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SURVEY OF CURRENT BUSINESS

Mar 1961

The 1960-61 decline was matched in
overall mildness by the advance which
preceded it. Plant and equipment
spending topped out last year, as earlier
noted, without matching its 1957 peak
volume. The shortfall was pronounced
in the sensitive durable goods manufacturing industries and the railroad
and mining groups, where the current
cyclical cuts have been sharpest, as well
as in nondurables manufacturing and
public utilities. (See text table.) Net
declines from peak to peak in these industries were substantially offset by the
continuing uptrend in capital outlays of
commercial firms and by the 1959-60
bulge in air transportation as the carriers rapidly converted their longer
through routes to jet operations.
Plant and Equipment Expenditures
(Percent change)
Peak to 3d quarter
after peak

Peak to
peak

1960 II
1957 III 1957 III
to 1961 I to 19.58 II to 1960 II

contrast to that recorded for the
second half of last year, when a piling
up of finished goods partially offset
the continuing reductions in working
stocks of producers.

the past year reflected in part a natural
tapering in the need to add to stocks as
the expansionary phase of the business
cycle matured. In part it was a reaction to the unusual pattern traced by
business holdings in 1959 and early
1960 because of the steel strike. With
increased productive capacity, and the
steel stock rebuilding proving shortlived, changes in the outlook for
material supplies came to be recognized rather abruptly, and there followed a large cutback in orders and a
move to draw down stocks in a number
of lines.
As has been the case in other postwar
business swings, the reduction in inventories has been most notable in
durable goods producing and handling
industries, where demand for final output dropped, and the especially marked
shift in the supply outlook for steel
reinforced this cyclical tendency.
Since 1961 opened, the sharpest
cuts in inventories have centered in
finished stocks, auto dealers' holdings
of new cars in particular having been
worked down at a time when they
usually increase. This pattern is in

Government and Export
Demand Strong
The continued expansion in government purchases and transfers at a time,
when revenues have been falling has
been one of the chief sustaining factors
in the economy recently, making a
substantial net contribution to the
strength of the markets for private
business output. At a $145 billion
annual rate for the winter quarter,
total expenditures shown by the national income accounts for Federal,
State and local governments (table 5)
were up $8/2 billion from the fourth
quarter of 1960 and $9 billion from the
spring of last year. At the same time
revenues from corporate profit taxes in
particular have dropped markedly.
The continued postwar uptrend in
State and local buying and the turnaround of Federal outlays since mid-

Durable goods manufacturing, mining, and railroads.

-14

-34

-13

Nondurable goods manufacturing and public utilities

-1

-19

-12

Table 1.—Gross National Product in Current and Constant Dollars (1-3, 1-5)
1960

Commercial and other
Airlines and other nonraiL _

-1

-4

+14

-12

-23

+19

-20

-4

Total

1958 1959 1960

I

II

III

IV

I

1958 1959 1960

The inventory movement proceeded
along cyclical lines, with liquidation
accelerated in the first quarter to a
seasonally adjusted annual rate well
above $4 billion. This compares with
$3 billion in the fourth quarter, the
difference comprising nearly half the
decline in total GNP in this period.
Accumulation had slowed progressively from early 1960 through midyear, and turned to liquidation in the
second half. The swing in inventories
since GNP topped out in the second
quarter has meant a $10 billion annual
rate decrease in demand from this
source. Notwithstanding the resultant
cut in earnings from production, major
categories of final purchases have held
up well, for the reasons earlier pointed
out.
The shift in inventory policy during




II

III

IV

I

Billions of 1954 dollars

Billions of current dollars
Gross national product

I

Seasonally adjusted at
annual rates

Seasonally adjusted at
annual rates

Inventory selloff accelerates

1W1

1960

1961

444.2 482.1 503.2 501.3 505.0 503.5 503.5 499.8 401.0 428.0 439.2 440.5 442.2 438.0 437. 0 432.4

Personal consumption expend293.5 313.8 327. 8 323. 3 329.0 328.3 330.8 328.8 273.6 289.4 296.8 294.8 298.3 296.9 297.6 294.7
itures
Durable goods
Nondurable goods
Services
Gross private domestic investment
New construction
Residential non farm . .
Other

37.3 43.4 43.6 44.2 44.5 42.7 43.2 39.2 35. 6 40.8 41.2 41.8 41.9 40. 2 41.2 37. o
142 0 147.6 152.4 150. 5 153. 5 152. 7 152. 9 153. 0 133. 7 139.3 141.9 141. 1 143.2 142.3 141.3 141. 1
114.2 122. 8 131.7 128. 6 130.9 132.9 134.7 136.6 104.3 109. 3 113. 7 112.0 113.3 114.4 115.2 11C,. 1
56.0 72.0 72.8 79.3 75.5 70.8 66.0 61.0 48.3 60.9 60.5 66.2 62.8 58.6 54.9 50.6
35.4 40.3 40.4 40.8 40.7 40.5 40.3 39.0 31.0 34.4 33.6 34.0 33.8 33. 6 33.5 32. 4
18.0 22.3 21.1 21.4 21.3 21.1 20. 5 19.2 16.2 19.4 18.0 18.3 18.2 18.0 17. 6 16. 5
17.4 18.0 19.3 19.3 19.4 19.5 19.8 19.9 14.9 15.0 15. 6 15.7 15.6 15. 6 15.9 10.fi

Producers' durable equipment. 23.1 25.8 28.8 27.1 29.5 29.7 28.7 26.5 19.4 21.3 23.7 22.4 24.2 24.4 23.8 21.9
Change in business inventories. -2.5

5.9

3.6 11.4

5.3

.6 -3.0 -4.5 -2.2

5.2

3.2

9.8

4.8

. 6 -2.4 — 3.8

-3.6
10

5.4
5

3.2 11.0
.4
.4

5.0
.3

.3 -3.4 -4.8 -3.1
.9
.3
.4

4.9
.3

2.8
.4

9.4
.4

4.5
.3

.3 -2.8 -4.D
.3

3.0

2.0

Nonfarm
Farm
Net exports of goods and servicesExports
Imports

5 3 — 2 —2 4

1 6 —. 1

3.4

38

22.7 22.9 26.5 25.2 26.4 27.3 27.0 27.4 21.4 21.9 25 2 23.8 25.2 25.8 25. 8
21.5 23.8 23.5 23.9 24.4 23. 5 22.4 22.1 21.6 2-1.3 23.6 24.0 24.5 23. 6 22.4

2»'.. 2

1.2 -1.0

1.2

3 7

4 6

. 7 2.2

Government purchases of goods
and services
_ _ _ 93.5 97.1 99.7 97.5 98.6 100.7 102.1 104.7 79.3 80.2 80.3 79.6 80.3 80.3 81.1 83.3
Federal
National defense
Other
Less: Government sales
State and local

52.6 53.3 52.4 51.8 51.7 52.7 53.3 54.7 44.5 43. f 41.6 41.8 41.8 41.2 41.4 42. 0
44.8 46.0 45.1 44.9 44.7 45.1 45.7 47.2
8 3 7 8 7 9 7.5 7.6 8.2 8.2 8.1
.6
.6
.6
.6
.5
.5
.5
.6
40.8 43.9 47.3 45.7 46.9 48.0 48.8 50.0 34.8 36. f 38.7 37.8 38.6 39.1 39.7 40. 7

SURVEY OF CURRENT BUSINESS

May 1961

period appears particularly unfavorable
by comparison with the opening quarter
a year ago, when the peak of the 195960 advance was reached.
The fragmentary information provided by first-quarter financial reports
of some of the largest companies has
featured declines for a number of durable goods manufacturing industries
and for the railroads. Income of iron
and steel producers, which dropped
sharply during 1960, seems to have continued downward in the opening months
of 1961. Profits of auto makers and construction materials companies, which
held up relatively better last year, also
experienced sharp reductions in earnings after the turn of the year. The curtailment of durable goods production in
the second half of 1960 has been reflected in lower railroad earnings; with
this factor aggravated by unfavorable
weather, several of the larger eastern
lines have reported deficits for the firstquarter of 1961.
In some other areas, profits have held
up very well or even expanded. The
service-t}7pe industries, notably communications and the public utilities,
have continued their growth into this
year. Some of the nondurable^ manufacturing lines have maintained the

durable goods and construction. Both
the falloff in corporate profits and that
in compensation of employees have been
concentrated in these industries.
At a $293^ billion annual rate in the
first quarter, employee compensation
was down $2 billion from the closing
quarter of last year and about $4 billion
from the third quarter peak. As shown
in table 2, a continued increase in
government payrolls has been more than
offset since last summer by a decline in
private wages and salaries. The drop
in the private segment from its mid1960 high to the first quarter of 1961
amounted to $5 billion—the same dollar
reduction that was recorded in the combined total for durables manufacturing,
mining, railroads, and contract construction. Changes in other industries
were comparatively limited.
Profits decline extended

By the end of 1960 pre-tax profits as
measured in the national income were
already $7 billion under their best 1960
quarter, and they have fallen somewhat
further since the turn of the year
(though sufficient data will not be available for some time to compute this portion of the first-quarter national income
total). Profits experience in the latest

Table 3.—Gross National Product by Major Type of Product in Current and Constant
Dollars (1-6, 1-7) 1
1901

1960

1960

Step-Up in Liquidation of
BUSINESS INVENTORIES in 1st Quarter
Billion $
3
2

Accumulation
1

0

-1

Liquidation

-2
Centered in FINISHED STOCKS •
2

AUTO DEALERS

1
0
-1

2

MANUFACTURERS &
NONAUTO DISTRIBUTORS

1
0

-1

J_

While Cutback in Manufacturers'
WORKING STOCKS Slowed

-2
1960

1901

U. S. Department of Commerce, Office of Business Economics

1958 1959

! 900

I

II

III

IV

I

1 958 1959 ! 900

I

II

III

IV

Billions of 1954 dollars

Billions of current dollars
Gross national product

444. 2 482.1 503. 2 501. 3 505.0 503. 5 503. 5 499. 8 401. 0 428. 0 439. 2 440. 5 442.2 438. 0 437. 0 432. 4

Final sales
Inventory change. _

440. 7 476. 1 499. (i 489. 9 499. 7 503. 0 500. 5 504. 4 403. 2 422. 8 430. 0 430.7 437.4 437. 4 439. 4 430. 1
-2.4 — 3.8
— 2. 5 5. 9 3.0 11.4 5. 3
-3.0
5.2 3.2 9.8 4.8

Goods ou tpu t
Final sales
Inventory change

- -

249.9 257 8 261. 0 261. 3 255. 7 253. 1 247. 4 211. 2 228. 3 233. 8 237. 5 237.1 231. 5 229. 1 223. 6
232. 3 230. 9 231.5 227.3
231.fi 244. 0 254. 2 249. 0 250. 1 255. 1 250. 0 251.9 213. 4 223. 1 230. 0

229.1

5. 9

3. 0 11.4

5.3

. 0 -3.0 — 4. 5 -2.2

5.2

3.2

9. 8

4.8

. 6 -2.4 — 3.8

Durable good output
Final sales
Inventory change _ . -

80. 2 94. 1 90. 1 101. 7 98. 0 93.9 90. 8 84.0 71.5 82. 1 83. 8 88. 7 85. 3 81.4 79. 8 73. 5
S3 3 91 0 93 9 91 8 94 9 9 4 . 0 94.8 90. 2 74. 2 79. 5 81. 9 80. \ 82. 6 81.5 83. 1 78. 9
2.0 1. 9 8.3 2.7 — . 1 -3.4 -5.4
— 3. i 3. 1 2 . 2 9. 8 3. 1 -. 1 -3.9

Nondurable goods output
Final sales
Inventory change

148.9 1 55. 8 101.7 159,3 103.3 101. 8 102.3 103. t 139.7 146. 2 150. 0 1 18. 8 151.8 150. 1 149. 3 150. 0
148. 3 153. 0 100.3 157. 8 101. 1 101. 1 101.3 101.7 139. 2 143.0 148.7 147.3 1 49. 6 149.4 148. 3 148. 4
1.5 2.2
. (\ 2.8 1.4
1.0 1.0
. 5 2.5 1.4 1.5 2.2
1. 0 1.0

Services
Construction

K>4. 3 175. 9 188. 7 184. 0 187. 0 190. 8 193. 4 19f>. 0 145. 3 151. 6 157.9 155. 6 157. 4 158. 8 100.0 1GI. 4
50 8 58. 3 56.6 56. 3 56. 7 57.0 57.2 56. 5 14. 4

18.1 47. 5 47.4 47.6 47.7

i For quarterly data beginning 1947, see SURVEY OF C T R K E X T BTSIXKSS, November I960, pages 18 and 19.


5912 8 S ° — 61
http://fraser.stlouisfed.org/ 2
Federal Reserve Bank of St. Louis

6'-5

I

Seasonal y adjusted at
arm ual rates .

Seasonally adjusted at
annual rates

1961

Quarterly Changes in Book Value
of Inventories, Seasonally Adjusted

47. 4

earnings levels they reached early last
year, and the petroleum industry, in
particular, reported higher profits in
the March quarter due to a large heating-oil demand, an improved supplydemand-price position, and cutbacks in
costs.
Profits data now available for the full
year 1960 show a slight reduction from
1959.
Pulled down by a $41 billion
fourth quarter rate, pretax earnings
and TYA totaled $44^ billion as against
$46K billion the year before. After-tax
net income was $23 billion, $1 billion
under the 1959 total.

* BUSINESS STATISTICS

WlontkL

J_ HE STATISTICS here are a continuation of the data published in the 1959 edition of BUSINESS STATISTICS, biennial Statistical Supplement
to the SURVEY OF CURRENT BUSINESS. That volume (price $2.25) contains monthly (or quarterly) data for the years 1955 through 1958 and
monthly averages for all years back to 1929 insofar as available; it also provides a description of each series and references to sources of monthly
figures prior to 1955. Series added or significantly revised since publication of the 1959 BUSINESS STATISTICS are indicated by an asterisk (*) and a
dagger (f), respectively; certain revisions for 1958 issued too late for inclusion in the aforementioned volume appear in the monthly SURVEY
beginning with the July 1959 issue. Except as otherwise stated, the terms "unadjusted" and "adjusted" refer to adjustment for seasonal
variation.
Statistics originating in Government agencies are not copyrighted and may be reprinted freely. Data from private sources are provided
through the courtesy of the compilers, and are subject to their copyrights.
1961

1960

Unless otherwise stated, statistics through 1958 and
descriptive notes are shown in the 1959 edition of
BUSINESS STATISTICS
March

April

May

June

July

SeptemAugust
October Novem- December
ber
ber

January

February

March

April

GENERAL BUSINESS INDICATORS
NATIONAL INCOME AND PRODUCT f
Seasonally adjusted quarterly totals at annual rates: t
National income, total
bil. of dol_-

414.4

419.4

419.3

416.9

do
do
do
do
._ _ do _.
do

290.2
268.7
222.1
9.9
36.7
21.5

295.0
273.1
225. 5
10.0
37.6
21.9

297.2
274.9
226.0
10.1
38.8
22.3

295 2
273 2
223.6
10 3
39.3
22 0

293 3
271.5
221.2
10.4
39.9
21.8

Proprietors' income, totalc?
- -do _ _ .
Business and professional^
do
Farm
do
Rental income of persons __ __
do . .
Corporate profits and inventory valuation adjustment, total
_
__ bil. ofdoLCorporate profits before tax, total
do
Corporate profits tax liability
do
Corporate profits after tax_
do
Inventory valuation adjustment
_ _ ...do

46.0
35.4
10.6
12.5

48.1
36.0
12.1
12.5

48.3
36.1
12.2
12.5

48 8
35.9
12 8
12.5

48
35
13
12

48.0
48.8
23.8
25.0
-.8

45.3
45.7
22.3
23.4
-.4

42.2
41.5
20.3
21.3
.7

41 0
40 7
19.8
20 8
.4

Compensation of employees, total _
Wages and salaries, total _.
Private
Militarv
Government civilian
Supplements to wages and salaries

Net interest

5
5
0
5

do

17.8

18.5

19 1

19 4

19 6

do

501.3

505.0

503 5

503 5

499 8

323.3
44.2
150.5
128.6

329.0
44.5
153.5
130.9

328
42
152
132

330
43
152
134

328 8
39 2
153 0
136 6

do
do
do ...
do

79.3
40.8
27.1
11.4

75.5
40.7
29.5
5.3

70 8
40.5
29 7
.6

66 0
40.3
28 7
30

61
39
26
4

Net exports of goods and services
do
Exports
._
do
Imports.
-.
-_ _ - _ - _ _ _ _ .-do _ _ _
Government purchases of goods and services, total
bil. ofdoL.
Federal (less Government sales)
_ do
National defense 9
do
State and local
do

1.2
25.2
23.9

2.0
26.4
24 4

3.7
27 3
23 5

4 6
27 0
92 4

5 3
27 4
22 1

97.5
51.8
44.9
45.7

98.6
51.7
44 7
46.9

100.7
52 7
45 1
48 0

102
53
45
48

Gross national product, total. _

Personal consumption expenditures, total.. _ do
Durable goods
do__ .
Nondurable goods._._do
Services
__ __ _ _ .
do ...
Gross private domestic investment, total
New construction
Producers' durable equipment
Change in business inventories

3
7
7
9

8
2
9
7

1
3
7
8

104
54
47
50

0
0
5
5

7
7
2
0

Personal income, total _ _
Less: Personal tax and nontax payments.
Equals: Disposable personal income

do
do_ _ _
do

396.2
49.2
347.0

404 2
50.0
354.1

408 0
50.5
357.5

408 5
50 4
358 1

407 5
50 3
357 2

Personal saving §

do ...

23.7

25.2

29.2

27 2

28 3

bil. of dol—

440.5

442.2

438.0

437.0

432.4

294.8
41.8
141.1
112.0

298.3
41.9
143.2
113.3

296 9
40.2
142.3
114 4

297 6
41 2
141 3
115 2

294 7
37 5
141 1
116 1

66.2
34.0
22.4
9.8

62.8
33.8
24.2
4.8

58.6
33.6
24.4
.6

54
33
23
2

50
32
21
3

-.1

.7

2 2

79.6
41.8
37.8

80.3
41.8
38.6

GNP in constant (1954) dollars
Gross national product, total

Personal consumption expenditures, total. ..do
Durable goods
do
Nondurable goods
do
Services
do
Gross private domestic investment, total
New construction
.
Producers' durable equipment
Change in business inventories
Net exports of goods and services

do
do
do
do— do

Government purchases of goods and services, total
bil. of dolFederal
do
State and local
do

9
5
8
4

3 4

6
4
9
8

38

80.3
81 1
83 3
41 2
41 4
42 6
39.1
39.7
40.7
r Revised.
f Revised series. Estimates of national income and product and personal income have been revised back to 1957; revisions prior to the 2d quarter 1959 (and prior to Mav 1959
for personal income) appear on pp. 8 ff. of the July 1960 SURVEY.
cf Includes inventory valuation adjustment.
9 Government sales are not deducted
§ Personal saving is excess of disposable income over personal consumption expenditures shown as a component of gross national product above

591288°—61-




S-l


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