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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
December 23, 1958
to
December 28, 1958
CONSUMER PRICES
MATCH JULY HIGH
Consumer prices rose again in November after three
months' respite, matching July's record 123.9% of
the 1947-49 average, the Department of Labor reported. The o.2{o increase exactly offsets the August decline. Ewan
Clague, the Labor Department's Corrnnissioner of Statistics, declared,
"inflationary factors are not strong in the index" and predicted
prices were entering "an era of stability." Almost all the November
increase, Mr. Clague said, was caused by higher prices for 1959 model
cars. (Wall St. J., 12/24 p .3)
BALANCED 1 60 BUDGET
OF $77 BILLION SEEN
President Eisenhower plans a balanced budget
"in the general area of $77 billion" for the
fiscal year starting next July 1. But Congressional leaders predicted the Government probably would be in the red
again before the year is out. The President said he would ask Congress to cut 1959-60 spending about $3 billion from the current fiscal year's $80 billion or more. He estimated revenues about $9 billion higher than fiscal 1959's total of around $68 billion. (Wall
St. J., 12/23 p.1)
REVENUE ESTIMATE
FOR FISCAL 1960
Administration estimates that Federal revenues in
1959-60 will amount to about $77 billion are based
on the assumption of big gains in corporate profits
and personal income in the calendar year 1959, officials disclosed.
The $77 billion of revenues would mean an increase of $9 billion over
Uncle Sam's estimated take in the fiscal year ending next June 30.
To support its revenue forecast , the Administration predicts corporate
profits will climb above $48 billion in the calendar year 1959, from
$36 billion counted on for 1958. Personal income will jump to about
$366 billion next year from $353 billion this year. (Wall St. J.,
12/24 p .1)
Selection of these items does not imply this bank's guaranty of their accuracy,
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nor agreement with the views expressed.
PLANS $3.6 BILLION
FOREIGN AID
Total Government outlays on all types of' foreign
aid will run just about the same in fiscal 1960
as they have this year. The military program
will be reduced slightly and Development Loan Fund dispersals will
increase slightly. The Administration will ask Congress for foreign
aid appropriations for next year totaling about $3.6 billion, which
will be less than the $3.9 billion the Administration asked for the
current year, but more than the $3.3 billion Congress actually appropriated. {J. of' Comm., 12/24 p.1)
BALANCE OF TRADE
CONTINUES DOWN
A Department of' Commerce analysis of' third quarter
balance of' payments shows no end in sight yet to
the decline in U.S. exports, and that, thus far,
there has been no acceleration of U.S. direct investments in Europe
in anticipation of the forming comm.on market. The analysis, appearing
in the December Survey of Current Business made by Commerce's Office
of Business Economics, also points out that the "relatively large excess" this year of U.S. payments over receipts raises the question
"whether the recent changes in the balance of payments indicate a
weakening of our competitive position." The third quarter outflow of
private U.S. capital was "substantially" less than in the second quarter. The Survey attributes this decline "in part" to "seasonal" factors involving tax payments to Venezuela by oil companies. U.S. exports did rise slightly in the third quarter. However, this increase
"was not sufficient ••• to indicate that the end of the low in the export cycle has been passed and the upswing has started." The overall balance of payments during the third quarter did not change significa.ntll from the pattern of the previous quarter. (J. of Comm.,
12/23 p.9)
BUSINESS BORROWING
Business borrowing at banks remains at a fairly
low ebb compared with a year ago as 1958 draws
to a close. Although borrowings to pay income taxes pushed commercial loans $382 million higher for the week of December 17, much of
the gain being in New York, the total of all member bank business
loans then were only $711 million above the midyear period and were
$1.3 billion lower than at the same date a year ago. {J. of Comm.,
12/26 p.1)
INDUSTRY TO FEEL
LABOR UNREST IN '59
Labor disputes appear to be shaping up next
year in several key industries. If strikes
occur, the tempo of the business recovery will
be slowed down, and the second half of 1959 may see a leveling off or
even a decline from the indicated production rate for the first half'.
Almost every month during 1959 will bring new problems for management
in the field of' labor relations. The most important contract expiring
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next year is that of the United Steel Workers with individual steel
companies. Both labor and management in steel are not optimistic
about the chances of' avoiding a strike. other industries facing key
negotiations are anthracite coal, next month; rubber and textiles in
April; women's clothing, oil, and West Coast docks in June; meat
packing in September; and railroads (operatin& and non-operating
unions) in .November. (Fish. J. of' Comm., 12/26 p.1)
MACHINE TOOL ORDERS
FELL IN NOVEMBER
Machine tool orders declined to $20.7 million
in November--down 27i from both the preceding
month and November 1957. For the first 11
months, the industry's incoming business fell to $248 million--off
more than 50'/o from the like 1957 period. Several tool building concerns reported, however, that December was producing some encouraging
bookings. And for next year as a whole, industry authorities look
f'or a rise of 201,_ to 25i in order volume over 1958•s poor showing.
(Wall St. J., 12/24 p.1)
VENEZUELA OIL TAX HIKE
DUE TO HAVE WIDE IMPACT
Venezuela•s sudden unilateral decision to
boost oil company taxes marked a turning
point in the country's 15-year good neighbor policy with the United States oil industry. The impact of the
move may be felt as far away as the Middle East where Arab State-oil
company relations are still governed by the traditional profits split
pioneered by Venezuela in 1943. Most oil companies operating in Venezuela have been paying a few percentage points more than the 50-50
minimum prof'its split. This ratio is now expected to go up about
10 percentage points. (Bley. J. of Comm., 12/23 p .1)
LOWER FARM PRICES
PREDICTED
Farm prices in many instances will fall below
year-earlier levels in the months ahead, the Department of' Agriculture predicted. Officially
forecasting a 13% rise in the 1959 spring pig crop, the Department
asserted hog prices would lead the downw~d parade. Eggs, poultry,
citrus fruit, and fresh vegetables were listed as other items for
which lower prices are in prospect. Consumer demand for food continues strong, but heavier supplies of major food commodities are expected to offset this factor. (Wall St. J., · 12/24 p.1)
FARM LOAN RATE
AT NEW HIGH
The Department of Agriculture boosted to a record
4i the interest rate on Government-insured loans
negotiated by the Farmers Home Ad.ministration. The
old rate was 3-1/2i. Farmers Home Administration officials said the
increase is needed to attract more private lenders, who started backing away from the program when the money market tightened last summer.
(Wall St. J., 12/24 p.10)
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