 8 billion, the lowest level since 1946. The excess of exports over imports of goods and services reached its low point in the first quarter of the year and rose only slightly in the second quarter, as shown in table 3. TABLE 3.—United States exports and imports of goods and services [Billions of dollars, annual rate] Exports of Imports of goods and goods and services > services 1 Period 1936-38 average 1946 1947—First quarter Second quarter.. Third quarter,... Fourth quarter.. 1948—First quarter 2 Second quarter _ 4.1 15.0 19.3 21.1 19.2 19.4 17.8 17.9 3.6 7.2 8.1 8.6 8.3 8.9 9.9 9.7 Surplus of exports of goods and services 0.5 7.8 11.2 12.5 10.9 10.5 7.9 8.2 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 exchange of goods rather than services. Lower exports and higher imports of goods characterized our trade with every continent. While the value of exports fell, their average prices continued to rise. The sharp decline in value thus reflected an even greater decline in the physical quantity of goods shipped to foreign countries. The physical quantity of goods exported in the first half of this year was at a rate 11 percent less than in the last quarter of 1947 and 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 quantities. (See appendix C, table 38.) Production of exportable goods has increased in some of the areas that supply us. There is increased pressure in many countries, moreover, to divert to the United States goods that might otherwise be sold in the home market or in foreign countries that do not pay for them in dollars. The depletion of foreign gold and dollar assets, which was an important cause of the decline in our export surplus, was reflected in the reduced role that 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 a year 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 the important factors in the expansion of our domestic money supply and bank reserves in 1947. There was an increase in the rate of utilization of Government aid in the first half of this year compared with the last quarter of 1947, but it was CHART 5 FINANCING THE EXPORT SURPLUS A sharp drop in the liquidation of foreign assets was the main financial factor in reducing the export surplus from the average level of 1947 to the first half of 1948. U. S. Government aid dropped slightly. BILLIONS OF DOLLARS 6 10 1946 1947 1948 1st half (Annual rate) NET FOREIGN INVESTMENT U. S. GOVERNMENT AID EXPORT SURPLUS * INCLUDES ALSO MOVEMENT OF'U. S. PRIVATE CAPITAL, NET DOLLAR DISBURSEMENTS BY THE INTERNATIONAL BANK AND THE INTERNATIONAL MONETARY FUND, AND ERRORS AND OMISSIONS. SOURCE: DEPARTMENT OF COMMERCE. 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 less drain and exerted less inflationary pressure on our economy than they had in 1947. The undertaking of new foreign aid programs in the past 6 months, however, presages an increase in the export surplus in the second half of this year. 17 TABLE 4.—Financing the surplus of goods and services supplied to foreign countries [Billions of dollars, annual rate] Period Means of financing Surplus of Liquidation exports of goods and Government of foreign Other means gold and services * of financing aid (net) * dollar assets (net) * (net)» 0.5 7.8 11.2 12.5 10.9 10.5 7.9 8.2 1936-38 average 1946.... 1947—First quarter Second quarter... Third quarter..._ Fourth quarter... 1948—First quarter Second quarter K 5.1 5.2 8.0 6.8 2.9 5.8 4.7 0.8 2.0 4.8 4.6 3.4 5.3 1.5 2.6 -0.3 .7 1.2 —.1 .7 2.3 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 disbursements 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 trom the public, under the impact of rising prices and incomes, continued their upward trend. Allowing for seasonal influences, receipts during these 6 months were running at an annual rate of 50.2 billion dollars, or 7 percent above the 1947 figure of 46.9 billion. Thus for this period the cash surplus was 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 magnitude of which partly reflected the heavy concentration of income tax collections in the spring, amounted to 27.2 billion dollars or 7.6 billion greater than actual cash payments in this period. The surplus during the second half of this year, however, will be drastically reduced. This change is due mainly to the reduction in income tax rates and to the increase in payments on account of the defense and foreign aid programs. Even after seasonal adjustment to allow for the fact that receipts are normally substantially greater during the first half of any calendar year than during the second, it is certain that the cash surplus will drastically decline from the first half of the year to the second. 18 TABLE 5.—Federal cash receipts from and cash payments to the public [Billions of dollars] Cash receipts other than borrowing Calendar years 1946 1947 _ Annual rates, seasonally adjusted: 1948—First half i 2 Second half Totals for half years, not adjusted for seasonal: 1948— First half K _. . . . _ Second half a __ . +.. Cash payments Surplus (+) or deficit (-) 45.5 46.9 45.3 41.1 +0.2 +5.7 50.2 44.7 37.6 40.8 +12.6 +3.9 27. T 20.3 19.6 19.7 +7.6 +.6 i Based on incomplete data. * Estimates. Source: Bureau of the Budget. State and local government spending continued to rise during the first half of 1948 so that the cash surplus of 1947 has disappeared. This trend in State and local transactions is likely to continue so that a cash deficit must probably be expected for the rest of this year. TABLE 6.—Cash receiptsfromand cash payments to the public by State and local governments [Billions of dollars] Cash receipts other than borrowing Calendar year 1946 1947 _ 1948—First half (annual rate, seasonally a d j u s t e d ) i . . . _. 11.0 13.1 13.8 Cash payments* 9.9 12.1 14.4 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 that governmental cash transactions differ considerably from receipts and expenditures as shown in conventional budgetary accounts. While some of these differences tend to balance out over a period of years, the analysis of cash transactions presents a more comprehensive and a more accurate basis for appraising the immediate economic impact of Government operations. The conventional budget accounts, however, are more significantif the long-range financial position of the Government is to be shown. As an example, transfers from budget accounts to trust accounts are not shown as payments to the public, while they do reflect an increase in Government liabilities which will result in payments in later years. (For further explanation, see appendix A, tables 6 and 7.) Payments. During the first half of this year, total Federal cash payments to 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 for 1947. The decline was chiefly in payments for national defense and international affairs, and represented a shrinkage of certain extraordinary payments rather than a reduction in continuing programs. In national defense, the decrease was accounted for in part by the tapering off of the cashing in of terminal leave bonds. The falling off of cash payments in the international field was due to the exhaustion of the British loan, and to the fact that payments to the Bretton Woods organizations were heavily concentrated in 1947. Payments under foreign aid and other international programs are expected to expand from an annual rate of 5.2 billion dollars in the first half of 1948 to 6.3 billion in the second half. This will still be below the 1947 level. Payments for defense likewise will rise because of increased procurement of equipment and some expansion of the armed forces. Thus, after declining for the past 2 years, Federal payments are now expected to rise; during the second half of 1948, they will probably reach an annual rate of 40.8 billion dollars, which is about 9 percent higher than during the first half of the year, and slightly less than in 1947. (See appendix A, table 10.) The major changes in payments by functions, discussed in the preceding paragraphs, are reflected somewhat differently in payments classified by type of recipient. (See appendix A, table 11.) Federal purchases of goods and services from business, for example, were at an annual rate of 10.6 billion dollars during the first half of this year, or 20 percent above the 1947 level, and they are expected to average during the second half of this year about 50 percent above last year's rate. The increase during the second half of the year is accounted for largely by the increasing defense and foreign-aid programs. Some of the increase in 1948 over 1947 is simply a statistical reflection of the shift from loans to outright grants in support of foreign aid. Federal salaries and wages during the first half of 1948 were a little below the 1947 level of 7.7 billion dollars, but are expected under the influence of pay increases and expansion of the armed forces to return to their 1947 level during the second half of the year. The aggregate of payments other than purchases from business, Federal salaries and international loans and other payments changes only moderately. Payments of State and local governments have continued to rise steadily, reflecting increases in costs and also the expansion of activities to make up for the restrictions of the war period and to meet new needs. The average rate of cash payments during the first half of 1948 was about 14.4 billion dollars, or 2.3 billion above the 1947 level, and this rising trend is expected to persist during the second half of the year. 20 State and local construction activity is continuing its rapid expansion in response to the pressure of urgent needs for new schools, streets and highways, and water and sewer systems. (See appendix C, table 13.) In terms of dollar volume, State and local construction during 1948 is expected to be about 45 percent above the 1947 level, compared with increases of about 30 percent for private construction and about 10 percent for Federal construction. In view of rising costs, these dollar figures considerably overstate the expansion in construction. The physical volume of Federal construction, for example, will probably be little different from the 1947 level, and the real expansion in the private and State and local sectors is correspondingly lower than indicated by the dollar figures. Receipts and debt management. Actual Federal cash receipts during the first 6 months of 1948 were 27.2 billion dollars, which is equivalent to a seasonally adjusted annual rate of 50.2 billion. For the second half of the year, the prospect is for a decline in actual cash receipts substantially greater than seasonal, from 27.2 billion dollars to 20.3 billion dollars or a seasonally adjusted annual rate of 44.7 billion. Over a full year's operation the new tax bill might be expected, provided present income levels were not pushed upward by the forces of inflation, to reduce revenues by about 5 billion dollars. Assuming some increase in present income levels, the tax reduction accounts for the largest part in the expected fall in total cash receipts. Most of this decline is in personal income taxes, only a small fraction being due to reductions in estate and gift taxes. Receipts from sales of surplus property are also expected to fall sharply during the second half of the year, while other receipts will show little change. The annual rate of cash receipts of State and local governments during the first half of 1948 was somewhat higher than in 1947. These increased receipts reflected higher tax rates, introduction of new taxes (especially sales taxes), and rising incomes, sales, and property valuations. Revenues from sales taxes during the first quarter of 1948, for example, were 20 percent above the same period of 1947. State and local governments continue to seek new sources of revenue to meet expenditures which are mounting faster than receipts. About 4.6 billion dollars of the Federal budgetary surplus during the first half of 1948 was used to retire public debt. Furthermore, the net increase in the public debt holdings of Federal trust funds and the net increase in the amount of savings bonds and notes outstanding made additional funds available to retire marketable debt held outside of the Government. In consequence, the marketable debt was reduced by about 5.4 billion dollars during the first half of 1948. Debt held by commercial and Federal Reserve banks was reduced by about 4.9 billion dollars. The gross 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, while the Treasury cash balance increased from about 3 billion dollars to nearly 5 billion during that period. (See appendix C, table 23.) The reduction in bank-held debt was an important factor in the decline of about 4.5 billion dollars in the money supply which occurred during the period. (See appendix C, table 22.) Throughout the period, public debt retirements were concentrated in the first instance on debt held by the Federal Reserve banks. However, the restrictive effect of debt retirements was offset in considerable measure by the gold inflow, by return of currency from circulation, and by open-market purchases of Government securities by the Federal Reserve System. Such purchases were necessary to support the prices of bonds as banks and others sold securities in order to maintain reserves and to obtain funds for other purposes. Nevertheless, the budget surplus and debt retirement placed some pressure on commercial bank reserves and were to some extent a contributory factor to the slow-down of commercial bank loan expansion which occurred during the period. State and local debt continued to expand. It was possible during war years, with high revenues and severely limited activities, to retire a substantial fraction of outstanding debt; but the pressure of new needs since the war has brought a return to the prewar picture of steadily growing physical assets and indebtedness. State and municipal securities issues to secure new capital were 2.2 billion dollars in 1947, or more than twice as great as in 1946. A substantial amount of borrowing was for the purpose of securing funds for payment of veterans' bonuses. This survey of the transactions of Federal, State, and local governments indicates that during the first half of 1948 their combined effect continued to serve as a strong factor of restraint on the force of inflation. During the second half of the year this restraining influence will be almost wholly lost. The Federal Government is faced with the prospect of decreased revenues and increased expenditures. While State and local governments are raising tax rates and levying new taxes, their expenditures continue to exuand faster than their revenues. Summary: The Nation's Economic Budget The Nation's Economic Budget is a convenient way of summarizing the main trends in the flow of goods and purchasing power, and of relating these trends to possible future developments. The Nation's Economic Budget total, representing gross national income or expenditure, in dollar terms increased by 7 percent from 1947 to the first half of 1948 (annual rate). (See chart 6.) This is a rate of increase 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 prices and wages; there was, however, also some increase in the real flow of goods and services. The inflationary tendencies that prevailed particularly in the second half of 1947 continued in 1948, though at a reduced rate. TABLE 7.—The Nation's Economic Budget [Billions of dollars] Calendar year 1948, first half, annual rates seasonally adjustedi Calendar year 1947 Account Receipts Consumers: Disposable income . Expenditures. Saving (+) Business: Undistributed profits and reserves Gross private domestic investment Excess of receipts (+) or investment (—) International: Net foreign investment - - Excess of receipts (+) or investment (—) Government (Federal, State, and local): Cash receipts from the public Cash payments to the public Excess of receipts (+) or payments (—)_ Adjustments..... Total gross national product Excess of receipts ExRependi- (+)or ceipts tures expenditures ( - ) 186.0 173.6 164.8 21 4 8.9 59.9 53.2 tures (-) 174.4 +8.8 19 4 30.0 Excess of receipts Expendi- (+)or tures expendi- -10.6 37.2 3.9 -8.9 64.0 52.0 +11.6 -15.8 -3.9 -21.3 -25.2 +6.7 +3.9 -24.9 -21.1 +12.0 -3.8 231.6 231.6 0 246.5 246.5 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 the first half of the current year with the preceding year, the similarities appear more significant than the changes that have occurred. The largest items in the Nation's Economic Budget are consumer income and expenditures. Their share in the Nation's Economic Budget total remains approximately constant with 75 percent and 71 percent for consumer income and consumer expenditures, respectively. These percentages, large as they are, are somewhat below those that prevailed in most peacetime years in the past. Large national and international government programs and large business investment compete with consumer expenditures for limited national resources. The sum of business, international, and government accounts in the Nation's Economic Budget maintained a relatively large share in the total; but there were quite substantial changes in the relationship among these accounts. Gross private domestic investment increased relatively more than any other major category in the Nation's Economic Budget. This was due to 23 CHART 6 THE NATION'S ECONOMIC BUDGET Consumer saving and the Government surplus increased between 1947 and first half of 1948, while the excess of business and foreign investment declined. 1948, FIRST HALF (BILLIONS OF DOLLARS) * CONSUMERS EXCESS OF EXPENDITURES (-), RECEIPTS (+) 0 BUSINESS INTERNATIONAL I EXCESS OF INVESTMENT GOVERNMENT CASH SURPLUS 1947, QALENDAR YEAR (BILLIONS OF DOLLARS) CONSUMERS CONSUMER SAVING , EXCESS OF INVESTMENT INTERNATIONAL i , EXCESS OF INVESTMENT GOVERNMENT CASH I SURPLUS I 59.9 * ANNUAL RATES, SEASONALLY ADJUSTED. NOTE: THE COMPONENTS DO NOT ADD TO THE GROSS NATIONAL PRODUCT BECAUSE OF CERTAIN SEE APPENDIX A. SOURCE: SEE APPENDIX A. 24 ADJUSTMENTS. increases in new construction and inventory accumulation. Present indications are that domestic investment will continue on a high level during the remainder of the year. Net foreign investment declined by more than half during the first 6 months of 1948. The increase in Government foreign assistance during the second half of the year will in large part take the form of grants, which are recorded in government expenditures rather than in net foreign investment. For this reason, the net foreign investment component of the Nation's Economic Budget will probably not rise, even though the total excess of exports of goods and services increases. Government payments have been declining since the war peak, and showed a further slight decline during the last 6 months. Because of the increase in Federal outlays for defense and foreign aid, and the continuing increase in State-local payments, this trend is likely to be reversed. An increase in government payments therefore appears certain for the coming 6-month period. Thus it seems likely that expenditures for private domestic investment will continue at a high level, while the decline in government payments will be reversed. In the present situation of full employment and capacity production, this makes for a situation of inflationary pressure. The picture of an unstable economy is presented even more clearly when attention is focused upon the excess of receipts or expenditures as presented for each year in the third column in table 7. Both in 1947 and during the first 6 months of 1948, the excess of investments and exports in the business and international accounts was largely offset by consumer net saving plus the government cash surplus. Between these two periods, the excess of business investment increased by nearly 5.5 billion dollars, as did the Government surplus. The most important change in the Nation's Economic Budget that is bound to occur under present legislation for the coming period is that this Government cash surplus will be drastically reduced. This means that by necessity other items of saving or excess of investment must adjust themselves correspondingly. It should be recognized that the large dollar amounts of individual saving and Government cash surplus that helped to balance the large excess investments and excess exports during the last 2 years were partly a result of the inflationary process. When incomes and prices are inflated, the amounts of saving and taxes tend to increase. Thus we have in our economic structure a kind of automatic emergency brake that helps to slow down inflation. By reducing tax rates despite inflationary prospects, we have acted like an engineer who releases his emergency brake—in the face of 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 accounts in the precarious manner that is characteristic of an inflationary movement. Looking at the Nation's Economic Budget from the long-range aspect of economic stability, it appears also that major adjustments still remain to be made if a peacetime economy of sustained prosperity is to be achieved. The sum total of business investment, net foreign investment, and government expenditures will probably require a smaller share in the Nation's Economic Budget total than in recent years. That means that, in a future expanded economy, consumer income and expenditures will require a larger share in order to assure markets for everything that can be produced. Adjustments that must be made eventually in order to assure sustained prosperity are not appearing in the course of unchecked inflation. By permitting further inflation, we render the future task of transition to a condition of sustained prosperity that much more difficult. 26 II. Prices, Wages, and the Impact of Three Government Actions T HE first half of 1948 has shown several important developments—and at times cross currents—in the process of market competition, collective bargaining, and price making through which our system of free enterprise operates. THE COURSE OF PRICES As 1947 closed, both wholesale and consumers' prices were at postwar peaks, after sharp advances in the second half of 1947 which carried wholesale prices to 47 percent and consumers' prices to 29 percent above the mid-1946 level. Early this year, this trend was broken by a sharp downturn in commodity prices, but during the second quarter prices again marched forward. At midyear of 1948, the level of wholesale prices was 1.8 percent higher and the level of consumers' prices was 2.8 percent higher than at the start of the year. As we enter the third quarter of 1948, price rises are occurring on a broad front, though somewhat more selective in character than a year ago. The course of wholesale prices and consumers' prices has varied considerably. During the first quarter, there was a sharp break in farm products and foods, which carried the wholesale price index substantially downward. In the second quarter, farm products almost regained, and foods more than regained, the ground lost earlier in the year. (See chart 7 and appendix C, table 18.) Wholesale prices other than farm products and foods were strong, with a slight upward movement. Three commodity areas in particular showed advances in wholesale prices in response to strong pressures of manufacturing and construction demand. (See chart 8.) These were fuel and lighting materials (notably coal), metals and metal products, and building materials. The second quarter saw prices increase for such important nonferrous metals as lead, tin, and aluminum. At the same time, weakness in a number of cotton-textile products reflected a reduction in demand and a much easier supply position. The one major industrial price index which showed a net decline for the whole period was hides and 27 WHOLESALE PRICES Wholesale prices showed little net change during the first half of 1948 because of the break in farm prices during February. Prices during the second quarter moved forward again. PERCENT OF 1926 AVERAGE 220 PERCENT OF 1926 AVERAGE 220 200 - - 180 - 160 - - 160 140 - - 140 120 - - 120 180 OTHER THAN FARM PRODUCTS AND FOODS 100 100 1946 1947 1948 PRECENTAGE INCREASES SINCE JUNE 1946 AND SINCE JUNE 1947 ALL COMMODITIES FOODS OTHER THAN FARM PRODUCTS AND FOODS FARM PRODUCTS SOURCE: DEPARTMENT OF LABOR. 200 28 CHART 8 WHOLESALE PRICES (COMMODITIES OTHER THAN FARM AND FOODS*) Price advances during the first half of 1948 were marked for basic metals, fuel, and building materials. Hides and leather products showed a substantial drop. PERCENT OF 1926 AVERAGE PERCENT OF 1926 AVERAGE I 40 I 40 I 20 I 20 CHEMICALS AND ALLIED PRODUCTS FUEL AND ' LIGHTING MATERIAL I 00 100 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 1 J F M A M J J A S O N D J F M A M J 1947 J F M A M J J A S O N D J F M A M * 1948 1947 220 220 200 200 1948 BUILDING MATERIALS_ ^*— 1 80 180 - HIDES AND LEATHER PRODUCTS 1 60 160 i 140 140 •wm^ TEXTILE PRODUCTS METALS AN 0 METAL ~ PR0DU ITS 1 20 - 120 100 - * I 1111 I 1I II 1 I 1M1 1947 1948 100 * H0USEFURNISHIN6 GOODS AND MISCELLANEOUS ITEMS NOT SHOWN. SOURCE: DEPARTMENT OF LABOR. - 1 111111111 1 1 1 11 1 1947 1948 leather products. This resulted from the better supply position and the reduction in market demand for shoes. Consumers' prices advanced somewhat more than wholesale prices during the half year. (See chart 9 and appendix C, table 17.) There was a temporary dip in food prices which reflected the February break in the prices of farm products. Thereafter, food prices rebounded and still continued upward, reaching new peaks. The growing effects of the decline in the supply of meat were reflected in a substantial rise in meat prices. Even during the dip in food prices, other consumer goods continued to advance as the increases in wholesale prices in the last quarter of 1947 were passed through to the retail level. Rents, which rose some 5 percent with partial decontrol in the fall of 1947, showed a slight continuous advance this year. A significant aspect of advancing consumer prices lies in their effect upon wage demands, while wage increases in turn are reflected in industrial prices. The course of prices in 1948 has been highlighted by several spectaculai eveiits. First came the unusually sharp break in grain prices in early February, following noticeable weakness in the last half of January. The decline affected cattle, hog, cotton, and other farm prices, as well as grain. The readjustment of farm prices was of unusual severity. It raised fears in some quarters of a widespread break in prices, production, and employment similar to the 1920-21 collapse. In this instance, however, the break was isolated, and did not have the feared effect upon industry and commerce. The existence of agricultural price supports set a limit to the possible extent of the fall and gave reassurance that there would be no agricultural collapse. Grain prices remained above the support levels for the 1947 crop, but wheat prices fell to about the level of the prospective supports for the 1948 crop. Furthermore, owing to the nature of the agricultural industry, the break in farm prices did not lead to curtailment of production or discharge of workers. A high level of investment in plant and equipment was being maintained, construction activity was expanding, and there was a large, export movement and a high level of consumption. All these factors continued to enable the economy to localize weakness in one sector, and even in that sector prices soon resumed their rise. Nevertheless, the recession in grain prices acted as a warning signal to business generally that price movements are no one-way street. Insofar as it damped down the spirit of inflation, its effect was salutary. Hope was generated in some quarters that prices were about to level off and that necessary price adjustments could be made in an orderly fashion in response to an improving demand-and-supply situation. There was belief, too, that 30 CONSUMERS' PRICES After 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 220 220 200 200 FOOD. 180 180 160 160 ITEMS* 140 140 120 100 120 RENT 1 1 1 1 1 1 1 ) 1 1 1 1 I I I 1 1 I 1946 1947 I 1 I I I 1 I I I 100 1948 PRECENTAGE INCREASES SINCE JUNE 1946 AND SINCE JUNE 1947 ALL ITEMS* FOOD APPAREL RENT SOURCE: DEPARTMENT OF LABOR. * ALSO INCLUDES HOUSEFURNISHINGS, FUEL, ELECTRICITY, ICE, AND MISCELLANEOUS GOODS AND SERVICES NOT SHOWN ON CHART. 31 such developments on the price front would have a restraining influence on the forthcoming wage negotiations in major industries. A second major price development which took place in the first quarter of the year was the gradual advance in numerous steel prices, culminating in the mark-up of semifinished steel on February 12. This rise gave notice that, whatever the readjustments in the farm area, demand pressures were still very strong in the area of basic industrial materials, and that the boom in capital goods was continuing unabated. Late in April, it is true, the leading company in the steel industry announced a series of price cuts and joined with other large employers in stating that the continuation of the price-wage spiral was harmful both to management and to labor. But this attempt to hold the price and wage line was short-lived. It was soon followed by both price and wage increases in many industries. Automobiles, aluminum, rubber products, and electrical equipment and appliances, and finally coal and steel, were prominent examples. Recently announced price increases for steel average more than $9 per ton, or about 11 percent. The price situation at midyear was thus dominated by the emergence of a new impetus to the wage-price spiral. The substantial increase of coal and steel prices, in conjunction with recent and prospective increases in transportation and public utility rates, represents a broad upward movement in the cost structure of industry at large, and forms the potential basis for a dangerous general spiraling of prices. THE COURSE OF WAGES Wage trends during the half year have corresponded fairly closely to the course of the economy as a whole. As the year opened, the inflationary tide of the second half of 1947 was running very strong, and this was reflected in wage settlements. When the break in commodity prices engendered a less inflationary sentiment, there appeared for a time a strong resistance to wage increases, revealing in part the feeling that they could not be passed on to the consumer through higher prices. When the pulse of inflation again quickened and the cost-of-living trend again became clear, the resistance to wage increases abated, and an upward spiral of prices and wages again developed. For the entire first half of the year, this spiral has not been as extreme as in the second half 3 of 1947, but its momentum increased rapidly during May and June. By the beginning of this year, most union workers had received at least two postwar wage increases, and a sizable fraction had received three or more. Available information indicates that unorganized workers did not fare quite so well. The third round of increases was well under way last fall, and the signing of new and significant wage agreements continued as 32 the new year began. Increases were negotiated in woolen textiles, westcoast lumber, building construction, part of the meat-packing industry, and other fields. Arbitration awards gave increases to maritime workers on both coasts and to some ladies' garment workers in New York. Interspersed with the third-round increases were many minor and some major secondround contracts. These wage settlements, like those of 1947, were dominated by the rising cost of living. Higher living costs had by early 1948 largely dissipated the monetary gains of the second round. Hence, organized labor was seeking new advances to restore its purchasing power. The third round settlements averaged somewhat less than those of the second round, and were more closely adjusted to particular situations, following somewhat less of a "pattern" than in previous years. When the price break in the commodity markets induced a widespread hope that inflation was losing its force and that the cost of living might be stabilized or reduced, coupled with the belief that the economy might not stand further advances in industrial prices, it seemed that the third round of wage increases might not extend to the major industrial concerns whose contracts were to be negotiated in the spring. The major electrical companies sought to hold wages and to lower prices. Negotiations in that industry had been practically deadlocked for weeks when, in April, the United States Steel Corporation refused the demand of the steel workers for a substantial increase, and made moderate reductions in prices of finished steel products. Following this action, major negotiations in other branches of industry were suspended, and several major companies in the automobile industry appeared to be standing firm in their opposition to wage demands. After the commodity price break had been arrested without spreading to other segments of the economy, and after the defense program was announced, it appeared to workers that costs of living would not decline and might advance and to employers that the passing on of wage increases in higher prices would be possible. Since profit prospects were good, and the denial of wage increases carried the threat of suspended operations, there were by May widespread settlements at higher wages, even in the metalr working field. The General Motors settlements of May 25 cast the die in favor of wage advances in the mass-production industries. In relatively short order, settlements were then reached in most of the automobile, electrical, aluminum, rubber, coal, and steel industries. Automobile contracts generally provided for around 13 cents increase in hourly wages, rubber 11 cents, and steel an average of 13 cents. In the major electrical companies, except for General Motors where the automobile contract 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, since they embodied the principle of adjustment up or down at short intervals in response to changes in cost of living and also provided for a future rise in dollar income to reflect technological progress. This formula has been adopted in very few subsequent contracts. On March 15, the bituminous coal miners stopped work in a conflict over the welfare fund. This stoppage resulted in a loss of steel output by about V/2 million tons. Work was resumed on April 12, but new strike threats arose in May, when negotiations were opened for the new year's contract. This was settled on June 25 by the granting of a $1 a day wage increase and doubling the welfare fund royalty—from 10 cents to 20 cents per ton. On July 4 the anthracite companies accepted a similar contract. The steel companies also reached an agreement covering their captive mines on July 14. As a result of the new contract, bituminous coal miners' average weekly earnings will rise to approximately $80, assuming a continuation of a full 40-hour workweek. Earnings in the building construction industry have risen only somewhat less steeply than in coal mining in recent years. Wage rates for construction workers have been adjusted upward periodically since VJ-day. Skilled construction mechanics in metropolitan areas today average nearly $2.25 an hour. Bricklayers are at the peak with an hourly wage running from $1.75 to $3.20 an hour. Weekly earnings for all construction workers average slightly more than $68 a week. (See appendix C, table 9.) This figure reflects the short average workweek in construction and the low earnings of many unskilled and semiskilled workmen, particularly in nonmetropolitan areas. The fact that many wages have advanced sharply should not overshadow the fact that millions of workers, who have not participated in the regular rounds of postwar increases, have seen their real earnings decrease as the cost of living has mounted. Such unevenness of wage movements has a disturbing effect upon the whole wage structure, upon relationships among the various cost factors in production, and upon interindustry relationships as well. Most third round increases have been roughly comparable, percentagewise, to the increase in the Consumers' Price Index since the previous contract. With few exceptions, bargaining has been concentrated this year on wage changes, rather than on pension and other security benefits. The limited fringe benefits have consisted largely of additional paid holidays and medical or hospitalization plans. Also, a significant number of 34 contracts have been signed for a 2-year period, thus improving the prospect for industrial peace. Despite the substantial wage rate increases in particular industries, neither average weekly earnings nor total wage and salary incomes have risen significantly. This was partly because of the delay in settlements in the February-May period, and partly because the effects of recent contract adjustments have not yet been reflected in the statistics. It was also partly because many workers have not had their wages raised, and partly because the hours worked per week have been somewhat reduced. The workweek in manufacturing industries, which averaged 40.4 hours in the last half of 1947, fell to an average of about 40.1 in the first half of this year. Similar decreases occurred in construction, telephones, electric power, trade and service industries. On balance, weekly earnings have been relatively stable throughout the early months of 1948, with increases in hourly earnings about offsetting reduction in hours. THE IMPACT OF THREE GOVERNMENT ACTIONS While these price and wage developments were going on, three important new factors were introduced into the price picture. The seriousness of the European situation led to an expanded defense program. The Congress approved an increase of approximately 3.5 billion dollars above the January budget recommendations of 11 billion dollars in support of national defense. At about the same time, the Congress authorized a new foreign aid program and set up an Economic Cooperation Administration to carry the program into effect. On April 2, Federal taxes were reduced in an estimated amount of 5 billion dollars a year. The impact of these three actions will be analyzed before evaluating the whole prospect for inflation. Foreign aid and domestic supply Under the Foreign Assistance Act and other aid programs, the Congress has, over the past 6 months, provided funds for foreign aid in an aggregate amount of over 7 billion dollars. Over 6 billion is intended for aid to Europe, primarily through the European recovery program. These funds are for use not later than the middle of 1949. The Economic Cooperation Administration was established by the Congress to administer the major new foreign aid programs. The ECA is insisting that the programs of the individual participating countries be screened by their joint organization before being submitted, so that the ECA will receive a unified program for all of western Europe. This procedure should serve to encourage a high degree of cooperation among the participating countries. 35 Programs for the third quarter of 1948, allotting over 1.1 billion dollars of EGA funds, were recently announced. Programs for later periods have not yet been finally determined. Procurement of commodities and services including freight, amounting to over 800 million dollars, had been authorized by the EC A up to July 19, 3 percent of this being for China and the rest for European countries. In accordance with the Government's policy of maximizing the use of private channels of trade, three-quarters of these authorizations were for procurement directly from private industry and only one-quarter, representing chiefly agricultural commodities, was for procurement through United States Government agencies. About half of the total consisted of authorizations to procure goods outside the United States, primarily in Canada, but including also the participating countries. Such "offshore procurement" constitutes the bulk of the authorizations in the cases of such commodities in tight supply in the United States as petroleum, nonferrous metals, meats, inedible oils and fats, fertilizer, and lumber and newsprint. The foreign aid program is not designed to put props under our current business boom. The unfilled demands of the American market, with its enormous purchasing power, would sustain our prosperity for the present even if foreign markets were sharply reduced. We are deliberately subjecting ourselves to inflationary pressures on the domestic economy in the short-run, in order to contribute to international security and economic stabilization in the long-run. Stabilizing the world political situation and restoring peaceful world trade is vital to maintaining our domestic economy on a high level of production and employment in the years to come. After accumulated demands at home have been successfully met and supply lines filled up, the American economy, to continue to operate at high speed, requires that the world in which we trade shall likewise be active and prosperous. Further recovery in western Europe will progressively remove the need for further assistance from the United States Government. Moreover, if we pursue proper policies in international trade, it will promote a beneficial flow of goods to the United States and support foreign demand for our products. These deferred advantages, however, do not eliminate nor even reduce the present problem resulting from stimulated exports of goods while our own markets are still not fully supplied. It is true that the total export surplus in the coming 6 months will probably not attain the average rate of 1947, even if our aid is utilized at a higher rate than last year. The reason is that foreign countries will not be able to liquidate gold and dollar assets in anything like the amounts they did in 1947 because these resources have been greatly reduced; and the funds made available through private 36 sources, through the International Bank, and through the International Monetary Fund are not likely to make up the difference. The excess of exports over imports may, however, be expected to rise from the level reached during the first half of this year, when operations under the Economic Cooperation Act had hardly begun. Even more significant than the total is the composition of the bill of goods required. Earlier reports on the impact of foreign aid upon the domestic economy have emphasized that the pressure upon a few key spots is more troublesome than the impact would appear to be when measured in aggregate dollar terms. This will continue to be the case, with an important difference between the impact upon agricultural supplies and the impact upon industrial supplies. In the case of agricultural supplies, exports of wheat from this country are now expected to be below the 480 million bushels exported during the past crop year. This reflects the prospects of unusually good cereal crops in western Europe this year compared with an extremely low yield last year. This easing of foreign pressure on our grain supplies comes at a time when our own 1948 wheat crop is estimated at a high figure of 1.2 billion bushels (120 million below last year's record crop). Meanwhile, the preliminary outlook for corn offers hope of a record crop of 3.3 billion bushels compared with last year's 2.4 billion. In addition, most of the agricultural commodities which are expected to be shipped abroad in larger quantities this year than in 1947, such as cotton, tobacco, and some other products, are available at home in adequate supply. Thus, the impact of the aid program in the agricultural area, with its important bearing upon domestic food prices, is unlikely to be as serious as it has been. Nonetheless, it will have a substantial continuing effect in view of the extraordinarily high domestic demand. In the case of some key industrial products, the foreign aid program will continue to exert great pressure against tight supply. Although major decreases are expected in the total export of fats and oils, freight cars, electrical machinery and apparatus, petroleum products, and coal, the high domestic demand for these products in relation to supply will require the most careful screening of exports. The rate of steel exports during the remainder of this year, while lower than in 1947, is expected to be higher than in the first part of this year because exports to western Europe are expected to increase more than exports to the rest of the world will be reduced even with drastic controls. Agricultural machinery, in great demand at home, is not expected to be exported at higher rates in the second half of this year than in the first half, although it will be exported at a higher rate than in 1947. 37 While increased production will make somewhat larger amounts of such important commodities as steel, agricultural machinery, and fertilizer available for domestic use, it may be said in summary that the foreign aid program as a whole will exert a somewhat greater pressure upon the domestic 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 Message called for only a slight expansion of our national defense program. The total authority to obligate funds for national defense during the fiscal year 1948 was 10.4 billion dollars, and the Budget Message requested a total authorization for the fiscal year 1949 of 10.9 billion. This increase was accounted for mainly by the universal training program proposed at that time and by a larger stockpiling program. Unhappily, the course of events made it clear that a prudent regard for maintaining the peace called for expanded programs in all areas of national defense. Following recommendations for an enlarged program, the Congress approved such expansion during the last session. For the fiscal year 1949, total appropriations and contract authorizations in the amount of about 14.4 billion dollars have now been approved—about 3.5 billion dollars above the amount recommended last January. Included in this increased program is 525 million dollars authorized for the stockpiling of strategic and critical materials. In addition to the defense program, about 100 million dollars have been authorized for related expansion for the merchant shipbuilding program, and 84 million not obligated last year has been extended. The largest increase in defense expenditures is accounted for by a very rapid stepping-up of the aircraft program. There will also be a substantial increase in the personnel of the Armed Forces and in procurement for the Army and the Navy. These increased authorizations, it is true, in the main provide the basis for future expansion, and will have relatively little effect on cash payments for defense programs during the last half of this year. During the first half of the calendar year 1948 cash payments in support of national defense were running at an annual rate of about 10.9 billion dollars. With the new programs, it is estimated that during the second half of this year the annual rate of payments will increase by about 800 million dollars. (See appendix A, table 8.) Most of the additional cash payments will be made in subsequent years. Looking at the matter only for the short run, it might be thought that such an increase in expenditures for defense does not have very significant consequences in an economy where the gross national prod- 38 uct is running at almost a 250 billion dollar level. There are, however, two reasons why the impact on the national economy will be substantial. The first reason is that the commitments involved in this stepping-up of the military establishment represent a rising trend. This does not mean that new defense proposals will be made; whether or not that will be necessary no one can now say. It means simply that the program now under way will involve an increasing rate of outlays over the next 3 years. The planning and contracting for these rising expenditures will have economic impacts in advance of actual expenditures. They support anticipations of high business volume and high consumer incomes. They equally support anticipations of pressures upon the labor supply and shortages of raw materials and key industrial products. Some of these effects are already beginning to appear. The second reason for the substantial impact of the defense program upon the domestic economy is that there is now little slack in the use of our productive capacity. Particular industries of great importance to the defense program are already severely overburdened, and particular materials are in short supply. On the side of materials, the program for the stockpiling of strategic and critical materials will give rise to important impacts. To carry out this program, the Congress has to date provided funds and contract authorizations totaling 800 million dollars. Of this amount, 500 million dollars were in appropriations and 300 million in contract authorizations. The big impact of stockpile procurement is yet to come; a major fraction of the funds available will not be spent until later years. Purchases thus far have been limited, since the needed materials have been in short supply even for current industrial use. Actual payments for deliveries from new procurement through June 30, 1948, were less than 100 million dollars. While there is no absolute certainty about the rate of stockpiling procurement in the future, the funds available are sufficient, if rapidly spent, to have a sharp impact in the basic materials markets. The rate at which the balance of about 700 million dollars already authorized will be spent during the next 12 months is still to be determined, but it will be stepped up considerably. The direct requirements of the military, maritime, atomic energy, and foreign aid programs in the next 12 months will absorb significant percentages of the prospective supply of such materials as copper, zinc, and lead. Attainment of the stockpile goals deemed necessary to our national security would require setting aside additional amounts annually for several years. As it will not be possible to increase supplies of these materials substantially in the near future, the removal of considerable amounts of them from the market for stockpiling purposes would encroach upon the 39 level of industrial production at many points. One serious consequence would be a substantial, and possibly in some instances drastic, rise in prices. Another would be the impairment of current civilian production. To hold the economic impact to the minimum consistent with satisfactory stockpiling progress, it will be necessary to keep the procurement program flexible, to give careful attention to its impact on other essential programs and to stimulate new production. The shortages which the national defense program will in due course accentuate are not limited to materials marked for stockpiling. Aluminum is a case in point. In view of the increased requirements for aircraft, military requirements for aluminum in the fiscal year 1948-49 amount to more than 4 percent of the supply. Further expansion of aluminum production draws heavily on the electric-power supply in regions where it is already short. Although electric-power capacity was greatly expanded during the war, the peacetime load of a civilian population with steady work and good incomes promptly took up the whole electric capacity and as a result an expansion program running several years ahead was launched. The electric-power shortage cannot easily be relieved by turning to fuel oil and natural gas, because of shortage of pipe and drilling equipment; nor by turning to coal, because of shortage of cars and generators. Steel is another case in point. The principal voluntary allotments already made or under consideration under Public Law 395 (military, atomic energy, housing, freight cars, barges, and oil and gas industry equipment), together with EC A and maritime program requirements, would absorb in this fiscal year nearly a quarter of the total supply of steel mill products and more than half the supply of some specific products such as plates and pipes and tubing. For steel and most of the other strategic materials, the task in hand is not simply to assure adequate supplies for the defense program and a few others of top priority. Expanded allocations to specific programs, if effectively accomplished, reduce the remaining supply available for all other needs. Most consumers of steel outside the present and contemplated voluntary allocation categories will have less steel in the next 12 months than they had during the past 12 months. Consumers who have been able to acquire their own steelmaking facilities will be in a preferred position. Many of the uses of strategic materials not included in the preferred programs are essential directly for the maintenance of civilian output, and indirectly for meeting our military and foreign aid commitments. These needs cannot be indiscriminately reduced. Nor can the fulfillment of these needs, without great damage, be left to a scramble for supplies by unlimited bidding-up of prices, or handled on the basis of historical trade quotas bearing little relation to essentiality. 40 The instruments now available for the domestic allocation of commodities in short supply do not afford adequate safety in the face of present and prospective pressures. There are, for example, provisions for the domestic allocation of antimony, tin and tin products, and mandatory power under the Selective Service Act to allocate steel for military requirements and to assign priorities for materials and products procured for the military and atomic energy programs. These mandatory powers, however, apply to only a small portion of the demand for the materials which they cover. Thus generally under the legislation now in force, only voluntary allocation procedures are available to distribute the supply of scarce commodities. This results in two grave difficulties. The first of these difficulties is that rapid progress toward our stockpiling goals would require curtailment of domestic civilian consumption to a greater extent than voluntary programs can accomplish. If either stockpiling or other procurement programs should be substantially accelerated, there is serious doubt of the ultimate adequacy of existing measures to meet the problems of inflation, disorganization of production, and harm to small business which would arise from aggravated specific commodity shortages. The second difficulty is that, with the weak tools now available, the orderly handling of essential stockpiling and procurement programs may be jeopardized in an effort to avoid disruption of the general economy. One further impact of the expanded defense program derives from its manpower requirements. These will not be very great in 1948, but it is estimated that new defense needs will, within a year from now, call for the services of about 1 million persons as additions to the armed forces, civilian employees of the armed forces, and workers for producing military equipment. These manpower requirements of the defense program can only in part be drawn from new accessions to the labor force. There will arise numerous labor shortages in some areas of the country. Some plants undergoing a marked expansion will experience manpower shortages, particularly of key skilled and professional personnel, such as tool and die makers, instrument makers, physicists, chemists, and aeronautical engineers. This will cause disturbances in some spheres of civilian production, and upward pressures on wages and other costs. The impact of tax reduction As shown in the discussion of government transactions on page 18, the consolidated cash surplus of Federal payments over receipts during the fiscal year 1948 amounted to 8.9 billion dollars, of which 7.6 billion came in the first half of the calendar year 1948. Under reduced taxes, it now appears that 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 pressure of inflation might operate to increase Treasury receipts materially. The drastic reduction in the surplus from the level prevailing during the first half of the calendar year 1948 is not due solely to tax reduction, but is due in part to increased expenditures, especially those resulting from the enlarged defense program. The decline in the surplus attributable to the adoption 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 with net incomes of $5,000 or less will receive a total tax reduction of about 3 billion dollars; a total of 2 billion dollars of tax reduction will accrue to those in the higher-income brackets. In the light of these figures, it seems reasonable to estimate that the tax reduction bill will result in an increase in the annual rate of consumer spending of somewhere between 3 and 4 billion dollars. The tax reduction occurred at a time when the international situation impelled us to adopt additional programs for national defense and foreign aid. It sharply reduces the large surplus at a time when inflationary forces are still present and thereby removes our principal protection against the strengthening of these forces. 42 III. The Issue Between Inflation and Stabilization N the preceding pages, the problem of inflation has stood at the center of the picture. The upsurge of various elements in the price and income structure has introduced unsettling factors which are clearly incompatible with stable prosperity and increasing national security. At the very heart of sound economic policies must be the desire to help achieve greater stability and more permanently workable relationships as rapidly as possible. From time to time since the war, there have been brief periods when we appeared to be moving toward such stabilizing relationships. But each time this prospect was soon upset by some new factor of curtailed supply or expanded market demand which unleashed again the unsettling forces of inflation. Effective adjustment policies have been hard to devise and harder to get accepted and applied. We appear now to be once more at a stage of renewed instability, with many prices reaching for the easy dollars that a still undersupplied market is ready to yield; with recent and prospective wage settlements contributing to the upward process; with market demand again being stimulated by the accelerating procurement programs of foreign aid and national defense; and with continuing scarcities of numerous key materials. Tax reduction has added to consumer and business demand in the market, but it is incapable of stimulating a proportionately larger flow of goods from our already overloaded plants, fully employed labor force, and still overstrained supply lines. The presence of these inflationary factors does not mean that we are on the threshold of an inflationary orgy of the "run-away" kind. While alarmists refer to our present currency as "printing press money," sober students do not see in the present monetary situation any real analogy with Continental and Confederate currency episodes or the more recent collapse of the currencies of numerous countries in Europe or elsewhere after both World Wars. Of course, the United States dollar has had its real value lowered in the course of the economic readjustments induced by World War II. And I 43 there is no likelihood of a near-time restoration of that former value. But there is nothing sacred about the price marks of 1939 or 1926, and the attempt to restore them would probably create more hardship than it would 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 the process of monetary adjustment is only one ingredient, and in a sense only a byproduct, of adjusting relationships within the price-income structure so as to facilitate and maintain maximum production and employment. The practical question now is how these adjustments may be wrought, primarily in the context of the bargaining and compromising through which the parties at interest work out their rival claims in a free economy, but subject to the guiding influences of appropriate public policies. In this process as it is now unfolding, there are complex forces somej working to lessen and others to intensify inflationary pressures. In attempting to judge what balance these competing forces may work out, we begin by examining some of the factors that reduce the pressure of inflation. Outstanding among these is the fact that, in many fields of production, the supply situation is greatly improved. One such development was dramatized by the Department of Agriculture crop report of July 9. It opened with these profoundly significant sentences: Crop production in 1948 promises to surpass that of the outstanding year of 1942, and the record set in 1946. * * * a record [corn] production of 3,329 million bushels is now indicated. The wheat prospect 1,242 million bushels is an improvement of 4 percent over earlier forecasts and will be the second largest crop in our history. * * * Cotton acreage is 10 percent larger than in 1947. * * * All-crop prospects are reported above the average of the past ten years and as good as in 1946. Current estimates indicate an aggregate production about 128 percent of the 1923-32 average, compared with 123 percent in 1942 and 126 percent in 1946. Despite our high degree of industrialization, the tremendous importance of agriculture cannot be overlooked. The world shortage of foods and other products of agricultural origin, continuing up to this year, has had an immense inflationary impact upon the whole price structure through the relations 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 some time, greater abundance in basic agricultural crops should be of signal aid in the checking of inflation and the progressive working out of reasonably stable relationships. That end would not be promoted if the enlargement in supply of farm products were to coincide with some serious curtailment of demand to produce a collapse of farmers5 incomes. Such a collapse shortly after 44 World War I spread to rural merchants and bankers, to manufacturers of farm equipment and consumer goods, and to other commodity markets. But the repetition of such a debacle today is precluded by a policy of farm income supports, implemented by procedures worked out and tested over the past twenty years, though not yet perfected. A second factor which should significantly work against further inflation is the increase in industrial expansion. We appear to be nearing the end of the strong impact of war-created shortages of plant and inventory. While industrial output has increased less rapidly than extremely favorable production conditions had led us to expect, it should progressively show the effect of nearly 3 years of added capital investment upon a vast scale. As an enlarged and modernized industrial plant gets shaken down and its crews trained to maximum efficiency, domestic backlogs of orders will be worked down, and the increased flow of final products will permit the great demands upon the productive system to be met more easily and will ease the pressure on prices. These favorable factors on the physical side are'reinforced by numerous indications of improved economic understanding and broader objectives on the part of those who operate our business system. It cannot fairly be said that they have rushed blindly ahead in the boom spirit of past expansionary periods. A sense of caution has been attained by industrialists, merchants, and bankers with regard to inventories, credit expansion, and construction plans. Some unions have applied moderation to their wage demands, and some manufacturers and distributors have sought to hold prices against further advances or have initiated reductions, as a means of doing something positive to stem inflation. If international tension lessens, the lightening of both the physical and psychological impact on our economy, with its great productive potential, would sharply reduce inflationary pressure at important points. We might then rather promptly be put to the test to show whether our producers and distributors could make price and cost adjustments fast enough to continue employment and production without serious cutbacks. In spite of the counterinflationary factors enumerated, it remains true that inflation is still very much with us. The nature of this continued inflation has been treated in detail in the preceding sections of this report. It can be summarized briefly as three interrelated phases of one complex process. First, there is the fact that demand in most categories has been expanding and may expand further. Consumer demand is running high, particularly under the impact of tax reduction and wage increases. Rising residential construction and heavy investment, fed by high profits, add to businesss 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 supply that increases only slowly. This excess of demand may not be as general as it was when postwar shortages were at their peak. The inflationary pressure is perhaps more selective than it was, but it is still a major factor in the price situation. Second, the inflationary effects have been multiplied through the pricewage spiral. Developments of the last few months have had a cumulative effect of great importance at the very base of our industrial structure. The recent attempt to hold industrial wages and reduce prices of industrial goods has evaporated. Substantial wage increases, which often have been made in order to catch up with previous price increases, have been accompanied in turn or promptly followed by substantial rises in the prices in industrial goods. Production costs are still rising, and while many businesses can pass them along in higher prices, there are others that are obviously squeezed. Capacity to pay for high-priced materials is not necessarily distributing them in the way most consonant with economic efficiency. Railroad freight and passenger rates have been materially increased, and utilities in many instances have been granted advances by public utility commissions while others have requests for such advances pending. This upward movement of prices is linked on the one side to the third round of wage increases and linked on the other to active talk of a fourth round. The rising cost of living is imposing intense hardship upon millions of individuals who are not strategically located to participate in the upward movement. Meat prices continue to rise, while the prospectively large supply of grain will have little power to enlarge the supply of meat throughout the remainder of this year and indeed may operate somewhat to reduce it. While improved grain stocks next year will have important effects on the prices of livestock products, they cannot in the immediate future counteract the strong inflationary forces which control our markets. Third, credit expansion, partly a cause and partly a result of inflation, still persists. The spiraling increase in prices and wages can continue only so long as business can replenish its working capital from bank credit or through the conversion of liquid assets. Almost as significant in its disturbing effect as the statistically demonstrable evidences of inflation is the persistent uneasiness which it breeds, an uneasiness which could expand into a profoundly disruptive force if it is not removed by dealing with the specific factors which are its causes. The deep significance and reality of this uneasiness in the presence of inflation was clearly illustrated by the conditions surrounding the break in commodity prices early in 1948. A tremor of uncertainty, even of fear, ran through 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 employment and production. Fortunately, that particular break turned out to be corrective rather than disastrous. But this should not blind us to the fact that there were special circumstances, already referred to, which isolated its significance and which could not be counted upon to protect us under other circumstances. Besides the farm price-support program, which gave assurance to the business community at large, the break was shortly followed by other events in the economy which fortified optimistic business sentiment. But we cannot ignore the prospect that unworkable relationships in the price structure, necessarily the outgrowth of unconquered inflation, may lead to a break in some other sector of the economy where the consequences would not thus be isolated. If attendant developments which cannot be foreseen did not serve substantially to counteract it, this break well might carry our highly sensitive economy into a general recession of serious proportions. In short, we have this very year had a significant warning while there has still been opportunity to act in time. Far from being satisfied because the lack of action thus far taken has not yet reaped the ultimate consequences of inflation, we should profit by this warning and vigorously seize the additional grant of time that circumstances have accorded to us. The most dangerous error that could overtake us as a nation would be to assume that the problem has disappeared, or that our efforts should be abated because we have thus far avoided serious reverses or because the basic conditions for continued prosperity appear to be sound. It is typical for inflationary and speculative booms to collapse while business sentiment is still confident. It is not enough to be satisfied with quick and crude adjustments by which our economy can "get by" from month to month or year to year, still under the momentum of forces engendered during the 4-year war period. No one can foretell precisely when some event or series of events might touch off a change in the economic situation more rapidly than we were prepared to deal with it. It is of ever-increasing importance that the policies and actions of private business, labor, agriculture, and Government should move toward economically sound relationships so that the postwar boom may be succeeded by a sustained prosperity based on the maximum reasonable use of our productive resources. In the Employment Act of 1946 the Congress declared the continuing policy of the Government to "coordinate and utilize all its plans, functions, and resources" to bring about and maintain maximum production and employment and to preserve and strengthen our economy of free competitive enterprise. This plan of action requires that we shall always look to the 47 independent factors in our business world to adjust their policies so intelligently that the imbalances which are inevitable in our highly dynamic economy shall be temporary and shall not accumulate until they destroy business stability. The role of the Government as contemplated in the Employment Act ordinarily is to develop its own activities and organize the policies which affect business in such a way as to facilitate these needed voluntary adjustments. But if economic maladjustments become so serious that the voluntary action is clearly inadequate to halt threatening trends in the economy, the power of Government must be used where the President and the Congress deem necessary to forestall serious damage to the public interest. The comprehensive wartime controls over business were rapidly removed after the close of hostilities. Voluntary action has been increasingly relied upon to maintain business activity at a high level without permitting serious maladjustments to arise. The files of our business journals show that wide attention has been given to the desirability as well as the need for every business firm to adjust its own policies so that it may contribute its share to stabilization. The attitude and effort of thousands of less conspicuous firms deserve to be recognized along with the better publicized actions of a few of our most important business corporations which have held down or actually reduced prices in a boom market for the express purpose of furnishing leadership in an effort to halt the inflationary movement. The same attitude has been exhibited by a large number of the most important leaders of organized labor, who have earnestly and with some success postponed or moderated the urgent demands of members of their labor unions for wage increases to meet the rising cost of living. Farmers have frankly expressed their uneasiness about the situation which was being created by rising prices even though they have been beneficiaries thereof, but the nature of this industry gives them little opportunity to take positive measures. Consumers have reserved large amounts of their savings bonds and, despite the pressure of high prices, have made large annual additions to current savings. While this spreading sense of responsibility and of caution promises much for the success of our economy in meeting problems of adjustment in the future, the forces with which we now contend have proved to be too strong for the countervailing efforts of individual factors in the business 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 brought them sacrifice without corresponding benefits to the public. The business firms which have held down their prices can only feel that they have permitted others to increase their profits, and they have not halted the inflation. 48 A real difficulty with the wholly voluntary solution is that it requires simultaneous action by workers, businessmen, and consumers. But no individual or group can have firm assurance that the inflation will be stopped. It is therefore necessary that the Government should have and use powers in the interest of economic stability, to supplement the strength of individual actions, to give them common direction, and to prevent their dissipation through mutual conflict of purpose. Only with the support of wise and vigorous Government action can the effectiveness of voluntary actions be assured. 49 Appendix A The Nation's Economic Budget Tables Page 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. The Nation's Economic Budget Consumer account Business account The export surplus and net foreign investment Government cash receipts and payments to the public Reconciliation of Budget receipts with cash receipts from the public, fiscal year 1948 Reconciliation of Budget expenditures with cash payments to the public, fiscal year 1948 Federal cash surplus, 1947 and 1948 Federal cash receipts from the public other than borrowing, 1947 and 1948 Federal cash payments by function, 1947 and 1948 Federal cash payments by type of recipient, 1947 and 1 9 4 8 . . . . Reconciliation of cash payments to the public with Government expenditures for goods and services Adjustments to receipts (or income) in the Nation's Economic Budget Reconciliation of cash receipts with tax series arising from current production of goods and services 51 52 54 55 56 57 58 58 59 59 60 61 63 63 64 The Nation's Economic Budget Explanation of the tables Table 1 presents the Nation's Economic Budget for the calendar year 1947 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] January-June 1948 annual rates, seasonally adjusted i 1947 Economic group Excess Excess (+)or Receipts ExpendiReceipts Expendi(+)or tures deficit tures deficit (-) (-) CONSUMERS Disposable income _ Expenditures . Saving (+) 173.6 186.0 164.8 ___ _ 174.4 +8.8 +11.6 BUSINESS Undistributed profits and additions to reserves Gross private domestic investment Excess of receipts (+) or investment 21.4 19.4 30.0 37.2 -10.6 -15.8 INTERNATIONAL Net foreign investment Excess of receipts (+) or investment 8.9 3.9 -8.9 -3.9 GOVERNMENT (Federal, State, and local) Cash receipts from the public Cash payments to the public Excess of receipts (+) or payments 59.9 64.0 53.2 52.0 +6.7 +12.0 A D J U S T M E N T S (To arrive at gross national product) For receipts— For payments Statistical discrepancy Total gross national product —17.9 O A 231.6 -25.2 -17.9 +25.2 -3.4 231.6 i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. 52 -21.1 -21.1 -3.8 246.5 246.5 -21.1 +21.1 -3.8 Nature of the accounts and sources The Nation's Economic Budget is designed to give a general picture of significant movements or changes in the economy, and their relation to the economic decisions of consumers, business, and government. The principal flows of income and expenditures, and the net additions to and absorption of saving are interrelated in an overall way in the Budget. The estimates of consumer receipts and expenditure, business receipts and domestic investment, and net foreign investment are based on the income and product accounts prepared by the Department of Commerce.1 Government receipts and payments are based on cash receipts from and payments to the public as estimated by the Bureau of the Budget.2 The cash receipts and payments series is used because it gives a more complete picture of the immediate economic impact of Government operations than other available series on Government expenditures. The adjustments to receipts and expenditures are made to reconcile the total of the accounts with the gross national product or expenditure. The latter includes only receipts or expenditures arising from the current production of goods and services, while the accounts of consumers, business, and government, include certain other types of transactions. The nature of these adjustments is discussed more fully in the section, "Adjustments to receipts and expenditures." A brief description of the accounts with explanatory and supplementary tables follows. Consumer account Table 2 below shows the principal sources of personal income, personal taxes, and a breakdown of expenditures by important classifications. Consumer income includes the net profits of unincorporated business. Personal saving is a residual derived by deducting expenditures from disposable income. Because of statistical imperfections, difficulties of adjusting for seasonality, etc., too much significance should not be attached to small variations in this figure. Expenditures for dwellings are considered as a business investment rather than a consumer expenditure. 1 A number of the principal series comprised in the national income and product estimates are shown in appendix C, tables 1 through 6 (by calendar years from 1929 through 1946 and by quarters for 1947 and the first half of 1948). Those desiring more detailed information 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 Calendar year 1947 and January-June 1948 [Billions of dollars] Eeceipts or expenditures Receipts: Personal income Salaries, wages, and other labor income 2_. Proprietors' and rental income Dividends and personal interest Transfer payments 3 ... Veterans < _ _ Other.. Less: Personal tax and nontax payments Equals: Disposable income. Expenditures: Durable goods Nondurable goods Services _ January-June 1948, annual rates, seasonally adjusted l 1947 __ __ Total.. Saving 195.2 121.9 46.0 15.6 11.7 7.3 4.4 21.6 173.6 208.1 128.7 51.1 16.7 11.6 6.2 5.4 22.1 186.0 21.0 96.5 47.3 22.0 102.4 50.1 164.! 174.4 "+8?! +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. NOTE.—Detail will not necessarily add to totals because of rounding. Business account The business account is shown in table 3. Business income includes undistributed corporate profits, and the adjustment for corporate inventory valuation, plus capital consumption allowances for both corporate and noncorporate business. Because there is no information on noncorporate entrepreneurial withdrawals, it is impossible to include an estimate of retained earnings for unincorporated business in business income. On the other hand, investment includes not only the investment of all business, but also the investment of individuals in homes. Business income and expenditures are therefore not entirely comparable. The investment items shown in the business account do not show completely the amount of funds required for financing. For example, investment includes only that part of an increase in the value of inventory arising from an increase in physical volume, while the whole amount of the increase in the book value of inventories must be financed. Needs for capital also arise in connection with the transfer of fixed assets, though such transfers are not reflected in the gross national product, and in connection with an expansion of accounts receivable. On the other hand, some investment in equipment is financed through depreciation allowances and some is charged to current expense. Agricultural equipment is frequently 54 financed out of farmers' current income and residential construction by the owner-occupant. Thus these investments do not give rise to financing requirements in the usual sense even though they do absorb saving. For the corporations alone, financing sources and requirements are shown in table 30, appendix G. TABLE 3.—Business account Calendar year 1947 and January-June 1948 [Billions of dollars] January-June 1948, annual Receipts or investment Receipts: Corporate profits _.. Less: Corporate profits tax liabilities _ Dividends.. _ Equals: Corporate undivided profits Plus: Capital consumption allowance .__ Less: Corporate inventory valuation adjustmenta Equals: Undistributed profits (excluding inventory valuation adjustment) and additions to reserves Domestic gross investment: Construction __ _. ._ _ Residential, nonfarm Nonresidential _ _ Producers' durable equipment Change in business inventories Total investment Excess of receipts (+) or investment (—) 37.2 -15.8 12 Estimates based on incomplete data. The estimate of corporate profits for the second quarter of 1948 is that of the Council of Economic Advisers. 3 This adjustment is required because corporate income is reckoned inclusive of changes in the book value of inventories, as is customary in business accounting, whereas only the value 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 account Net foreign investment, as included in the Nation's Economic Budget, does not reflect the entire export surplus shown in table 3, page 16, of the text. It consists only of the portion financed by means that add to this 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 included in the Nation's Economic Budget as a Government payment; private unilateral transfers are included in consumer expenditures. In 1946 and 1947 these two types of unilateral transfers had a net value of nearly 2.9 and 2.4 billion dollars, respectively. In 1948, however, this total, and consequently the difference between the total export surplus and net foreign investment, is expected to become considerably greater owing to the large proportion of Government aid to foreign countries that will take 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 major portion of the total export surplus will be included in the Government component of the Nation's Economic Budget. The composition of the total excess of exports of goods and services and the means of financing it are shown in appendix C, table 31. The derivation of net foreign investment from this total is shown in table 4 below. TABLE 4.—The export surplus and net foreign investment Calendar year 1947 and January-June, 1948 [Billions of dollars] Item January-June 1948, annual rates l 1947 Surplus of exports of goods and services.— Less: Net unilateral transfers: Government Private Equals: Net foreign investment. . 11.3 8.0 1.8 .6 8.9 3.5 .6 3.9 i Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Government account Table 5 provides a breakdown of the cash receipts and payments of Federal and State and local governments which are combined in the Nation's Economic Budget. Tables 6 through 11 are supplementary tables on the Federal budget. The first two of these show the derivation of cash receipts and payments from budgetary receipts and expenditures. Table 8 shows the Federal cash surplus and tables 9, 10, and 11 provide additional analytical material on cash receipts and payments, including estimates for the second half of calendar year 1948. a. Derivation of Cash Receipts and Payments from Budgetary Receipts and Expenditures. The basic sources of information concerning Federal Government receipts and disbursements are Government Budget and Trust accounts. Such accounts present the financial position and operations of the Government in accordance with conventional governmental accounting techniques. From the standpoint of depicting the current flow of funds to and from the Government, however, and hence the immediate economic impact of Government operations, Federal receipts and expenditures as stated in conventional Budget and Trust accounts are deficient. In the first place, as is desirable for purposes of long-range financial control, they show receipts and expenditures in many fields on an accrual rather than on a current cash basis. Terminal-leave bonds issued to veterans, for example, are 56 recorded as a budgetary expenditure at the time of issue rather than at the time they are redeemed although it is probably not until the latter moment that their direct economic impact is felt. Secondly, conventional Budget and Trust account data contain, in the aggregate, a considerable amount of double counting when considered from the standpoint of the Government as a whole. For example, transfers from the Treasury general fund to trust accounts are, in order to present a complete picture of Federal financial operations, recorded both as expenditures and receipts. From the standpoint of the Government as a whole, however, the transaction is purely one of intragovernmental accounting. 5.—Government cash receipts and payments to the public TABLE Calendar year 1947 and January-June 1948 [Billions of dollars] 1947 Receipts or payments Receipts: Federal State and local * 46.9 13.1 50.2 13.8 _ 59.9 .64.0 _. 41.1 12.1 37.6 14.4 53.2 52.0 +5.7 +1.0 +12.6 —.6 +6 7 12.0 .--... Total receipts Payments: Federal.. State and local » _ _ _ Total payments Surplus (+) or deficit (—): Federal. _ State and local Total JanuaryJune 1948 annual rates, seasonally adjusted i _ _ i Estimate based on incomplete data. * Excludes Federal grants-in-aid. NOTE.—Detail will not necessarily add to totals because of rounding. In order to derive the Government Account in the Nation's Economic Budget, therefore, it is necessary (i) to place the conventional data on a current cash basis, and (ii) to eliminate double counting. Tables 5 and 6, on page 19 of the text, show the cash transactions of Federal and of State and local governments on such a consolidated basis. Tables 6 and 7 show a reconciliation of Federal Budget receipts and expenditures with cash receipts from and payments to the public. A detailed reconciliation of Federal Budget and cash transactions appears monthly in the Treasury Bulletin. A fuller explanation of the differences between budgetary and cash receipts and expenditures may be found in the 1949 Budget of the United States (p. A121). 57 TABLE 6.—Reconciliation of Budget receipts with cask receipts from the public Fiscal year 1948 [Billions of dollars] Fiscal Year Receipts 1948 1 Net budget receipts Trust account receipts _ ___ 44.7 9.5 Total recorded receipts 54.3 Less: Intragovernmental transactions: Payments to U. S. Treasury (miscellaneous receipts) by Government enterprises Transfers from general fund to trust accounts Interest received by trust funds on investments in United States securities Receipts from sale of surplus vessels transferred to U. S. Treasury (miscellaneous receipts) but also recorded as a trust account receipt and expenditure Other Less: Recorded receipts-not paid in cash by the public: Deduction from Federal employees' salaries for retirement funds Other... _ Equals: Cash receipts from the public* _ * Estimates based on incomplete data. 2 Less than 50 million dollars. «Excludes borrowing. NOTE.—Detail will not necessarily add to totals because of rounding. TABLE 7.—Reconciliation of Budget expenditures with cash payments to the public Fiscal year 1948 [Billions of dollars] Expenditure or payment Fiscal Year 19481 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 accounts Interest received by trust funds on investments in United States securities Investments of trust funds and Government enterprises in United States securities Receipts 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 funds Interest 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 certificates Terminal 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 46.1 .5 46.6 .7 4.2 .8 3.0 .8 .2 .5 .2 (*) 1.5 .9 .1 38.8 i Estimates based on incomplete data. * Less than 50 million dollars. NOTE.—Detail will not necessarily add to totals because of rounding. 39.3 58 b. Supplementary Tables on Federal Cash Transactions. Table 8 shows the Federal cash surplus for recent and current periods. The major sources of Federal revenues are shown in table 9. Table 10 analyzes Federal cash payments according to major governmental function. Table 11 differs from table 10 by classifying cash payments not according to function but according to the major groups initially receiving such payments, so far as can be done on the basis of the available data. Civilian salaries and wages, for example, are grouped in a single category, although in the functional table they are distributed among virtually all categories. Similarly, "payments to business for purchases of goods and services" include a large volume of purchases financed by grants from the Federal Government in support of our foreign aid programs, although these would fall under "international affairs and finance" in the functional classification. T A B L E 8.—Federal cask surplus Calendar years 1947 and 1948 [Billions of dollars! 1947 actual Receipts or payments JanuaryJune preliminary JulyDecember estimate 46.9 41.1 50.2 37.6 44.7 40.8 +5.7 +12.6 +3.9 Receipts... Payments. Surplus (+) or deficit ( - ) . 1948 annual rates, seasonally adjusted NOTE.—Detail will not necessarily add to totals because of rounding. T A B L E 9.—Federal cash receipts from the public other than borrowing Calendar years 1947 and 1948 [Billions of dollars] 1948 1947 actual Source Direct taxes on individuals *_ Direct taxes on corporations.. Employment taxes * Excises and customs Miscellaneous receipts Receipts of trust accounts Total cash receipts.. i Includes personal income taxes and estate and gift taxes. * Excludes amounts transferred directly to trust accounts. NOTE.—Detail will not necessarily add to totals because of rounding. 59 annual rates, seasonally adjusted JanuaryJune preliminary JulyDecember estimate 21.0 9.1 .7 7.7 4.7 3.6 23.0 11.5 .8 7.9 3.5 3.6 19.0 11.2 .8 8.0 2.1 3.7 46.9 50.2 44.7 TABLE 10.—Federal cash payments by function Calendar years 1947 and 1948 [Billions of dollars] 1948 1947 actual Payment annual'rates, seasonally adjusted January-June July-December preliminary estimate Budget accounts: National defense . International affairs and finance Veterans' services and benefits _ _ . __ _ Interest on the public debt Refunds of receipts Other _ Trust accounts Exchange Stabilization Fund _ . . . Deduction from Federal employees' salaries for retirement Clearing 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 accounts Foreign economic cooperation trust fund Exchange Stabilization F u n d ' Total.. 12.9 10.9 11.7 i34 6.6 3.9 2.4 7.6 25 5 .4 -.3 -.6 6.1 6.6 i49 3.8 2.6 5.3 2.6 1.4 -.2 .2 — 3 3.9 2.4 5.5 3.3 .3 -.2 .1 -.2 41.1 37.6 40.8 6.1 4.9 1.4 .3 3.4 2.5 .4 7.5 5.2 6.3 6.6 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. NOTE.—Detail will not necessarily add to totals because of rounding. 60 TABLE 11.—Federal cash payments by type of recipient Calendar years 1947 and 1948 [Billions of dollars] Payment 1948 annual rates, seasonally adjusted 1947 January-June July-December preliminary estimate Individuals: Salaries and wages of Federal personnel: Military (excluding terminal-leave pay to enlisted personnel) Civilian» Allowances to dependents of military personnel Readjustment benefits, pensions, and other payments to veterans 2 Social insurance beneficiaries Loans to home owners 8 Interest on the Federal debt -Refunds of taxes * Other* Total Business: Payments for purchases of goods and services Subsidies and other payments to farmers Loans and investments * Interest on the Federal debt Refunds of taxes 4 ._ _ ._ Subsidy arising from postal deficit • _ Home mortgage purchases from financial institutions. War-damage insurance claims and participants' profit Total International: Loans to foreign governments _ Subscriptions to the International Monetary F u n d and Bank Membership in other international organizations and unilateral cash transfers Total State and local governments and public agencies: G ran ts-in-aid Interest on the Federal debt Loans Total 3.1 4.6 .3 3.0 4.3 .3 3.3 4.6 .3 7.3 1.8 —.2 .8 1.6 .4 19.7 6.2 1.8 -.1 1.0 1.7 1.1 19.3 5.9 2.0 -.1 .9 1.7 .7 19.1 8.8 .8 .1 2.9 1.0 .2 .1 10.6 .2 2.9 .7 .3 .1 (8) 8 13.3 .7 2.9 .7 .6 .4 (8) 13.9 14.7 18.5 3.6 1.0 .8 1.8 .6 .6 .1 5.5 .1 1.8 .2 1.6 1.7 8 8 1.6 .1 8 2.0 .1 () () () 1.8 1.8 2.2 .2 .1 -.6 41.1 37.6 40.8 Clearing account for outstanding checks and telegraphic reports Total Federal cash payments to the public (8) 1 Civilian wages and salaries exclude payroll deductions for Federal employees' retirement benefits and Post Office wages and salaries. Post Office wages and salaries are estimated at 1.2 billion dollars in calendar year 1947 and at annual rates of 1.2 billion and 1.5 billion in the first and second halves of calendar year 1948, respectively. The total Federal civilian pay roll, including the Post Office, is estimated to be 6.0, 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, mustering-out pay, and payment of Government and national service life insurance benefits to veterans' beneficiaries. * 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 Government and national service life insurance. Such items as repayments of personal funds of military and civilian personnel located overseas which were deposited in trust accounts and payments of earnings to prisoners of war are included. fl Includes payments of foreign economic cooperation trust fund for goods and services of 2.5 billion dollars. 78 Includes a small amount for subsidies to business. 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 the subsidy to mail other than first class. NOTE.—Detail will not necessarily add to totals because of rounding. 793637°—48 6 61 Adjustments to receipts and expenditures The adjustments to receipts and expenditures shown in table 1 reconcile the sum of the accounts of consumers, business, government, and net foreign investment with the gross national product. The latter includes only expenditures for the current production of goods and services. The Government 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 certain groups in the economy. Private transfers, such as gifts, have by and large not been taken into account. Receipts in the various accounts again include income arising from Government transfers and are not comparable with income arising from transactions in goods and services. The adjustments include transfer payments, purchase or sale of existing assets, and other transactions which must be deducted to arrive at the gross national product. Details of the adjustments are shown in tables 12 and 13. According to table 12, "Adjustments to expenditures," transfers to individuals, including social-security benefits, veterans' bonuses, pensions and 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 a transfer of purchasing power, are a second large item. Loans to foreign governments or subscriptions to the International Fund or Bank are similar to domestic transfers since they involve an addition to the purchasing power or ability of foreign countries to obtain goods from the United States.2 In addition to transfers of purchasing power, discrepancies in timing between the time cash payment is made and the time production is directly affected must be eliminated. Government transfer payments to individuals and interest payments must be eliminated from receipts as well as payments. Receipts from the sale of surplus property must also be deducted since sales of surplus involve only transfers of existing assets rather than current production. In addition a number of adjustments must be made for the difference between the time taxes accrue from current production and the time the Government records receipts. A summary of the adjustments to receipts is shown in table 13. Table 14 details the reconciliation between cash receipts and the estimates of taxes used by the Department of Commerce in developing estimates of gross national receipts and expenditures. 2 Sales of surplus property are included among the adjustments for a somewhat different reason. Such sales are included as part of net foreign investment and since they do not involve current production, an offsetting entry must be made to arrive at the gross national product. 62 T A B L E 12.—Reconciliation of cash payments to the public goods and services with Government expenditures for Calendar year 1947 and January-June 1948 [Billions of dollars] Description JanuaryJune 1948 annual rates, 1947 adjusted i 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 governments Subscriptions to the International Bank and Monetary Fund Sales of surplus abroad 3 Adjustment for Government enterprises * _ Miscellaneous trust account payments. _ Adjustments for time lags 5 . Noncash expenditures for goods and services 9 .... _ Plus: Clearing account for outstanding checks and telegraphic reportsTotal adjustments _ _ Equals: Government expenditures for goods and services ._ Plus: Expenditures of consumers, business and net foreign investment. Equals: Gross national product or expenditure __ 63.2 52.0 11.1 2.6 4.1 .6 3.6 1.8 1.0 .2 .8 .7 -1.5 -.2 11.0 2.4 4.4 .6 1.0 .2 1.0 -.1 -1.0 -.1 25.2 21.0 28.0 203.7 231.6 31.0 215.6 246.5 12 Estimates based on incomplete data. Includes Government subsidies, domestic sales of consumer-type surplus property, and capital transactions. Domestic sales of consumer-type surplus property are deducted because they are included in consumer 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 since the4 figure shown in this table includes sale of goods on credit. 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 pay certificates, issue of special currency, etc. • Includes contributions of Government and Government employees to retirement funds and Government contributions to national service life and Government life insurance. NOTE.—Detail will not necessarily add to totals because of rounding. T A B L E 13.—Adjustments to receipts {or income) in the Nation's Economic Budget Calendar year 1947 and January-June 1948 [Billions of dollars] January-June, 1948 annual rates, seasonally adjusted 1 Description Total receipts (or income) __ Less: Adjustments Receipts of Government transfer payments 3 Receipts of Government interest payments Subsidies less current surplus of Government enterprises Adjustments to Government cash receipts s Total adjustments Less: Statistical discrepancy Equals: Gross national receipts 252.9 271A 11.1 4.4 -.1 2.5 17.9 3.4 231.6 11.0 4.6 -.3 5.8 21.1 3.8 246.5 * 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. NOTE.—Detail will not necessarily add to totals because of rounding. 63 T A B L E 14.—Reconciliation of cash receipts with tax series arising from of goods and services current production Calendar year 1947 and January-June 1948 Receipts January-June 1948, annual rates seasonally adjusted» 1Q47 Cash receipts from the public Less: Excess of business tax receipts over liabilities Excess of personal tax receipts over payments Receipts from sales of domestic surplus property Receipts from sales of foreign surplus property Other receipts from abroad 2 Miscellaneous trust 8account receipts Plus: Noncash receipts Equals: Tax receipts arising from current production of goods and services 59.9 64.0 -1.4 1.8 2.8 .3 .4 .3 1.5 1.4 3.4 1.5 57.4 58.2 .a .2 .1 1.0 i Estimates based on incomplete data. * Primarily reimbursable lend-lease. * Includes contributions of Government and Government employees to retirement funds, and Government contributions to national service life and Government life insurance funds. NOTE.—Detail will not necessarily add to totals because of rounding. 64 Appendix B The Distribution of Consumer Income and Ownership of Liquid and Other Assets Tables Page 1. Share of total money income received by each tenth of the Nation's spending units when ranked by size of income, 1946 and 1947 2. Distribution of families and spending units by income level, before and after Federal income tax, 1947 3. Distribution of spending units by income level and type of income change, from 1946 to 1947 4. Selected components of saving, 1946 and 1947 5. Proportion of liquid assets held by spending units and family units in early 1948, by income level 6. Distribution of spending units by size of liquid asset holdings in early 1947 and 1948 7. Proportion of spending units reducing liquid assets in 1947, by purpose of withdrawal and by income level 8. Distribution of spending units holding various types of assets, by type of asset held in early 1948 and by income level 65 67 68 70 71 71 72 73 73 Distribution of Consumer Income and Ownership of Liquid and Other Assets The following appendix is intended to supplement the text section, "Consumer income, expenditure, and saving," page 6, mainly by presenting factual material from which the conclusions of the text are drawn. Topics relate to changes in the equality of the distribution of income between 1946 and 1947, the distribution of income before and after income tax, income increases and decreases between 1946 and 1947, saving and dissaving, and the distribution of ownership of liquid and other assets by consumers. Equality of the distribution of income The degree of equality in the distribution of money income has remained substantially unchanged between 1946 and 1947, according to a survey of consumers made early in 1948.1 This is indicated by the fact that when the Nation's spending units are ranked according to their incomes, from lowest incomes to highest, the proportion of the total money income of the Nation going to each tenth of the spending units has remained almost constant.2 This is shown in the following table: The stability of the above distributions between 1946 and 1947 is in contrast to the significant decrease in income concentration from 1935-36 and 1941 to 1946 described in the Economic Report of January 1948. The reasons for the increase in the degree of equality over the war period ha^ve not been completely analyzed but the following factors were probably the most important: (1) The decrease in unemployment and underemployment, (2) the increase in the number of families with more than one earner, (3) the rise in farm income relative to the total, and (4) the narrowing of wage differentials. 1 The 1948 Survey of Consumer Finances conducted for the Board of Governors of the Federal Reserve System by the Survey Research Center, of Ann Arbor, Mich. This survey was made for the third consecutive year. Extensive data on distribution of income, liquid asset holdings, consumer purchases of durable goods, etc., drawn from these surveys have been 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 incomes for their major items of expense. 66 TABLE 1.—Share of total money income received by each tenth of the Nation's spending units when ranked by size of income, 1946 and 1947 l Percent of total money income before taxes Spending units ranked from lowest to highest income By tenths 1946 Lowest tenth.. Second tenth 2 Third Fourthtenth tenth... _ _ Fifth tenth Sixth tenth Seventh tenth Eighth tenth Ninth tenth.— Highest tenth 2..._ 1 3 5 6 7 9 10 12 15 32 __ _ 194' _ Cumulative 1 1946 1 3 4 7 q 10 1? 15 33 1 4 9 15 22 31 41 53 68 100 1947 1 4 8 14 ?,1 30 40 5? 67 100 1 Income data for 1947 are based on interviews in January-March 1948; for 1946 on interviews in JanuaryMarch 1947. It is possible that the proportion of income received by the highest tenth of income receivers is underestimated by several percentage points in all years. Samples of approximately 3,000-3,500 spending units have been used in these surveys; owing to the dispersion of higher incomes it cannot be expected that 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 survey are described in the Federal Reserve Bulletin, June 1948, p. 643. Between 1946 and 1947, some of the reasons for the previous trend toward an increased degree of equality continued, such as a continued rise in farm incomes and a further increase in employment. In the light of the development during previous years, it might have been expected that this trend would result in a continued improvement in the income distribution. However, the Survey of Consumer Finances indicates that the distribution of income by deciles has remained the same. An explanation may be that the favorable effect of employment conditions was offset by the unfavorable effects of inflation. Inflation per se tends to increase the inequality of income distribution, since many families, particularly in the lower 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 in the Economic Report of January 1948 relate to money income before tax. For some purposes, however, it is of more interest to know the distribution of income after tax. Until the present, data have been inadequate to present reliable distributions on an "after tax" basis. Through the cooperation of several agencies, distributions of families and of spending units by income level, before and after Federal income tax, are now presented for 1947 in table 2. Families as well as spending units are included in table 2 for the sake of comparability 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 more than one spending unit if some of the members of the family manage their income separately. TABLE 2.—Distribution of families and spending units, by income level, before and after Federal income tax,1 1947 Percent of families Percent of spending and single indiunits viduals Money income class Before tax After tax 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. Before tax After tax 15 25 25 17 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 2 are sufficiently reliable to show the approximate effect of Federal income-tax liabilities on the distribution of families by income level. In this connection, it should be mentioned that the tax liability was not based directly on information obtained in interviews or on tax returns, but on an estimate of the 1947 tax liability made from comprehensive data concerning family composition and income assembled in connection with the Survey of Consumer Finances. Further work must be completed to relate the distribution after tax to the adjusted distribution before tax for 1947 (see Table 2—a below), and to determine more precisely the effect of the tax on the concentration of income. Study of available prewar data on the distribution of taxes by income level is also under way with the object of presenting in a future report a comparison of the effect of the Federal income-tax on the distribution of income between a current and a prewar year. The distribution of families before taxes shown above is not comparable with that presented for 1946 on page 19 of the Economic Report of January 1948. The 1946 distribution was based on survey data which had been adjusted in such a way as to make it agree with certain independently determined national aggregates of income and of family numbers. For purposes of comparison, both adjusted and unadjusted distributions are shown below for 1946 and 1947: 68 TABLE 2—a.—Distribution of families by income level, adjusted and unadjusted basis, in 1946 and 1947 Percent of families 1946 Money income before taxes Survey data 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. 100 1947 Adjusted survey data* 100 Survey data 100 Adjusted survey data J 11 16 18 17 12 16 10 100 * Revised. Preliminary. 3 For a description of the methods of adjustment for 1946 and 1947 incomes, see the January Economics Report, page 102. As stated in that report, the estimated number of families and single individuals in the civilian noninstitutional population on 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 income was 165.7 billion dollars in 1946 and 185.5 billion dollars in 1947, according to recently revised data. The percentage expansion of the distributions after adjustment 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 the income aggregates and population numbers are subject to further revision. Table 2 shows that about two-thirds of families (including single individuals) had money incomes under $4,000 before taxes and 31 percent had money income below $2,000. After payment of taxes, there was an increase in the number of families in all income brackets under $4,000 and a decrease in all brackets above this. Nearly three-fourths of the families had incomes of less than $4,000. Increases and decreases in income, 1946-47 Although there was a general rise in personal incomes between 1946 and 1947, many families did not share in the increase. Of the spending units having 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 in the under $3,000 group, which accounted for 59 percent of the spending units. Thus income increases were somewhat more frequent in the higher income 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 grouped according to income received in 1947. Units with income increases between 1946 and 1947 are now classed according to the higher incomes received in 1947, while units whose income decreased are'classed according to the lower income to which they moved. Thus the basis of classification exaggerates somewhat the impression that income increases were more concentrated at levels above $2,000 or $3,000. 69 Units with relatively fixed incomes are found most frequently in the lower income brackets. The proportion of persons in the lower brackets whose income is fixed, such as pensioners and annuitants, widows, etc., has undoubtedly increased over the war period and during the subsequent inflation. The income of low-wage earners and marginal farmers has increased in relation to that of retired persons and those receiving Government stipends or allowances, changing the composition of the lowest income groups. TABLE 3.—Distribution of spending units by income level and type of income change, from 1946 to 1947 i Percent of spending units Change in income, 1946 to 1947 1947 money income before taxes Total Increase in income 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 Same income Decrease in income 14 22 23 17 10 9 5 8 18 24 20 12 12 6 20 23 23 16 6 8 4 18 27 22 15 8 6 4 100 100 100 100 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 the same." Source: See table 1. Saving and dissaving In 1947, almost three-fourths of all spending units saved, while onefourth spent in excess of income. The proportion of families dissaving was not very different from that of 1946, but the amounts involved increased considerably. Since saving on the part of people who saved remained fairly constant, net saving declined between 1946 and 1947. (See appendix C, table 5.) Saving took the principal forms of an increase in currency and bank deposits, life insurance, corporate securities, and in homes and other direct investments. Purchasers of durable goods such as automobiles are not considered as saving. Dissaving was mainly in the form of an increase in consumer debt and decreases in holdings of liquid assets such as Government bonds and bank deposits. The amounts of selected components of personal saving or dissaving in 1946 and 1947 were as follows: 70 T A B L E 4.—Selected components of saving) 7946 and 7947 [Billions of dollars] Amount of saving Item of saving 1946 Currency and bank deposits * U. S. Government securities l 2 State and local government securities . Corporate and other securities 2 Private pension and insurance reserves Liquidation of debt: Mortgage d e b t 3 4 _ Installment debt Other consumer debt« Nonfarm dwellings « 1947 +10.4 -3.2 -.4 +4.4 +.4 +3.4 +1.0 +3.3 -3.3 -1.6 -1.9 +3.9 -3.8 -2.2 -l.C +.2 +.3 +5.8 1 2 3 4 8 8 Excludes holdings by unincorporated business and trusts. Includes holdings by unincorporated business and trusts. Debt on 1- to 4-family non-farm-residential structures. Installment sale credit and installment loans. Single-payment loans, charge accounts, and sale credit. 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. Government 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, as the text of this report states, it is the form of saving which is most clearly anti-inflationary. Furthermore, a cushion to future downward fluctuations in demand is provided by a wide dispersion of liquid-asset holdings among all groups of the poulation and all income levels. The distribution of liquid assets by income level is at present very unequal, although substantial amounts are held by families at every level. As shown in table 5, 31 percent of the families whose incomes were less than $2,000 had only 13 percent of the liquid assets in 1947. T A B L E 5.—Proportion of liquid assets held by spending units and income level * family units in early 7948, by Family units 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 _ . _ Spending units Percent of families Percent of liquid assets held Percent of spending units 13 18 20 17 11 13 8 100 5 8 9 10 9 19 40 100 14 22 23 17 10 9 5 100 Percent of liquid assets held 6 10 12 13 9 16 34 100 * 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. Source: See table 1. 71 The proportion of spending units with no liquid assets increased from 24 to 27 percent between 1947 and 1948, and the proportion with no assets or less than $200 worth of assets increased from 38 to 42 percent. In early 1948, 55 percent of spending units had less than $500 in liquid assets, as show in Table 6. TABLE 6.—Distribution of spending units by size of liquid asset holdings in early 1947 and 1948 Percent of spending units Amount of liquid assets i 1947 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. 1948 24 14 12 14 14 7 7 5 3 All units. _ Median holdings of all units Median holdings of units with assets . 27 15 13 12 12 6 6 5 4 100 100 $470 . $890 $350 $820 i Includes all types of U. S. Government bonds, checking accounts, and savings accounts in banks and savings and loan associations, postal savings, and shares in credit unions. Source: See table 1. Table 7 presents an analysis of decreases in asset holdings over the past year. The main reasons for decreasing asset holdings are shown for three income ranges, under $2,000, $2,000 to $5,000, and $5,000 and over. Purchases of nondurable consumer's goods and services (living-expense items) were given as the sole reason for reducing liquid assets by 70 percent of the under $2,000 groups, and by 48 percent of the $2,000 to $5,000 income group. Of those having over $5,000 income, living-expense items were less important than acquisition of durable goods, homes, and other investments. Thus, in a large proportion of cases in the upper income groups, liquid assets 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 and by income level withdrawal Percent of spending units reducing liquid assets 1947 mouey income before taxes Nondurable goods andl services All purposes Under $2,000... $2,000 to $4,999. $5,000 and over 100 100 100 All units. 100 Automobiles Houses and Several investand other purposes 8 durable ments * goods 16 23 32 54 13 13 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: Percent Nondurable consumers goods, etc., and durable goods 8 Nondurable consumers goods, etc., and houses and investments 5 Durable goods and houses and investments 4 Other combinations 3 Total Source: See table 1. .... 20 Table 8 presents data on ownership of various types of non-liquid assets in early 1948 by income groups. The ownership of almost all types of assets increases as income rises, with the exception of homes. The proportion of persons owning homes appears to be larger in the under $1,000 group than in the $1,000 to $2,000 to $3,000 intervals. In the lowest income group, only 45 percent of spending units have life insurance and only 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 in early 7948 and by income level Percent of spending units holding assets 1947 money income before taxes Liquid assets 1 Life insurance Automobile Home 2 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 overAll units... Unincorporated business Stocks and bonds 3 3 5 5 8 10 21 73 50 43 i Checking accounts and savings accounts in banks and saving and loan associations, postal savings, and shares 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 C Statistical Tables Relating to Employment, Production, and Purchasing Power CONTENTS National Income: 1. Gross national product or expenditure, 1929-48 2. Disposition of gross national product, 1939-48 3. National income by distributive shares, 1929-48 4. Personal income, 1929-48 5. Disposition of personal income, 1929—48 6. Per capita disposable income in current dollars and 1947 dollars, 1929-48. Employment and Wages: 7. Labor force, 1929-48 8. Number of wage and salary workers in nonagricultural establishments, 1929-48 9. Average gross weekly earnings in selected industries, 1929-48 10. Average hourly earnings in selected industries, 1929-48 Production and Business Activity: 11. Physical production index, 1929-48 12. Industrial production index, 1929-48 13. New construction activity, 1929-48 14. Business expenditures for new plant and equipment, 1929—48 15. Business inventories and sales, 1939-48 16. Sales, stocks, and outstanding orders at 296 department stores, 1939-48.. Prices: 17. Consumers' price index, 1929-48 18. Wholesale price index, 1929-48 19. Index of prices received and of prices paid by farmers and parity ratio, 1929-48 Money, Banking, and Credit: 20. Consumer credit outstanding, 1929-48 21. Loans and investments of all commercial banks, 1929-48 22. Adjusted deposits of all banks and currency outside banks, 1929-48.... 23. Estimated ownership of Federal securities, 1939-48 Corporate Profits and Finance: 24. Profits before and after taxes, all private corporations, 1929-48 25. Profits after taxes, 629 large private industrial corporations, by industry groups, 1939-48 75 Page 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 Corporate Profits and Finance—Continued 26. Relation of profits before and after taxes to sales, private corporations excluding finance, insurance, and real estate, 1946—48 27. Relation of profits before and after taxes to investment, private manufacturing corporations, by industry groups, 1947 28. Relation of profits before and after taxes to sales, private manufacturing corporations, by industry groups, 1947 29. Relation of profits before and after taxes to investment and to sales, all private manufacturing corporations, by size classes, 1947—48 30. Sources and uses of corporate funds, 1946—48 International Transactions: 31. The international transactions of the United States, 1946-48 32. United States Government aid to foreign countries, 1946-48 33. United States merchandise exports, including reexports, by continents, 1936-38 quarterly average and 1947-48 34. United States general merchandise imports, by continents, 1936-38 quarterly average and 1947-48 35. United States merchandise exports, by economic classes, 1936-38 quarterly average and 1947-48 36. Indexes of quantity and unit value of United States merchandise exports, by economic classes, 1936-38 quarterly average and 1947-48 37. United States imports for consumption, by economic classes, 1936-38 quarterly average and 1947-48 38. Indexes of quantity and unit value of recorded United States imports for consumption, by economic classes, 1936-38 quarterly average and 1947-48 Summary: 39. Changes in selected economic series since 1939 and since the first half of 1947 76 Page 102 103 104 105 106 107 108 109 110 Ill 112 113 114 115 Statistical Tables Relating to Employment, Production, and Purchasing Power TABLE 1.—Gross national product or expenditure, 7929-48x [Billions of dollars] Period Gross national product Personal consumption expenditures GovernGross priment purvate do- Net foreign chases of mestic in- investment goods and vestment services 1929. 103.8 78.8 15.8 0.8 8.5 1930 1931. 1932. 1933. 1934. 90.9 75.9 58.3 55.8 64.9 70.8 61.2 49.2 46.3 51.9 10.2 .7 .2 .2 .2 .4 9.2 8.1 8.0 1935. 1936. 1937. 1938. 1939. 72.2 82.5 90.2 84.7 90.4 56.2 62.5 67.1 64.5 67.5 -.1 -.1 .1 1.1 .9 9.9 11.7 11.6 12.8 13.1 1940. 1941. 1942. 1943. 1944. 100.5 125.3 159.6 192.6 212.2 72.1 82.3 90.8 101.6 111.4 1.5 1.1 -.2 13.9 24.7 59.7 88.6 96.5 1945. 1946. 1947. 213.4 209.3 231.6 122.8 147.4 164.8 5.4 .9 1.3 2.8 6.1 8.3 11.4 6.3 9.0 13.0 17.2 9.3 4.6 6.4 -2.2 -2.1 9.2 -1.4 26.5 30.0 4.7 8.9 82.8 30.8 28.0 Annual rates, seasonally adjusted 1947—First half Second half 1948—First half 2 . 227.4 235.9 161.2 168.4 29.5 30.5 9.5 8.3 27.3 28.7 246.5 174.4 37.2 3.9 31.0 1947—First quarter Second quarter.. Third quarter.,. Fourth quarter.. 226.4 228.3 227.9 243.8 158.1 164.2 165.6 171.1 32.6 26.4 25.6 35.4 8.8 10.2 8.4 8.2 26.9 27.6 28.3 29.0 1948—First quarter Second quarter 2 . 246.0 247.0 172.3 176.5 40.4 34.0 3.9 4.0 29.4 32.5 1 The figures for 1944-48 are based on the revised series of national income and product of the Department of 2Commerce. For detail, see the Survey of Current Business, July 1948. Estimates based on incomplete data. 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 Disposition of gross national product Export surplus of 3goods and services Total Period national product Total Government Product war or for national domestic Financed Financed defense civilian by Govother expendiuse ernment by tures means aid Billions of dollars (3) 1939 90.4 1.1 1.1 1.2 88.1 1940 1941 1942. 1943. 1944 100.5 125.3 159.6 192.6 212.2 1.7 2.3 6.1 10.7 12.0 0.1 1.3 6.4 12.8 14.0 1.6 1.0 -.3 -2.1 -2.0 2.2 12.8 43.2 67.1 73.7 96.6 110.2 110.3 114.8 12G.5 1945 1946 1917 213.4 209.3 231.6 5.7 7.5 11.3 7.7 5.1 5.7 -2.0 2.5 5.6 67.2 15.9 10.0 140.5 185.9 210.3 Annual rates: 1947—First half Second half 227.4 235.9 11.8 10.7 6.6 4.8 5.3 5.9 10.2 9.8 205.4 215.4 1948~-First half * 246.5 8.1 5.3 2.8 9.6 228.8 1947—First quarter Second quarter.. Third q u a r t e r - . Fourth quarter.. 226.4 2?8.3 227.9 243.8 11.2 12.5 10.9 10.5 5.2 8.0 6.8 2.9 6.0 4.5 4.1 7.6 9.4 10.9 9.2 10.3 205.8 204.9 207.8 223.0 1948—First quarter Second quarter 4. 246.0 247.0 7.9 8.2 5.8 4.7 2.1 3.5 9.3 10.0 228.8 228.8 _ Percentage of total 1939.. 100.0 1.2 1.2 1.3 97.5 1940.. 1941.. 1942.. 1943.. 1944.. 100.0 100.0 100.0 100.0 100.0 1.7 1.8 3.8 5.6 5.7 0.1 1.0 4.0 6.6 6.6 1.6 .8 —.2 -1.1 -.9 2.2 10.2 27.1 34.8 34.7 96.1 87.9 69.1 59.6 59.6 1945.. 1946.. 1947.. 100.0 100.0 100.0 2.7 3.6 4.9 3.6 2.4 2.5 -.9 1.2 2.4 31.5 7.6 4.3 65.8 88.8 90.8 1947—First half.... Second half.. 100.0 100.0 5.2 4.5 2.9 2.0 2.3 2.5 4.5 4.2 90.3 91.3 1948—First half «... 100.0 3.3 2.2 1.1 3.9 92.8 1947—First quarter..._ Second quarter. Third q u a r t e r Fourth quarter- 100.0 100.0 100.0 100.0 4.9 5.5 4.8 4.3 2.3 3.5 3.0 1.2 2.7 2.0 1.8 3.1 4.2 4.8 4.0 4.2 90.9 89.8 91.2 91.5 1948—First quarter Second quarter * 100.0 100.0 3.2 3.3 2.4 1.9 .9 1.4 3.8 4.0 93.0 92.6 (') 1 The figures for 1944-48 are based on the revised series of national income and product of the Department of Commerce. For detail, see the Survey of Current Business, July 1948. 2 U. S. Government transfers to foreign countries are included in the export surplus and are excluded from 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! [Billions of dollars] Proprietors' and rental income Corporate profits and inventory valuation adjustment Corporate profits Period 111 0.5 6.5 2.5 3.3 -1.3 2.4 1.0 -3.4 - . 4 -2.1 1.0 - . 6 6.2 5.9 5.4 5.0 4.7 1929- 87.4 50.8 19.7 8.3 5.7 5.8 10.3 1.4 1930.. 1931.. 193219331934- 75.0 58.9 41.7 39.6 48.6 46.5 39.5 30.8 29. 34.1 15.7 11.8 7.4 7.2 8.7 7.0 5.3 3.2 2.9 4.3 3.9 2.9 1.7 2.3 2.3 6.6 3.3 4.8 3.6 1.6 - . 8 2.5 - 2 . 0 - 3 . 0 2.0 - 2 . 0 .2 2.1 1.7 1.1 .8 .5 .4 193519361937. 19381939- 56.8 64.7 73.6 67.4 72. 37.1 42. 47. 44. 47.8 12.1 12.6 15.4 14.0 14.7 5.0 6.1 6.6 6.3 6.8 4.9 3.9 5.6 4.4 4.5 2.3 2. 3.1 3.3 3.5 3.0 4.9 6.2 4.3 5.8 3.2 5.7 6.2 3.3 6.5 1.0 1.4 1.5 1.0 1.5 2.3 4.3 4.7 2.3 5.0 19401941.. 19421943.. 1944- 51.8 81. 103.8 64.3 136.5 84.7 168.3 109.1 182.4 121.1 16.3 20.8 28.1 32.1 34.1 7.7 9.6 12.1 14.1 15.4 4.9 6.9 10.6 11.8 11.9 3.6 4.3 5.4 6. 6. 9.2 14.6 19.8 23.7 24.0 9.3 17.2 21.1 24.5 24.3 2.9 7.8 11.7 14.2 13.5 6.4 9.4 9.4 10.4 10.8 194519461947.. 181. 122.9 179.3 117.3 202.5 127.5 36.0 41.8 46.0 16.8 20.4 23.2 12.3 14.6 15.6 7.0 6. 7.1 19.8 16.8 24. 20.4 21.8 29.8 11.6 9.0 11.7 8.7 12.8 - 5 . 0 18.1 - 5 . 1 3.0 3.4 4.3 8.4 -.2 -.7 1.0 -.7 -.1 -2.6 -1.3 -.8 -.3 4.5 4.5 4.4 4.3 4.2 4.1 4.1 3.9 3.4 3.1 Annual rates, seasonally adjusted 1947—First half... Second half _ 198.3 125.2 206.7 129.9 45.5 46.5 22.6 23.9 15.9 15.4 7.0 7.3 23.5 25.9 28.9 30.8 11.4 12.1 17.5 - 5 . 4 18.7 - 4 . 9 4.2 4.5 1948—First half ' 216.3 134.0 51.1 25.5 18.1 7.5 26.6 30.5 11.9 18.6 - 3 . 9 4.6 1947—First quarter Second quarter Third quarter Fourth quarter 197.3 199.3 200.6 212.8 125.0 125.3 127.6 132.2 46.4 44.6 44.4 48.6 22.5 22.7 23.0 24.7 16.9 14.9 14.3 16.5 7.0 7.0 7.1 7.4 21.8 25.2 24.3 27.5 28.9 28.8 29.1 32.4 11.4 11.3 11.4 12.7 17.5 17.5 17.7 19.7 -7.1 -3.6 -4.8 -4.9 4.1 4.2 4.4 4.5 1948—First quarter Second q u a r t e r ' . . . 215.5 134.0 217.1 134.0 50.6 51.6 25.0 26.0 18.0 18.1 7.5 7.5 26.3 26.9 31.4 29.5 12.2 11.5 19.2 - 5 . 1 18.0 - 2 . 6 4.6 4.6 1 The figures for 1944-48 are based on the revised series of national income and product of the Department of 2Commerce. For detail, see the Survey of Current Business, July 1948. National income is the total net income earned in production by individuals or businesses. The concept of national income currently used differs from the concept of gross national product in that it excludes depreciation charges and other allowances for business and institutional consumption of durable capital goods. 3 Includes wage and salary receipts and other labor income (see appendix C, table 4), and employer and employee 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 Department 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 * [Billions of dollars] Period Salaries, Proprie- Dividends Nonagriwages, Total and and personal Transfer cultural personal and other tors' payments rental personal4 labor income interest 3 income income 2 income income 1929. 85.1 50.5 19.7 13.3 1.5 76.8 1930. 1931. 1932. 1933. 1934. 76.2 64.8 49.3 46.6 53.2 46.2 39.2 30.5 29.1 33.8 15.7 11.8 7.4 7.2 8.7 12.6 11.1 9.1 8.2 8.6 1.5 2.7 2.2 2.1 2.2 70.0 60.1 46.2 43.0 49.5 1935. 1936. 1937. 1938. 1939. 59.9 68.4 74.0 68.3 72.6 36.7 42.1 45.9 42.8 45.6 12.1 12.6 15.4 14.0 14.7 8.6 10.1 10.3 8.7 9.2 2.4 3.5 2.4 2.8 3.0 53.4 62.8 66.5 62.1 66.3 1940. 1941. 1942. 1943 1944. 78.3 95.3 22.2 149.4 164.5 49.5 61.5 81.2 104.4 116.1 16.3 20.8 28.1 32.1 34.1 9.4 9.9 9.7 10.0 10.6 3.1 3.1 3.2 3.0 71.5 86.1 108.7 134.3 149.0 1945 1946 1947. 170.3 178.1 195.2 116.7 111.4 121.9 36.0 41.8 46.0 11.4 13.5 15.6 6.2 11.4 11.7 154.3 159.4 174.9 Annual rates, seasonally adjusted 1947—First half Second half 1948-Firsthalf* 1947—First quarter Second quarter Third quarter.. Fourth quarter 1948—First quarter Second quarter 190.3 199.9 119.1 124.7 45.5 46.5 15.1 16.0 10.6 12.8 208.1 190.9 189.6 196.7 203.1 128.7 51.1 16.7 11.6 184.8 119.0 119.2 122.3 127.1 46.4 44.6 44.4 48.6 14.9 15.3 15.8 16.1 10.7 10.5 14.3 11.2 169.4 170.2 177.8 181.8 207.3 208.8 128.6 128.7 50.6 51.6 16.6 16.8 11.5 11.7 184.4 185.2 169.8 179.8 1 T h e figures for 1944-48 are based on the revised series of national income and product of the Department of Commerce. For detail, see the Survey of Current Business, July 1948. 2 Differs from "compensation of employees" in appendix C, table 3, in that it excludes employer and employee contributions to social insurance. Includes wage and salary receipts and other labor i n c o m e compensation for injuries, employer contributions to private pension and welfare funds, pay of military reservists 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 enemy prisoners 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, agricultural net rents, agricultural net interest, and net dividends paid by agricultural corporations. « Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 80 TABLE 5.—Disposition of personal income, 1929—48l Period Less: PerPersonal sonal tax income and nontax payments Equals: Less: Per- Equals: Dispos- sonal con- Personal Net saving as able sumption net of personal expendsaving percent disposincome itures able income Billions of dollars 1929. 85.1 2.6 82.5 78.8 3.7 4.5 1930. 1931. 1932. 1933. 1934. 76.2 64.8 49.3 46.6 53.2 2.5 1.9 1.5 1.5 1.6 73.7 63.0 47.8 45.2 51.6 70.8 61.2 49.2 46.3 51.9 2.9 1.8 -1.4 -1.2 -.2 3.9 2.9 -2.9 -2.7 1935. 1936. 1937. 1938. 1939. 59.9 68.4 74.0 68.3 72.6 1.9 2.3 2.9 2.9 2.4 58.0 66.1 71.1 65.5 70.2 56.2 62.5 67.1 64.5 67.5 1.8 3.6 3.9 1.0 2.7 3.1 5.4 5.5 1.5 3.8 1940. 1941. 1942. 1943. 1944. 78.3 95.3 122.2 149.4 164.5 2.6 3.3 6.0 17.8 18.9 75.7 92.0 116.2 131.6 145.6 72.1 82.3 90.8 101.6 111.4 3.7 9.8 25.4 30.0 34.2 4.9 10.7 21.9 22.8 23.5 1945. 1946. 1947. 170.3 178.1 195.2 20.9 18.9 21.6 149.4 159.2 173.6 122. 8 147.4 164.8 26.6 11.8 8.8 17.8 7.4 5.1 Annual rates, seasonally adjusted 7.9 9.6 4.7 5.4 1947—First half.-. Second half _ 190.3 199.9 21.3 22.0 169.0 178.0 161.2 168.4 1948—First half K 208.1 22.1 186.0 174.4 11.6 6.2 1947—First quarter Second quarterThird quarter—. Fourth quarter.. 190.9 189.6 196.7 203.1 21.2 21.4 21.7 22.2 169.7 168.2 175.0 180.9 158.1 164.2 165.6 171.1 11.6 4.1 9.4 9.7 6.8 2.4 5.4 5.4 1948—First quarter Second quarter ? 207.3 208.8 23.2 21.0 1«4.1 187.8 172.3 176.5 11.8 11.3 6.4 6.0 1 The figures for 1944-48 are based on the revised series of national income and product of the Department of Commerce. For detail, see the Survey of Current Business, July 1948. 2 Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 81 TABLE 6.—Per capita disposable income in current dollars and 1947 dollars, 1929-48 Per capita disposable Disposable personal income Population Consumers' personal (thouincome price index, sands) * (billions 1947*100 Current 1947 of dollars)i dollars * dollars Period 82.5 121,770 76.9 678 882 1930 1931 1932 1933 _. 1934 73.7 63.0 47.8 45.2 51.6 123,077 124,040 124,840 125, 579 126,374 75.0 68.3 61.3 58.0 60.1 599 508 383 360 408 799 744 625 621 679 1935. 1936 1937 _1938 1939 58.0 66.1 71.1 65.5 70.2 127, 250 128,053 128.825 129, 825 130, 880 61.6 62.2 64.5 63.3 62.4 456 516 552 505 536 740 830 856 798 859 75.7 92.0 116.2 131.6 145.6 131, 970 133. 203 134, 665 136, 497 138,083 62.9 66.1 73.2 77.6 78.8 574 691 863 964 1,054 913 1,045 1,179 1,242 1,338 149.4 159.2 173.6 139, 586 141. 235 144,034 80.7 87.5 100.0 1,070 1,127 1,205 1,326 1,288 1,205 1929 _ . _ 1940 1941 _. 1942 1943 1944 1945 1946 1947 _ _ __ ._ _. _ Annual rates, seasonally adjusted Not adjusted for Annual rates, seasonally adjusted seasonal variation • 1947—First half Second half 169.0 178.0 143,385 144,807 97.6 102.4 1,179 1,229 1948—First half • 186.0 146,035 106.2 1,274 1,200 1947—First quarter Second quarter Third quarter Fourth quarter 169.7 168.2 175.0 180.9 143, 049 143,702 144, 411 145,150 96.9 98.2 101.0 103.8 1,186 1,170 1,212 1,246 1,224 1,191 1,200 1,200 184.1 187.8 145, 733 146,325 105.3 107.1 1,263 1,283 1,199 1,198 1948—First quarter Second quarter' _ _ _____ 1,208 1,200 1 The figures for 1944-48 are based on the revised series of national income and product of the Department 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 of July 1 and quarterly and semiannual data as of middle of period, interpolated from published monthly estimates. 3 Current dollars divided by the consumers' price index on the base 1947=100 to give a rough measure of changes 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 (consumers' price index.) 82 TABLE 7.—Laborforce, 7929-48 [Thousands of persons, 14 years of age and over] Civilian labor force Total labor force (including Armed Period armed forces) Monthly average: forces Employment Total civilian labor force Total Unem- Nonagri- Agriculcultural tural ployment 1929 49,440 260 49,180 47,630 37,180 10,450 1,550 1930 1931 1932 1933 1934- 50,080 50,680 51,250 51,840 52,490 260 260 250 250 260 49,820 50,420 51,000 51, 590 52,230 45,480 42,400 38, 940 38,760 40,890 35,140 32,110 28, 770 28, 670 30, 990 10,340 10,290 10,170 10, 090 9,900 4,340 8,020 12, 060 12,830 11,340 53,140 53, 740 54,320 54,950 55,600 270 300 320 340 370 52, 870 53,440 54.000 54,610 55, 230 42,260 44, 410 46. 300 44,220 45, 750 32,150 34, 410 36,480 34, 530 36, 140 10,110 10, 000 9,820 9,690 9,610 10,610 9,030 7,700 10, 390 9,480 1940 1941 1942 1943 .-_1944 56,030 57, 380 60,230 64,410 65,890 390 1,470 3,820 8,870 11, 260 55,640 55, 910 56,410 55, 540 54,630 47,520 50,350 53, 750 54,470 53,960 37, 980 41. 250 44,500 45,390 45,010 9,540 9,100 9,250 9,080 8,950 8.120 5,560 2,660 1,070 670 1945 1946 1947. 65,140 60,820 61,608 11, 280 3,300 1,440 53,860 57,520 60,168 52, 820 55, 250 58,027 44, 240 46, 930 49,761 8, .580 8,320 8,266 1,040 2,270 2,141 1947—First half Second half 60,920 62, 297 1,551 1,328 59,368 60,969 57,009 59,044 49,033 50,488 7,976 8,556 2,359 1,924 1935 1936 1937 1938 1939 _- 1948—First half 1947—January February March April May June _ July August September October November 1948—January February March April . May June _ _ 61,770 1,240 60, 531 58,317 50,753 7,564 2,214 59,510 59,630 59,960 60,650 61,760 64,007 64,035 63,017 62,130 62,219 61,510 60,870 1,720 1,620 1,570 1,530 1,470 1,398 1,371 1,352 1,346 1,327 1,294 1,280 57,790 58,010 58,390 59,120 60,290 62,609 62,664 61,665 60,784 60,892 60, 216 59,590 55,390 55,520 56,060 56,700 58,330 60,055 60,079 59,569 58,872 59,204 58,595 57,947 48,890 48,600 48,820 48,840 49,370 49,678 50,013 50, 594 50,145 50,583 50,609 50,985 6,500 6,920 7,240 7,860 8,960 10,377 10,066 8,975 8,727 8,622 7,985 6,962 2,400 2,490 2,330 2,420 1,960 2,555 2,584 2,096 1,912 1,687 1,621 1,643 60. 455 61,004 61,005 61.760 61,660 64, 740 1,242 1,226 1,236 1,237 1,238 1,260 59,214 59, 778 59,769 60,524 60, 422 63,480 57,149 57,139 57,329 58,330 58,661 61,296 50,089 50,368 50, 482 50,883 50,800 51,899 7,060 6,771 6,847 7,448 7,861 9,396 2,065 2,639 2,440 2,193 1,761 2,184 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: FedManufacturing Transeral, Total Con- portaState, wage tract tion and FiMinand Servcon- and Trade nance ice local salary Dur- Non- ing strucpublic govwork- Total able durable tion utilerners goods goods ities ment 1929. 31,041 10,534 1,078 1,497 3,907 6,401 1,431 3,127 3,066 1930.. 1931. 1932. 1933. 1934. 29,143 26,383 23,377 23.466 25,699 9,401 8,021 6,797 7,258 8,346 1,000 864 722 735 874 1,372 1,214 970 809 862 3,675 3,243 2,804 2,659 2,736 6,064 5,531 4,907 4, " 5,552 1,3 1,3 1,270 1, 225 1,247 3,084 2,913 2,682 2,614 2,784 3,149 3,264 3,225 3,167 3,298 1935. 1936. 1937. 1938. 1939. 26.792 8,907 9,653 888 937 91: 1,145 1,112 1,055 1,150 2,771 2,956 3,114 2,840 2,912 5,692 6,076 6,543 6,453 6,705 1,262 1,313 1,355 1,347 1,382 2,883 3,060 3,233 3,196 3, 228 3,477 3,662 3,749 3,876 3,987 1940. 1941. 1942. 1943.. 1944. 32,031 36,164 39,697 42,042 41,480 5,805 6,488 6,873 7,084 6,91f 916 94' 1,294 1,790 2,170 1,567 1,094 3,013 3,248 3,433 3,619 3,798 7,055 7,567 7,481 7,322 7,399 1,419 1,462 1,440 1,401 1,374 3,362 3, 554 3,708 3,786 3,795 4,192 4,622 5,431 6,G49 6,026 1945. 1946. 1947_ 40,069 15, 302 8,477 6,825 41,494 14,515 7,180 7,335 43, 970 15,901 8,055 7,846 826 852 911 1,132 1,661 1,921 3,872 4,023 4,059 7,685 1,394 3,891 8.820 1,586 4,430 9,450 1,656 4,622 5,967 5,607 5,450 43,337 15, 713 8,022 44,603 16,089 8,088 8,002 906 91 1,781 2,06r 4,003 4,116 9,233 1,637 4,584 9,667 1,675 4,660 5,483 5,417 44,550 16,103 8,176 7,927 908 1,929 4,030 9,596 1,702 4,725 5,557 910 90: 906 881 910 919 890 923 921 922 923 925 922 91922 820 933 936 1, 1,668 1,709 1,798 1,865 1,957 2,043 2,096 2,107 2,099 2,046 1,978 4,018 9,160 4,016 9,143 4,027 9,236 3,845 9,255 3,981 9,277 4,129 9,324 4,155 9,316 4J63 9,356 4,134 9,471 4,097 9,684 4,077 9,886 4,071 10,288 1,626 1,628 1,638 1,636 1,643 1,650 1,675 1,688 1,668 1,671 1,673 1,676 4,527 4,561 4,565 4,552 4,590 4,711 4,686 4,619 4,634 4,662 4,670 4,688 5,455 5,463 5,503 5,504 5,510 5,454 5,341 5,318 5,403 5,414 5,387 5,638 1,871 1,731 1,805 1,933 2,049 2,182 4,020 4,019 4,032 3,977 4,041 4,092 1,6 1,6 1,697 1,704 1,716 1,727 4,723 4,730 4,729 4,768 4,738 4,663 5,498 5,492 5,546 5,577 5,624 5,607 1947—First half.. Second half 1948: First half *.. 1947—January FebruaryMarch April. May. June July August September.. October November.. December.. 1948—January. _. FebruaryMarch April May June 3 1,006 1,718 10,606 882 28,902 9,253 () 845 30,287 10,078 4,357 5,720 10,780 4,975 12,974 6,485 15,051 8,179 17, 381 10,297 17, 111 10,200 43,063 43,169 43,410 43, 221 43,345 43,816 43, 686 44,125 44, 513 44, 758 44,918 45,618 15, 67" 15,783 15, 826 15, 750 15, 569 15, 672 15, 580 15, 962 16,175 16,209 16, 256 16,354 7,949 8,030 8,071 8,068 7,962 8,050 7,874 7,987 8,070 8,126 8,194 8,274 7,728 7,753 7,755 7, 682 7,607 7,622 7,706 7,975 8,105 8,083 8,062 8,080 44,603 44, 279 44, 599 44,298 44,609 44, 913 16,267 16,183 16,269 15,945 15,893 16,058 8,256 8,167 8,258 8,159 8,113 8,102 8,011 8,016 8,011 7,786 7,780 7,956 9,622 9,520 9,599 9,574 9,615 9,648 1 Includes all full- and part-time wage and salary workers in nonagricultural establishments who worked or received pay during the pay period ending nearest the 15th of the month. Excludes proprietors, selfemployed persons, domestic servants, and personnel of the armed forces. Not comparable with estimates of nonagricultural employment of the civilian labor force reported by the Department of Commerce (appendix C, table 7) which include proprietors, self-employed persons, and domestic servants; which count persons as employed when they are not at work because of industrial disputes, bad weather, or temporary lay-off; and which are based on an enumeration of population, whereas the estimates in this table are based on 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 Manufacturing Bituminous coal Dur- Nondur- mining able Total able goods goods Period Monthly average: 1929 1930. 1931 1932 1933._1934 —- 1935 1936 1937 1938 1939 19401941 1942 1943 1944 1945. 1946 1947 $25.03 —- — . — — 1947—First half Second half 1948—First half. Private building construction $28.49 $25.72 23.25 20.87 () 17.05 $16.21 16.73 16.43 18.40 18.87 20.13 21.52 21.78 24.04 24.05 26.91 22.30 24.01 23.86 26.50 () A 16.89 18.05 19.11 19.94 21.53 21.05 21.78 22.21 17.69 13.91 14.47 18.10 Class I Retail Hotels steam Tele- Wholesale (year rail- phone trade trade round) * roads () I 19.58 22.71 23.84 20.80 23.88 $22.97 24.51 27.01 30.14 29.19 30.39 27.76 26.76 23.34 23.09 24.32 () 26.76 28.01 () 29.20 $29.81 30.26 31.58 30.99 31.94 8 $27.72 $20.71 26.11 19.18 26.37 19.86 26.93 19.96 28.53 20.68 29.94 21.73 29.48 21.14 29.85 21.17 $14.25 12.79 13.17 13.57 13.97 14.78 14.93 15.25 25.20 29.58 36.65 43.14 46.08 28.44 34.04 42.73 49.30 52.07 22.27 24.92 29.13 34.12 37.12 24.71 30.86 41.62 41.68 51.27 31.70 35.14 41.80 48.13 52.18 32.44 32.74 33.97 36.30 38.39 32.32 35.56 39.40 42.29 21.17 21.94 23.24 24.88 26.58 15.52 16.09 17.62 20.21 22.65 44.39 43.74 49.25 49.05 46.49 52.45 38.29 41.02 45.87 52.25 58.03 66.86 45.69 53.73 () 56.24 < 51.22 44.04 54.17 44.96 44.07 48.06 52.40 28.31 32.55 36.67 24.53 26.95 29.65 47.89 50.61 50.78 54.12 44.77 46.96 64.41 69.20 60.95 65.58 52.38 56.03 51.22 53.55 35.98 37.43 29.19 30.10 8 48.26 « 55. 46 »38.79 •31.20 52.02 55.19 48.64 5 68.92 s 66.99 1947—January February... March April May June. _ July __August September. October Nobember. December.. 47.10 47.29 47.69 47.50 48.44 49.33 48.98 49.17 50.47 51.05 51.29 52.69 49.60 49.74 50.30 50.34 51.72 52.99 52.19 52.46 54.06 54.69 54.86 56.48 44.47 44.67 44.89 44.40 44.88 45.31 45.61 45.78 46.80 47.29 47.56 48.72 69.54 65.30 64.90 54.14 65.51 67.09 54.87 70.23 71.19 71.91 71.77 75.22 59.97 58.92 61.23 60.53 62.38 1948—January—_ February. March April May 7 June 7 52.07 51.75 52.07 51.71 51.76 52.81 55.46 54.77 55.25 54.87 54.65 56.14 48.45 75.78 48.56 70.54 48.66 74.84 48.26 «49.33 48.61 74.09 49.29 66.28 66.31 66.89 67.31 68.15 63.30 66.97 65.22 66.14 64.55 67.31 31.55 34.25 38.65 43.68 46.06 40.86 47.92 52.70 43.37 54.10 43.31 52.43 42.51 52.03 0 32.26 51.30 8 38.13 51.72 45.58 51.16 46.51 51.68 46.92 57.47 48.02 58.44 48. 77 58.38 49.44 59.02 47.83 50.05 50.87 50.80 51.13 51.57 52.88 52.22 52.05 53.65 53.68 54.70 54.97 35.02 35.27 35.31 35.93 36.50 37.82 37.99 38.14 37.06 36.74 37.14 37.51 28.62 28.91 29.09 29.41 29.23 29.85 29.36 29.50 29.86 30.45 30.54 30.89 48.20 47.82 47.31 48.39 49.59 54.36 55.87 55.17 55.76 56.13 37.62 38.33 38.89 39.27 39.84 30.55 31.19 30.96 31.59 31.70 (*) 60.54 58.94 i Money payments only; additional value of room, board, uniforms, and tips are not included, as 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 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 other industries. Source: Department of Labor 85 TABLE 10.—Average hourly earnings in selected industries, 1929-48 Manufacturing Bitu- Private minous building NonconDura- dura- coal strucmining tion Total ble ble goods goods Period Monthly average: $0.566 Class I Hotels steam Tele- Wholesale Retail (year 1 rail- phone trade trade round) roads $0,681 $0.636 1930.. 1931.. 1932.. 1933.. 1934.. .552 .515 () () .446 $0.497 $0. 420 .472 .442 .427 .532 .556 .515 .684 .647 .520 .501 .673 .644 .651 .600 .595 .602 1935.. 1936.. 1937.. 1938.. 1939.. .550 .556 .624 .627 .633 .577 .586 .674 .530 .529 .577 .584 .582 .745 .794 .856 .878 .815 .824 .903 .908 .932 1940.. 1941.. 1942.. 1943.. 1944. .661 .729 .853 .961 1.019 .724 .808 .947 1.059 1.117 .602 .640 .723 .803 .861 .993 1.059 1.139 1.186 .958 1.010 1.148 1.252 1.319 1945. 1946. 1947. 1.023 1.084 1.221 1.111 1.156 1.292 .904 1.012 1.145 1.240 1.401 1.633 1.379 1.478 1.681 1947—First half Second half 1.188 1.253 1.252 1.331 1.119 1.172 1.485 1.804 1.626 1.726 1948—First half 1.296 1.362 1.223 81. 836 1947—January February. _. March April __. May June July August September. October NovemberDecember. _ 1.161 1.170 1.180 1.183 1.207 1.226 1.230 1.236 1.249 1.258 1.268 1.278 1.224 1.229 1. 236 1.243 1.278 1.303 1.305 1.312 1.331 1.337 1.346 1.354 1.094 1.107 1.119 1.122 1.130 1. 140 1.150 1.158 1.165 1.175 1.185 1.196 1.491 1.491 1.484 1.483 1.470 1.489 1.740 1.787 1.819 1.798 1. 8*1 1.826 1948—January February March April6 May June 8 . 1.285 1.287 1.289 1.292 1.301 1.319 1.355 1. 352 1.352 1. 357 1.365 1.390 1.210 1.217 1.220 1.219 1.231 1.242 1.847 1.826 1.842 1.823 1.841 1929.. ._ 1 3 () $0. 795 5 8 8 (2) ( () () $0. 528 $0. 273 .651 .659 .676 .712 .714 $0. 774 .816 .717 .822 .751 .827 .824 .820 .897 .843 .870 .911 .942 < 1.116 1.124 1.170 1.199 $0.648 .667 .698 .700 .715 .521 .522 .551 .543 .536 .279 .287 .308 .315 .324 .739 .793 .860 .933 .542 .568 .614 .670 .724 .332 .348 .386 .451 .505 1.029 1.144 1.258 .773 .878 .991 .550 .612 .661 1.129 1.212 1.163 1.230 1.232 1.283 .971 1.012 .647 .675 1.594 1.598 1.610 1.634 1.656 1.661 1. 6C9 1.689 1.718 1.738 1.765 1.774 1.131 1. 151 1.130 1.119 1.120 1.122 1.117 1.121 1.244 1. 233 1.283 1.272 1.132 1.141 1.124 1.174 1.189 1.218 1.211 1.215 1.230 1.241 1.254 1.229 1.197 1. 230 1.231 1.229 1.241 1.262 1.257 1.258 1. 281 1.289 1.314 1.300 .953 .957 .960 .974 .985 .996 1.003 1.003 1.012 1.013 1.025 1.016 .654 .642 .642 .643 .650 .652 .660 .672 .684 .687 .693 1.781 1.806 1.805 1.818 1.833 1.279 1.302 1.262 (2) 1.241 1. 238 1.223 1.242 1.255 1.309 1.343 1.334 1.346 1.363 1.044 1.050 1.044 1.055 1.064 .695 .695 .695 .699 .710 1.240 1.809 8 «1.339 5 1.051 Money payments only; additional value of room, board, uniforms, arid tips are not included. 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. *8 Annual avorai^ includes retroactive pay increases not included in the monthly averages. 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] Nonagricultural production Total production Period Weights i Total Nonagricultural. Agricultural production Minerals Total TransConManufactures struction portation 100.0 20.6 79.4 100.0 4.9 6.2 50.8 64.0 7.6 9.6 Electric and gas , utilities 12.9 16.2 3.2 4.0 1929 113 97 117 107 110 180 117 82 1930 1931 1932 1933 1934 98 86 71 74 75 95 104 101 93 79 99 82 63 69 75 93 80 67 76 80 90 74 57 68 74 153 124 79 53 58 104 89 73 76 83 82 78 71 72 78 1935 1936 1937 1938 1939 88 99 111 94 109 96 85 108 105 106 85 103 111 91 110 86 99 112 97 106 87 104 113 87 109 69 101 106 101 123 88 101 110 95 106 85 97 106 100 112 121 152 184 205 201 110 114 128 125 130 124 161 199 226 220 117 125 129 132 140 126 168 212 258 252 133 182 202 112 60 116 142 180 214 224 123 141 159 184 193 181 165 177 129 134 129 195 174 190 137 134 149 214 177 194 68 127 143 217 198 209 190 192 219 1940 1941 1942 1943 1944 -_ 1945 1946 1947 1947—First half Second half (2) (2) (3) (3) 188 191 147 152 193 195 134 153 208 208 218 221 1948—First half * (2) (3) 195 153 199 160 206 247 1 Computed from the D e p a r t m e n t of Commerce data of national income. T h e weight factors are percentages of the national income for each industry to the t o t a l for the 6 industries. T h e weight for construetion has been adjusted to include force account a n d other construction done outside of the contract construction 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 d a t a . Sources: Based on the following data: Agricultural production.—Department of Agriculture index of farm outfjut which measures the physical 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 b y their index of construction costs and converted into relatives with 1935-39 as 100. Transportation.—Department of Commerce index of transportation. T h e figures for 1947 and first half of 1948 are estimated by the Board of Governors of the Federal Reserve System on the basis of transportation d a t a . Electric and gas utilities.—Based on the following series- Electric power generated for public use as reported by the Federal Power Commission, and sales of gas to consumers as reported by the American Gas Association. T h e two series are converted into relatives with the average for the period 1935-39 as 100. T h e relative scries are combined into an index of public utility production with electric power given a weight of 73 and gas 27, the respective percentages of the revenues by each of the utilities to the total revenues produced by both in the base period 1935-39. 87 TABLE 12.—Industrial production index, 1929-48 [1935-39=100, seasonally adjusted] Total industrial production 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 March April May . June July August September October November _ December 1948—January February March April . . May 1 June . . Manufactures Minerals Nondurable 110 110 132 93 107 91 75 58 69 75 90 74 57 68 74 98 67 41 54 65 84 79 70 79 81 93 80 67 76 80 87 103 113 89 109 87 104 113 87 109 83 108 122 78 109 90 100 106 95 109 86 99 112 97 106 125 162 199 239 235 126 168 212 258 252 139 201 279 360 353 115 142 158 176 171 117 125 129 132 140 203 170 187 187 187 214 177 194 274 192 220 166 165 172 137 134 149 195 193 221 218 173 172 147 152 192 198 224 178 153 189 189 190 187 185 184 176 182 187 190 192 192 196 197 198 194 191 191 183 188 192 197 199 198 221 222 225 222 218 219 207 210 217 223 224 229 176 176 175 172 170 168 163 169 172 176 179 173 146 146 148 143 151 148 140 150 153 155 155 156 193 194 191 188 191 192 200 201 200 195 197 198 229 226 229 217 220 222 178 180 177 177 178 178 154 155 142 147 162 158 i Estimates based on incomplete data. Source: Board of Governors of the Federal Reserve System. Durable Total 88 TABLE 13.—New construction activity, 1929-48 [Millions of dollars] Private construction Public construction By source of funds Period Total new ResiPubcondential Nonlic resistruc- Total build- dential utilprition i ing buildvate (nonand ings farm) farm Total public Federal By type of construction Military and fedOther State erally Highand ways publocal lic financed industrial 1929. 9,873 7,476 2,797 2,822 1,857 2,397 237 2,160 19 1,254 1,124 1930. 1931. 1932. 1933. 1934. 8,042 5,265 5,967 3,375 3,290 1,467 2,376 1,012 2,805 1,235 1,446 1,228 462 278 361 2,099 1,104 499 404 455 1,720 1,043 506 330 419 2,777 2,592 1,823 1,364 1,570 338 451 510 552 720 2,439 2,141 1,313 812 850 29 40 34 38 58 1,505 1,351 961 809 1,243 1,201 828 517 686 1935. 1936. 1937. 1938. 1939. 3,230 4,836 5,487 5,186 6,307 1,676 2,550 3,390 3,076 3,808 665 1,131 1,372 1,511 2,114 472 712 1,088 764 785 539 707 930 801 909 1,554 2,286 2,097 2,110 2,499 1,262 1,154 989 1,257 726 1,024 943 1,121 1,242 39 33 39 74 148 709 927 902 858 867 ,156 1,178 ,484 1940. 1941 1942. 1943. 1944. 7,042 10,490 13,412 7,784 4,136 4,390 5,426 3,007 1,744 1,823 2,355 2,765 1,315 650 535 1,028 1,486 635 232 350 1,007 2,652 1,175 5,064 1,057 10, 405 6,040 2,313 1,397 3,853 9,544 5,614 1,912 1,255 1,211 861 426 401 549 2,900 8,453 4,218 1,344 882 800 616 420 346 ,221 ,364 ,336 1,402 623 1945. 1946. 1947. 4,808 2,716 10,458 8,253 13, 977 10,893 3,183 5,260 1,014 3,346 3,131 1,018 1,724 2,502 2,092 2,205 3,084 1,558 1,074 1,175 534 1,131 1,909 1,160 272 229 772 1,233 546 1,161 1,622 Totals for period, not adjusted for seasonal 1947—First half.... Second half 5,677 4,432 8,300 6,461 1,935 3,325 1,504 1,627 993 1,245 1,509 1,839 518 727 657 1,182 102 127 426 807 717 905 1948—First half.... 7,684 6,064 3,100 1,651 1,313 1,620 533 1,087 87 558 975 1947—January February March.. April May June July August September October November December 873 823 859 928 1,032 1,162 1,264 1,364 1,423 1,497 1,432 1,320 703 662 679 713 790 885 966 1,042 1,086 1,129 1,141 1,097 300 280 285 310 355 405 455 500 540 590 630 610 275 258 241 238 242 250 254 260 267 275 287 284 128 124 153 165 193 230 257 282 279 264 224 203 170 161 180 215 242 277 298 322 337 368 291 223 83 81 76 84 90 104 112 120 121 128 99 77 87 80 104 131 152 173 186 202 216 240 192 146 18 15 15 19 18 17 21 23 23 24 19 17 39 36 50 76 100 125 137 149 159 178 119 65 113 110 115 120 124 135 140 150 155 166 153 141 1948—January February March April May June. 1,157 948 837 1,009 940 1,166 1,302 1,015 1,445 1,106 1,605 1,218 500 400 475 525 575 625 273 265 266 263 278 306 175 172 199 227 253 287 209 172 226 287 339 387 71 55 71 94 111 131 138 117 155 193 228 256 15 12 13 15 15 56 41 57 98 136 17 170 119 156 174 188 200 i Excludes construction expenditures for crude petroleum and natural gas drilling, and, therefore does not agree 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 commercial 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 [Millions of dollars] Manufacturing and mining Period Total i Total Manufacturing Mining Transportation Railroad Other Electric and gas utilities Commercial and miscellaneous 2 1929 9,165 3,596 (3) (3) 840 (4) (4) 4,729 1930 1931 1932 1933 1934 7,610 4,712 2,608 2,137 3,080 2,541 1,435 930 992 1,460 (3) (3) (3) (3) (4) (•) (4) (3) (3) (3) (3) (3) S65 360 164 101 218 (4) (4) (4) (4) (4) (4) 4,204 2,917 1,514 1,044 1,402 3,738 5,077 6,730 4,520 5,200 1,790 2,450 3,330 1,830 2,310 (3) (3) (3) (3) (4) 380 166 306 525 238 280 (4) 1,930 (3) (3) (3) (3) (4) (4) (4) (4) (4) (4) 480 1,782 2,321 2,875 2,452 1,850 6.490 8,190 6,110 4 530 5,210 3,140 4,080 3. 170 2,610 2,890 2. 580 3,400 2. 760 2.250 2,390 560 680 410 360 500 440 560 540 460 580 390 340 260 190 280 550 710 680 540 490 1,980 2.490 1,470 730 970 6,630 12,040 16, 200 3,650 6,470 8,150 3,210 5,910 7,460 440 560 690 550 570 910 320 660 800 630 1,040 1,900 1,480 3,300 4,430 _ 1935 1936 1937 1938 1939 . 1940 1941 1942 1943 1944 _ . 1945 1946 1947 (3) 280 Annual rates, not adjusted for seasonal 1947—First half Second half 1948—First half« 1947—First quarter ___ Second quarter T h i r d quarter Fourth quarter 1948—First quarter Second quarter f i T h i r d quarter 8 620 780 760 1,060 820 780 1,560 2,240 3,860 5,000 7,620 720 1,240 780 2,220 5,140 640 880 920 1,200 720 920 800 760 1,320 1,800 2,000 2,480 3,600 4,120 4,640 5,360 1,080 1,400 1,520 720 840 680 2,000 2,440 2,600 4,960 5,320 5,360 14, 200 18,180 7,220 9,100 6,600 8,320 17, 720 8,340 12, 640 15, 760 16,560 19,800 6.400 8,040 8,200 10,000 5,800 7,400 7,480 9,160 600 640 720 840 16,680 18, 760 18, 280 7,920 8, 760 8,120 7,200 8,040 7,400 720 720 720 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. *6 Included in commercial and miscellaneous prior to 1939. 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 the Department of Commerce, principally because the latter cover agricultural investment and also certain equipment and construction outlays charged to current expense. Figures for 1929-44 are Federal Reserve Board estimates based on Securities and Exchange Commission and other data. Detail will not necessarily 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 Manufacturing i Period Wholesale 2 Retail 2 Millions of dollars Ratio of Millions of dollars Ratio of Millions of dollars Ratio of Inventories 3 Sales * inventories to sales Inventories 3 Sales * inventories to sales Inventories 3 Sales * inventories to sales 1939 11, 516 5,112 2.25 3,609 4,606 0.78 5,502 3,504 1.57 1940 1941 1942 1943 1944 12, 873 17, 024 19, 221 19, 897 19,122 5,859 8,172 10, 346 12, 603 13, 402 2.20 2.08 1.86 1.58 1.43 3, 793 4.729 4,013 3,986 4,024 5,147 6,964 7,769 8,274 8,617 .74 .68 .52 .48 .47 6,011 7,620 7,874 7, 350 7,396 3,866 4,624 4,796 5,307 5,790 1.55 1.65 1.64 1.38 1.28 1945 1946 1947 17, 924 23. 435 28, 020 12, 371 12, 020 15, 671 1.45 1.95 1.79 4.308 5,994 7,577 8,782 10, 958 12, 915 .49 .55 .59 7,502 11, 049 12, 953 6,381 8, 355 9,810 1.18 1.32 1.32 1947—First half Second half... 26, 479 28, 020 14, 948 16, 396 1.77 1.71 6,864 7,577 12, 572 13, 306 .55 .57 11, 948 12, 953 9,469 10,152 1.26 1.28 1948—First half«._._ 29, 438 16, 923 1.74 8,071 13, 809 .58 13, 753 10, 566 1.30 1947—January February March April May June July August September October November December 24, 213 24, 831 25, 398 25, 853 26, 440 26, 4/9 26, 846 27, 051 27,055 27, 397 27, 627 28,020 14, 453 14,175 15, 546 15, 398 15, 049 15, 065 14, 362 15, 258 16, 597 18, 081 16, 556 17, 524 1.68 1.75 1.63 1.68 1.76 1.76 1.87 1.77 1.63 1.52 1.67 1.60 6,248 6,444 6,611 6,778 6,737 6,864 6,726 6,886 6,997 6,943 7,349 7,577 12, 683 12,996 12, 627 12, 218 12, 369 12, 541 12, 403 12, 523 13, 263 13, 615 14, 333 13, 697 .49 .50 .52 .55 .54 .55 .54 .55 .53 .51 .51 .55 11, 427 11, 653 11, 832 11,974 11, 772 11,948 11, 9^5 11,944 12,073 12, 435 12, 621 12, 953 9,097 9,285 9,399 9,610 9,681 9,743 9,730 9,621 10,162 10, 258 10. 485 10, 653 1.26 1.26 1.26 1.25 1.22 1.23 1.23 1.24 1.19 1.21 1.20 1.22 1948—January February March April e May • 28, 491 28, 757 29, 053 29,149 29, 438 16, 549 16, 208 18,100 17, 212 16, 547 1.72 1.77 1.61 1.69 1.78 7,618 7,754 8,054 8,049 8,071 14, 096 13, 993 13, 426 13, 684 13, 847 .54 .55 .60 .59 .58 13,384 13, 751 14, 040 13, 907 13, 753 10, 445 10, 381 10, 565 10, 841 10, 599 1.28 1.32 1.33 1.28 1.30 1 Not adjusted for seasonal variation. 2 Adjusted for seasonal variation, s4 Book value, end of period. 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 with the estimates of "change in business inventories" included in the gross national product since they cover only manufacturing and trade rather than all business, and show inventories in terms of current book value without 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 Millions of dollars * Period Sales (total for month) Monthly average: 1939 Stocks (end of month) Outstanding orders (end of month) Ratio of stocks to sales Ratio of orders to sales Ratio of orders to stocks 128 344 1940 1941 1942 1943 1944 136 156 179 204 227 353 419 599 508 534 108 194 263 530 560 2.60 2.69 3.35 2.49 2.35 0.79 1.24 1.47 2.60 2.47 0.31 .46 .44 1.04 1.05 1945 1946 1947 255 318 336 563 714 823 729 909 553 2.21 2.25 2.45 2.86 2.86 1.65 1.29 1.27 .67 1947—First half Second half 300 373 817 828 488 619 2.72 2.22 1.63 1.66 .60 .75 1948—First half 316 887 466 2.81 1.47 .53 256 250 331 321 336 304 253 274 341 367 416 584 770 835 866 849 816 768 732 789 823 912 942 770 620 606 489 388 353 470 603 622 676 663 605 544 3.01 3.34 2.62 2.64 2.43 2.53 2.89 2.88 2.41 2.49 2.26 1.32 2.42 2.42 1.48 1.21 1.05 1.55 2.38 2.27 1.98 1.81 1.45 .93 .81 .73 .56 .46 .43 .61 .82 .79 .82 .73 .64 .71 271 263 355 331 339 337 789 878 941 938 919 857 633 575 420 356 339 471 2.91 3.34 2.65 2.83 2.71 2.54 2.34 2.19 1.18 1.08 1.00 1.40 .80 .65 .45 .38 .37 .55 1947—January February March _ _ April _ May June _July August September October November December 1943—January February March April May June 3 _ 2.69 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 of 296 of the larger department stores located in various cities throughout the country and are not estimates of total sales, stocks, and outstanding orders for all department stores in the United States. Data are not available 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 Food Apparel Rent Fuel, elec- House tricity, furnishand ice Miscellaneous Monthly averager 1929 122.5 132.5 115.3 141.4 112.5 Ill. 7 104.6 1930 1931 1932.... 1933 1934.. 119.4 108.7 97.6 92.4 95.7 126.0 103.9 86.5 84.1 93.7 112.7 102.6 90.8 87.9 96.1 137.5 130.3 116.9 100.7 94.4 111.4 108.9 103.4 100.0 101.4 108.9 98.0 85.4 84.2 92.8 105.1 104.1 101.7 98.4 97.9 1935 1936-. 1937 1938 1939 98.1 99.1 102.7 100.8 99.4 100.4 101.3 105.3 97.8 95.2 96.8 97.6 102.8 102.2 100.5 94.2 96.4 100.9 104.1 104.3 100.7 100.2 100.2 99.9 99.0 94.8 96.3 104.3 103.3 101.3 98.1 98.7 101.0 101.5 100.7 100.2 105.2 116.5 123.6 125.5 96.6 105.5 123.9 138.0 136.1 101.7 106.3 124.2 129.7 138.8 104.6 106.2 108.5 108.0 108.2 99.7 102.2 105.4 107.7 109.8 100.5 107.3 122.2 125.6 136.4 101.1 104.0 110.9 115.8 121.3 1945 1946 1947 128.4 139.3 159.2 139.1 159.6 193.8 145.9 160.2 185.8 108.3 108.6 111.2 110.3 112.4 121.1 145.8 159.2 184.4 124.1 128.8 139.9 1947—First half— Second half. 155.4 163.0 187.0 200.7 183.4 109.0 113.4 117.7 124.6 181.5 187.4 138.3 141.6 1948—First half— 116.4 130.8 193.9 147.0 108.5 110.5 156.1 127.9 - 1940 1941 1942 1943 1944 188.1 169.1 208.3 1946—June 133.3 145.6 1947—January February. March April May June July August September October November December 153.3 153.2 156.3 156.2 156.0 157.1 158.4 160.3 163.8 163.8 164.9 167.0 183.8 182.3 189.5 188.0 187.6 190.5 193.1 196.5 203.5 201.6 202.7 206.9 157.2 179.0 181.5 184.3 184. 9 185.0 185.7 184.7 185.9 187.6 189.0 190.2 191.2 108.8 108.9 109.0 109.0 109.2 109.2 110.0 111.2 113.6 114.9 115.2 115.4 117.3 117.5 117.6 118.4 117.7 117.7 119.5 123.8 124.6 125.2 126.9 127.8 179.1 180.8 182.3 182.5 181.9 182.6 184.3 184.2 187.5 187.8 188.9 191.4 137.1 137.4 138.2 139.2 139.0 139.1 139.5 139.8 140.8 141.8 143.0 144.4 1948—January February March.. __ April.. ..__ May June 168.8 167.5 166.9 169.3 170.5 171.7 209.7 204.7 202.3 207.9 210.9 214.1 192.1 195.1 196.3 196.4 197.5 196.9 115.9 116.0 116.3 116.3 116.7 117.0 129.5 130.0 130.3 130.7 131.8 132.6 192.3 193.0 194.9 194.7 193.6 194.8 146.4 146.4 146.2 147.8 147.5 147.5 Source: Department of Labor. 793637° 93 195.7 TABLE 18.— Wholesale price index, 1929-48 [1926=100] Average: 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 . - , - _ 1940 1941 1942 1943 1944 1945 1946 1947 1 ! f'l If I •oS - 1947—First half Second half <x> e^ ^ w a fl 0CST3 4 a B tea „ S3 +2 o3 a .9 if !§> T3 H | I 1 s 95.3 104.9 99.9 91.6 109.1 90.4 83.0 100.5 95.4 94.0 94.3 82.6 86.4 73.0 64.8 65.9 74.9 88.3 64.8 48.2 51.4 65.3 90.5 74.6 61.0 60.5 70.5 85.2 100.0 75.0 86.1 70.2 72.9 71.2 80.9 78.4 86.6 80.3 66.3 54.9 64.8 72.9 78.5 67.5 70.3 66.3 73.3 92.1 84.5 80.2 79.8 86.9 89.9 79.2 71.4 77.0 86.2 88.7 79.3 73.9 72.1 75.3 92.7 84.9 75.1 75.8 81.5 77.7 69.8 64.4 62.5 69.7 80.0 80.8 86.3 78.6 77.1 78.8 80.9 86.4 68.5 65.3 83.7 82.1 85.5 73.6 70.4 77.9 89.6 79.6 95.4 85.3 104.6 81.7 92.8 81.3 95.6 70.9 71.5 76 3 66.7 69.7 73.5 76.2 77.6 76.5 73.1 86.4 87.0 95.7 95.7 94.4 85.3 86.7 95.2 90.3 90.5 79.0 78.7 82.6 77.0 76.0 80.6 81.7 89.7 86.8 86.3 68.3 70.5 77.8 73.3 74.8 100.8 108.3 117.7 117.5 116.7 73.8 84 8 96.9 97.4 98.4 71.7 95.8 94.8 76.2 99.4 103.2 78.5 103.8 110.2 80.8 103.8 111 4 83.0 103.8 115. 5 77.0 88.5 84.4 94.3 H5.5 102. 4 94.9 102.7 95.2 104.3 77.3 82.0 89.7 92 2 93.6 78.6 67.7 71.3 87.3 82.4 82.7 98.8 105. 9 99.6 103.1 122 6 106.6 104.0 123.3 104.9 - a «S 3 Foods Period Farm products All commodities Other than farm products and foods -a S 83.0 89.0 95.5 96.9 98.5 I c la 1 ffl •—i bl. W 99.7 118.1 100.1 84.0 104.7 117.8 95.2 104.5 94.7 121.1 148.9 130.7 109.5 137.2 116.3 90.1 115.5 132.6 101.4 111.6 100.3 152.1 181.2 168.7 135.2 182.4 141.7 108.7 145.0 179.7 127.3 131.1 115.5 - 105.8 128.2 106.2 146.7 174.7 161.8 131.0 173 8 139.7 101.2 140.8 175.2 128.5 128.7 114.1 157.2 187.3 175.4 139.3 191.1 143.6 115.8 149.1 183.8 126.3 133.4 116.6 1948—First half. _ __ 163.5 190.4 176.9 148.5 189.8 149.5 131.5 156.4 194.6 136.0 142.2 121.5 1946—June _. 112.9 140.1 112.9 105.6 122.4 109.2 87.8 112.2 129.9 96.4 110.4 98.5 1947—January - - 142.0 145.2 February March _ _ _ _ _ 150.0 148.0 April 147.3 May 147.7 June - 150.6 July 153.7 August _. 157.4 September 158.5 October 159.6 November _ 163.2 December 165.0 170.4 182.6 176.9 175. 4 177.8 181.4 181.6 186.4 189.7 187.9 196.7 156.6 162.3 167.9 162 4 159.6 161.8 167.1 172.3 179.2 177.7 177.9 178.4 128.4 129.4 131.7 132.4 132.3 131.6 133.5 136.2 138.3 140.1 142.1 145.5 176.2 174.1 175.1 172.1 171.5 173.8 179.1 182.8 185.6 193.1 202.5 203.4 138.2 139.5 140.5 140 3 139.9 139 9 140.5 141.8 142.4 143.4 145.2 148.0 97.7 98.2 100.7 103.2 103.4 104.0 109.0 112.6 114 2 116.1 118.2 124.6 139.0 139.6 141.1 141.3 141.9 142.0 143.1 148.5 150.1 150.5 150.8 151.5 170.2 174.8 177.5 178 1 176.2 174. 1 175.5 179.6 183.4 185.8 187.7 191.0 128.3 129.3 132.2 133.5 127.1 120.8 118.8 117.5 122.3 128.6 135.8 135.0 126.5 128.3 129.0 129. 1 129.5 129.7 129.8 129.9 131.3 132.4 137. 5 139.4 110.9 111.7 115.6 116.1 116.9 113 5 113.2 113.1 115.9 117.1 118.8 121.5 165.7 160.9 161.4 162.8 163.9 166.2 199.2 185.3 186.0 186.7 189.1 196.0 179.9 172.4 173.8 176.7 177.4 181.4 148.3 147.6 147.7 148.7 149.0 149.5 200.3 192.8 185.4 186.1 187.5 186.8 148.4 148.9 149.8 150.3 150.2 149.6 130.0 130.8 130.9 131.6 132.6 133.1 154.3 155.3 155.9 157.2 157.1 158.7 193.3 192.7 193.1 195.0 196.4 196.8 138.8 134.6 136.1 136.2 134.7 135.7 141.3 141.8 142.0 142.3 142.6 143. 4 123.6 120.1 120 8 121.8 121.5 121.4 1948—January February March April May. June 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] Prices received i Period Monthly average: 1929. Prices paid (including interest and taxes) Parity ratio a 149 167 89 1930.— 1931 1932. 1933 1934 128 90 68 72 90 160 141 124 120 129 80 64 55 60 70 1935 1936. 1937 1938 1939 109 114 122 97 95 130 127 133 126 124 84 90 92 77 77 1940 1941 1942 1943 1944 100 124 159 192 195 125 132 150 162 169 80 94 106 119 115 1945 1946 1947 202 233 278 172 193 231 117 121 120 1947—First half.. Second half. 270 286 225 238 120 120 291 249 117 1947—January February. March April May June July August September October .__. November December 260 262 280 276 272 271 276 276 286 289 287 301 215 221 226 229 228 230 230 234 238 239 241 245 121 119 124 121 119 118 120 118 120 121 119 123 1948—January February March April May June 307 279 283 291 289 295 251 248 247 249 250 251 122 112 115 117 116 118 1948—First half... 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 [Millions of dollars] End of period Total consumer credit Instalment credit i Charge accounts Other consumer credit 2 1929 7,637 3,167 1,749 2,721 1930 1931_ 1932 1933. 1934 6,829 5,526 4,093 3,919 4,396 2,696 2,212 1,526 1,595 1,867 1,611 1,381 1,114 1,081 1,203 2,522 1,933 1,453 1,243 1,326 1935 1936..._ 1937 1938. 1939 5,439 6,796 7,491 7,064 7,994 2,627 3,526 3,971 3,612 4,449 1,292 1,419 1,459 1,487 1,544 1,520 1,851 2,061 1,965 2,001 1940 1941 1942 1943 1944 9,146 9,895 6,478 5,334 5,776 5,448 5,920 2,948 1,957 2,034 1,650 1,764 1,513 1,498 1,758 2,048 2,211 2,017 1,879 1,984 _. 6,638 10,166 13,385 2,365 3,976 6,156 1,981 3,054 3,612 2,292 3,136 3,617 1947—January... February.. March April May June July August September October... November. December. 10,024 10, 019 10,379 10, 631 10, 934 11,230 11,302 11,433 11, 682 12, 055 12,636 13,385 4,048 4,156 4,329 4,536 4,739 4,919 5,045 5,179 5,290 5,463 5, 733 6,156 2,764 2,602 2,768 2,782 2,835 2,887 2,786 2,755 2,864 3,029 3,309 3,612 3,212 3,261 3,282 3,313 3.360 3,424 3,471 3,499 3,528 3,563 3,594 3,617 1948—January.. _ February.. March April May June ? 13, 058 12, 945 13,391 13, 599 13,804 14,100 6,186 6,249 6,498 6,737 6,957 7,200 3,240 3,067 3,281 3,265 3,255 3,300 3,632 3,629 3,612 3,597 3,592 3,600 1945 1946 1947 _ _ __ 1 Includes automobile and other sale credit and repair and modernization loans insured by Federal House ing Administration. 2 Includes single-payment loans of commercial banks and pawnbrokers and service credit. 3 Estimates based on incomplete data. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Board of Governors of the Federal Reserve System. 96 TABLE 21.—Loans and investments of all commercial banks, 1929-48 [Billions of dollars] Total loans and investments End of month Investments Loans Total U. S. Government obligations Other securities 1929—Junel 49.4 35.7 13.7 4.9 8.7 1930—-June l 1931—June»1 1932—June 1933—June 1* 1934—June 48.9 44.9 36.1 30.4 32.7 34.5 29.2 21.8 16.3 15.7 14.4 15.7 14.3 14.0 17.0 5.0 6.0 6.2 7.5 10.3 9.4 9.7 8.1 6.5 6.7 1935—June1 1936—December 1937—December ._ 1938—December 1939—December. 34.6 39.5 38.3 38.7 40.7 14.9 16.4 17.1 16.4 17.2 19.7 23.1 21.2 22.3 23.4 12.7 15.3 14.2 15.1 16.3 7.0 7.8 7.1 7.2 7.1 1940—December 1941—December 1942—December 1943—D ecember 1944—December _. 43.9 50.7 67.4 85.1 105.5 18.8 21.7 19.2 19.1 21.6 25.1 29.0 48.2 66.0 83.9 17.8 21.8 41.4 59.8 77.6 7.4 7.2 6.8 6.1 6.3 124.0 26.1 97.9 90.6 7.3 119.4 114.0 27.1 31.1 92.3 82.9 84.5 74.8 7.8 8.1 112.8 116.3 33.7 38.1 70.5 69.2 8.5 9.0 114.1 39.7 79.1 78.2 74.4 65.0 9.4 .- - -_ 1945—December ., 1946—June Dpinpmbfir 1947—June December 1948—June* _ _. _ 1 Complete end-of-year figures are not available for years prior to 1936. Estimates by Council of Economic Advisers. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Board of Governors of the Federal Reserve System (except as noted). 2 97 TABLE 22.—Adjusted deposits of all banks and currency outside banks, 1929-48 [Billions of dollars] End of period Total deposits U.S. adjusted Governand ment l currency deposits outside banks Other deposits and currency outside banks Total Demand Time 3 Currency deposits outside adjusted 2 deposits banks 1929 54.7 0.2 54.5 22.8 28.2 3.6 1930 1931 1932 — 1933 1934 — 63.6 48.3 45.4 42.5 48.0 .3 .5 .5 1.0 1.7 53.2 47.9 44.9 41.5 46.3 21.0 17.4 15.7 15.0 18.5 28.7 26.0 24.5 21.7 23.2 3.6 4.5 4.7 4.8 4.7 52.2 57.4 56.6 59.0 64.1 .9 1.0 .8 .9 .8 51.3 56.4 55.8 58.1 63.3 22.1 25.5 24.0 26.0 29.8 24.2 25.4 26.2 26.3 27.1 4.9 5.5 5.6 5.8 6.4 1940 1941 1942 1943 1944 70.8 78.2 99.7 122.8 151.0 .8 1.9 8.4 10.4 20.8 70.0 76.3 91.3 112.4 130.2 34.9 39.0 48.9 60.8 66.9 27.7 27.7 28.4 32.7 39.8 7.3 9.6 13.9 18.8 23.5 1945 175.4 24.6 150.8 75.9 48.5 26.5 1946—June December 171.2 167.1 13.4 3.1 157.8 164.0 79.5 83.3 51.8 54.0 26.5 26.7 165.5 171.4 1.4 1.5 164.1 170.0 82.1 87.1 55.7 56.4 26.3 26.5 167.5 2.2 165.3 82.6 57.1 25.6 1935 . . 1936 1937 -_ 1938 1939 — y 1947—June December.. __ 4 1948—June 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. NOTE.—Detail will not necessarily add to totals because of rounding. 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 values 1 ] Gross debt and guaranteed obligations outstanding Held by public End of period Total 1939—December 1940—December 1941—December 1942— December 1943—December 1944— December 1945—December 1946—December.. 1947— necember 1948—June9 _ _ _ 47.6 50.9 64.3 112 5 170.1 232.1 278.7 259.5 257 0 252.4 Held by U. S. Government agencies and trust funds 6.5 7.6 9.5 12 2 16.9 21.7 27.0 30.9 34.4 35.8 Nonbank private State Com- Federal financial and Total local mercial3 Reserve corporagovernbanks banks tions and associaments 2 tions * 41.1 43.3 54.8 100.3 153. 2 210.4 251 7 228.6 222.6 216.6 1 3 0.4 .5 .7 10 2.1 4.3 6.5 6.3 7.3 7.2 15.9 17.3 21.4 41 1 59.9 77.7 90.8 74.5 68 7 65.0 2.5 2.2 2.3 62 11.5 18.8 24.3 23.3 22.6 21.4 12.0 12.5 16.3 27 4 41.2 56.0 65.3 59.5 57.5 56.3 Individuals* 10.4 10.9 14.1 24 5 38.4 53.5 64.8 64.9 66.6 66.8 United States sayings bonds, series A-D, E, and F, are included at current redemption values. 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 Territories 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 December 1946, includes investments by the International Bank for Reconstruction and Development and International Monetary Fund in special non-interest bearing notes issued by the U. S. Government. Beginning 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 rounding Source: Treasury Department. 99 TABLE 24.—Profits before and after taxes, all private corporations, 1929—48 [Billions of dollars] Period 1929. Corporate profits after taxes Corporate profits before taxes Corporate tax liability 1 9.8 Total Dividend payments Undistributed profits 1.4 8.4 5.8 2.6 1930. 1931. 1932 1933 1934 3.3 -.8 -3.0 .2 1.7 .5 .4 .5 .7 2.5 -1.3 -3.4 -.4 1.0 5.5 4.1 2.6 2.1 2.6 -3.0 -5.4 -6.0 -2.4 -1.6 1935. 1936. 1937. 1938. 1939. 3.2 5.7 6.2 3.3 6.5 1.0 1.4 1.5 1.0 1.5 2.3 4.3 4.7 2.3 5.0 2.9 4.6 4.7 3.2 -.6 -.3 1940. 1941. 1942. 1943. 1944. 9.3 17.2 21.1 24.5 24.3 2.9 7.8 11.7 14.2 13.5 6.4 9.4 9.4 10.4 10.8 4.0 4.5 4.3 4.5 4.7 2.4 4.9 5.1 5.9 6.1 1945. 1946. 1947. 20.4 21.8 29.8 11.6 9.0 11.7 8.7 12.8 18.1 4.7 5.6 4.0 7.2 11.2 Annual rates, seasonally adjusted 1947—First half Second half 1948—First half 3 28.9 30.8 11.4 12.1 17.5 18.7 30.5 11.9 28.9 1947—First quarter... Second quarter. Third quarter.. Fourth quarter. 29.1 32.4 11.4 11.3 11.4 12.7 1948—First quarter... Second quarter 31.4 29.5 12.2 11.5 7.0 10.9 11.7 18.6 7.4 11.2 17.5 17.5 17.7 19.7 6.4 6.7 7.1 11.1 10.8 10.8 12.6 19.2 18.0 7.3 7.5 11.9 10.5 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+ [Millions of dollars] Manufacturing and mining Period 629 47 77 49 1939 1,465 146 115 223 102 119 151 1940-.. 1941 1942 _ 1943.... 1944.. 1,818 2,163 1, 769 1,800 1,896 278 325 226 204 194 158 193 159 165 174 242 274 209 201 222 173 227 182 180 190 133 153 138 128 115 148 159 151 162 175 1,925 2, 545 3,670 188 283 437 163 171 334 243 130 417 169 127 205 108 136 198 199 356 354 Number of companies 1945 1946 1947 __ _, - 15 80 74 186 134 122 112 174 152 186 220 194 207 164 170 187 160 187 136 149 147 132 152 161 171 223 281 187 273 345 154 302 370 203 321 45 184 Totals for period, not adjusted for seasonal 1947—First half Second half 1947—First quarter. Second quarter Third quarter Fourth quarter 1,738 1,933 226 212 153 182 199 218 102 103 93 104 109 130 162 193 199 281 175 169 188 183 134 160 871 1,033 126 100 100 112 70 83 77 105 94 105 103 115 49 53 57 46 47 46 45 59 51 58 59 71 98 64 85 108 89 110 121 160 88 87 81 88 96 92 93 90 63 71 80 1948—First quarter.... 1,030 121 87 130 61 49 62 83 196 90 93 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 amusement industry, 21 in shipping and transportation other than railroads (largely air lines), and 11 companies furnishing scattered types of service. Source: Compiled by the Board of Governors of the Federal Reserve System and based on published reports of various industrial corporations. 101 TABLE 26.—Relation of profits before and after taxes to sales, private corporations excluding finance, insurance, and real estate, 7946-48 Profits before taxes as percent of sales Profits after taxes as percent of sales Industry group 1946 1947 All industries, excluding finance insurance, and real estate 7.9 8.6 Mining.._ Manufacturing Metal industries _ Other manufacturing _. Wholesale and retail trade Transportation Communications and public utilities All other industries 2 _. 11.5 8.7 5.8 10.0 5.6 5.0 18.5 9.0 14.9 10.3 11.1 9.9 4.8 7.2 15.7 8.3 1948, first quarter i 16.0 10.2 11.0 9.8 5.0 4.7 16.7 7.5 1 Estimates based on incomplete data. Includes agriculture, forestry and fisheries, and contract construction. Source: Department of Commerce. 2 102 1946 1947 1948, firstl quarter 4.6 5.2 5.2 8.2 5.1 2.9 6.0 3.3 2.5 11.2 5.3 10.5 6.2 6.6 6.1 2.8 4.2 9.6 4.9 11.3 6.2 6.5 6.1 2.9 2.8 10.2 4.4 T A B L E 27.—Relation of profits before and after taxes to investment, private corporations, by industry groups, 7947 manufacturing Ratio of profits (annual rate) to stockholders' equity Industry group 1947 total First quarter Second quarter Third quarter Fourth quarter Before Federal taxes All private manufacturing corporations Food ..__ Tobacco manufactures Textile mill products Apparel and finished textiles Lumber and wood products Furniture and fixtures Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products. _ Products of petroleum and coal Rubber products Leather and leather products ' Stone, clay, and glass products Piimary n on ferrous metal industries Primary iron and steel industries Fabricated metal products Machinery (except electrical and transportation) Electrical machinery.. Transportation equipment (except motor vehicles). Motor vehicles and parts Instruments; photographic and optical goods; watches and clocks __ Miscellaneous manufacturing (including ordnance). 24.7 28.0 25.2 24.0 24.8 29.5 16.2 30.6 31.4 34.9 28.9 33.8 28.8 25.1 18.8 24.2 23.8 22.7 19.3 19.2 28.0 25.8 30.5 4.8 28.2 32.4 14.8 40.0 36.0 36.4 32.8 41.6 35.2 31.6 16.8 28.4 34.4 24.4 24.4 23.6 32.0 27.6 32.4 7.2 29.2 28.0 15.2 31.2 28.4 35.6 32.8 38.4 30.8 24.8 19.2 24.4 21.6 25.2 21.6 18.4 28.4 29.2 32.0 6.0 28.4 30.8 17.2 26.4 34.0 34.8 28.8 32.8 30.0 22.4 21.2 18.8 20.8 21.6 15.2 18.0 27.2 24.0 28 0 3.6 27.2 28. 0 18.8 32.8 29.2 38.0 27.6 30.4 18.0 24.4 21.6 26.8 20.8 21.6 20.8 19.2 28.0 24.8 33.2 2.0 32.0 22.6 24.3 24.0 26.8 23.2 24.4 20.8 26.4 25.6 19.6 After Federal taxes All private manufacturing corporations Food Tobacco manufactures __ Textile mill products Apparel and finished textiles Lumber and wood products Furniture and fixtures Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products. ____ Products of petroleum and coal Rubber products Leather and leather products _ _._ Stone, clay, and glass products Primary nonferrous metal industries Primary iron and steel industries Fabricated metal products Machinery (except electrical and transportation)... Electrical machinery Transportation equipment (except motor vehicles). Motor vehicles and parts Instruments; photographic and optical goods; watches and clocks Miscellaneous manufacturing (including ordnance) _ 15.1 16.8 15.6 14.8 15.2 17.4 9.8 18.4 18.5 22.0 17.3 20.8 17.4 15.5 14.0 12.2 13.8 13.7 11.6 11.7 17.0 15.4 18.4 .4 15.8 18.8 8.8 24.0 21.2 22.4 20.0 25.6 21.6 19.2 12.4 16.4 20.4 14.4 14.8 14.4 19.6 16.4 20.0 3.2 16.8 16.4 9.2 18.8 16.0 22.4 20.0 23.6 18.8 15.2 14.4 8.4 12.8 15.6 13.2 11.2 17.2 17.6 19.2 2.0 16.8 18.4 10.8 15.6 20.8 21.6 17.6 20.4 18 8 14.0 15.6 8.8 12.0 13.2 8.8 10.8 16.4 14.4 16.8 15.6 16.8 11.2 19.6 17.2 24.8 15.6 18.8 9.6 15.2 16.4 16.0 11.6 12.8 10.4 12.0 17.2 14.4 20.0 -3.6 16.4 14.1 14.0 14.8 15.2 14.4 14.8 12. 8 16.0 15.6 10.0 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 Profits in cents per dollar of sales Industry group 1947 total First quarter Second quarter Third quarter Fourth quarter Before Federal taxes All private manufacturing corporations 11.0 12.4 11.1 10.6 10.1 Food Tobacco manufactures.Textile mill products _ Apparel and finished textiles Lumber and wood products Furniture and fixtures Paper and allied products Printing and publishing (except newspapers)._ Chemicals and allied products Products of petroleum and coal Rubber products Leather and leather products.. Stone, clay, and glass products Primary nonferrous metal industries Primary iron and steel industries Fabricated metal products __ _ Machinery (except electrical and transportation) Electrical machinery Transportation equipment (except motor vehicles). Motor vehicles and parts Instruments; photographic and optical goods; watches and clocks _._ __ Miscellaneous manufacturing (including ordnance). 7.1 6.7 13.7 7.8 18.1 10.1 17.4 10.1 14.2 14.6 8.7 7.4 13.1 14.6 10.9 12.1 12.1 10.4 2.8 10.7 8.1 6.8 15.8 8.8 19.5 11.2 19.6 12.6 16.9 13.8 10.8 10.1 13.9 16.2 13.6 14.1 13.2 11.0 5.0 11.2 7.0 6.1 13.7 7.6 18.3 11.1 18.1 11.3 14.2 14.4 8.7 7.2 13.9 14.8 10.1 12.1 12.8 10.3 3.6 10.4 7.3 6.8 12.0 7.9 16.8 10.1 16.8 10.7 13.4 15.5 6.8 6.7 12.4 11.6 10.1 11.5 11.5 9.9 2.4 10.3 6.3 7.3 13.1 6.9 17.9 8.3 15.1 5.9 12.4 14.6 8.8 5.9 12.4 15.6 9.8 11.1 11.1 10.4 .9 10.7 12.5 10.8 13.5 12.2 12.0 10.8 12.0 12.1 12.7 8.4 After Federal taxes All private manufacturing corporations 6.7 7.5 6.8 6.5 6.2 Food Tobacco manufactures Textile mill products. _ Apparel and finished textiles Lumber and wood products Furniture and fixtures. Paper and allied products Printing and publishing (except newspapers) Chemicals and allied products Products of petroleum and coal Rubber products . Leather and leather products Stone, clay, and glass products Primary nonferrous metal industries Primary iron and steel industries. _ Fabricated metal products Machinery (except electrical and transportation)... Electrical machinery Transportation equipment (except motor vehicles) . Motor vehicles and parts Instruments; photographic and optical goods: watches and clocks Miscellaneous manufacturing (including ordnance). 4.2 4.1 8.2 4.6 4.7 4.1 9.5 5.2 4.1 3.7 8.2 4.3 4.3 4.2 7.2 48 11.4 12.1 11.4 10.5 10.7 12.0 11.2 10.3 10.9 10.4 10.1 10.8 11.4 3.2 3.9 7.6 6.8 6.1 6.9 6.9 6.0 .1 5.9 3.7 4.3 7.9 4.1 11.7 4.7 9.3 3.1 7.8 11.3 5.2 3.3 7.4 9.7 6.1 6.8 6.5 6.3 -1.6 5.6 7.8 6.2 8.3 7.0 7.5 6.5 7.5 7.3 7.8 4.3 6.0 6.1 8.7 4.4 4.3 7.9 8.8 6.6 7.4 7.2 6.3 .3 6.0 6.8 7.8 6.2 5.9 8.2 9.7 8.2 8.6 7.9 6.8 2.2 6.4 6.8 6.9 8.7 3.0 4.2 8.5 9.0 6.2 7.4 7.8 6.1 1.1 6.1 Sources: Federal Trade Commission and Securities and Exchange Commission. 104 6.1 6.7 8.2 TABLE 29.—Relation of profits before and after taxes to investment and to sales, all private manufacturing corporations, by size classes, 1947—48 Before Federal taxes After Federal taxes 1947 1947 Assets class (thousands of dollars) Total First Second Third Fourth quar- quar- quar- quar- Total ter ter ter ter First Second Third Fourth quar- quar- quar- quarter ter ter ter 1948, first quarter i Ratio of profits (annual rate) to stockholders' equity All sizes 24.7 28.0 25.2 24.0 24.8 15.1 16.8 15.6 14.8 15.2 (2) Ito249 250 to 9991,000 to 4,999 5,000 to 99,999 100,000 and over.__ 24.4 29.2 30.6 27.3 20.3 26.8 35.2 38.8 31.2 20.8 28.4 30.8 32.4 28.4 19.6 30.0 30.0 28.4 26.0 19.6 10.0 22.4 25.2 27.6 24.0 14.8 16.9 18.2 16.5 12.9 16.4 20.4 23.2 18.8 13.2 18.0 18.0 19.6 17.2 12.4 19.2 17.6 17.2 15.6 12.4 3.6 12.0 14.0 16.8 15.6 (2) Profits in cents per dollar of sales All sizes 11.0 12.4 11.1 10.6 10.1 6.7 7.5 6.8 6.5 6.2 7.2 1 to 249. 250 to 999 1,000 to 4,999 5,000 to 99,999. 100,000 and over... 6.5 8.8 10.7 11.9 11.4 7.6 10.5 13.0 13.3 12.2 8.0 9.3 11.2 11.9 11.0 7.8 9.1 10.3 11.3 10.8 2.6 6.5 8.3 11.1 11.7 3.9 5.1 6.3 7.2 7.2 4.7 6.1 7.9 8.0 7.8 5.1 5.4 6.7 7.2 6.9 5.0 5.4 6.2 6.8 6.8 1.0 3.5 4.7 6.7 7.6 2.0 4.9 6.0 7.1 8.7 1 Estimates based on incomplete data. Not available. Sources: Federal Trade Commission and Securities and Exchange Commission. 2 105 TABLE 30.—Sources and uses of corporate funds, 7946—48 [Billions of dollars] Use or source of funds 1946 Plant and equipment outlays Inventories (increase in book value) Increase in customer financing __ Net repayment of trade debt Net repayment of short-term bank loans Net repayment of RFC loans Reduction 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-term Long-term __ __. Increase in mortgage loans Net new security issues: Bonds Stocks.. Increase in liability for Federal income tax Increase in trade debt Other net sources. Total sources of funds Discrepancy (uses less sources) 1948, first halfi 1947 11.6 7.5 5.4 15.0 7.2 5.6 8.4 2.8 .8 .2 2.5 .1 .1 0 27.2 27.9 12.7 4.1 6.3 6.4 .7 4.5 10.6 .3 .1 2.4 4 6.0 .2 .2 1.9 1.4 .6 1.6 1.3 .6 1.0 1.3 3.0 0 3.1 1.3 2.4 2.2 .5 26.7 28.5 12.6 .5 -.6 .1 c> 0 .4 2.1 .5 .5 .3 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 other financial data. 106 TABLE 3 1 . — The international transactions of the United States, 1946—48 [Millions of dollars] 1947 Item 1946 Total Exports of goods and services: 2 Recorded goods Other goods 5 1948 First Second T h i r d Fourth First quarter quarter quarter quarter quarter Second quarteri 10,188 1,686 15,338 718 3,775 179 4,185 123 3,716 159 3,662 257 3,318 368 3,328 332 11,874 2,272 820 16,056 2,611 1,074 3,954 650 212 4,308 726 243 3,875 675 251 3,919 560 368 3,686 547 217 3,660 560 260 14, 966 19, 741 4,816 5, 277 4,801 4,847 4,450 4,480 4,908 260 5,733 338 1,412 95 1,449 113 1,323 30 1,549 100 1,794 141 1,625 165 5,168 1,783 216 6,071 2,165 227 1,507 464 51 1,562 532 55 1,353 674 47 1,649 495 74 1,935 494 56 1,790 565 70 7,167 8,463 2,022 2,149 2,074 2,218 2,485 2,425 5,280 1,426 9,605 380 2,363 84 2,736 10 2,393 129 2,113 157 1,524 227 1,703 167 Total goods Services Income on investments. . 6,706 489 604 9,985 446 847 2,447 186 161 2,746 194 188 2,522 1 204 2,270 65 294 1 751 53 161 1,870 Total surplus of exports.. 7,799 11, 278 2,794 3,128 2,727 2,629 1,965 2,055 1,968 4,514 1,197 Total goods Services Income on investments.. Total exports Imports of goods and services: Recorded goods Other goods Total goods _ Services Income on investments.. Total imports Surplus of exports of goods and services: Recorded goods Other goods.. _ Means of financing: Net liquidation of gold and dollar assets by: Foreign countries International Monetary F u n d . . Loan disbursements by International Bank Net United States private capital outflow to foreign countries Net U. S. Government loans Net U. S. Government unilateral transfers Net private unilateral transfers. . Total means of financing . . . Errors and omissions e 190 1,144 856 1,317 368 640 464 56 148 260 132 20 297 92 142 63 103 50 335 727 301 207 98 121 230 185 2,774 3,900 854 1,538 1,201 307 606 230 2,279 1,812 444 457 492 419 842 945 598 568 145 119 138 166 159 145 7,954 -155 12, 282 -1,004 2,941 -147 3,613 -485 3,075 -348 2,653 -24 2,440 -475 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 them comparable with figures for 1948. Such shipments are included in exports as recorded by the Bureau of the3 Census in 1948 but were not so included in prior years. Includes goods sold to or bought from other countries that have not been shipped from or into the United States 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 [Millions of dollars] 1947 A. Unilateral payments: Straight lend-lease _ UNRRA Post-UNRRA Civilian supplies for occupied areas ... European recovery program. Greek-Turkish aid._._ Chinese aid International Refugee Organizations Transfers to Philippines ._ Interim aid Other Total unilateral payments... Less: Unilateral receipts.. Equals: Net unilateral payments. B. Long-term loans and investments: Lend-lease credits _ . Surplus property, including ship sales Export-Import Bank United Kingdom loan Investment in International Bank .. .. Investment in International Monetary Fund Other Total, long-term loans and investments Less: Repayments— Equals: Net long term loans and investments, including International Bank and International Fund... Less: Investments in International Bank and International Fund Equals: Net long term loans and investments, excluding International Bank and International Fund_._ 1946 209 1,524 539 1948 First Second T h i r d Fourth First Second Total quarter quarter quarter quarter quarter quarter^ 543 245 285 209 2 49 98 145 45 980 219 240 306 215 340 38 36 85 74 15 33 2 20 12 58 33 13 342 29 584 127 577 85 488 69 887 45 1,020 75 457 492 419 842 945 1 1 53 61 1,300 65 206 100 234 170 300 1 2 2 (2) 18 20 15 38 170 101 113 2,517 238 2,272 460 623 179 2,279 1,812 444 600 2 841 945 600 274 796 2,850 96 280 500 60 249 950 2} *) 2 ) 317 318 159 159 5 12 2,745 80 2,745 28 49 3,320 90 7,065 174 3,808 51 1,467, 34 1,416 40 374 49 706 46 255 25 3,230 6,891 3,757 1,433 1,376 325 660 230 322 3,063 2,904 159 230 2,908 3,828 853 1,274 1,376 325 660 0. Short-term loans (net): -134 72 1 264 -175 -18 —54 Net unilateral payments and loans and investments, excluding International Bank and International Fund 5,053 5,712 1,298 1,995 1,693 726 1,448 i Estimates based on incomplete data, a Not available. NOTE.—Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 8 (2) 17 96 12 305 60 (2) ! 33 Type of aid 108 1,175 T A B L E 33.—United States Period merchandise exports, including reexports, quarterly average and 1947—48 Total merchandise North exports, including America reexports South America Europe by continents, Asia Australia and Oceania 1936-38 Africa Millions of dollars 1936-38 Quarterly average 742 183 69 311 125 23 32 1947 Quarterly average. - . First quarter. _ Second quarter Third quarter Fourth quarter 3,836 3,775 4,185 3,716 3,662 957 906 1,013 900 1,010 588 571 648 560 574 1,421 1,484 1,571 1,392 1,235 582 567 649 564 550 80 64 74 97 86 205 183 230 202 206 1948—First quarter Second quarter i . . . 3,318 3,328 789 921 549 534 1,209 1,080 532 552 42 35 197 206 4.3 HI Percentage of total 1936-88 Quarterly average, 100.0 24.7 9.3 41.9 16.8 3.1 1947 Quarterly average... First quarter Second quarter Third quarter Fourth quarter 100.0 100.0 100.0 100.0 100.0 25.0 24.0 24.2 24.2 27.6 15.3 15.1 15.5 15.1 15.7 37.1 39.3 37.5 37.5 33.7 15.2 15.0 15.5 15.2 15.0 2.1 1.7 1.8 2.6 2.3 1948—First quarter Second quarter i . . . 100.0 100.0 23.8 27.7 16.5 16-0 36.4 32.5 16.0 16.6 1.3 1.1 m 5.3 4.8 5.5 5.4 5.6 5.9 6.2 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 foreign countries including, in 1947 and 1948, goods destined to United States armed forces abroad for distribution in occupied areas as civilian supplies. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 793637°— 4 8 - 109 TABLE 34.— United Slates general merchandise imports, by continents, 1936-38 quarterly average and 7947-48 Period Total general imports North America South America Europe Asia Australia and Oceania Africa Millions of dollars 622 150 81 177 187 10 17 1947—Quarterly average First quarter Second quarter.. Third quarter. Fourth quarter 1,433 1,412 1,449 1,323 1,549 536 495 568 521 560 309 309 291 276 360 204 187 195 213 225 262 303 269 205 273 39 47 54 25 30 82 69 74 83 100 1948—First quarter Second quarter * 1,794 1,625 605 613 423 328 264 247 337 312 48 25 116 100 1936-38—Quarterly average. Percentage of total 1936-38—Quarterly average 100.0 24.1 13.0 28.5 30.1 1.6 2.7 1947—Quarterly average First quarter Second quarter Third quarter Fourth quarter 100.0 100.0 100.0 100.0 100.0 37.4 35.1 39.2 39.4 36.2 21.6 21.9 20.1 20.9 23.2 14.2 13.2 13.5 16.1 14.5 18.3 21.5 18.6 15.5 17.6 2.7 3.3 3.7 1.9 1.9 5.7 4.9 5.1 6.3 6.5 1948—First quarter Second quarter x 100.0 100.0 33.7 37.7 23.6 20.2 14.7 15.2 18.8 19.2 2.7 1.5 6.5 6.2 * Based on actualfiguresfor 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 merchandising channels, plus entires into bonded customs warehouses. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. no TABLE 35.—United States merchandise exports, by economic classes, 1936-38 quarterly average and 1947-48 Total merchandise exports Period Crude materials Crude foodstuffs Manufactured foodstuffs Semi manufactures Finished manufactures Millions of dollars 1936-38—Quarterly average 731 167 34 42 130 358 1947— Quarterlv average First quarter Second quarter Third quarter Fourth quarter 3,790 3.713 4,140 3,683 3,624 400 430 431 352 389 332 322 333 347 324 444 452 490 457 376 446 384 485 478 438 2,168 2,124 2,401 2,049 2,098 1948— First quarter. Second quarter i 3.287 3,295 329 338 315 241 352 388 381 365 1,910 1,964 17.8 49.0 11.8 10.3 11.7 13.0 12.1 57.2 57.2 58.0 55.6 57.9 11.6 11.1 58.1 59.6 Percentage of total 1936-38—Quarterly average.— 100.0 22.8 4.7 1947—Quarterly average First quarter Second quarter. Third quarter Fourth quarter 100.0 100.0 100.0 100.0 100.0 10.6 11.6 10.4 9.6 10.7 8.8 8.7 8.0 9.4 8.9 100.0 100.0 10.0 10.3 9.6 7.3 1948—First quarter. Second quarter * _. _.. 5.7 1£2 11.8 12.4 10.4 10.7 11.8 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 foreign countries, including in 1947 and 1948, goods destined to United States armed forces abroad for distribution in occupied areas as civilian supplies. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. Ill TABLE 36.—Indexes of quantity and unit value of United States merchandise exports, by economic classes, 1936-38 quarterly average and 1947-48 [1936-38=100] Total merchandise exports Period Crude materials Crude foodstuffs Manufactured foodstuffs Semimanufactures Finished manufactures Quantity indexes 1936-38—Quarterly average 100 100 100 100 100 100 1947—Quarterly average First quarter Second quarter Third quarter Fourth quarter 275 281 299 260 249 123 130 127 101 391 425 414 401 336 482 494 523 504 389 203 189 221 213 191 332 341 367 303 307 1948—First quarter Second quarter * 220 222 87 88 318 255 364 410 160 153 275 283 no Unit value indexes 1936--38— Quarterly average. 100 100 100 100 100 100 1947—Quarterly average First quarter Second quarter Third quarter.. _ Fourth quarter 1S8 181 189 194 199 195 197 203 208 210 247 221 235 252 281 218 217 222 215 229 169 157 169 173 177 182 174 183 189 191 204 203 227 229 289 275 229 224 184 183 194 194 1948—First quarter Second quarter i _ _ i Based on calculated indexes for April and M a y 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 on values of changes in average prices has been eliminated. The indexes of unit value provide a measure of 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. The indexes for 1947 and 1948 are based on data which include goods destined to the United States armed forces abroad for distribution to civilians in occupied areas. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 112 TABLE 37.—United States imports for consumption, by economic classes, 1936-38 quarterly average and 1947—48 Total imCrude ports for sonsumption materials Period Crude food- Manufactured stuffs foodstuffs Semimanufactures Finished manufactures Millions of dollars 615 190 85 95 126 120 1947—Quarterly average First quarter Second quarter Third quarter Fourth quarter 1,410 1,395 1,409 1,322 1,516 436 460 453 389 440 254 288 227 201 300 164 134 182 169 171 311 281 312 310 343 246 231 236 254 262 1948—First quarter l Second quarter 1,769 1,612 571 459 346 275 161 183 396 382 295 313 1936-38—Quarterly average. Percentage of total 1936-38—Quarterly average. 100.0 30.9 13.8 15.4 20.5 19.5 1947—Quarterly average First quarter Second quarter Third quarter Fourth quarter - 100.0 100.0 100.0 100.0 100.0 30.9 33.0 32.2 29.4 29.0 18.0 20.6 16.1 15.2 19.8 11.6 9.6 12.9 12.8 11.3 22.0 20.1 22.1 23.4 22.6 17.4 16.6 16.7 19.2 17.3 1948—First quarter l Second quarter - 100.0 100.0 32.3 28.5 19.6 17.1 9.1 11.4 22.4 23.7 16.7 19.4 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 foreign countries. Imports for consumption include merchandise entered immediately upon arrival into merchandising or consumption channels, plus withdrawals from bonded customs warehouses for consumption. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 113 TABLE 38.—Indexes of quantity and unit value of recorded United Slates importsfor consumption, by economic classes, 1936-38 quarterly average and 1947—48 [1936-38=100] Total imports for onsumption Period Crude materials Crude food- Manufactured stuffs foodstuffs Semimanufactures Finished manufactures Quantity indexes 1936-38—Quarterly average.... 100 100 100 100 100 100 1947—Quarterly average First quarter. Second quarter. Third q u a r t e r . . Fourth quarter 109 113 107 102 115 130 138 133 120 134 96 116 85 78 107 83 73 87 86 87 130 126 129 126 140 84 86 80 83 86 126 113 157 125 119 94 81 88 154 142 93 97 1948—First quarter Second quarter* ~ Unit value indexes 1936-38—Quarterly average 100 100 100 100 100 100 1947—Quarterly average First quarter Second quarter Third quarter Fourth quarter 211 201 214 211 215 176 175 179 170 172 311 293 314 302 330 208 195 220 208 206 191 177 193 196 194 245 226 245 256 255 1948—First quarter Second quarter i 227 232 191 194 342 344 210 218 205 214 266 269 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 measure of 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. Detail will not necessarily add to totals because of rounding. Source: Department of Commerce. 114 T A B L E 39.—Changes in selected economic series since 1939 and since the first half of 1947 1939=100 Source: Appendix C table number 1947 Economic series 1946 Total 11.. 12.. 13. 14. 15. 15. 17. 18. 19.. 20. 24. Gross national product Personal consumption expenditures Gross private domestic investment Net foreign investment ..Government purchases of goods and services. National income.._ _ Compensation of employees Personal income Disposable personal income Personal net saving _ Per capita disposable personal income: Current dollars 1947 dollars Labor force, including armed forces Civilian labor force Employment _ Nonagricultural Agricultural Unemployment _ Average gross weekly earnings: Manufacturing _ Bituminous coal mining Private building construction Retail trade Physical production: total _ Agriculture Nonagriculture Industrial production index: total Durable manufactures. Nondurable manufactures Minerals New construction: total Private Residential Nonresidential Public utility and farm Public Business expenditures for new plant and equipment. Inventories, end of period: Manufacturing _. Wholesale Retail ss: Manufacturing _ Wholesale Retail _. Consumers' price index: all items Food Apparel Rent Wholesale price index, all commodities Farm products Foods Other than farm products and foods Prices received by farmers - . . Prices paid by farmers (including interest and taxes). Parity ratio Consumer credit outstanding .end of period. Corporate profits before taxes Corporate profits after taxes Dividend payments Undistributed profits First Second half half 1948, first half Percent change, 1947, first half, to 1948, first half 232 218 294 522 235 252 256 244 239 333 328 989 1,056 214 208 261 250 339 922 219 273 258 413 433 237 +8.3 +7.9 +25.9 -59.0 +13.9 247 245 245 227 437 279 267 269 247 326 274 262 262 241 293 285 272 275 254 356 298 280 287 265 430 +8.8 +6.9 +9.5 +11.0 +46.8 210 150 109 104 121 130 87 24 225 140 111 109 127 138 86 23 220 141 110 108 125 136 83 25 229 140 112 110 129 140 89 20 238 140 111 110 128 140 79 23 +8.2 183 243 185 154 151 126 158 156 176 151 126 166 217 151 426 190 88 232 206 280 208 173 162 122 173 172 202 158 141 222 286 249 399 275 123 312 201 270 201 170 212 290 216 177 218 289 220 183 +8.5 +7.0 +9.5 +7.6 203 166 201 (i) (i) (i) (i) 171 172 203 159 139 180 233 183 383 218 100 273 174 172 200 158 143 263 339 315 415 332 147 350 243 210 235 230 190 217 235 238 238 140 168 159 104 157 228 186 135 245 156 307 280 280 160 204 185 107 197 277 240 166 293 186 157 127 335 256 147 600 156 167 458 362 182 933 —.7 +.9 +1.9 +2.4 +2.9 -4.8 -8.0 (i) 0) 177 176 206 163 144 244 318 293 421 289 130 341 +3.5 +2.3 +1.5 +2.5 +3.6 +35.6 +36.5 +60.1 +9.9 +32.6 +30.0 +25.0 243 210 235 256 224 250 +11.3 +17.9 +15.2 292 273 270 156 196 183 105 190 268 230 161 284 181 321 289 290 164 211 187 109 204 287 249 171 301 192 331 300 302 170 219 195 112 212 292 251 183 30fi 201 +13.4 +9.9 +11.9 +9.0 +11.7 +6.6 +6.7 +11.6 156 141 445 350 174 908 156 167 474 374 184 975 152 176 469 372 1?5 933 -2.6 +24.8 +5.4 +6.3 + 12.1 + 2 . 8 +9.0 +9.1 +14.4 +7.7 +11.0 i Bfcau& of the extreme seasonal nature of agricultural crop production, oniy an annual index has been computed. 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