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Midyear Economic Report
of the President
TRANSMITTED TO THE CONGRESS




July 21,1947




THE MIDYEAR ECONOMIC
REPORT OF THE
PRESIDENT
To the Congress, July 2 1 , 1947

UNITED STATES GOVERNMENT PRINTING OFFICE
WASg^NGTON : 1947

For sale by the Superintendent of Documen^ U. S. Government Printing Office
Washington 25, D. C. -? Price 25 cents







LETTER OF TRANSMITTAL
THE WHITE HOUSE,

Washington, D. C, July 21, 1947.
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 8, 1947, 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.
Respectfully,







CONTENTS
Page

I. Foreword and summary
II. From war to peace
Lessons from 1919-21
The approach to postwar readjustment
The first Economic Report
III. The situation at midyear
Employment
Production
Purchasing power
IV. Changes in the Nation's Economic Budget, December to June
Consumer income and expenditures
Business income and domestic business investment
International transactions
Government transactions
V. Economic adjustments for sustained high production
The process of price adjustment
The process of wage adjustment
Profits and business
financing
Responsibility for adjustment by business, labor, and Government
VI. Special factors in the economic situation
The agricultural outlook and food prices
Wage advances and industrial productivity
Housing and other construction
The foreign aid program
Contents of appendixes
Appendix A. Explanation of the Nation's Economic Budget
Appendix B. Statistical tables relating to employment, production, and purchasing power
v




1
5
5
6
7
9
9
11
11
14
14
19
22
24
28
28
33
35
36
37
38
40
43
45
49
51
61




To the Congress of the United States:

When my first Economic Keport was presented to the Congress on
January 8, 1947, the Nation was turning from the economic controls
of wartime to a free economy. Now, 6 months later, it is appropriate
that we consider carefully what success we have had in meeting the
problems of that process, what difficulties lie ahead, and what action
should now be taken. It is for this reason that I transmit to the
Congress this Midyear Economic Report.

FOREWORD AND SUMMARY
Americans today live in a richer and more productive economy, and
are enjoying its benefits more equitably, than ever before in peacetime history.
At midpoint in the year 1947, we have surpassed previous high
records of civilian production, and are now producing goods and
services at a rate of 225 billion dollars annually. Month by month
there has been talk of recession; month by month recession has failed
to materialize. In June we reached a level of 60 million .civilian jobs,
regarded by many as impossible of attainment. Our standard of
living is exceptionally high, and purchasing power has thus far been
adequate to absorb completely the enormous production of American
farms, mines, and factories. Farm income has attained a record level.
The financial position of business is strong. A healthy slowing down
in inventory accumulation has taken place. Business investment in
plants and equipment has increased this year, even above the record
highs of last year. Management and labor have cooperated in maintaining industrial peace, and a wide range of important collectivebargaining agreements have been signed without widespread strikes.
With a slight reduction in the workweek, productivity is on the
increase.
The credit for this magnificent record is shared by American farmers, who exerted great efforts to plant and reap bumper crops; by
workers, who stayed on the job and increased their productivity; by
businessmen, who overcame many shortages and established new
records in the production of more and better goods; and by leaders
of industry and labor who strove for industrial peace in the face of
serious difficulties.
The unprecedented prosperity of our Nation must not be a cause
for idle self-congratulation. We m u s t remember that full employment at a high price level is being sustained at present by the reconversion demands of business and the backlog demands of consumers,
by extensive use of savings and credit, and by an extraordinary excess
of exports over imports. These are temporary props to our economic
system. As they weaken, we shall need to make many basic readjustments to complete the transition to a permanently stable and
maximum-level peacetime economy.
1




2

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

These adjustments take time to accomplish in our free, enormous,
and complex economic system. They must be made before the lack
of them produces serious unemployment and business decline. Adjustment through recession or depression is tragic, costly, and wasteful. Moderate adjustments, made in time, can accomplish more than
drastic measures in a crisis produced by delay or neglect.
Price and income adjustments stand foremost in need of attention.
Industrial and agricultural prices.—Prices increased sharply in the
second half of 1946, increased more slowly in the first quarter of 1947,
and then leveled off in the second quarter. This leveling off reflected
some catching up of supply with immediate demand, an increase of
consumer resistance, and the encouraging response of many businessmen to the Government's price advice, which they recognized to be
in their own long-range interest.
This improvement in the price situation should not blind us to
further need for price reductions in some cases. In other cases, there
is need to hold the price line in the face of recent developments which
revive some fears of another upswing of inflation.
There are many areas where price reductions still are necessary to
check current or prospective declines in demand and to provide outlets
for increased production. In the numerous instances where profit
margins permit, or where future profits would be better protected by
assuring larger volume through lower prices, business should make
these adjustments now.
At the beginning of this year, the prospect for abundant crops gave
promise that the price increases in farm and food products would be
checked. Although there was a leveling off in food prices in the second
quarter of this year, bad weather, extensive floods, and unexpectedly
urgent foreign need have caused some further price increase in food
and farm products in recent weeks. There are fears of a short corn
crop, but no general or present scarcity of farm and food products
as a whole.
Although most farmers cannot voluntarily reduce their prices
because they do not make price decisions, we are not entirely without
recourse in the farm situation. We may still obtain a total agricultural output as large as last year. But in view of the existing uncertainty in the farm outlook, it is the duty of food growers, processors,
and the Government to keep the public currently informed of the real
facts concerning our food supply. Unfounded fear of food shortages
should not be allowed to lead to speculation, hoarding, and unnecessary buying. We should all realize, too, that any slight inconveniences or momentary shortages that may develop are the consequence
primarily of the high incomes and standard of living most of us are
enjoying today.
Wages and salaries.—Although the moderate and peaceful wage
adjustments during the first half of the year improved the position
of many wage earners, the majority of consumers were not directly
benefited. Because of increases in the cost of living, the purchasing
power of total consumers' incomes is no higher than at the beginning
of the year.
In some cases wage increases are still needed to attain workable
relations in the wage and salary structure, and to alleviate hardship




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

3

due to wages which are substandard or which have risen substantiallyless than the increase in the cost of living.
Except for such special circumstances, wage increases should be
related to general trends in productivity and not made on a basis
which forces price increases or prevents price reductions needed to
assure sale of increasing supplies.
With the wage adjustments already made and those still needed in
special wage areas, it follows that the patterns of workable price
relations ultimately arrived at will be on a somewhat higher price
level than would otherwise have come about. However, this is not a
justification for pyramiding wage-price increases or failing to make
price reductions whenever and wherever possible.
In the interest of those whose income has remained substandard,
it is imperative that legislation be enacted to extend the coverage of
the Fair Labor Standards Act, to increase the minimum wage level
to at least 65 cents an hour, and to enlarge social-security benefit
payments in view of the higher cost of living.
Under the recent wage settlement in the coal mining industry, the
wages of coal miners occupy a place near the top of the wage structure.
The earnings of the coal miners under the new contract must be
judged in the light of the character of their work and the labor needs
of the industry. There has been exaggeration of the size of this adjustment compared with the adjustments previously made in many
other industries. Every effort should be made to absorb the cost
increases in the coal mining industry and the industries indirectly
affected, through increased productivity and through reduction in
profit margins.
The increases that have already been made in coal prices are contributing to inflationary pressures. We have a right to expect that,
as operating adjustments toward maximum efficiency are made and
present shortages are overcome, the price of coal will be restored to a
lower level, thus easing the cost situation for industrial, railway, and
domestic users. Meanwhile, pyramiding of price advances by coal
distributors is wholly unjustified.
Similarly, increases in the price of steel would have a widespread
inflationary effect. Steel companies should exercise extraordinary
caution at this stage of our reconversion effort to see that increases in
coal prices or other costs are offset as fully as possible through the
savings of continuous and high-level operation. Recent favorable
earnings should permit the absorption of an extraordinary cost over
a short period in order to stabilize prosperity for the longer run.
In no case should the particular wage increases in the mining industry be made the basis for wage demands in other fields governed
by different circumstances.
It is in the interest of steady expansion of the economy that, with
the aid of collective bargaining, prices and wages be brought in line
with general productivity trends.
Housing and other construction.—Although housing construction has
been higher in 1947 than in 1946, it lags far behind the real needs of
our people for homes. A much higher volume of housing output will
be needed to help sustain maximum employment when temporarily
sustaining forces—such as the huge net export balance, high invest-




4

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

ments in reconversion, and an abnormal rate of inventory accumulation—begin to decline or decline further.
The needed stimulus to more housing construction, and also to
industrial and commercial construction, depends largely upon lower
prices. Housing costs can and should be substantially lowered through
the efforts of material suppliers, builders, and workers.
Of utmost importance is immediate enactment of the comprehensive
housing program which I have previously recommended to the present
Congress. Without such a law, housing is seriously handicapped.
Public construction for the time being should be held to moderate
amounts consistent with essential needs.
The foreign aid program.—The United States has indicated its
readiness to consider further aid toward reconstruction in Europe if
the foreign countries themselves present a plan that makes such help
truly effective. We must continue to help other countries help
themselves, until the reconstruction of their own economies reaches
the point where they are able to pay their way by exchange of goods
and services. The possibility of additional foreign aid programs
makes it all the more necessary to appraise the impact of exports on
the domestic economy during the last 6 months. A large excess of
exports over imports occurring at a time of inflationary pressure has
created some strain on the economy. But this strain is of moderate
proportions and will be of temporary duration. Our exports have
not necessistated undue denial at home, where our standards of living
are much higher than before the war.
These exports for the aid of other countries are directed toward the
winning of the peace—they are at the core of this Nation's foreign
policy.
The responsibilities of government.—Economic adjustment to changing conditions is, in a free enterprise economy, accomplished largely
through a multitude of voluntary decisions by business management,
farmers, and labor. Wise and farsighted policy by these groups is
necessary to assure the satisfactory operation of our economic system.
Government must, however, at all times exert its complementary
influence.
Legislative action on minimum wages, on social security and on
housing, as already indicated, forms part of the immediate responsibility of government.
In addition, the recent uncertainties arising in four fields—uncertainties as to the effect of the crop situation upon food prices, the
effect of the coal mine settlement upon industrial prices, the trend of
housing costs and house production, and the whole matter of foreign
economic policy—have a vital bearing upon the immediate fiscal
policies of the Government. The developments in these areas mean
that the inflationary factors in the economy may become stronger.
Tax reduction now would add to inflationary pressures and would
also prevent the debt reduction which should be carried out in prosperous times to strengthen the Nation's financial position against
future contingencies. A policy of restraint at the present time will
enable the Government to use fiscal measures effectively should the
time come when they might be needed to lend support to the economy.




MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

5

The sound financial policies that the Government has been following have been vindicated by every test of experience. These policies
should not be abandoned nor weakened.
The Employment Act of 1946 contemplated that prompt attention
would be given to the maintenance of maximum prosperity in all its
phases—employment, production, and purchasing power.
This midyear report, unlike the first Economic Report in January,
deals only with problems requiring immediate attention. It is a
check-up on the extent to which we have thus far achieved the goals
wre set in January.
Many of the short-range recommendations made in January have
not yet been adopted—especially those requiring legislation. The
fact that this delay has not yet produced bad results is no reason for
further delay. Waiting until bad results appear means that action
is too late to be fully effective.
Long-range economic programs will also be required. They embrace
resource and regional development, health and welfare, antimonopoly
programs, stabilization devices, and many other undertakings essential to the full realization of our superb economic potential. The first
Economic Report indicated the range of these programs, and studies
are now under way to make them ready for presentation by next year.
We must adjust our minds to the fact that we are living in a 225
billion dollar economy; that our free system has become today, and
tomorrow must continue to be, the richest and most powerful productive machine ever devised by the minds and hands of man. Our
task is to create for the functioning of this great productive force an
environment in which it can operate smoothly at capacity. Thus far
we have avoided the economic misfortunes which followed World War
I and then culminated in a disastrous depression in 1929. Today we
are wiser, more experienced, infinitely more blessed with material
riches, more united as a people, stronger as a nation. If, calmly and
realistically, we assess our strong points and our weaknesses and boldly
take necessary steps in time, we can place the high production and the
high employment that we have today on a firm foundation of enduring prosperity and peace.
II
FROM WAR TO PEACE
LESSONS FROM 1919-21

At the end of World War I, the traditional reluctance of the
American people to accept restraints by Government on their business
decisions and their personal choices brought about the immediate
abandonment of wartime controls. Production, employment, and
national income, after a brief lag, bounded forward, but with such
faulty internal adjustments that prosperity was short-lived. In less
than*2 years a sharp recession ensued. Although industry recovered
promptly from this recession, agriculture was seriously depressed
and was by no means securely adjusted when industry again suffered
collapse in 1929.




6

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

The failure of the prosperity of 1919-20 to continue was due to
maladjustments growing out of an unrestrained market. Credit wa,s
freed of wartime controls, resulting in a surging demand from business, eager to exploit the glittering profit opportunities of the day.
Also consumers, who had been unable to buy many articles during the
war, had incomes of unexampled size further bolstered by wartime savings, creating a demand for many types of goods far greater than the
markets could supply. There was an intensive foreign demand,
resulting in a temporary increase in the value of exports.
Prices in this free market skyrocketed far above wartime levels,
which, under the limited price controls of that period, were already
very high. Between the armistice in 1918 and May 1920 wholesale
commodity prices rose about 23 percent to a point 148 percent above
the prewar level. Eetail prices outstripped the increase in consumers'
incomes so far that consumer buying fell sharply, labor controversies
increased, inventories became financial nightmares, orders were
canceled, and the price structure collapsed. Then came a sharp drop
in production and employment.
The factors which during World War I led to the difficult conditions
of postwar transition were present in aggravated degree in World
W ar II. Diversion of national productive power to war uses was much
greater. Expansion of money and credit was severalfold larger. War
incomes went to a larger proportion of the people and over a period
more than twice as long. Kequirements for new industrial equipment
were far greater. A much more effective control of prices established
a relatively low level from which postwar inflation could spring. The
problem of changing from the controlled economy of wartime to the
traditional American economy of free enterprise, which the Nation
did not solve successfully after World War I, was far more serious
when World War II came to a close in a devastated world.
THE APPROACH TO POSTWAR READJUSTMENT

We were, however, determined to effect both physical and economic
reconversion with less waste and on a better stabilized basis than
the record shows for the 1920's and the 1930's. This determination was reflected not merely in the words and actions of individuals
and organizations but also in Government policies and programs.
It was registered with clarity and force in the Employment Act of
1946. As we looked forward toward making that act effective in
realizing the high purposes which it set forth, we had occasion to be
much gratified by the proofs afforded since VJ-day of the great productive power and financial resources of our economy. The shift
from war production to the production of civilian goods and services
was carried through so rapidly that prompt employment was given
to the labor force, rapidly expanded by the return of millions of
veterans. Unemployment never approached the magnitude that
many experts were predicting.
Economic phases of reconversion, however, presented greater
difficulties than the physical or technological ones. The American
people were united in their determination to return to free enterprise
and to discontinue wartime controls as rapidly as possible, but there
was no clear and certain standard or formula by which timing and
method could be determined. Many economic controls were progressively discarded in the year following the Japanese surrender.



MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

7

Price control was^materially reduced and in the fall of 1946 was
finally discontinued except for a few commodities and rents.
Claims made by the advocates of early decontrol, that OPA prices
had retarded production and that it would promptly catch up with
demand after the removal of the controls, were not fully borne out by
developments. Production, with important exceptions, did not increase as rapidly in the fixst few months after decontrol as in the last
few months before decontrol.
In the face of this failure of production to respond more sensitively
to the freeing of market demand, the abundant purchasing power of
both consumers and business buyers met a sharp response in soaring
prices. The price index of food products at wholesale jumped 28
percent in a single week in October when price control was ended on
meats, fats and oils, and other foods. Though it reacted promptly,
it has not since then approached the previous level. Wholesale prices
of goods other than farm and food products, which had risen about 5
percent during the first half of 1946, climbed by the end of the year to
24 percent above the level of 12 months earlier. Ketail prices, though
their changes are ordinarily more sluggish, moved upward almost as
much as wholesale prices. The index of consumers' prices of goods
and services rose 15 percent between June and December, even
though rents, which were kept under control, remained stable.
Personal incomes increased at a much slower rate. In the last
quarter of 1946 these incomes were at a rate about 9 percent above
that of 6 months earlier. The real purchasing power of consumers'
current incomes had steadily declined, notwithstanding high employment and rising wage rates.
THE FIRST ECONOMIC REPORT

This was the situation at the time of my first Economic Report
last January. In many respects the economic situation was good.
Employment was at a very high level, and the labor-management
controversies which caused many work stoppages in 1946 had quieted
down. Profits of business were high, and new business investment
was proceeding at a record rate. National credit was unimpaired,
and we were showing our ability to manage the huge national debt.
The banking structure and the monetary system were not under
strain. There was no speculative color to the securities markets.
The state of credit was good, although there was a rapid increase in
consumers' credit. The export balance of foreign trade appeared too
great to continue indefinitely, but it was evident that for the immediate future foreign demand for our goods would remain large.
At the same time it was clear that inflationary elements continued
strong. Many prices were still rising under the influence of shortages
and extraordinary backlog demands for consumer goods and capital
goods not available during the war. Yet there was danger that
deflationary forces might develop during the year. For example, it
was clear that the exceptional rate of inventory accumulation would
not long continue, that the backlog demands would be filled sooner
or later, and that many consumers were using up past savings or
resorting to credit in order to keep up with the cost of living. If
prices should continue to move ahead of the current buying power of




8

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

consumers and business, it was evident that trouble would develop in
the economy.
Under the Employment Act of 1946 it was the obligation of the
President, with the assistance of the Council of Economic Advisers,
to propose policies to sustain a high level of production and employment. To that end, among the policies recommended in the first
Economic Report, adjustments were urged to bring prices and current
incomes of our people into better balance. The main approach to
attain this balance, it was said, was to reduce prices rather than to
increase incomes. Price reductions automatically benefit all buyers
of goods for consumption or business purposes. Increases in incomes
cannot be spread evenly in a free economy, and many incomes are
increased slowly or not at all. The standard of living of large numbers
of our people had already become seriously threatened by the price
advances which had taken effect, while their incomes had not increased
in step with those of others. Among them were millions of workers,
people dependent upon fixed incomes, and teachers and other public
servants.
It was recognized, of course, that here, as in all aspects of our
involved and dynamic economy, there are many complications. The
price reductions which benefit buyers of goods likewise reduce the
incomes of producers of these goods. Price reduction was necessary,
but it needed to be made with discrimination to avoid placing an
inequitable share of the burden upon certain groups of producers
and to preserve a level of business profit and farm returns adequate to
sustain a high level of business investment and a healthy agriculture.
Our economic problems are never simple; they are not subject to
solution by a pat formula.
The positive method to determine prices is by Government mandate,
but it involves complicated determinations and irritating restraints
which Americans have tolerated only under stress of war. In response
to an insistent demand by business, with wide public support, positive
control of the prices of most goods was ended late in 1946. In the
free economy, prices are made by the forces of the market place and
the action of business management. The initial responsibility for
many prices is that of the businessman who decides at what figure
he will sell. In the first Economic Report each businessman was
urged to take a broad view of the long-run problem and, in the interest
of sustaining large markets, to reduce his prices insofar as costs
permitted.
Labor, in turn, was advised to bear in mind the greater benefit of
sustained employment as a result of prices in balance with workers'
incomes, as compared with the immediate advantage of such wage
increases at particular points as would distort the wage and price
structure, stimulate inflation, and lead to business maladjustment
and unemployment. It was noted, however, that increase in the
money incomes of many workers was desirable where it would not
contribute to further price advances. For many workers in the
lagging parts of the wage structure, moreover, it would be appropriate
to increase their incomes even though to do so would in some instances
increase prices. Both workers and farmers were urged to contribute
vigorously to larger production, the best preventive of price inflation.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

9

Specific action by the Government itself, as proposed in the first
Economic Report, was designed to continue, and skillfully to extend,
lines of action already adopted. The major short-range recommendations for immediate Government action included:
1. The continuance of existing taxes upon business^and^in dividual
incomes.
2. The reduction of the public debt as promptly as Treasury surplus
funds became available.
3. The continuance of rent control and the enactment of a comprehensive housing program.
4. The raising of minimum wage rates and the extension of coverage.
5. Increases in social security benefits in view of the higher cost of
living.
The Nation-wide reception to the first Economic Report was
encouraging, although neither in the area of private adjustment nor
congressional legislation have its recommendations met with adequate response. It is because further adjustments by the people and
further governmental action both are needed that this review of the
economic situation at midyear is being presented. It undertakes to
evaluate developments which have taken place since January, to
identify the major problems with which we are now confronted, and
to project forward the lines along which preventive or corrective
efforts should proceed. Ever-increasing benefits should flow from
improvement in our means of measuring economic causes and results
and through constant retesting of our means of dealing with these
situations. These periodic reviews should promote increasing appreciation by the people and their Government of the value of the
economic stabilization undertaking embodied in the Employment
Act of 1946.
Ill
THE SITUATION AT MIDYEAR
EMPLOYMENT

During the first half year, the maximum employment level for 1947,
as set forth in the Economic Report in January, was well maintained.
With seasonal fluctuations, civilian employment was held at record
levels, and in June reached an all-time peak of more than 60 million.
Including the armed forces, more than 61,400,000 people were employed. Unemployment, now about 2% million, is near a minimum
for an economy undergoing many readjustments. The increase of
about half a million in reported unemployment from May to June
was due mainly to the closing of schools resulting in a larger labor
force. (See appendix B, tables VII and VIII.)
Despite this very high employment, there recently has been some
weakening of demand for labor, particularly in the textile, apparel,
leather, and electrical machinery industries. In some instances, this
may represent only the return of more customary seasonal patterns
after months of steadily rising employment. The Council of Economic Advisers is watching soft spots in the employment picture for
signs of spreading unemployment.




10

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

THE CIVILIAN LABOR FORCE
Civilian employment has been maintained at record
levels
MILLIONS OF PERSONS
80

MILLIONS OF PERSONS
80

CIVILIAN LABOR FORCE

UNEMPLOYMENT
60

60

40

40
CIVILIAN
EMPLOYMENT

NONAGRICULTURAL

20

20

J

F

M

A

M

,L
J

J

t ' l
A S

-I
O

r •' I

i
N

D

J

F

1946

M

A

t'/T
M

J

1947

while unemployment remains low.

UNEMPLOYMENT
(Magnified Scale)

J

F

M

A

M

J

J

S O U R C E : B U R E A U OF T H E CENSUS




A

S

O

N

D

J

F

M

A

M

J

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

11

To have avoided even a brief spell of large-scale unemployment, in
the transition from war production to peace production, has been a
splendid achievement.
PRODUCTION

Industrial production rose rapidly at the beginning of the year,
leveled off, and later declined slightly. (See appendix B, table XIV.)
The slackening in industrial production was offset by expansion in
other parts of the economy. In consequence, total production for the
half year was at a higher rate than during the last quarter of 1946 or
any previous peacetime year. With employment so near the maximum, this production record was achieved through an average workweek which was reduced only slightly, and through a very good record
of industrial peace during the first half year.
By midyear, most of the remnants of reconversion problems were
cleared away. The benefits of new plant and equipment became increasingly felt. Labor, turn-over decreased. And the labor force attained higher average abilities due to additional training. The trend
of productivity has been upward in some industries since the end of the
war. The trend in this direction should accelerate as the few remaining transitional difficulties are conquered.
There is prospect for continued high production in agriculture.
The winter wheat crop was of record proportions. There is danger,
however, of a short corn crop, although it is too early to make an accurate forecast. Preliminary estimates indicate that with normal
weather during the rest of the growing season we may expect a corn
crop 20 percent below that of last year and slightly below the 10-year
average for 1936 through 1945. Such a drop in corn production may
have serious repercussions on livestock and livestock products.
The gross national product in dollar terms for the first half of this
year has been at an annual rate of about 6.4 billion dollars (or 3
percent) higher than in the fourth quarter of 1946. The exact
increase in the volume of goods and services produced cannot be
stated because of changes in the assortment and quality of goods
reaching the market. Consequently, the degree to which a rise in
the average level of prices, the increase in employment, and a change
in the average output of employed persons each contributed to the
over-all rise in the dollar value of the gross national product cannot
be stated exactly. (See appendix B, table I.)
If the remaining bottlenecks in plant operation and shortages of
materials can be removed substantially, and if no serious work stoppages occur, we can just about accomplish during this year the production increase of about 5 percent above the annual rate at the end
of 1946 which the Economic Report in January set as the objective
for 1947.
PURCHASING POWEjR

At the beginning of the year, it was stated that a shortage of purchasing power might develop before the end of the full year if production should rise at the anticipated rate and no adjustments were
made in the relative levels of price and mass income. During the
first half of 1947, purchasing power in the hands of consumers, business buyers, Government disbursing offices, and foreign takers
749764—47




2

12

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

remained adequate to take the full product of American industry
and agriculture without undue accumulation of unsold goods or
general lowering of prices. There was an immense aggregate demand
created by the high level of current incomes, by an extraordinary
backlog of deferred wants for consumer goods, by the need for replenishing business inventories and for capital expansion, and by large
export requirements.
These extraordinary demands were supported by unusual financial
resources, including past savings of individuals, liquid business assets,
expansion of consumer and business credit, and larger dollar and gold
balances available to other countries. In fact, the combined demands of domestic businessmen and consumers and foreign buyers
exerted upward pressure on prices in the first quarter of the year
despite the counter-inflationary influence of a Government cash
surplus.
The temporary character of some of this demand was recognized at
the beginning of the year as a deflationary threat for the future. For
example, it was certain that inventory accumulation would decline
and that the high rate of business expenditures of a reconversion
character would sooner or later recede. To replace these temporary
factors and to absorb increasing output, the need existed for longrange expansion in residential construction, for expansion in industrial
capacity, and especially for an increase in the amounts of goods and
services bought by consumers. There was danger that prices and
incomes might not be adjusted rapidly enough to achieve this new
balance.
Owing to price increases in the first quarter of 1947, there was
little if any increase in the total real income of consumers as a whole
during the first half of this year. Wage and salary adjustments did
improve the position of some. Most prices leveled off in the second
quarter of the year, but there was no general downward adjustment
and there were some advances in farm and food prices. The rise in
some wages, profits, and agricultural income benefited large segments
of the population, but other segments had little or no increase in
money income and a decrease in real income due to price rises. These
maladjustments could, in a short time, disturb the balance among
investment, saving, and consumer spending and thus impair total
purchasing power, employment, and production. (Statistics bearing
upon purchasing power may be found in appendix B, tables II, III,
IV, and V.)
It must be remembered that during the first half of the year the
unexpected increase in net exports and such temporary expedients
as the liquidation of savings and the extension of consumer credit
helped to maintain economic activity at the high price level. Failure
to make long-run adjustments has not thus far checked total production nor brought about unemployment. But the continuing problem
will be to adjust production, prices, and incomes to the requirements
of a peacetime economy at maximum production and employment—
and to do so in time. The nature of these foreseeable strains and
ways of meeting them will be discussed later in this report,




13

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

INDUSTRIAL PRODUCTION
reached higher level in 1947 with slight decline in the
second quarter of 1947.
PERCENT
22 0 I

1935-39 «100, SEASONALLY ADJUSTED

PERCENT
1 2 20

180

180

JOTAL INDUSTRIAL
PRODUCTION
140

140

100

100

Durable goods production, well above 1946, slipped
in the second quarter of 1947. Nondurables, up less
from 1946, also declined.
260 1

H 2 60

220

220
DURABLE
^^^
MANUFACTURES ^ \ ^ ^ ^ ^

—

/

f*SS

180

180
mm

NONDURABLE
MANUFACTURES

140

140

,

100

1

1

1

1

1

.

100

1

Mineral production rose slightly.
180

180
MINERALS
1 40 -

—^

100

i

J

w
i

F

——•«y

1 ^ 1

M

A

J

J

1946
SOURCE: FEDERAL RESERVE




A

S

O

N

-*»•*»

1

. . . .

i

1

M

>•

D

J

140

100
F

M

A

1947

M

J

14

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

IV
CHANGES IN THE NATION'S ECONOMIC B U D G E T DECEMBER TO JUNE
The Nation's Economic Budget presents a master sheet of the
Nation's economic account. It indicates broad changes in the
economy and its component parts. It reflects adjustments made and
helps to identify those needed to sustain maximum employment,
production, and purchasing power. The changes in the Nation's
Economic Budget which occurred between the last quarter of the
calendar year 1946 and the first half of 1947 are depicted in table I.
TABLE I.—The Nation1 s economic budget1
[In billions of dollars, seasonally adjusted annual rates, current prices]
October-December 1946

January-June 19472

Excess
Excess
Receipts Expendior def- Receipts Expendior deftures (+)
tures (+)
icit ( - )
icit (-)
Consumers:
Income after taxes .
167.0
169.6
E xpenditures
154 9
158.0
Saving (+)
.
.
+12.1
Business:
Undistributed profits and additions
to reserves
14.2
19 1
30.4
Gross domestic investment
29.5
Excess of receipts (+) or investment (—).
-16.2
International:
Net exports of goods and services
5.2
10.0
Net expenditures on foreign account (—)
—5.2
Government (Federal, State, and local):
Receipts from the public
58.2
57.1
Payments to the public
53.2
48.7
Excess of receipts (+) or payments (—)
+8.4
Adjustments:
—.1
-.1
For Government receipts from abroad.
-.8
For Government transfers abroad
-3.1
-7.6
+3.1
-17.5
For Government domestic transfers...
-17.5
-18.1
-18.1
-2.1
For statistical discrepancy
-2.1
-3.0
Total gross national product
218.6
218.6
0
225.0
225.0
1
For explanation and details see appendix A.
2
Based on incomplete data.
NOTE.—The figures in this table are based upon a new national income and expenditure series
Department of Commerce. They are not comparable to figures in the January Economic Report.

+11.6

-10.4
-10.0

+5.0
-.8
+7.6
-3.0
0
of the

We may now examine in more detail the current and foreseeable
trends in the main components of the Nation's Economic Budget.
CONSUMER INCOME AND EXPENDITURES

Consumer expenditures represent about 70 percent of the Nation's
Economic Budget, while consumer income is an even larger proportion.
Relatively small changes in the real incomes of consumers, or in the
disposition of consumers to spend, have a marked influence upon economic activity.
As shown in the Nation's Economic Budget, the annual rate of
consumer income (after taxes) rose by less than 2 percent from the
last quarter of 1946 to the first half of 1947. The index of consumers'
prices rose slightly more than this. Even allowing for the reappearance
of many low-priced items, it appears that consumers did not obtain
the increase in real income set forth as an objective in the Economic
Report in January. (For more details, see appendix B, table V.)
One measurement of trends in the average buying power of consumers is shown in the following table:




15

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

-1
1 —
I 1•• 11 1

THE NATION'S ECONOMIC BUDGET
BILLIONS OF DOLLARS
CURRENT PRICES
CONSUMERS
160

BILLIONS OF DOLLARS
CURRENT PRICES

^

_

Hii

120

-

160

-

120

-

80

-

40

TURES ^ H S I i

80

40

~ Hill

0
BUSINESS

EXCESS OF
/EXPENDITURES

INTERNATIONAL
40

40
NET
EXPORTS

NET
IMPORTS

GOVERNMENT
120

80
EXCESS OF
RECEIPTS N

P

40

I

0
1939

1944

4thQr.
1946

SOURCE: BASED




ON REVISED

SERIES

OF NATIONAL

INCOME

80

-

1

1st half
1947

PROOUCT BECAUSE OF CERTAIN

AND GROSS NATIONAL

-

—

SEASONALLY ADJUSTED
ANNUAL RATE
THE COMPONENTS DO NOT ADD EXACTLY TO THE 6R0SS NATIONAL
ADJUSTMENTS.
SEE TABLE ON THE NATION'S ECONOMIC BUDGET.

120

_

M.

^

--

PRODUCT.

•nHHaaa

40

16

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE II.—Per capita disposable income
Current
dollars

Period
1935-39 average .
1940
1944
1946.

_.

Seasonally adjusted annual rates:
First quarter.
_
Second quarter
Third quarter
Fourth quarter
1947, first half 3

1944
dollars 2

516
574
1,057
1,122

647
719
1.057
1,011

1,074
1,091
1,133
1,181
1,183

1,038
1,037
990
979
956

1 The concept "disposable income" corresponds closely to "consumer income after taxes" as used in the
Nation's
Economic Budget. Differences between the two concepts are explained in appendix A, table III.
2
Deflated by the BLS Consumers' Price Index, which cannot fully reflect changes in the quality and
relative availability of higher-priced and lower-priced goods.
3 Estimates based on incomplete data.
NOTE.—The figures in this table are based upon the revised series of national income of the Department
of Commerce. They are not comparable with the figures in the January Economic Report.

This table indicates that American consumers are, on the average,
better off than before the war. They live in a richer and more productive economy, and they are sharing its benefits. But our concern
today is not whether consumers can buy as much as they could before
the war. It is, rather, whether they can buy enough to sustain our
postwar economy at maximum production. The downward trend in
the per capita real incomes of consumers since the middle of last
year, to which the Economic Keport in January called attention, has
continued in 1947.
Current trends in consumer spending and saving
The volume of consumer buying, determined primarily by income,
is also affected by the relationship between spending and saving out
of current income and by the availability and utilization of past
savings.
Consumers are now saving less than 7 percent of their disposable
income and spending more than 93 percent. This marks a transition
from the very low spending rate of 75 percent of income, reached
during the war years, to a much higher peacetime level. The following table shows this change:
TABLE III.—Trend in consumer saving l
[Billions of dollars]

Period

1935-39 average
1940
1944
1946

_._.
.:

Seasonally adjusted annual rate
First quarter
Second quarter
Third quarter
Fourth quarter
1947: First half 1

Disposable
income

Net
saving

Net
saving as
percent of
disposable
income

66.6
75.7
146.0
158.4

3.0
3.7
35.6
14.8

4.5
4.9
24.4
9.3

150.9
153.8
160.4
168.0
169.6

16.6
15.5
13.1
13.1
11.6

11.0
10.1
8.2
7.8
6.8

1 Estimates based on incomplete data.
NOTE.—These estimates are derived from revised statistics of national income and are not comparable
with the estimates in the January report.
Source: Department of Commerce,




17

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

CONSUMER INCOME, SPENDING a SAVING
Consumer expenditures rose more than consumer income in
the first half of 1947.
BILLIONS OF DOLLARS
200

BILLIONS OF DOLLARS
2 00

DISPOSABLE PERSONAL INCOME *
(Personal income less taxes)
160

1 60
DISPOSABLE INCOME

120

120

80

80

CONSUMERS
EXPENDITURES
40

40

L— 0
1939

1940

1941

1942

1943

1944

1945

1946

1947

The percentage of income saved continued
to drop.
PERCENT
30

NET SAVING AS PERCENT OF DISPOSABLE
INCOME

PERCENT
30

20

20

10

10

r r . i , • • i , , . i , , • i , •, i • • , i . , • i • •, l
1939

1940

1941

1942

1943

* SEASONALLY ADJUSTED ANNUAL RATE
SOURCE! DEPARTMENT OF COMMERCE (Revisod




Serin)

1944

1945

1946

_L

1947

18

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

The trend toward more spending and less saving by consumers may
continue for a time, particularly with more durable goods coming on
the market. According to the most recent statistics the proportion of
income saved is still much higher than in the prewar years. Also,
improvements in the quality of almost all categories of goods tended
to increase spending during the first half of 1947, and the trend toward
better goods will undoubtedly continue.
Allowing for all these considerations, however, it is very questionable whether the rate of net savings will drop much lower or return
to the prewar rate except through adversity. Incomes are much
higher than before the war, and there are several million fewer unemployed. In a prosperous economy, the amount saved probably tends
to be larger in proportion to income.
Use of past savings

The high rate of consumer expenditures and the declining rate of
net savings reflect the fact that many families have been using their
past savings. According to a recent Federal Reserve Board survey,
while the net increase in liquid-asset holdings of consumers as a whole
was 8 billion dollars in 1946, the people who used liquid assets disposed of a total of 10 billion dollars of such savings. The cashing in
of series E bonds has been running recently at about 3 percent of
disposable income, and the average monthly amount redeemed has
been slightly above 1 percent of the total outstanding issue. While
these redemptions, which have taken place particularly in the smaller
denominations, have been more than offset by the purchase of other
savings bonds of larger average denomination, they represent cuts
in saving by many families.
According to the Federal Reserve Board, about two-fifths of all
families increased their holdings of liquid assets, such as Government
bonds and bank accounts, during 1946, while more than two-fifths
reported decreases in these assets. Among the families reporting the
use of liquid assets, it is estimated that 40 percent of the money was
used to pay essential living expenses, such as food, clothing, and
medical care; about 20 percent to buy durable goods; about 20 percent
for housing; and about 20 percent for transfer to other forms of investment. The extensive use of savings for current living costs and
the concentration of this practice among families of low and moderate
income reflect the failure of numbers of persons to secure incomes
commensurate with the higher cost of consumer goods.
The survey also found that almost one-quarter of the families in
the United States had no Government bonds nor bank accounts in
February 1947. This proportion was about the same as a year earlier.
The study also showed clearly that the proportion of spending units
holding liquid assets varied with income, as indicated in the following
table:




19

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE IV.—Consumers' holdings of Government bonds and savings and checking

accounts, first quarter, 1947

1946 income t

Percent
of spending units
in income
group

Under $1,000.
$1,000 to $2,999__
$3,000 to $4,999
$5,000 and over
All income classes

100

Liquid
Percent
of
of spend- assets
middleing units
most
having holder in
liquid
income
assets
class 2
49
73
90
100

$370
640
1,200
4,000

76

890

1
Money income before taxes.
2 Median amount held by units having liquid assets.
Source: Survey of consumer finances, conducted by survey research center of the University of Michigan
for the Board of Governors of the Federal Reserve System.

Consumer credit

The rapid increase in consumer credit in 1946 which brought a
warning note into the Economic Report in January abated with the
turn of the year. The increase of 1 billion dollars in the 6 months
ending May 1947 was not much more than one-half the increase in
the preceding 6 months' period. Consumer credit now stands at a
level slightly above the 1941 record. But its ratio to consumers'
disposable income is much lower than in that year. (See appendix B,
table VI.)
The credit situation is sound enough to permit the continuance of
the present rate of increase for the remainder of the year, and the
demand for durable goods, especially automobiles, may be expected
to induce such expansion. But a more rapid increase in consumer
credit would be unhealthy. It would create a charge against the
income of consumers which would reduce their power to buy goods
in 1948 as compared with their buying power in 1947. For this reason
it will be most unfortunate if merchants, by resorting to competition
in easy credit terms rather than to competition in price, induce buyers
to resort more freely to the use of credit.
BUSINESS INCOME AND DOMESTIC BUSINESS INVESTMENT

Business investment, including residential construction, is only
about an eighth of the total expenditures in the Nation's Economic
Budget, but it is a highly dynamic force in the economy. As expected in January, the rate of inventory accumulation has declined,
and a further decline in the rate is expected. While residential
construction has increased, the rate of increase has been below the
expected or needed levels. This inadequacy has been due to the high
cost of building and to longer term influences that have made it
impossible to adjust the housing supply to the mass market. As the
most urgent needs for reconversion and modernization of plant and
equipment are gradually being met, business expansion depends increasingly on the regular and much-needed additions to capacities
in many lines of industry and on the technological advances that call




20

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

for many new plants. A continued high level of business investment
is essential.
TABLE V.—Business receipts and investment 1
[In billions of dollars, seasonally adjusted annual rates, current pricesl
October
to December
1946

Receipts:
Corporate undivided profits after taxes
_.
Capital consumption allowance and adjustments.
Adjusted corporate undivided profits and additions to business reserves.
Gross domestic business investment:
Construction.
_
_._
Residential
Nonresidential
__
_
Producers' durables
.._
_
Net change in inventories (after adjustment for revaluation)
Total
_
___
Excess of receipts (+) or investment (—).

_
_

January

to June
1947 2

10.2
4.0
14.2

11.2
7.9
19.1

9.3
3.6
5.7

9.8
4.2
5.6

15.7

17.0

30.4

29.5

-16.2

-10.4

5.4

2.7

1 For explanation and details, see appendix A, table IV.
Based on incomplete data.
NOTE.—The figures in this table are based upon a new national income and expenditure series of the
Department of Commerce. They are not comparable to figures in the January Economic Report.
2

Producers' durables
Outlays for producers' durables have been running a little higher
during the first half of this year than during the last quarter of 1946.
Some of the more urgent and more obvious demands for reconversion
and for additional capacity have been filled. But the backlog of
needs, particularly for replacement and modernization of equipment,
is far from exhausted. Production bottlenecks are still an important
limitation, both directly and because shortages of particular productive facilities prevent expansion in other areas. It is likely that
total outlays for 1947 will not differ much from expectation and
therefore will not introduce any pronounced change in the general
economic picture.
Inventories
The rate of increase in the adjusted volume of inventories during the
first half of 1947 was about half the rate of increase during the last
quarter of 1946, as shown in the table "Business receipts and investment. " This rate may decrease further in the second half of the year.
Manufacturers' inventories (book values) have shown a fairly steady
rate of increase during the last 9 months, although the peak rate
occurred in the third quarter of last year. The rate of increase in
wholesalers' and retailers' inventories, seasonally adjusted, has been
showing a significant decline. An important difference between the
first half of this year and the last half of 1946 is that accumulation of
durables accelerated, while accumulation in the previous period was
heaviest in nondurable lines. The condition of retail inventories has
been improved, both in respect of the decreasing rate of accumulation
and in the quality of goods. Merchants have been aggressive in
ridding their stocks of the inferior, substitute, and off-brand goods
which crept into their stores during the period of wartime shortages.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

21

The inventory situation at this time is not unbalanced, judged by
the business standards of prewar years. (See appendix B, table XVI.)
The values of the inventories of manufacturers, of wholesalers, and of
retailers in proportion to their respective volume of sales are all below
the ratio of the years before the war. They can probably increase
to some extent with safety. It is not certain that it is prudent business practice to maintain the same ratio of inventory as volume of
sales increases.
There is little of the speculative condition in inventories and orders
which in some other periods of active business has created a point of
vulnerability. For example, reports from 296 department stores
indicate a decrease in outstanding orders. (See appendix B, table
XVII.) In May 1946, orders approximated 3 months' volume of
sales. They are now about equal to sales in 1 month. Many other
wholesale and retail distributors, in addition to department stores,
have reduced orders below the high levels of 1946. This strengthens
the inventory situation, since wholesalers and retailers would not
find it necessary to cancel large outstanding orders in case of a decline
in market demand.
Industrial and commercial construction
There was a rush to build during 1946, in spite of rising construction costs, in order to complete construction in time for production to
take advantage of a lush market. Construction contracts let for
industrial structures decreased during the first half of 1947, when
activity was below the level of the last quarter of 1946. Continued
high costs and the difficulty of securing firm contracts, as well as the
Government restrictions which had been imposed to aid housing, all
affected the rate of industrial construction.
Commercial construction appears to be holding up relatively better
than industrial construction. Most commercial structures can be put
in place more rapidly and are immediately put to profitable use.
Contracts let have shown an increase since January but are still below
the level of a year ago, and construction work is at considerably lower
levels than it was in the fourth quarter of 1946. With the elimination
of most controls over this type of construction, the volume may not
continue to decline, although it is not expected that commercial
construction will exceed that of 1946.
On balance, nonresidential construction has been proceeding
approximately at expected levels. (See appendix B, table XV.)
Residential construction
It is in the area of residential construction that activity has fallen
most short of needs, whether these are measured by consumers7 needs
or by the role that home building should play in an economy stabilized
at high levels. Seasonally adjusted outlays for residential construction during the first half of 1947 were running at a level above that
of the last quarter of 1946, but the number of houses started this year
has been far below requirements. Many of those who need housing
are not in income groups that can be served under present cost-price
conditions. This makes much of the backlog demand for housing
ineffective.




22

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

The unexpected increase in foreign buying and the backlog of
demand for other consumer goods have thus far prevented the disappointing record of housing construction from affecting maximum
employment and production this year. But it is none too early to be
concerned about a possible relapse of housing into its prewar state of
chronic ill-health and instability. Housing remains, in some respects,
our domestic problem number one.
INTERNATIONAL

TRANSACTIONS

During the first half of 1947, there was a large increase in our
exports unaccompanied by any significant increase in our imports.
Our total transfers of goods and services to other countries rose to an
annual rate of 20.7 billion dollars compared with a rate of 15.3 billion
in the last quarter of 1946. The goods and services we provided to

MERCHANDISE TRADE (Recorded*)
Exports increased sharply

in the

first

half

of 1947.

Imports rose less.
BlLLIONS OF DOLLARS
20

|

1910
1915
1920
1940
1925
1930
1935
I_FISCALJ
FISCAL!L
CALENDAR YEARS
I YEARS]
YEARS!
"INCLUDES LEND LEASE; EXCLUDES SURPLUS PROPERTY SALES
AND CIVILIAN SUPPLIES FURNISHED TO OCCUPIED AREAS.
SOURCE: DEPARTMENT OF COMMERCE

BILLIONS OF DOLLARS
|

1945

|

1 20

12 3 4 1 2 3 4
1946 1947
QUARTERLY DATA
AT ANNUAL RATE

other countries ran ahead of what they provided to us at the rate of
12.7 billion dollars a year. Merchandise (including surplus-property
sales and provision of civilian supplies to occupied areas) accounted,
at an annual rate of 11 billion dollars, for most of this excess of exports
over imports. The remainder, at an annual rate of 1.7 billion dollars
was excess receipts from service transactions and income on investments. This total of 12.7 billion dollars a year includes Government




23

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

unilateral aid and private gifts and remittances at an annual rate of
about 2.6 billion dollars. The net excess of commercial exports thus
ran at a rate of about 10 billion dollars a year, compared to a rate of
5.2 billion in the last quarter of 1946, as shown in the Nation's Economic Budget. (See appendix A, table V and appendix B, tables
XXII and XXIII.)
The effect of these transactions upon the total flow of the Nation's
income is roughly indicated by the fact that this increase in the annual
rate of the net foreign balance constituted about three-fourths of the
increase in the annual rate of the total gross national product from
the last quarter of 1946 to the first half of 1947.
More than one-half of the excess of goods and services foreign countries received from us over those they supplied to us was financed by
aid and loans extended by this Government. Nor is this situation
likely to change immediately. There is little likelihood that a greater
part of the burden will soon be carried by increased imports, private investments abroad, liquidation of dollar balances, or gold shipments
to this country. Gold stocks of other nations and their investment
and credit funds in America have been considerably reduced. Production in wax-stricken countries of goods for export will not increase
greatly until the reconstruction of their economies has proceeded
much further.
During the first half of 1947, foreign countries not only had to
continue liquidation of their short-term capital holdings in the
United States at the high rate that prevailed in late 1946, but also
had to sell greatly increased quantities of gold. Private gifts and
remittances from the United States and tourist trade contributed to
the financing of foreign needs, but private long-term investment played
a negligible role on balance. How the excess requirements of foreign
countries were financed is shown in summary by the following table.
(Also see appendix B, table XXI.)
TABLE VI.—Financing of the excess of goods and services supplied to foreign
countries
[Billions of dollars, seasonally adjusted annual rates]
1946
I
2

U. S. Government loans and unilateral transfers (net)
Liquidation of short-term
capital in United States for foreign
countries (net) 2
__Sale of gold by foreign countries to United States (net) 2
Private gifts3 and remittances (net)__ __
._
Other (net)
Total means of financing 4

II

III

IV

1947
first
halfi

5.0

6.5

5.8

4.2

6.6

.9
.6
.6

2.0
.1
.7
.6

.5
.3
.6
.7

2.3
1.1
.7
-.6

2.1
2.8
.8
.4

7.1

9.9

7.9

7.7

12.7

i Estimates based on incomplete data.
3 These figures exclude payment of the United States subscriptions to the International Monetary Fund
and International Bank. Prior to the second quarter of 1947 the United States investments in these institutions were held in gold and short-term dollar assets. To the extent that these funds have subsequently
been disbursed to foreign countries they are included under the liquidation of foreign short-term capital
in the United States.
3 Includes private long-term capital movement, movement of United States short-term capital, and
errors and omissions.
< The excess of goods and services includes the unilateral transfers of goods that are excluded in the "net
exports of goods and services" as used in the Nation's Economic Budget. See appendix A, table V.
Source: Department of Commerce.




24

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

The root cause of this high rate of net expenditure by other countries has been, of course, their intense need for goods. The rehabilitation of Europe has been much slower than expected. The economic
destruction was greater, and the dislocation of peoples and the ebbing
of morale were more serious, than had been realized. The effects of
adverse weather conditions have been more keenly felt. The results
have been an increase beyond expectation in the need for American
goods and services in the devastated countries and a limited return
by these countries to their role of exporters to other areas. Some of
the other areas, such as Canada and Latin America, as a result have
been forced to resort to our market for imports they would normally
have bought elsewhere. Demand of some countries for our goods has
been further increased by wartime deferral of demand for goods they
normally buy from us and by the existence of internal boom conditions.
The world demand for all kinds of goods is so great, and the supply
of those goods elsewhere than in the United States is so limited, that
foreign buying in the American markets in the coming months will
certainly reach the limit of the buying power of other nations. Under
present prospects this buying power is likely soon to decline, at least
for a considerable number of foreign nations. Existing United States
Government loans and credits, which stood at a little over 5 billion
dollars at the beginning of the year, are nearing exhaustion. As a
matter of fact, various countries have felt obliged to adopt import
restrictions during recent months. It is also unlikely that gold sales
and dollar-asset liquidation can be maintained at the present rate.
Moreover, these resources are not distributed in relation to the need
for American products. It is unlikely, too, that productive facilities
abroad will be restored in the near future to a point that will permit
significant increases in exports to the United States.
Thus there is a prospect for exhaustion of presently available resources for foreign financing of the present export surplus, and little
prospect for an early significant increase in the earnings of dollars by
United States imports. It seems likely, therefore, that unless additional credits, governmental or private, are provided, the United States
net exports of goods and services must be expected to decline before
the end of the year.
GOVERNMENT TRANSACTIONS

Federal transactions

The Economic Report in January stated: "With an outlook of high
economic activity for the current year, the revenue policies are designed to balance the budget and achieve a surplus toward a retirement of the national debt." This policy is being followed. Under
current economic conditions, the accumulation of a Federal surplus
counteracts remaining inflationary influences, reduces the national
debt, and leaves us in a better position to deal with changing developments, whether domestic or international.
The year that ended June 30, 1947, showed a budget surplus of 754
million dollars according to the conventional budget figures. Federal




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

25

cash receipts from the public exceeded cash payments to the public
by nearly 7 billion dollars in the same period. For showing the
financial position of the Government, it is better to measure Federal
transactions by the conventional budget figures. For example, during the last 12 months, 1.8 billion dollars in terminal-leave bonds
issued to veterans are shown as an expenditure in the conventional
budget, but will not show as a cash payment until the bonds are
cashed. Similarly, the budgetary receipts and expenditure accounts
contain 2.6 billion dollars allocated to social insurance trust funds,
which represent an obligation to beneficiaries of these funds. The
conventional budget figures show many accruing obligations of the
Government which are not reflected in cash payments to the public.
Also, receipts of trust accounts, such as deposits by States in the
unemployment trust fund, although they are cash receipts from the
public, are not funds available for regular budget operations and are
not included in the conventional budget receipts.
Thus, the conventional budget figures represent more adequately
the long-run financial position of the Government, while statements
of cash receipts from and payments to the public measure more
accurately the impact of Government operations on consumer and
business income and spending. A reconciliation between the Federal
budgetary surplus and the cash excess of receipts over payments
appears in appendix A, section 5.
TABLE VII.—Federal cash payments to the public and Federal cash receipts from the
public 1
[Millions of dollars—annual rates, seasonally adjusted]
Cash payments
July 1945 to June 1946.
July to December 1946
January to June 1947 2 .

65,627
37,300
3 41,700

Surplus of cash
Cash receipts receipts (+),
payments (—)
47,775
45,800
46,800

-17,852
8,500
5,100

1 For details and explanation see appendix A, tables VII, VIII, and IX.
Based on incomplete data.
The increase in Federal cash payments in the period January to June 1947 was due largely to extraordinary payments on account of contributions to international organizations and loans to foreign countries,
particularly the concentration of British loan withdrawals in this period.
Source: Bureau of the Budget.
2
3

In the first half of this year the Federal cash surplus was almost
4.6 billion dollars or about 9.1 billion at an annual rate. After
allowing for seasonal factors, such as the peak in tax receipts in March,
the adjusted surplus was 5.1 billion at an annual rate, as shown in the
table. This cash surplus is expected to be larger during the next 12
months' period, estimated on the basis of present tax rates and enacted
or pending appropriations, and assuming substantially unchanged
business conditions.
The economic effects of Federal expenditures must be measured by
their distribution as well as their total amount. This is shown in the
following table.




26

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE VIII.—Federal cash payments to the public
[Billions of dollars]

Payments to—

I. Individuals:
Military pay__
Salaries of civilian personnel
Other*
._
Total
II. Business:
Goods and services purchased
Subsidies to farmers
Other 2
Total

_

III. Foreign governments and international organizations *
IV. State and local governments:
Grants in aid
Adjustments 3
_
Total.

_

Calendar
1946

JanuaryJune 1947
(seasonally
adjusted an-l
nual rates)

6.9
6.7
11.0

3.9
5.5
10.5

24.6

19.9

13.5
.8
3.8

9.7
1.3
3.9

18.1

14.9

1.7

5.9

1.1

1.4

-.4

-.4

45.2

41.7

1

Based on incomplete data.
* For a break-down of these items, see appendix A, table XI.
»For explanation, see appendix A, table XI, footnote 8.
Note.—Details will not necessarily add to totals because of rounding.

The composition of Federal payments has changed more than their
general level, and is expected to change still further this year. Payments to Federal civilian and military personnel have been reduced
substantially and are still declining. Purchase of goods and services
by the Federal Government were reduced sharply during the last 12
months' period. They are likely to increase somewhat in the near
future, because of some increase in long-delayed procurement for
national defense and nonmilitary construction that it seemed inadvisable to defer any longer. Some large payments on account of contributions to international organizations and of loans to foreign governments have been made during the last 6 months. A substantial
reduction in such payments is expected for the coming period unless
new foreign-aid programs are adopted by legislation.
During the first half of calendar year 1947 the total Federal debt
was reduced by slightly more than 1 billion dollars to 258.4 billion
dollars on June 30, 1947. Since February 28, 1946, when the debt
reached a peak of 279.8 billion dollars, total debt reduction has
amounted to 21.4 billion dollars. Practically all of this has been
accomplished by drawing down the Treasury cash balance, although
the small budgetary surplus in fiscal year 1947 was also available for
this purpose.
The budgetary surplus during the first 6 months of 1947 amounted
to over 750 million dollars. The cash surplus during the period—that
is, the actual excess of cash receipts over cash payments—amounted
to approximately 4.6 billion dollars, however. This cash surplus
contributed toward a reduction of 8 billion dollars in the marketable
debt during the 6-month period, 5 billion of which was in the Government security holdings of commercial and Federal Reserve banks.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

27

The total debt, however, declined only by about a billion dollars due
to offsetting increases in other types of debt. There was an increase
of almost 5 billion dollars in the debt held by Federal agencies or
funds (for example, the social security reserve funds) and by the
International Bank and the Monetary Fund. There was also an
offsetting increase of over 1 billion dollars in terminal leave bonds
issued to veterans.
The excess of cash receipts over payments, and the correlative
reduction of bank-held debt, contributed materially to the alleviation
of inflationary pressures during the period.
State and local transactions

Combined receipts of State and local governments expanded
moderately during the war period, and have shown some further
increase in the last 6 months. Recent increases have been mainly in
response to the high level of business activity and prices, although
these governmental units are making efforts to increase their sources
of revenue. Receipts of local governments, which arise mainly from
the general property tax, do not rise automatically in response to a
rise in incomes or prices, placing the localities in an unfavorable
situation at times like these. State revenues are more flexible.
Expenditures have risen more rapidly than revenues since the war,
and many local units are now running into deficits. Increases in
expenditures have occurred as a result of the rapid rise in pay rolls
and costs of supplies and materials, despite deferral of nonessential
construction. There is a very real backlog of needed public construction of all types, but high costs of present-day construction are
deterring expansion. Public construction, Federal, State, and local,
during 1947 is expected to be only a fourth of total construction as
against a 20-year average of about a third.
More than a billion dollars in veterans' bonuses have been approved
or are awaiting referendum approval in several States. Thus State
and local expenditures may increase by an annual rate of about a
billion and a half dollars during the next 12 months, exceeding receipts
by about one billion dollars. This possible deficit offsets to some extent
the excess of receipts in Federal transactions. It is not sufficient, however, to change markedly the anti-inflationary impact of all Government transactions on the whole economy.
The outstanding developments shown by this review of the Nation's
Economic Budget may be summarized as follows:
(1) During the past 6 months, expenditures for producers' plant
and equipment, inventory accumulation, and Government expenditures have conformed approximately to the expectation set forth in
the January Economic Report. On the other hand, the increase in
the export surplus has far outdistanced the expectation of last winter,
rising from an annual rate of 5.2 billion in the last quarter of 1946 to
an annual rate of 10 billion dollars in the first half of 1947. The increase in residential construction has not reached the desired level.
Nor have consumer incomes and buying power reached the levels
deemed desirable in January. But this has not yet caused a drop in
employment and production, or alternatively in prices, because tem749764—47




3

28

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

porary supports are still so powerful—for example, exceptional exports and large use of savings and credit.
(2) As a decline in some of these extraordinary factors of demand
must be expected in the near future, the conclusions in the January
Economic Report are still valid in the present situation. Price and
income adjustments are still needed to strengthen consumer purchasing power and give impetus to residential and business construction,
so as to assure maximum activity for the full year and set safe conditions for future progress.
V
ECONOMIC ADJUSTMENTS FOR SUSTAINED HIGH
PRODUCTION
To aid in appraising our present situation correctly and in charting a future course, some details of the economic adjustments that
have occurred thus far in 1947 will be examined.
THE PROCESS OF PRICE ADJUSTMENT

The startling rise in prices between the termination of price control
and the end of 1946 was a major concern of the Economic Report in
January. Price control having been abandoned, I urged businessmen to resist inflationary pressures or temptation and to make
voluntary price reductions wherever possible.
During the first quarter of this year, the average of wholesale prices
rose another 7.4 percent, with increases in all major commodity
groups. The Consumer Price Index held stable until March, then
rose about 2 percent, chiefly as a result of price increases in farm
and food products. Late in March and again in April, it was found
necessary again to call attention to the dangerous price situation.
During the second quarter of this year the upward movement in
prices appeared to be halted. The average of wholesale prices flattened out at a level slightly below the peak reached at the end of the
first quarter. The average of all commodity groups other than farm
and food products showed very little change. Small increases in
some groups were offset by declines in others. In April the average
of farm prices fell somewhat from its March peak, but then crept
upward. The trend of food prices in general followed that of farm
prices. Corn and other feed grains again began rising substantially
during the closing weeks of June as a result of unfavorable weather
during and immediately after the planting season. In April and May
the averages of all major groups in the Consumers' Price Index—
food; clothing; rent; fuel, electricity, and ice; and house furnishings—
showed little change. In June food prices advanced again. (See
appendix B, tables XI and XII.)
The leveling off of prices reflected an easing of some of the inflationary factors in the second quarter. In some commodities, sellers'
markets began to change to buyers' markets as backlog demands were
worked off and shortages began to disappear. There was an increase
in consumer resistance to high retail prices and general resistance to




29

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

high construction costs. The substantial excess of Federal cash
receipts over cash payments was also an anti-inflationary influence.
The course of prices in the second quarter likewise reflected the
conscious intention of many sellers to hold prices below what the
traffic would bear or to reduce prices promptly on the appearance or
even the clear prospect of insufficient demand to absorb increasing

CONSUMERS' PRICES
after a sharp rise in the second half of 1946, rose
somewhat further in the first quarter of 1947, and
leveled off in the second quarter.
PERCENT
1935-39 = 100
200

PERCENT
200

180

180

160

160

140

140

120

120
RENT*

i ,.

I

100
J

F

M

A

M

J

J

A

S

O

1946

N

D

J

F

i
M

100
A

M

J

1947
*

ALSO INCLUDES H0USEFURN1SHINGS, FUEL, ELECTRICITY,
ICE, AND MISCELLANEOUS GOODS AND SERVICES
NOT SHOWN ON CHART.

SOURCE: DEPARTMENT OF LABOR

supplies at prevailing prices. Many retailers and wholesalers reduced
their margins, which in many cases had been greatly enlarged during
the war. They and a number of their organizations endeavored to
secure price reductions from manufacturers. It is clear, however,
that much of the decline in wholesale prices after March came in
those commodities whose prices react quickly to short-term changes
in demand and supply relations. Dairy products, oils and fats,
leather, and crude rubber are examples.




30

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

Voluntary price adustments by manufacturers did not become
widespread. The attempt of many retailers and wholesalers to respond to consumer resistance with substantial price reductions ran
into manufacturers' resistance to lower prices at the other end. Some

WHOLESALE PRICES
reached a peak in March 1947 and have
since been lower.
PERCENT
200

1926 s 100

PERCENT
1200

180

180

160

160

FARM
PRODUCTS

140

140

120

120
OTHER THAN FARM
PRODUCTS AND FOODS

100
J

F

M

A

I

I

M

J

I
J

1946

I

I
A

I
S

O

I

I

N

O

I
J

I

I

I

I

F

M

A

100
M

J

1947

SOURCE: DEPARTMENT OF LABOR

suppliers are, however, beginning to furnish larger quantities of goods
in lower-price lines in clothing, furniture, and some appliances. Substantial reductions in prices require trimming of margins all along
the line of production and distribution.
Although prices leveled off in the second quarter, the present price
situation contains divergent elements, some of which were anticipated
and others not. For some commodities there has been a decline in
market demand. In many others demand remains high and in a
number of cases, especially primary markets, there is a renewed
upward pressure on prices. These elements present important problems of orderly price adjustment which will be briefly reviewed.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

31

At the time of the January Economic Report, certain extraordinary and temporary elements of demand were expected to recede
substantially in the early months of the year. Therefore, prompt
downward price adjustments were recommended to sustain the level
of business activity, residential construction, and consumer purchasing
power in general. This anticipated decline of extraordinary demand
has already occurred in a number of commodities, particularly in the
consumer-goods field. Examples are some items of women's apparel,
and of men's furnishings, small radios, liquor, and rubber tires. Many
more of these cases will appear, one after the other. Price adjustment in each case, as it emerges, can smooth the progress to a sound
and vigorous peacetime economy. As backlogs of demand are worked
off, as shortages are overcome by increased production and as demand
is less supported by the use of liquid assets and credit, sellers' markets
begin to fade. Such adjustments then become imperative. To
avoid a price collapse and the demoralization of markets, it is necessary to make substantial price reductions before market forces take
control. As competition reappears, sellers who overstay the market
are likely both to suffer serious inventory losses and to create a
worsening economic situation through curtailed production. If price
adjustments are not promptly made there will be danger of a simultaneous collapse of a number of markets, which would have a cumulative influence toward general business recession.
It was also emphasized in the January report that in many other
cases, even when there is no prospect of imminent decline in demand,
price restraint will be of long-run advantage to the firms and of immediate benefit to the whole economy. This is true where profit
margins are more than adequate to maintain the financial health of
the enterprise, to provide reasonable returns to investors and management, and to obtain funds for needed expansion and modernization.
Proper price adjustments in these situations will ordinarily benefit
the firm by building good will and stimulating future market expansion. They will benefit the economy immediately by increasing the
real purchasing power of current incomes, thus reducing the resort
to use of savings and credit. Moreover, even where the market
situation would permit higher prices to be obtained, it is frequently
wise business strategy, as well as a general economic advantage, to
forego that temporary gain.
There is ample evidence that many businessmen realize that charging less than the traffic will bear is good business policy and is in the
public interest. Many firms are rationing their output among customers, which shows that they could obtain higher prices. The socalled "'gray market" prices are an indication that regular suppliers
are charging less than the demand would permit. Moreover, a number
of individual firms and representatives of business organizations have
recognized that their own long-run interests and the welfare of the
country are best served by reduction of profit margins. Many others
are in a position to follow this policy.
The need for restraint in pricing practice which was stated in the
January Economic Report is even more important today than it was
at that time. Its relevance is underscored by the recent revival of




32

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

fears of inflation. Such fears threaten the process of orderly price
adjustment. The change in psychology has been unduly stimulated
by such events as the corn crop scare and an exaggerated interpretation of the effects of the coal mine wage adjustment. Ill-informed
ideas about the new foreign-aid proposals have also been an element
in the revived talk of inflation and in a relaxation of resistance to
high prices.
Such developments accentuate the need not only for restraint in
price policies, but also for continued caution in the purchase of materials where many prices are quickly affected by changes in the psychology of buyers and sellers. To expand commitments at high or
rising prices will only increase the dangers of creating future disorderly
movements in prices. Speculative increases at this time would insure
a much sharper fall in prices later, with all the losses which that would
bring. Consequently, it is urgent for sellers to refrain as far as possible
from price advances and for buyers to resist price increases by their
suppliers.
Some persons have scoffed at the idea that businessmen could or
would follow a stabilizing course. Yet the reaction among progressive business leaders in the first half of the year was such as to
mark new possibilities of orderly price corrections in a free economy
through the voluntary action of individual firms. Responsive to the
Government's repeated emphasis upon the gravity of the situation,
they have widely acknowledged the need of price reductions or the
foregoing of price increases. The obligation of each businessman to
give this matter his serious attention has been presented in numerous
business journals and meetings of business associations.
While the course of prices did not clearly turn downward in the
second quarter, there can be little doubt that the Nation-wide focus
of attention on this matter acted as an important anti-inflationary
force. The leveling off of industrial prices came at the very time when
considerable wage advances were granted to large numbers of workers.
Thus, in the second quarter of 1947, some progress was made toward
averting the prospective disparity between prices and mass incomes
which was discussed in the Economic Report in January. Any sharp
increase in prices in the coming months would wipe out that progress.
The guiding principles for price making outlined above apply in
all fields of business activity—production, trade, and services—
where a firm has any range of discretion in setting its prices. As
pointed out earlier, far-seeing pricing at the materials and manufacturing levels is the outstanding need at the present time, in order to
facilitate workable adjustments of price to income and demand all
along the line. Wholesalers and retailers must recognize, of course,
that their part in the process involves trimming of exceptional margins
as well as promptly reflecting in their own prices any reductions made
by their suppliers.
It is recognized that cost increases have limited the ability of a
number of firms to make price reductions. Nevertheless, the general
principle holds that prices, to support a prosperous economy, must
be kept down to the lowest point compatible with costs and reasonable business incentives.
Beyond what the individual business executive does toward price
adjustment as a matter of economic policy, the Government must do




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

33

everything possible to promote vigorous conditions of market competition. A free-enterprise system cannot tolerate collusion in price, in
curtailment of output, or in restriction of capacity expansion, or the
hampering of the entry of new firms into the business life of the community. The antitrust laws must be applied energetically wherever
freedom to compete is restrained or impeded.
Recommendation of voluntary price reduction and of foregoing
possible increases has been addressed primarily to businessmen who
follow a conscious price policy, and not generally to farmers. There
are sound and fair reasons for this. Most individual farmers, like
many small business firms, do not have it within their power in the
same way as large industrial producers to determine the prices for
their products. Farming in America is not organized that way.
Nevertheless, it is incumbent on farmers to follow sound pricing principles in their collective-bargaining activities through cooperative
associations and in their efforts to maintain legislative support of
farm prices. Small business has the same responsibilities to work
toward desirable price adjustments.
Though it is true that farm prices have advanced even more than
industrial prices in many cases, we now, after termination of price
control, have only limited powers to deal with them except through
increased production and through shifts in, or control of, demand.
The special problem of agricultural prices in the second half of this
year will be dealt with in later sections on the agricultural problems
and foreign economic policy.
Likewise, the cost of construction—residential, industrial, and
commercial—is of outstanding importance. Unless this cost is
brought down and kept strictly in line with the financial position of
buyers, we shall not have a satisfactory increase in the volume of
private construction and we may suffer a decline. This is a crucial
factor in the present situation, and it will be discussed separately later
in this report.
THE PROCESS OF WAGE ADJUSTMENT

In January the Economic Report recommended moderate wage increases at points where rates had lagged behind the cost of living or
were substandard. The Report laid stress also on the desirability of
raising the minimum wage rate and coverage and increasing rates of
unemployment and old-age benefits under social-security laws. Wage
increases where increased productivity would permit them without
interfering with desirable price adjustments and high production
levels were recognized as justifiable. But the Report warned against
an inflationary wage-price spiral.
Since that time, peaceful collective bargaining has yielded widespread wage increases in many industries, such as textiles, rubber, steel,
automobiles, electric equipment, local transit, department stores, and
construction. (See appendix B, tables IX and X.) These settlements have tended also to move wages up in other firms and industries.
Most of these wage increases have been absorbed without price increases, and in a few cases have been accompanied by price reductions—a result that would have been unlikely had there not been
concentrated national attention to the price problem.




34

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

In some previous inflationary periods, the effort of workers to
protect their family budgets and the efforts of business managers to
protect the financial position of their companies led to strikes which
crippled production, added to the inflationary condition of inadequate
supply, and subjected workers and their families to desperate hardships and the stockholders of the employing corporation to heavy
financial losses. The important and long-drawn-out strikes in 1946
were ample warning that the situation in labor-management relations
was highly explosive.
It was fortunate that when the time came for the determination
of wage rates early this year, both employers and workers were disposed not to take such extreme positions as to lead to deadlock. The
cost of living had risen sharply with the end of OPA, and employers
acknowledged the justice of a demand for an increase in wages and
did not confront workers with the alternatives of accepting an inadequate wage increase or a strike with its accompanying hardships.
The workers, on their part, recognized the danger of inflation and kept
their demands within such a practical trading range that a quick
settlement was agreed upon in each of the early contract discussions
in the major industries.
While these wage increases have added substantially to the buying power of these groups of workers, they have tended to advance
wages in the upper brackets of the wage structure without raising
the compensation of lower paid wage earners, whose relatively greater
need was recognized in the first Economic Report. These increases
will undoubtedly raise the question of increases in other firms or
industries in order to attain workable relations in the wage and
salary structure. Such wage questions should be settled through
the processes of collective bargaining or, where workers are not
organized, through voluntary adjustments by employers, after carefully
weighing the specific problems peculiar to the particular circumstances.
There are some groups of workers who are suffering hardship
because their wages are substandard or have risen far less than the
increase in the cost of living. The inequities involved in these cases
ought to be eliminated by granting wage increases.
Businesses should absorb these wage increases without increasing
prices wherever possible. They should, in fact, reduce prices in any
case where profits would still be unnecessarily large after the wage
increase. It should be recognized, however, that in some cases such
wage increases will require price increases or prevent price reductions.
Aside from these types of wage increases, the national welfare
requires that labor shall not insist upon wage increases that would
necessitate price increases or forestall desirable price reductions.
Sound principles of wage settlement require that recognition be
given to the peculiar conditions of given firms, industries, or occupations and to the current situation. Over the long run, trends in real
wages should be based on general productivity trends.
Wage levels, wage adjustments, and workers' incomes, however, are
not solely the responsibility of management and labor. Action to
sustain the purchasing power of low-income groups should also be
taken by the Government. It was recommended in the Economic
Report in January that several measures be enacted to eliminate
income inequities and to restore the purchasing power of certain




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

35

underprivileged sections of the population. Specifically, the report
urged upward revision of social security benefit payments, an extension of the coverage of the Fair Labor Standards Act, and an increase
in the minimum-wage level.
No action has thus far been taken toward raising social security
benefits or on the minimum-wage subject, although the latter recommendation was renewed in my message on the portal-to-portal pay
bill. The minimum wage should be increased to at least 65 cents
per hour by amendment of the Fair Labor Standards Act. Action
by Congress is called for. But individual employers should raise
substandard wages now, without waiting for congressional action.
The increase in living costs makes the 40 cents minimum today
equivalent to about 25 cents at the time the law was enacted.
In view of the inadequate provision for rent control in the extended
act, this important element in the cost of living is certain to rise.
This makes still greater the need for bolstering the incomes of those
on the lower rungs of the economic ladder*
PROFITS AND BUSINESS FINANCING

Total corporate profits, both before and after taxes, increased
in the first half of 1947 above the record levels of the last quarter
of 1946. The striking disparities between profits of durable-goods
industries and non-durable-goods industries, which existed during part
of the reconversion period, have now disappeared. Nearly all industries enjoyed high profits in the fourth quarter of last year and the
first half of this year. (See appendix B, table XVIII.) Profits of
unincorporated businesses also increased somewhat between the latter
part of 1946 and the first half of this year. For the last 6 months,
total corporate profits after taxes represented a return of about 10
percent on net worth. Net farm income has continued at a record
Wei.
High corporate profits have provided funds for a substantial proportion of the heavy volume of business investment during the first
half of 1947. Business expenditures on new plant and equipment
and on inventory accumulation were at an annual rate of nearly 25
billion dollars during this period. This volume of business investment
was financed in three ways.
(1) The greater part continued to be financed from so-called internal sources—current earnings and previously accumulated liquid
assets. During the war, corporations and businesses invested a large
portion of their reserve funds in short-term Government securities,
with a view toward liquidating these funds in the reconversion period
as they were needed for the purposes for which they had been accumulated. In the first half of 1947, corporations drew on their Government-security holdings to a lesser extent than in 1946.
(2) Funds were secured from the issuance of new securities at an
annual rate of 3 billion dollars.
(3) Business loans increased at an annual rate of about 1 billion
dollars. (See appendix B, table XIX.)
It must be recognized that a high volume of profits is necessary to
make provision for the increased cost of buying inventory and capital




36

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

equipment and the decreased real value of existing reserves at present
price levels. Even after these allowances are made, it is evident that
in many cases business profits are more than adequate to permit price
reductions or wage increases, or some combination of both.
RESPONSIBILITY

FOR ADJUSTMENT BY BUSINESS, LABOR, AND
GOVERNMENT

In a free enterprise system, economic adjustment to changing conditions does not proceed according to any neat plan evolved at the seat
of government and promulgated by governmental authority. Belief
in the free enterprise system, as expressed in the Employment Act,
stems from the conviction that the processes of dynamic economic
life are so complicated and conditions change so fast that a multitude
of local decisions and flexible revisions are indispensable to economic
health and vigorous growth.
The activities of the war and the fiscal and monetary devices by
which we financed that struggle introduced a profound upheaval in
our economic affairs. The shock of war stimulated the country to
full use of our resources. We do not propose to slump back to low
productivity and underemployment. At present we are in the
process of seeking to find a workable pattern of income and price
relationships on a new price level but with continuing high production and employment. It is generally conceded that this new price
level will be higher than prewar.
A large part of the increase in prices since 1940 has become imbedded
in the cost and income structure of the economy. Hence decline to
the prewar level could be expected only as an accompaniment of a
depression. That we are all determined to prevent. Nonetheless,
prices should be revised downward where profits are excessive or where
reductions are needed to forestall a collapse of markets.
How much higher than prewar the price level will be, no one can
say until a host of events have worked out their direct influences and
remote repercussions. This must be done amid the pressures and
resistances, the economic wisdom and the economic illiteracy, the
forbearance and the avarice of many individuals and organizations,
making their decisions within the structure of our economic institutions.
No individual, no organization, and no branch of government can
be absolved of responsibility for its part in this process. Each of
these price, wage, or other income adjustments helps to determine
the general levels of production and employment in the period just
ahead. And since it takes time for the results of these decisions to
become apparent, we must be farsighted as well as broad-visioned in
the decisions we make. We cannot wait until a drop in demand or
some other market change forces the adjustment, unless we are willing to jeopardize the continuation of prosperity.
We depend first and foremost on business, farmers, labor, and the
consuming public to eliminate or reduce the basic maladjustments




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

37

that cause industrial strife, impair the willingness of business to invest,
or limit the ability of consumers to buy the volume of goods and
services that reaches the market. While the Government should
refrain from action that would tend to prolong maladjustments, it
must be ever ready to perform its complementary role in sustaining
and strengthening the economy.
Economic policy and performance still face a double task. Since
extraordinary and transitional stimuli will begin to wane in due
course, it is necessary to put in motion adjustments in production,
prices, and incomes which will be needed to prevent deficiencies in
demand and decreases in production and employment. At the same
time, it is still necessary to use the fiscal powers of the Government as
a safeguard against inflationary possibilities which still exist.
A policy of budget surplus and debt redemption is imperative under
present conditions to provide that safeguard. While the American
people look forward to relief from the burden of taxes, tax reduction
now would add to the existing temporary inflationary pressures. It
would impede those basic adjustments in the private economy which
must be made for achieving stability in the future.
Such a policy of restraint at the present time will enable us to use
fiscal policies effectively if they are required at a later time to lend
support to the economy. It is of the utmost importance that we be
prepared to take prompt action should a downturn in business activity
appear imminent. Such action taken at the proper time would help
to prsvent the downturn from developing into a serious deflation.
When the time comes for a relaxation of fiscal restraints, it will be
necessary to formulate a program of tax reduction that will give aid
where it is most needed, and that will fit into a broad program of
improvement in our tax system. The purpose of fiscal policy must
be to facilitate, rather than to hinder, the basic adjustments in the
private economy which will be necessary for continued high employment and production. Fiscal measures such as these should be
prudently timed—and the time is not yet.
Several recent developments have sharpened the evidence that the
inflationary danger is still with us. These developments involve the
agricultural outlook and food prices, wage advances and industrial
productivity, housing and other construction, and the foreign aid
program. Each of these will be discussed in the next section of this
report.
VI
SPECIAL FACTOKS IN THE ECONOMIC SITUATION
While the economic situation of the Nation at midyear presents a
predominately encouraging outlook, certain aspects of the economy
have not followed so favorable a course. The nature and probable
effects of these situations need to be examined searchingly so that we
may act intelligently and vigorously to remedy them or hold their
harmful effects to a minimum. Where the basic difficulty lies outside




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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

our power of cure, we must study every possible means of wisely
adapting other actions to this unfavorable condition or, if possible,
offset it by some well-considered line of action.
THE AGRICULTURAL OUTLOOK AND FOOD PRICES

Unfavorable spring weather over large areas of the country makes
it necessary to evaluate the probable consequences of some crop
shortage.
This country was blessed throughout the war period and after
VJ-day with an unbroken series of favorable crop years. This good
fortune carried through the winter wheat crop which is now being
harvested. It promises to yield an all-time record crop of 1.1 billion
bushels. The total output of winter and spring wheat together is
estimated at 1.4 billion bushels. Last year's corn crop reached the
unprecedented figure of almost 3.3 billion bushels and, with favorable
weather, was expected to reach almost as high a mark this year. The
growing assurance that the winter wheat crop would far surpass all
records justified optimism that even the heavy requirements of other
nations could be met without serious pressure upon our domestic
markets and the cost of living.
In May, however, these fair prospects began to darken as unfavorable weather impeded the completion of spring planting. June was a
month of heavy rains, with serious floods in parts of the|Corn Belt.
Although it is too early to forecast this year's corn crop accurately,
the present official crop estimate (July 10) points to a crop of 2.6
billion bushels, which, though approximately 20 percent below last
year's record output, is only slightly below the average of the past
10 years. This is only a preliminary estimate made very early in the
season. Favorable weather could raise the output substantially,
while an early frost could reduce both the yield and the keeping quality of corn. However, there are as yet no grounds for real alarm, nor
for general speculative increases in food prices. It appears likely that
four factors will operate toward offsetting the reduction in the corn
crop: (1) A fairly large carry-over of good corn, (2) large supplies of
concentrated feeds, (3) excellent pastures and forage crops, (4) the
record wheat crop and the prospect that therefore corn exports can be
reduced.
Even though the reduction in corn yield should prove not to be very
great, the effect on price might be considerable if speculative forces
become active in the market. With our last year's record corn crop,
meat and dairy prices were high this spring, and wheat, in the face of
a fine winter prospect, rose to a new high of $3.06 in March. The
corn-crop scare has already driven corn prices for the first time in
history to above $2 a bushel ($2.21 on July 15). The present condition of the corn crop does not warrant a general speculative rise in
food prices.
No matter how high farm prices may rise, these prices can do
practically nothing to alleviate shortages this year, though their effect
on acreage of wheat sown this fall might be considerable. They can
do little to attract imports and nothing to lessen the need of hungry




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

39

people overseas. At home, they operate chiefly to curtail the consumption of those persons whose nutrition is already below a satisfactory standard, but during times of high prosperity they do little to
decrease the total domestic market demand.
During the war, the prices of farm products increased more than the
prices of manufactured goods. The additional disproportionate
advances since the war complicate our problem of relief to countries in Europe or elsewhere. If the corn crop should be seriously
curtailed, it would threaten higher living costs, higher wage demands,
and a new inflationary push on the general price situation at home.
This would be a most unfortunate development from the standpoint
of our desire to stabilize our economy at a high level of employment
and production.
The farm price-support policy has not been a major factor in current
farm prices. The market has made a price well above the support
price for all but a few products. There is little chance that this
condition will change in 1947. In fact, the price-support program,
through protecting farmers against any such disaster as that which
overtook them after World War I, has eased the situation by encouraging a high output for agriculture. If support prices become operative
with the rehabilitation of foreign agriculture, it should be considered
a fortunate circumstance rather than a cause for resentment against
farmers. (Appendix B, table XIII, shows data on prices received
and paid by farmers.)
The total agricultural situation will remain highly uncertain until
the date and severity of killing frosts this fall has been revealed.
Meanwhile, we cannot afford either to ignore the significance of this
factor in our total production picture nor to allow exaggerated impressions about it to become a demoralizing factor in our market,
price, and wage system. To this end, two lines of action should be
considered:
(1) The public should at all times be kept informed as to the true
agricultural outlook, so that unfounded rumors may not lead to
speculative developments in the commodity markets, to undue
advances in food prices, to panicky hoarding of stocks, or to labor
unrest based on fears of greater increases in living costs than are
justified by the actual situation.
If real shortages should develop, the need of sharing such relative
scarcity on as equitable a basis as possible both among ourselves and
between domestic and foreign users of our food resources should be
emphasized. Full publicity on the nature of the shortage might
properly include a campaign for strict economy in the use of certain
foods through personal restraint or special organized campaigns.
The scope and timing of such educational efforts would, of course,
depend upon whether present crop prospects improve or grow worse
as the season progresses.
(2) In case the situation should take on really serious proportions
as crop prospects become more certain, plans should be readied well
in advance of actual need to conserve supplies and to make certain
that they are used as wisely as possible. This can be done partly




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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

through use of remaining authority to control exports of wheat,
flour, and other cereal products. It might also be necessary to work
out some method of adjusting the amounts and kinds of grain used
by processors. Legal authority to regulate the processing and distribution of grain has recently expired. It might become desirable
to renew some of this authority. In any case, the Government
should seek the voluntary cooperation of the grain trade in carrying
out such conservation measures as are found to be necessary.
WAGE ADVANCES AND INDUSTRIAL PRODUCTIVITY

A second development which requires careful consideration at this
time is the recent settlement between the soft-coal miners and the
mine operators.
While the Economic Report in January recognized the need for
certain types of wage increases in lagging parts of the wage structure,
it cautioned against the pressing of demands which would result in
price increases or prevent reductions needed to assure a market for an
expanding volume of industrial output. The negotiations in the first
half of this year resulted in numerous wage increases that in the main
were absorbed without price increases. A few prices went up, a few
down, and many remained about the same.
The effect of the recent mine settlement is to raise the basic straighttime hourly rate from $1.18 to $1.63 and to raise the average hourly
wage by 31 cents—from $1.32 to $1.63. This represents an adjustment of two types. The first type was a reduction o,f the working
day from 9 to 8 hours without lowering the daily pay of $11.85.
Return to the basic-8-hour day without a general reduction in takehome pay occurred in many major industries in 1946 but was deferred
in coal mining until this year. The second type of adjustment was
to increase daily pay from the former level of $11.85 to $13.05. This
was equivalent to an increase of 15 cents per hour for 8 hours, which
was quite similar to the settlement during the first half of this year
in other major industries. The miners had likewise gained a raise
of isy2 cents last year, following a "pattern" which was prevalent
at that time. As part of this year's settlement, the miners agreed
to give up the overtime premium on the eighth hour worked in a day,
which had been a feature of their preceding contract. Also, payment
to the welfare and retirement fund was increased from 5 cents to 10
cents per ton.
With the adjustments of this year taken all together the coal miners
stand in a position near the top of the industrial wage structure.
The avoidance of a prolonged stoppage in coal mining means that
all-out production can be continued. This represents a contribution
to the good labor-management relations which have generally prevailed during the last 12 months and which have contributed so
greatly to the high production and maximum employment of 1947.
This new contract, moreover, is a recognition of the need to maintain an adequate supply of productive labor in this key industry.
The nature of work in coal mining underscores the necessity of




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

41

attractive wages, hours, and working conditions. The drift of young
workers away from the coal mines is a general phenomenon, here and
abroad, and deserves attention in the light of the international coal
shortage.
One major question raised by the coal settlement is whether the
wage increase for the miners will give impetus in other fields to wage
demands unrelated to the specific problems and possibilities of those
particular industries. If so, it could lead to a more or less general
wage-price spiral, increasing and prolonging our transitional difficulties. Clearly, the coal-mine settlement represents a resolution of
a number of complex issues peculiar to the soft coal industry. It does
not provide a guide or pattern for wage settlements in other fields.
There is every reason to expect other industries to settle their wage
questions in terms of their own needs and possibilities, rather than
taking the soft-coal rate increase out of context and adopting it.
Other questions raised by the settlement are the extent to which
these wage increases in mining will be offset by improved productivity,
absorbed by the coal industry, reflected in price rises no greater than
necessary, or used as an excuse for excessive price rises which, because
of the manifold uses of coal, could give another inflationary push
to the economy. And will the coal price increases which occur be
pyramided and passed along, or will they be stopped wherever profit
margins make some absorption of cost possible? The national welfare hinges in large measure on the answers given by industry to these
questions.
Within the mining industry, the miners themselves have pledged
high productive effort in an attempt to offset higher wage costs.
The elimination of the least productive hour of the day—the ninth
hour—and the better relations flowing from the consummation of a
satisfactory contract should serve to minimize cost increases. In
addition, management can make a great contribution to increased
output by seeing that the mines are equipped with the best products
of modern technology.
The members of the coal industry from producers through retailers
have a great responsibility, in their own interest, and in the interest of
the whole country, to consider their pricing with utmost care. Under
no circumstances should a higher wage bill be used as an excuse for
raising prices above the level actually necessitated.
The prominent coal operators and steel producers who brought
about the agreement on the new wage contract have said that they
were greatly influenced by their belief that continued production of
coal is so vital to the maintenance of prosperity that they were
called upon to reach an immediate settlement even though it involved
some risk. They also declared that the new contract contains desirable provisions which may lead, after adjustments have been made,
to a gradual decline in costs and prices below the new levels. Private
management has recently resumed full control after some years of
Government operation and Government control. Coal operators now
have the opportunity to demonstrate the efficiency of private management so that output will be increased and cost and prices lowered.




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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

Until the coal situation clarifies further, steel producers and other
manufacturers who mine or buy coal have a responsibility not to make
decisions on price advances until the effect of the wage-price adjustments in coal has been determined by actual experience. This
applies with particular force to industries such as the steel industry,
whose costs are much less affected than those of the coal industry by
the recent coal settlement. Viewing the profit margins in the steel
industry, the certainty of high and increasing demand for many
years if we maintain maximum employment, and the financial strength
of the industry, stability in steel prices would be a wise economic
policy for this industry as well as for the country. The desirable
economic results which flowed from pursuit of such a policy by the
steel industry and other industries after the wage adjustments during
the first half of the year have been adequately demonstrated. On the
other hand, the pursuit of a different policy now by the steel industry
or by other industries even more remotely affected by the coal settlement could offset the progress thus far made and start another pricewage spiral in motion.
Price boosts now in pivotal areas of the industrial field, based on
uncertain estimates of expected cost increases, or without full consideration of whether profit margins permit absorption, can only add
to inflationary forces. Another general surge of price inflation would
have only one result—the sharp recession which it is to everyone's
interest to prevent.
The fact that most of the 1947 wage negotiations have been concluded without work stoppages is commendable. The continuance
of this record is of major importance to the economy. The new LaborManagement Relations Act creates a new set of rules to govern industrial relations. Adjustment to new standards is always difficult. If
management and labor should substitute excessive litigation for negotiation, we could not hope for peaceful labor-management relations.
But with fair dealing and mutual forbearance, labor and management
can work cooperatively together. Recognizing their common interest
in common ends, they should do everything in their power to increase
production so that the goals of maximum production, employment,
and purchasing power can be continuously achieved.
This involves a change of attitude on the part of some employers and
some workers. Certain businessmen seem motivated in their business
decisions by the belief that the consumption capacity of the country
is severely limited, and that the occurrence of periodic depressions is
unavoidable. They consequently seek relief from business difficulties
by limiting production, and they hope to avoid future business difficulties by limiting the capacity of their plants and industries and by
withholding new production techniques. Some even go so far as to
urge that a considerable volume of unemployment is necessary in
order to induce workers, under the threat of lay-offs, to produce
efficiently. Such beliefs and practices must be discarded. This
Nationlhas the physical resources, the technological skills, the managerial genius, and the trained labor for a steady expansion of national
output.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

43

Labor, for its part, must root out a belief long held by some that
the volume of work available is strictly limited, and that if they do it
rapidly they will soon be out of a job because the work is finished.
Make-work operations, feather-bedding, and soldiering on the job
are practices that fall into the same category as limitations on production, capacity, and new techniques on the part of management. Such
practices obviously reduce our output, lower our consumption, and
retard economic progress.
We are all pledged by the Employment Act of 1946 to sustain an
economy of maximum employment, production, and purchasing
power. The capacity of markets to absorb ever-increasing output of
goods and services is enormous if proper economic adjustments are
made. Production and more production is our great need.
HOUSING AND OTHER CONSTRUCTION

A third area in which the process of economic adjustment toward
a stabilized pattern of maximum production and employment is encountering difficulties is in the construction industry, particularly
residential housing. This is an old problem in the American economy.
Prewar conditions were not satisfactory, wartime shortages were
acute, and the postwar performance has fallen below expectation and
certainly below needs.
The housing goal has been set by a IN ational Housing Agency study
at one million residential units in 1947 and a million and a half in
subsequent years. Present indications are that not more than 750,000
units will be built this year. Moreover, this housing has been available only at high prices and has thus failed to relieve the needs of
many families most in need of accommodation. It puts a heavy
drain on the resources of many who have bought at these high prices.
The problem of bringing the construction industry up to a much
higher level, important as it is, has not yet showed its full significance,
since the national labor force is fully employed while the housing program is still only on the 750,000-units level. The important fact is that
several other lines of activity that have been absorbing the Nation's
resources of labor and materials in the industrial reconversion and
restocking process are beginning to decline or are about to decline.
As domestic backlogs are whittled down and the extraordinary
demand in other areas recedes, released resources seeking productive
use can well find their opportunity in the field of construction, especially housing.
If this development is to take place, however, fundamental adjustments must be made in housing costs. Up to now, the housing shortage has been so serious that buyers have been available at almost any
price. But already, high prices are preventing the bulk of new housing construction from serving those who need it most and are preventing the total volume of new housing from reaching desired levels. If
not reduced, these prices will lead inevitably to a decline in housing
construction when the limited market made up of those who can buy
in spite of cost has been served. Nowhere are cost reductions more
important to the whole economy than in the case of construction.
It is not possible to cut prices of new building to prewar levels.
749764—47




4

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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

But there is widespread agreement that costs can be lowered through
the joint efforts of material suppliers, builders, and workers. Producers of materials, construction labor, and builders all have a vital
stake in this. If they achieve a substantial cut in building prices,
they can look forward to a long period of high activity based upon
vast needs.
In addition, new construction methods offer promising possibilities
for cost reduction. Due to legislative action taken this year, special
assistance to prefabricated-house manufacturers, provided by the
guaranteed market provisions of the Veterans Emergency Housing
Program is no longer available. Provision for insurance of loans
through the FHA to finance manufacturing costs for these producers
has been authorized, however, in addition to the continued availability of insured mortgages to builders or purchasers of such homes
on site, when they meet FHA standards. It is believed considerable
stimulus will thus be given to factory production of housing. The
FHA is taking steps to make this assistance available promptly.
Another important program which is already under way, and which
recently has been given increasing emphasis, is mortgage insurance
aid to rental housing construction by the FHA. Although builders
and owners have been reluctant to make heavy investments in rental
housing while construction costs continue at their present abnormally high levels, the FHA has stimulated an increase in rental
construction by insuring units, under the terms of the Patman Act,
on the basis of current rather than expected reproduction costs.
While volume is still low, it is rising and the FHA is processing a
large volume of applications.
More important than any of these measures, however, is prompt
passage of a comprehensive housing program embodied in the nonpartisan bill now before the Congress. The provision of publicly
financed housing for low-income families, the facilitation of land
acquisition in urban areas, the stimulation of privately financed rental
housing through yield insurance and other measures, and the initiation
of a broad rural hpusing program, are all indispensable elements in
providing healthful and cheerful living conditions for all the American
people at costs within their means. From the purely economic viewpoint, many have repeatedly emphasized the dangers to our economy
if the housing industry is not stabilized at high levels of production.
Even assuming the necessary price reductions, no such goal can
possibly be achieved or maintained without a home-building program
for all income
groups in all parts of the country, urban and rural.
Veterans7 housing depends upon this basic program, for veterans and
their families are in all income groups and in all parts of the country.
The bill comprising this program has long been supported by the
overwhelming weight of informed and objective opinion, starting in
the Congress itself. This bill should be enacted without delay.
At present, only a minimum volume of Federal construction is under
way; and only a moderate amount will begin during the next 12
months. The Federal Government will continue to exert its influence
to hold construction costs down. For example, the Public Roads
Administration of the Federal Works Agency has adopted an interim
policy of approving no contracts above the average 1946 price level
except in cases of urgent iiecessity and then only when the higher price




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

45

has been justified. As a result of this policy, there are already indications of a softening in contractors' bids on Federal-aid highway
projects. An increasing proportion of bids for highway jobs are
beginning to come in at or below this ceiling.
State and local governments should continue following this same
policy of restraint. However, some construction by State and local
governments, as well as the Federal Government, cannot be postponed
because it is needed at once for essential public purposes.
Necessary construction cannot be started until drawings and specifications are available for contractors to follow. The Federal Government has been making repayable advances to State and local governments to enable them to prepare drawings and specifications for jobs
which are necessary now, and for construction which will be appropriate after cost adjustments have taken place. The authority and
funds for new commitments under this program lapsed in the middle
of 1947. Bills are before the Congress to restore this authority. This
type of coordinating and preparatory action is vital. The authority
to continue to make advances for this purpose should be approved
by the Congress. Funds are also needed to prepare a more adequate
Federal shelf of reserve projects.
THE FOREIGN AID PROGRAM

The fourth development of extreme importance to the American
economy during the first half of 1947 has been the unprecedented
rise of exports, and their excess over imports, above the high level
reached by the end of last year. As was shown earlier in this report,
total transfers of goods and services to other countries in the firsthalf of 1947 reached an annual rate of 20.7 billion dollars, an amount
which exceeded by 12.7 billion dollars the annual rate at which other
countries were providing goods and services to us. About one-half
of the excess was being financed by loans and other aids from the
United States Government.
All continents and most countries participated in the increase of
American exports. The largest increase was in supplies for Europe.
American products provided essential aid to combat starvation and
deprivation in many countries and facilitated to some degree the
reconstruction of war-torn economies. However, the progress of reconstruction in Europe has been deeply disappointing. The slowness
of recovery has become a threat not only to economic stability but
also to social order and international peace.
While the need of most countries for the products of the United
States will continue to be very great, their power to finance purchases
out of their own resources and from present programs of American
and international aid is certain to decline substantially during the
present year. This is true despite the fact that the Congress has
made available funds for some further foreign relief. It is true also
despite the fact that the International Bank for Reconstruction and
Development has begun to operate, and that the Export-Import Bank
and many private financial institutions are ready to grant credit on a
commercial and quasi-commercial basis. Many countries have not
as yet been able to reconstruct their own productive powers sufficiently to finance their requirements with their own exports and




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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

through credits of this character. Moreover, presently available
funds are not distributed among countries in accord with the most
urgent needs of reconstruction.
In the face of this situation, the United States Government has
indicated its readiness to consider further aid toward reconstruction
in Europe if thp foreign countries themselves present a plan that
makes such help truly effective in putting them on their feet again.
The time has come now to put increased emphasis on programs that
assure the restoration of a working world economy. By expediting
the process of reconstruction abroad, we shall arrive sooner at the
point where foreign countries will be able, by providing us with
needed imports, to pay for the goods they require from us. European
reconstruction cannot be accomplished simply by American aid; it
must be accomplished through the cooperative efforts of the countries
concerned. This cooperative effort will require our aid if it is to
succeed.
In formulating new foreign aid programs we must consider not only
the requirements of foreign countries for our aid, but also our own
resources and needs. In balancing their needs against our means,
we must recognize that neither our domestic needs nor our means are
rigidly fixed. With our tremendous productive resources developed
far beyond previous peacetime capacities, we can raise our standard
of living, expand our capacities, and still produce for export.
Studies are now under way to determine what further financial aid
is required for the European effort of reconstruction and what aid can
be given within the limits of our means. To further the development
of a sound program for the near future, the Secretary of Commerce,
with the assistance of a committee of distinguished experts, and the
Secretary of the Interior have undertaken to study our resources and
the extent to which we can furnish aid to other countries. To round
out this survey, the Council of Economic Advisers has been asked to
consider the impact upon the domestic economy of a foreign aid program of proposed proportions. These studies, conducted with vigor
and speed, will shed increasing light upon the problem and will help
in the clarification of our future policy.
Meantime it is possible, and pertinent to this report, to make some
appraisal of the already revealed effects of exports upon the domestic
economy during the first half of 1947.
The increased volume of exports has added a substantial demand at
a time when domestic demand itself was running extraordinarily high.
Thus a reduction in our exports during the last 6 months would not
have reduced employment in the same proportion, since workers
producing for export could have shifted in most cases to production
for the home market.
Occurring in a period of high domestic demand, the increase of
exports contributed to the upward pressure on prices. This was
particularly true of grains, for which the foreign requirements were
most imperative. While this is the group of commodities with respect
to which we now face the most serious threat of further price increases
affecting the cost of living, wage demands, and the cost of industrial
production, it must be borne in mind that the high level of domestic
demand has been a chief factor in the upward surge of prices since




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

47

the end of price control. ^ The domestic demand is so large and the
ratio of domestic consumption to foreign buying is so great for most
items that a price problem in connection with many items would exist
even if foreign buying were curtailed. This is clearly demonstrated
by the price rise of some products the export of which declined as
compared with last year.
A basic question is whether shipments of goods abroad have involved
excessive denial at home. When domestic demand is as high as it is at
present, any substantial export surplus means fewer goods for home
use. But it is easy to exaggerate the degree of deprivation. Even
the high level of exports which prevailed during the past 6 months
represented a relatively minor fraction of total American production.
Moreover, the American people now have available for their own use
a larger quantity of goods and services than ever before.
In the field of food products, in 1946 we consumed 15 percent more
meat per capita than in 1939 despite a much larger population.
Comparing 1946 with 1939 on a per capita basis, domestic consumption
of canned vegetables increased by 52 percent, of fresh vegetables by
14 percent, of canned fruits by 36 percent, and of eggs by 22 percent.
Domestic consumption of wheat, dairy products, fresh fruits, and food
fats and oils declined very slightly. (See appendix B, table XXVI.)
No official data are yet available for food consumption in 1947,
but the figures will not be significantly different from 1946. These
improvements, made possible by the expansion of production in
response to high demand, are in vivid contrast to the greatly deteriorated nutrition of unfortunate peoples in many other countries of
the world. The consumption of major food products by American
consumers has clearly not been jeopardized, although the aid rendered
to those stricken by the war has, of course, entailed some sacrifice.
With respect to many nonfood commodities, the domestic use in
1946 and 1947 has been higher than ever before, and the ratio of
foreign shipments to production was in most cases similar to the ratio
before the war. Only for a few nonfood commodities was the ratio of
exports to production in the first quarter of 1947 very high and above
the prewar ratio. The amounts exported were, for example, 21
percent for motortrucks and 17 percent for steel rails. The high
ratio of 31 percent for lubricating oils was similar to its prewar ratio.
Items such as these are clearly indispensable to the importing countries.
While we could use far more of such goods at home than have been
made available, this temporary denial has been essential to the
reconstruction of a more balanced world economy. (See appendix
B, tables XXIV and XXV.)
This analysis of the impact of exports on the domestic economy
during the last 6 months shows that the large exports did create some
strain at a time when the economy was under inflationary pressure.
But it also shows that this strain was of moderate proportions except
in the case of a few important products. And it is a temporary strain.
Even if new programs of the character now under consideration are
put into effect, it is quite unlikely that the high levels of exports and
export surplus existing during the past 6 months will be maintained.
While the level of exports has important effects on the American
economy, it must be clear that we did not and should not embark




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MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

upon foreign aid programs as a device for supporting maximum production and employment at home. To be sure, restoration of world
trade, when achieved, will facilitate our own efforts in maintaining a
prosperous domestic economy. The immediate and sole objective of
our foreign aid programs should be to restore a vigorous, stable, and
peaceful world economy. It is our goal to contribute to the restoration
of conditions under which other countries will be able to pay their way
by mutual exchange of goods and services, under such economic
institutions as they freely determine and adapt to their peculiar
circumstances.
For the purposes of our foreign policy it is worth enduring temporary shortages of a few commodities within the United States. This
will bring lasting benefits in the long run. In any case, the costs of
effective foreign aid programs will be only a very small fraction of the
cost of winning the war, and they are vital to the winning of the peace.




CONTENTS OF APPENDIXES
Appendix A: Explanation of the Nation's Economic Budget
1. The Nation's Economic Budget
2. Consumers' account
3. Business account
4. International transactions
5. Government account
Appendix B: Statistical Tables Relating to Employment, Production, and
Purchasing Power
I. Gross national product or expenditures, 1929-47
II. National income, by distributive shares, 1929-47
III. Personal income, 1929-47
IV. Disposition of personal income, 1929-47
V. Disposable personal income, population, and consumers' price
index, 1929-47
VI. Total consumer credit, 1929-47
VII. The labor force, 1940-47
VIII. Number of employees in nonagricultural establishments,
1939-47
IX. Average gross weekly earnings in selected industries, 1939-47_
X. Average hourly earnings in selected industries, 1939-47
XI. Consumers'price index, 1939-47
XII. Wholesale price index, 1939-47
XIII. Index of prices paid and prices received by farmers and parity
ratio, 1939-47
XIV. Industrial production index, 1939-47
XV. New construction activity, 1929-47
XVI. Business inventories and sales, 1939-47
XVII. Sales, stocks, and outstanding orders at 296 department
stores, 1939-47
XVIII. Corporate profits before and after taxes, 1939-47
XIX. Commercial, industrial, and agricultural loans, 1940-46
XX. Adjusted deposits of all banks and currency outside banks,
1929-47
XXI. U. S. Government foreign transfers and loans, 1946-47
XXII. Exports, including reexports, by continents
XXIII. General imports, by continents
XXIV. Recorded exports of selected commodities from the United
States
XXV. United States production and export of selected nonfood commodities
XXVI. Distribution of United States food supplies moving into consumption channels, 1939 and 1946
49




51
51
52
54
54
56
61
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
78
79
79
80
80
81
81
82




APPENDIX A
THE NATION'S ECONOMIC BUDGET

Revision of the basic series.—The Nation's Economic Budget is
based on the statistics of national income and national product of
the Department of Commerce and Government payments to the
public and receipts from the public estimated by the Bureau of the
Budget. The methods used in deriving the Nation's Economic
Budget were briefly explained in appendix A of the President's
Economic Report of January 8, 1947. In this midyear report the
Economic Council has used the same general concept of the Nation's
Economic Budget, but the Department of Commerce has revised the
basic series of national income and product on which the budget is
largely based. Because of this revision the present estimates of the
Nation's Economic Budget are not comparable with those presented
in the January 8 report. The revised estimates of national income and
product, on which the present Nation's Economic Budget estimates
are based, are published by the Department of Commerce in a supplement to the July 1947 Survey of Current Business, entitled "National
Income and Product Statistics of the United States, 1929-46." This
supplement also explains the revisions in concepts and estimates over
the former series.
1. The Nation's Economic Budget (see sec, IV, p. 14 in text)
Estimates of the Nation's Economic Budget for calendar 1946,
October1 to December 1946, and January to June 1947 are shown in
table I. The derivation and break-down of the component parts
of the Nation's Economic Budget are presented in the subsequent
sections.
1 For the principal categories of expenditure for 1929 and following years, see table I, appendix B.




51

52

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE I.—The Nation's economic budget
[Billions of dollars; current prices]
Seasonally adjusted annual rates

Calendar 1946

October to December
1946

Excess

Ex- (+)or
Re- pendceipts itures
deficit
(-)

Consumers:
Income after taxes
157 2
143.7
Expenditures
Savings (+)
Business:
Undistributed profits and additions to reserves
14 2
24.6
Gross domestic investment
Excess of receipts (+) or investment (—)
International:
Net exports of goods and
services
4.8
Net foreign investment __
Government (Federal, State,
local):
Receipts from the public2
56.5
Payments to the public 3. _.
55.6
Excess of receipts (-{-) or payments (—)
Adjustments:
For Government
receipts
from abroad i
-.6
For Government
transfers
abroad 8
-3.5
For Government
domestic
transfers e .
-21.5 -21.5
For statistical discrepancies. ._ - 2 . 1
Total gross national product- 203.7
21

203.7

Januarv to June
19471

Ex- Excess
Ex- Excess
Re- pend(+)or Re- pend(+)or
ceipts itures
deficit ceipts itures deficit
(-)
(-)
167 0

+13.5
14 2

154.9

169 6

+12.1

29.5
—16.2

-10.4
10.0

5.2

-5.2

-4.8
57.1

58.2

48.7

+.9

-.1

—.1

-3.1

-2.1

-17.5
-2.1

0

218.6

-17.5
218. 6

+5.0
-.8

+3.1
-2.1
0

-10.0

53.2

+8.4

+3.5

+11.6

19.1

30.4

— 10 4

-.6

158.0

-.8
-7.6

-18.1
-3.0

-18.1

225.0

225.0

+7.6
-3.0
0

Based on incomplete data.

See tables VI and X.
3 See tables VI and XI.
*8 Cash receipts from sales of surplus property and from reimbursable lend-lease.
Includes loans to foreign governments, subscriptions to the International Monetary Fund and Bank,
reimbursable lend-lease, and sales of surplus property abroad to the extent they have been included in
exports of goods and services.
• Includes transfers of funds which are included in private receipts and Government expenditures but do
not involve additions to the Nation's output, such as unemployment compensation, veterans' readjustment
allowances, mustering-out pay, etc.
NOTE.—Detail will not necessarily add to totals because of rounding.

2. Consumers1 account (see sec. IV, p. 14 in text)
The derivation of personal income from the gross national product
and national income, as estimated by the Department of Commerce,
is shown in table II.




53

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE II.—Relation of gross national product, national incomef and personal
income
[Billions of dollars]
Seasonally adjusted

annual rates

Calendar
1946

October to
December
1946

Gross national product
Less:
Capital consumption allowances
_
Indirect business tax and nontax liabilities._
Business transfer payments
Statistical discrepancy
Plus: Subsidies less current surplus of Government enterprises .
Equals: National income 2.
Less:
Corporate profits and inventory valuation adjustment
Contributions for social insurance
Excess of wage accruals over disbursements
Plus:
Government transfer payments...
Net interest paid by Government
Dividends
_.
Business transfer payments
Equals: Personal income.

January
to June
1947 1

203.7

218.6

225.0

11.0
16.8
.5
-2.1
.8
178.2

11.5
17.7
.5
-2.1
-. 1
191.0

11.8
16.8
.5
-3.0
.1
199.0

16.5
6.0
0

18.8
5.3
0

23.5
5.9
0

10.8
4.5
5.6
.5
177.2

9.8
4.5
5.9
.5
187.5

10.3
4.5
6.2
.5
191.1

1

Based on incomplete data.
For a break-down of national income by distributive shares, see appendix B, table 2.
NOTE.—Detail will not necessarily add to totals because of rounding.

2

The adjustments necessary to obtain consumer income after taxes
as it appears in the Nation's Economic Budget, and consumer expenditures by principal categories, are shown in table III.
TABLE III.—Consumers7 account
[Billions of dollars; current prices]

Calendar
1946
Keceipts:
Personal income
Less: Personal tax and nontax payments:
Federal
State and local
.
Disposable personal income (Commerce concept)
Adjustments 3to Nation's Economic Budget concept:
For taxes
Others
Income after taxes (Nation's Economic Budget concept)
Expenditures:
Durable goods
Nondurable goods
_.
Services
_
Total
.__
Excess of receipts: Saving

__

Seasonally adjusted
annual rates
October to
December
1946

January
to June
1947 1

177.2

187.5

191.1

17.2
1.6

17.9
1.6

19.9
1.6

158.4

168.0

169.6

.1

1.1
-1.1

—.1

-1.1

i

-t

157.2

167.0

.169. 6

14.9
87.1
41.7
143.7

18.2
93.6
43.1
154.9

19.5
94.5
44.0
158.0

13.5

12.1

11.6

i Based on incomplete data.
* Represents the difference between Federal personal tax and nontax payments as estimated by the
Department
of Commerce and cash receipts from personal taxes by the Federal Government.
3
Includes the receipts of certain Federal Government trust accounts.
NOTE.—Detail will not necessarily add to totals because of rounding.




54

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

8. Business account (see sec. IV, p. 19 in text)
Table IV contains a derivation of business receipts and gross
domestic business investment, including residential construction, by
main categories. Net profits of unincorporated business are not
included in receipts because of the difficulty of separating out entrepreneurial withdrawals. Other receipt items include all ^business
as does investment.
TABLE IV.—Business account
[Billions of dollars; current prices]
Seasonally adjusted
—annual rates
Calendar
1946

Receipts:
Corporate profits3
Less:
Corporation income-tax liabilities
Dividends _ .
_
Equals: Corporate undivided profits
Plus:
Capital consumption allowance
Government transfers to business3
Less:
Subsidies less current surplus of Government enterprises
Inventory valuation adjustment
Payments by business to Government *~ _.
Equals: Adjusted corporate profits and additions to reserves
Gross domestic investment:
Construction
Residential
_
Nonresidential
Producers' durables _. _ _
Net change in inventories _

„
_ __

_

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

._

October to
December
1946

January
to June
1947 1

21.1

27.1

29.0

8.6
5.6
6.9

11.0
5.9
10.2

11.6
6.2
11.2

11.0
7.1

11.5
3.5

11.8
3.4

.8
4.7
5.4
14.2

-.1
8.3
2.8
14.2

.1
5.5
1.7
19.1

8.5
3.3
5.2
12.4
3.7

9.3
3.6
5.7
15.7
5.4

9.8
4.2
5.6
17.0
2.7

24.6

30.4

29.5

-10.4

-16.2

-10.4

i Based on incomplete data.
* Commerce concept. Profits include incorporated business only.
3 Includes refunds of business taxes, loan transactions of Government corporations, renegotiation of war
contracts, and miscellaneous items. Does not include purchases of goods and services.
* Includes renegotiation payments made in discharge of previous liabilities and excess of business tax
payments over liabilities.
NOTE.—Detail will not necessarily add to totals because of rounding.

4. International transactions (see sec. IV, p. 22 in text)
The "excess of goods and services supplied." by the United States
to the rest of the world differs (see table VI in text, p. 23) from the
net exports of goods and services shown in the Nation's Economic
Budget because it includes unilateral transfers and excludes expenditures in United States Territories. (The balance of payments of the
United States includes the Territories, but is otherwise the same as net
exports of goods and services.) Unilateral transfers to foreign countries have recently been very large since they include UNRRA and




55

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

civilian supplies for occupied territories. The net balance of unilateral
transfers consequently is heavily in favor of the rest of the world.
A reconciliation between the excess of goods and services supplied
by the United States, the net foreign balance and net exports, as used
in the Nation's Economic Budget, is shown below:
TABLE V.—Reconciliation between excess of goods and services lsupplied by the
United States, net foreign balance, and net exports
[Billions of dollars]
Annual rates
Calendar
1946

Excess of goods and services supplied _ _ _ _ _ _
_ ___
Less: Net balance of unilateral transfers:
Government
__
_
_ _
Private
E quals: Net balance of payments on current account
Less: Adjustment for expenditures in United States territories 3
Equals: Net exports of goods and services !

October to January to
December June 1947 2
1946

8.1

7.7

12.7

2.4
.7
5.0

1.5
.7
5.4

1.8
.8
10.1

.2

.2

.1

4.8

5.2

10.0

* As used in the Nation's Economic Budget.
2 Based on incomplete data.
3 National product and income statistics are estimated for continental United States, making this adjustment necessary.
NOTE.—Detail will not necessarily add to totals because of rounding.

Unilateral transfers to foreign countries by the Government are
included in Government payments to the public, and in Government
expenditures for goods and services, while private gifts to foreign countries are included under consumers7 expenditures. Therefore the
Nation's Economic Budget uses a concept of "net exports of goods
and services" that excludes these unilateral transfers.
The net foreign balance is financed in part by loans made by the
United States Government and by loans made by international financial organizations out of United States subscriptions. The total
United States subscriptions to international financial organizations
and loans to foreign governments, to the extent drawn upon, are
included in the adjustment item "transfers abroad'' in the Nation's
Economic Budget. (See table XII, p. 60.)
In considering the expansionary impact of Government cash expenditures, it should be remembered that transfers abroad do not
directly augment domestic incomes. With some time lags, however,
they indirectly increase domestic incomes by financing the export
surplus. The total expansionary and contracting factors in the economy should be appraised only after consideration of the excess or
deficit in the major component parts of the Nation's Economic
Budget and of the net adjustments.




56

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

5. Government account (see sec. IV, p. 24 in text)
State and local cash receipts and expenditures are shown separately
from Federal cash receipts and expenditures in table VI. The rest of
the tables in this section deal with the Federal Government only.
TABLE VI.—Government account
[Billions of dollars]
Seasonally adjusted
annual rates *
Calendar
1946

Receipts:
Federal receipts from the public
State and local
Payments:
Federal payments to the public.
State and local
Excess (+) or deficit ( - )

October to
December
1946

January
to June
1947*

45.5
11.0

45.8
11.3

46.8
11.4

45.2
10.4

37.4
11.3

41.7
11.5

+0.9

+8.4

+5.0

1 Federal interest payments and refunds of taxes have been adjusted to eliminate seasonal peaks. Other
expenditures
are entered as recorded. Receipts are smoothed except for receipts from abroad.
2
Based on incomplete data.

Tables VII, VIII, and IX reconcile the Federal budget surplus as
conventionally defined for fiscal year 1947 with the excess of receipts
over payments in Federal cash transactions with the public. Table VII
presents a comparison between the two surpluses, while VIII and IX
show a derivation of Federal cash receipts from budgetary receipts
and cash payments from budgetary payments, respectively.
TABLE VII.—Comparison of Federal budgetary surplus with
the excess of cash receipts
over payments, fiscal year 1947 1

Net budget receipts
Net budget expenditures

[Billions of dollars]

Budgetary surplus
Net cash receipts from the public--.
Net cash payments to the public
Excess of cash receipts

43. 3
42. 5
.8
46. 3
39. 5
6. 8

i Based on incomplete data.

The general method of reconciliation is as follows: To budgetary
receipts or expenditures (general and special accounts and corporations' net expenditures) are added the cash receipts or expenditures
of the trust funds, and, on the payment side, the expenditures of the
Exchange Stabilization Fund. Transactions among various Federal
agencies or funds are then eliminated. The accounts of the Federal
Government are thus presented on a consolidated basis. Adjustments
are then made to eliminate noncash receipts or expenditures. The
only noncash receipt is the deduction from Federal workers' salaries
for retirement benefits. An example of a noncash expenditure is the




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

57

issue of veterans' terminal-leave bonds which will be recorded as a
cash expenditure only when redeemed.
TABLE VIII.—Derivation of Federal cash receipts from the public, fiscal year 1947 l
[Billions of dollars]
Description

Net Budget receipts2
43. 3
Total trust account receipts
6. 2
Total recorded receipts
49. 5
Less: Intragovernmental transactions:
Payments to U. S. Treasury (miscellaneous receipts) by Government enterprises
0. 9
Transfers from general fund to trust accounts
1.4
Interest received by trust funds on investments in United States
securities
.6
Less: Recorded receipts not paid in cash by the public: Deductions
from Federal employees' salaries for retirement funds
.3
Equals: Cash receipts from the public

2

Q

.3
46. 3

i Based on incomplete data.
* Direct taxes on individuals and corporations, excise taxes, customs, miscellaneous receipts of the U. S.
Treasury, and employment taxes less net appropriations for Federal old-age and survivors insurance trust
fund. This net appropriation is included as a trust-account receipt.

TABLE IX.—Derivation of Federal cash payments to the public, fiscal year 1947 l
[Billions of dollars]
Description

Budget expenditures (daily Treasury statement basis)
Trust-account expenditures and investments
Exchange Stabilization Fund expenditures
Total recorded expendituresNet adjustment for checks issued and not paid
;
Adjusted total, recorded expenditures
Less: Intragovernmental transactions:
Transfers from general fund to trust accounts
Payments to U. S. Treasury (miscellaneous receipts) by Government enterprises
Investments of trust funds and Government enterprises in United
States securities
Interest received by trust funds on investments in United States
securities
Less: Recorded expenditures not paid out in cash:
Deductions from employees' salaries for retirement fund
Terminal-leave bonds, issues less cash redemptions
Interest on savings bonds (net increase in redemption value of
outstanding issues)
Subscriptions in non-interest-bearing notes to Bretton Woods
organizations from General and Exchange Stabilization Funds.

42. 5
7. 3
1. 8
51. 6
—.4
51. 2
1. 4
.9
3. 5
.6

6.4

.3
1. 8
.5

2. 4
r 5.0
Plus: Cash expenditures by Government
enterprises from proceeds of
2
sales of obligations in the market
—. 3
Equals: Federal cash payments to the public
* Based on incomplete data.
«Net of redemptions.




39. 5

58

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

In tables X and XI the cash receipts and payments have been
smoothed to obtain figures for the first half of 1947 which are comparable with either calendar or fiscal year totals, and which can be combined with seasonally adjusted figures in the Nation's Economic
Budget. The receipts in the first half of the year, on an unadjusted
basis, are always much greater than in the second half, under the
same levels of income and employment, due to larger payments of
income taxes by individuals and businesses. On the payments side,
the seasonal humpin interest payments and tax refunds has been
smoothed.
«
H§Table X shows a break-down of receipts by type of tax payment,
and table XI presents some additional information on the table on
Federal cash payments to the public, page 26, in text.
TABLE X.—Federal receipts from the public other than borrowing
[Billions of dollars]

Receipts from

Calendar
1946

January to
June 1947,i
annual rates *

18.8
11.0
.5
7.7
3.5

20.4
9.7
.8
7.3
4.2

Total budgetary receipts
Receipts of trust accounts

41.5
4.0

42.5
4.3

Total cash receipts

45.5

46.8

Personal taxes
Corporation taxes
Employment taxes 3
Excises and customs
Miscellaneous receipts

.__

1 Based on incomplete data.
All receipts except those from abroad have been smoothed to eliminate seasonal peaks.
Net of sums transferred to trust accounts.
NOTE.—Detail will not necessarily add to totals because of rounding.
2
3




59

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT
TABLE XI.—Federal cash payments to the public
[Billions of dollars]
Calendar
1946

Payments to—
I. Individuals:
A. Salaries and wages of Federal personnel:
Military 3
Civilian
B. Pensions and other payments to veterans4
C. Social-security beneficiaries
D. Loans to home owners 8
E. Interest on Federal debt
F. Refunds of taxes
_..
II. Business:
A. Payments for purchases of goods and services.„
B. Subsidies and other payments to6 farmers
C. Loans and subsidies to business
D. Interest on the Federal debt
E. Refunds of taxes
TotaL._
III. International:
A. Loans to foreign governments
B. Subscriptions to Bretton Woods organizations
C. Membership in other international organizations and unilateral
transfers
Total

_

IV. State and local governments (grants-in-aid)
Adjustment to daily Treasury statement basis 8

_.
_

3.9
5.5
6.2
1.8

6.9
6.7
7.0
1.9
-.3

.

Total

Total, Federal cash payments to the public

Annual
rates 1
January to
June 1947»

_

1.6

1.8

24.6

19.9

13.5
.8
-.4
3.1
1.2

9.7
1.3
-.3
2.9
1.3

18.1

14.9

1.5
.1

4.0
1.9

.2

(7)

1.7

5.9

1.1

1.4

—.4

-.4

45.2

41.7

1
Payments of interest and refunds of taxes have been smoothed. All other payments have been included
when
recorded.
2
Based
on incomplete data.
3
Includes
dependency allowances.
4
Includes mustering-out pay and cash terminal-leave pay.
*6 In calendar 1946 repayments exceed loans.
7 Repayments exceed loans and subsidies.
8 Less than 50 million dollars.
The total is the sum of checks paid as entered in the daily Treasury statement. A discrepancy arises
between the components and the total because it was necessary to estimate some of the components partly
on a checks-issued basis.
NOTE.—Detail will not necessarily add to totals because of rounding.

6. Adjustments
The adjustments on the expenditure side of the Nation's Economic
Budget are to deduct payments appearing in the expenditures of the
component accounts which were not made in return for goods and
services currently rendered, and were consequently not included in
the gross national product. An equivalent deduction must be made
on the receipts side of the account for the receipt of payments not
arising from current productive activity. In the case of income
transferred abroad by the Government, no deduction need be made
on the receipts side of the account, since these payments were not
received by units that belong to the domestic economy. Similarly,
no deduction need be made in expenditures for receipts from abroad
which were not for goods and services currently rendered.
749764—47-




60

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

The deduction of the adjustments from cash payments to the public
by the Government, plus some small items not included in cash
payments, yields Government expenditures for goods and services
included by the Department of Commerce as a part of the gross
national product. A reconciliation is shown in table XII below.
TABLE XII.—Reconciliation between Government cash expenditures and expenditures
for goods and services
[Billions of dollars; annual rates
Seasonally adjusted
annual rates
Calendar
1946

October to January to
December June 19471
1946

Cash payments to the public: Federal, State, local
Less: Adjustments
Transfers to individuals (Commerce concept)
Refunds of taxes to individuals-TjitfTWt p&ymp.nts to individuals
Transfers to business,
including refunds and interest payments...
Transfers abroad 2
Plus: Non-cash expenditures for goods and services»

55.6

48.7

53.2

10.8
1.6
1.1
10.5
3.5
2.5

9.8
1.6
1.1
6.9
3.1
1.9

10.3
1.8
1.1
6.8
7.6
1.9

Equals: Expenditures for goods and services (Commerce concept) _ .

30.7

28.2

27.5

*8 Based on incomplete data.
Includes loans to foreign governments, subscriptions to Bretton Woods organizations (items IIIA and
IIIB in Federal cash payments to the public) plus sales of surplus property abroad and reimbursable lendlease
(which have been included as a receipt in the balance of payments).
3
Contributions of Government employees and the Government to pension funds and Government contributions to national service life and Government life insurance.
NOTE.—Detail will not necessarily add to totals because of rounding.




APPENDIX

B

STATISTICAL TABLES RELATING TO EMPLOYMENT, PRODUCTION, AND
PURCHASING POWER
TABLE I.—Gross national product or expenditure,

1929-47l

[Billions of dollars]

Gross
national
product

Period

1929...

1930
1931
1932
1933
1934

...

... .
..

.

...

1935...

1936
1937...

1938.

„..,

1939...

1940
1941...

1942
1943...

1944
1945...

1946

_

103.8
90.9
75.9
68.3
55.8
64.9
72.2
84.7
90.2
84.7
90.4
100.5
125.3
159.6
192.6
210.6
213.1
203.7

Personal
consumption expenditures

Gross
private
domestic
investment

78.8
70.8
61.2
49.2
46.3
51.9
56.2
62.5
67.1
64.5
67.5
72.1
82.3
90.8
101.6
110.4
121.7
143.7

15.8
10.2
5.4
.9
1.3
2.8
6.1
10.5
11.4
6.3
9.0
13.0
17.2
9.3
4.6
5.7
9.1
24.6

Net
foreign
investment

Government
purchases
of goods
and
services
8.5
9.2
9.2
8.1
8.0
9 8
9.9
11 7
11.6
12.8
13.1
13.9
24.7
59.7
88.6
96.6
83.1
30.7

0.8
.7
.2
.2
.2
.4
-.1
—.1
.1
1.1
.9
1.5
1.1
-.2
-2.2
-2.1
—.8
4.8

Seasonally adjusted annual rates
1946:

I.
II
Ill

IV....
1947:
First half2

191.7
197.0
207.5
218.6

134.3
138.2
147.3
154.9

18.6
22.3
27.0
30.4

qq
6.1
4.5
5.2

35.4
30.3
28.6
28.2

225.0

158.0

29.5

10.0

27.5

1 The figures in this table are based on the revised series on national income and product of the Department
of Commerce. For explanation of revisions see the Department of Commerce supplement to the July 1947
Survey of Current Business entitled, "National Income and Product Statistics of the United States,
1929-46."

2
Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (revised series).




61

62

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE II.—National income by distributive shares, 1929-47

l

[Billions of dollars]
Proprietors' and
rental
income 4

ComTotal pensanation- tion of
al inemcome 2 ploy- Total
ees 3

Period

1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946

__-.

87.4
75.0
58.9
41.7
39.6
48.6
56.8
66.9
73.6
67.4
72.5
81.3
103.8
136.5
168. 3
182.3
182.8
178.2

50.8
46.5
39.5
30.8
29.3
34.1
37.1
42.7
47.7
44.7
47.8
51.8
64.3
84.7
109.1
121.2
122.9
116.8

BusiRental inness
and Farm come Total
proof
fespersional
sons

19.7
15.7
11.8

8.3

5.7

5.8

7.0
5.3

3.9
2.9

4.8
3.6

7.4

3.2

1.7

2.5

2.9
4.3
5.0
6.1

2.3
2.3
4.9
6.1
5.6

7.2
8.7
12.1
14.8
15.4
14.0
14.7
16.3
20.8
28.1
32.1
34.4
37.1
41.8

Corporate profits and inventory valuation adjustment

6.6

6.3
6.8
7.7
9.6
12.1
14.1
15.3
16.7
19.7

4.4
4.5
4.9.
6.9
10.6
11.8
12.4
13.5
15.2

Net
Inven- intertory
valu- est
Profits Tax Profits
tion
before! liabil- after 5 adjustity 6 taxes
taxes
ment
Corporate profits

2.0
2.1
2.3
2.7

10.3
6.6
1.6
-2.0
-2.0
1.1
3.0
4.9

3.3
-.8
-3.0
.2
1.7
3.2
5.7

3.1

6.2

6.2

1.5

3.3
3.5
3.6
4.3
5.4
6.2
6.7
7.0
6.9

4.3
5.8
9.2
14.6
19.8
23.7
23.5
19.7
16.5

3.3
6.5
9.3
17.2
21.1
24.5
23.8
20.2
21.1

1.0
1.5
2.9
7.8
11.7
14.2
13.9
11.3
8.6

2.3
5.0
6.4
9.4
9.4
10.4
9.9
8.9
12.5

6.1

9.8

1.4

.8
.5
.4

.5
.7
1.0
1.4

8.4

0.5

6.5

2.5
-1.3
-3.4

3.3
2.4
1.0
-2.1
-.6
-.2
—.7

6.2
5.9

l'.O
2.3
4.3
4.7

(6)

1.0

-!i
— 2. 6
-1.3
-.8
-.4
-.5
-4.7

5.4

5.0
4.8
4.5
4.5
4.4

4.3
4.2
4.1
4.1
3.9
3.4
3.2
3.1
3.2

Seasonally adjusted annual rates
1946:
I

II

III
IV.
1947:
First half 7.

168.2
173.5
179.9
191.0

111.5
114.0
119.2
122.2

39.4
39.2
41.9
46.7

18.5
18.6
19.9
22.0

14.1
13.8
15.2
17.8

6.9

6.8
6.8
7.0

14.2
17.2
15.6
18.8

15.2
19.4
22.9
27.1

8.0
9.3
11.0

9. 1
11.5
13.5
16.1

—1.0
-2.3

-7.3
-8.3

31
3.2
3.2
3.2

199.0

125.3

46.9

22.2

17.6

7.1

23.5

29.0

11.6

17.4

-5.5

3.3

1

The figures in this table are based on the revised series on national income and product of the Department of Commerce. For explanation of revisions see the Department of Commerce supplement to the
July 1947 Survey of Current Business entitled, "National Income and Product Statistics of the United
States, 1929-46."
2 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 excluding depreciation
charges and other allowances for business and institutional consumption of durable capital goods. A reconciliation between these two series and personal income is shown in appendix A, table II, for selected periods.
* Includes wages and salaries, employer contributions for social insurance, and other labor income.
* Includes noncorporate inventory valuation adjustment.
« Federal and State income and excess-profits taxes.
* Less than 500 million dollars.
* Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (revised series).




63

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE III.—Personal income, 1929-47

l

.

FBillions of dollarsl

Period

1929.
1930
1931.
1932
1933.
1934.
1935
1936.
1937.
1938
1939
1940.
1941.
1942.
1943.
1944.
1945.
1946.

Total Wage and Other
personal
salary
labor
income 2 receipts 3 income
85.1
76.2
64.8
49.3
46.6
53.2
59.9
70.6
74.0
68.3
72.6
78.3
95.3
122.2
149.4
164.9
171.6
177.2

50.0
45.7
38.7
30.1
28.7
33.4
36.3
41.6
45.4
42.3
45.1
48.9
60.9
80.5
103.5
114.9
115.2
109.2

0.5
.5
.5
.4
.4
.4
.4
.5
.5
.5
.5
.6
.6
.7
.9
1.3
1.5
1.6

Proprietors' and
rental
income
19.7
15.7
11.8
7.4
7.2
8.7
12.1
14.8
15.4
14.0
14.7
16.3
20.8
28.1
32.1
34.4
37.1
41.8

Dividends

Personal Transfer
interest payments
income

5.8
5.5
4.1
2.6
2.1
2.6
2.9
4.6
4.7
3.2
3.8
4.0
4.5
4.3
4.5
4.7
4.8
5.6

7.5
7.1
7.0
6.6
6.2
6.0
5.7
5.6
5.6
5.5
5.4
5.4
5.4
5.4
5.5
6.0
6.8
7.7

Seasonally adjusted annual rates
1946:
I...
II....
Ill
IV.
1947:
First half«.

168.7
172.5
179.5
187.5

102.6
107.0
111.8
115.4

1.6
1.6
1.6
1.6

39.4
39.2
41.9
46.7

5.1
5.4
5.6
5.9

7.6
7.7
7.7
7.7

12.5
11.6
10.9
10.3

191.1

117.8

1.7

46.9

6.2

7.7

10.8

1
The figures in this table are based on the revised series on national income and product of the Department of Commerce. For explanation of revisions see the Department of Commerce supplement to the
July 1947 Survey of Current Business entitled, "National Income and Product Statistics of the United
States,
1929-46."
2
Formerly called income payments.
3
Total
employer disbursements less employee contributions for social insurance.
4
Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (revised series).




64

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE IV.—Disposition of personal income, 1929-^7

x

[Billions of dollars]

Personal
income

Period

1929 .
1930
1931
1932
1933
1934
1935...
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945. .
1946

_

. .

85.1
76.2
64.8
49.3
46.6
53.2
59.9
70.6
74.0
68.3
72.6
78.3
95.3
122.2
149.4
164.9
171.6
177.2

Less: PerLess: PerEquals:
sonal tax Disposable
sonal conand nonsumption
personal
tax payexpendiincome
ments
tures
2.6
2.5
1.9
1.5
1.5
1.6
1.9
2.3
2.9
2.9
2.4
2.6
3.3
6.0
17.8
18.9
20.9
18.8

82.5
73.7
63.0
47.8
45.2
51.6
58.068.3
71.1
65.5
70.2
75.7
92.0
116.2
131.6
146.0
150.7
158.4

78.8
70.8
61.2
49.2
46.3
51.9
56.2
62.5
67.1
64.5
67.5
72.1
82.3
90.8
101.6
110.4
121.7
143.7

Equals:
Personal
saving

3.7
2.9
1.8
-1.4
-1.2
-.2
1.8
5.8
3.9
1.0
2.7
3.7
9.8
25.4
30.0
35.6
29.0
14.8

Seasonally adjusted annual rates
1946:
II
.
III
IV
1947:
First half *

_ _

168.7
172.5
179.5
187.5

17.8
18.7
19.1
19.5

150.9
153.8
160.4
168.0

134.3
138.2
147.3
154.9

16.6
15.5
13.1
13.1

191.1

21.5

169.6

158.0

11.6

1 The figures in this table are based on the revised series on national income and product of the Department of Commerce. For explanation of revisions see the Department of Commerce supplement to the
July 1947 Survey of Current Business entitled, "National Income and Product Statistics of the United
States, 1929-46."
2 Estimates based on incomplete data.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (revised series).




MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

65

TABLE V.—Disposable personal income, population and consumers* price index,
1929-47
Disposable
personal
income
(billions
of dollars) *

Period

1929
1930.
1931
1932 .
1933.-.
1934
1935
1936
1937
_
1938
1939
1940
1941
1942
1943
1944
1945
1946- .

-.
.
.

.

_ _.
_

_

_
.

_

.

82.5
73.7
63.0
47.8
45.2
51.6
58.0
68.3
71.1
65.5
70.2
75.7
92.0
116.2
131.6
146.0
150.7
158.4

Population Consumers'
index
(thousands) * price
(1944=100)

121, 770
123,077
124,040
124,840
125,579
126,374
127.250
128,053
128,825
129,825
130,880
131,970
133,203
134,665
136,497
138,083
139,586
141,229

Seasonally
adjusted
annual rates
1946:
I
II
_
Ill
IV
1947:
First half e

_
_

97.6
95.1
86.6
77.8
73.6
76.3
78.2
79.0
81.8
80.3
79.2
79.8
83.8
92.8
98.5
100.0
102.3
111.0
Not adjusted
for seasonal *

Per capita disposable
personal income
Current
dollars
678
599
508
383
360
408
456
533
552
505
536
574
691
863
964
1,057
1,080
1,122

1944
dollars 3
695
630
587
492
489
635
583
675
676
629
677
719
826
930
979
1,057
1,056
1,011

Seasonally adjusted
annual rates

150.9
153.8
160.4
168.0

«140,549
«140,985
5141,547
* 142,288

103.5
105.2
114.5
120.6

1,074
1,091
1,133
1,181

1,038
1,037
990
979

169.6

143,338

123.7

1,183

956

1
Based on the revised series on national income and product of the Department of Commerce. For
explanation of revisions see the Department of Commerce supplement to the July 1947 Survey of Current
Business entitled, "National Income and Product Statistics of the United States, 1929-46."
2 Estimated population of continental United States, including armed forces overseas; annual data as of
July
1 and quarterly data as of middle of quarter.
3
Current dollars divided by the consumers' price index on 1944=100 base to give a rough measure of
changes in buying power of disposable income.
<
A small part of the increase may be seasonal.
5
Interpolated from published data.
• Estimates based on incomplete data.
Sources: Department of Commerce (disposable income and population) and Department of Labor
(consumers' price index).




66

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT
TABLE VI.—Total consumer credit, 1929-47
Estimated amounts outstanding
[Millions of dollars]
End of year or month

1929
1930
1931.—
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944.
1945
1946.

_...
1...
,

..

1946:
January. __
February..
March
April
May
June
July
August
September.
October....
November.
December.
1947:
January...
February..
March
April
May

Total
consumer
credit

Installment
credit i

Other
consumer
credit *

7,637
6,829
5,526
4,093
3,929
4,396
5,439
6,796
7,491
7,064
7,994
9,146
9,895
6,478
5,334
5,776
6,637
10,147

3,167
2,696
2,212
1,526
1,605
1,867
2,627
3,526
3,971
3,612
4,449
5,448
5,920
2,948
1,957
2,034
2,365
3,976

4,470
4,133
3,314
2,567
2,324
2,529
2,812
3,270
3,520
3,452
3,545
3,698
3,975
3,530
3,377
3,742
4,272
6,171

6,427
6,530
6,984
7,368
7,607
7,905
8,025
8,362
8,631
9,013
9,527
10,147

2,364
2,404
2,503
2,649
2,783
2, 902
3,022
3,165
3,288
3,458
3,646
3,976

4,063
4,126
4,481
4,719
4,824
5,003
5,003
5,197
5,343
5,555
5,881
6,171

9,967
9,910
10,216
10,413
10,664

4,048
4,157
4,329
4, 543'
4,747

5,919
5,753
5,887
5,870
5,917

1 Includes automobile and other sale credit and repair and modernization loans insured by the Federal
Housing
Administratioa.
2
Includes noninstallment consumer loans (single-payment loans of commercial banks and pawnbrokers),
charge accounts, and service credit.
Source: Board of Governors of the Federal Reserve System.




75

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE XV.—New construction activity, 1929-47
{Millions of dollars]

Private construction

Public construction
By funds

Year or
quarter

Total
new
conResi- Nonresi- Other Total
struc- Total dential dential
tion private build- build- private public
ing
ing

9,913
1929
8,059
1930
5,980
1931...
3,260
1932
2,223
1933
2,756
1934
3,110
1935
4,714
1936
1937
_- 5,308
5,018
1938
6,062
1939
6,807
1940
10,308
1941
13,353
1942
1943
- 7,734
1944
- 4,073
4,609
1945
9,890
1946
1,524
11
I I » . — 2,300
IIIi— 3,104
IV i . . . 2,962

7,522
5.306
3,416
1,482
1,005
1,221
1,648
2,486
3,274
2,941
3,619
4,199
5,238
2,908
1,669
1,746
2,561
7,739
1,257
1,862
2,376
2,244

2,797
1,446
1,228
462
278
361
665
1,131
1,372
1,511
2,114
2,355
2,765
1,315
650
535
684
3,183
432
722
1,027
1,002

2,822
2,099
1,104
499
404
455
472
712
1,088
764
785
1,028
1,486
635
232
350
1,014
3,350
632
843
953
922

2,460
2,896

1,948
2,167

869
1,014

782
735

1947:
IK....

II i«...




Military
and
fedHigherally waj r s
financed
industrial

Federal

State
and
local

1,903
2,391
1,761
2,753
1,084
2, 564
521 1,778
323 1,218
405
1, 535
511
1.462
643 2,228
814
2,034
666 2,077
720
2,443
816 2,608
987
5,070
958 10,445
787 6,065
861 2,327
863 2,048
1,206
2,151
193
267
297
438
396
728
320
718

237
338
451
510
540
698
822
1,255
1,143
976
1,251
1,406
3,845
9,531
5,605
1,912
1,558
1,067
140
199
344
384

2,154
2,415
2,113
1,268
678
837
640
973
891
1,101
1,192
1,202
1,225
914
460
415
490
1,084
127
239
384
334

19
29
40
34
38
58
39
33
39
74
148
549
2,900
8,453
4,218
1,344
1,160
272
67
61
70
74

1,248
1,481
1,323
916
675
821
622
876
850
837
835
875
• 850
675
450
360
342
706
60
149
265
232

1 ,12
] ,24
] ,201
82S
505
656
801
:L, 319
L,145
L, 166
L,460
L, 184
L, 320
L, 317
L, 397
623
546
]L, 173
140
228
393
412

512
729

236
267

276
462

47
56

119
300

346
373

1 Not adjusted for seasonal variation.
2 Estimates based on incomplete data.
Source: Departments of Commerce and Labor.

749764—47-

By types

297
418

Other
public

76

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE XVI.—Business inventories and sales, 1989-47
Manufacturing *

Year or month

1939 average
1940 average
1941 average

1946 average

5,284
5,484
6,040
7,523

3,504
3,866
4,624
8,063

1.51
1.42
1.31

4,223
4,287
4.159
4,381
4,485
4,361
4,730
4,789
4,816
6,203
6,110
5,204

6,438
6, 273
6,628
6,826
6,989
7,171
7,575
7,730
8,037
8,684
8,797
9,130

7,654
7,839
7,784
7,605
7,635
7,692
7,971
8,420
8,264
8,387
8,796
8,705

.84
.80
.85
.90
.92
.93
.95
.92
.97
1.04
1.00
1.05

6,418
5,314
5,163
5,226
5,173

9,384
9,432
9,562
9,487
9,442

8,899
9,038
8,942
8,832
8,836

1.05
1.04
1.07
1.07
1.07

9,941
11,171
13,379
17,817

4,741
5,482
7,783
10,4/2

2.10
2.04
1.72
1.70

2,479
2,619
3,026
3,423

1,961
2,183
2,852
4,646

16,369
16,590
16,829
16,837
16,934
17,175
18,010
18,466
19,533
19,896
20,259

8,913
8,163
9,507
9,956
10,058
9,702
9,976
11,157
10,738
12,240
12,426
12,849

1.84
2.03
1.77
1.69
1.68
1.77
1.81
1.66
1.76
1.60
1.60
1.58

3,041
2,981
3,048
3,109
3,161
3,242
3,318
3,463
3,634
3,784
4,046
4,245

20,805
21,176
21,612
22,061
22,408

13,226
12,940
13,937
13,898
13,723

1.57
1.64
1.55
1.59
1.63

4,425
4,564
4,682
4,800
4,781

i1 Not adjusted for seasonal variation.
Adjusted for seasonal variation.
» Service and limited function wholesalers only.
* Book value, end of month.
»Total for month.
Source: Department of Commerce (Office of Business Economics).




Retail

Millions of dollars Ratio of Millions of dollars Ratio of Millions of dollars Ratio of
inveninveninventories to Inventories to Inventories to
Invensales
sales
tories* Sales'
tories < Sales«
tories < Sales*

1946:

January
February.
March
April
May
June...
July...
August
September
October
November
December
1947:
January
February
March
April
May

Wholesale»»

1.26
1.20
1.06
.74

77

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE XVII.—Sales, stocks, and outstanding orders at 296 department stores,
1939-47
Millions of dollars
Year or month

1939 average..
1940 average.
1941 average.
J 942 average.
1943 average.
1944 average .
1945 average.
1946average.
1946:
January
February...
March
April
May
June
July
August
SeptemberOctober
November..
December. .
1947:
January
February...
March
April
May

Ratio of Ratio of Ratio of
stocks to orders to orders to
sales
sales
stocks

Stocks
(end of
month)

128
136
156
179
204
227
255
318

344
353
419
599
508
534
564
714

108
194
263
530
560
728
907

2.69
2.60
2.69
3.35
2.49
2.35
2.21
2.25

0.79
1.24
1.47
2.60
2.47
2.85
2.85

0.31
.46
.44
1.04
1.05
1.29
1.27

224
239
301
319
304
304
244
303
309
341
404
526

491
533
583
644
674
699
735
806
828
879
919
776

899
979
971
910
934
1,048
1,073
1,012
960
845
691
557

2.19
2.23
1.94
2.02
2.22
2.30
3.01
2.66
2.68
2.58
2.27
1.48

4.01
4.10
3.23
2.85
3.07
3.45
4.40
3.34
3.11
2.48
1.71
1.06

1.83
1.84
1.67
1.41
1.39
1.50
1.46
1.26
1.16
.96
.75
.72

256
250
332
321
332

769
838
865
849
810

619
603
485
387
348

3.00
3.35
2.61
2.64
2.44

2.42
2.41
1.46
1.21
1.05

.80
.72
.56
.46
.43

Source: Board of Governors of the Federal Reserve System.




\Jllli'

Sales
(total for
month)

standing
orders
(end of
month)

78

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE XVIII.—Corporate profits before and after taxes, 1939-47
[Millions of dollars]
All private
corporations

629 large private corporations—profits after taxes 1

Year or quarter

Number of
panies.-

ss

com-

1940.
1941.
1942.
1943.
1944.
1945.
1946.

45
6,467
9,325
17, 232
21,098
24, 516
23,841
20, 222
21,140

5,005
6,447
9,386
9,433
10,363
9,928
8,939
12,539

1,465
1,818
2,163
1,769
1,800
1,896
1,925
2,545

3,724
4,876
5,743
6,797

2,135
2,904
3,449
4,051

323
604
698
853

74

122
132
152
161
171
184
203
321

1946:

I...
II..
III.
IV..
1947:
I...
II..

-19 -34
49
21
32
42
61 102

63

89

875

}*7,250

82
80
93

97
(3)

3

64
)

1
Federal and State income and excess-profits taxes.
* Quarterly average based on incomplete data for the first half year.
3
Not available.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce (all corporations); Bqard of Governors of the Federal Reserve System
(629 large corporations).

TABLE XIX.—Commercial, industrial, and agricultural loans of all insured banks,
1940-46
[Millions of dollars]
Total commercial,
industrial,
and agricultural
loans

Call date

1940: Dec. 31 _ ,
1941: Dec 31
1942: Dec. 31
1943: Dec. 31
1944: Dec. 30
1945: Dec. 31
1946:
June 29
Dec 31
1947: June 30 2

_.
.

.

.

Commercial and
Agriculindustrial
tural loans l
loans i

8,459
10,664
9,399
9,282
9,643
10,775

7,178
9,214
7,757
7,777
7,920
9,461

1,281
1,450
1,642
1,505
1,723
1,314

11,700
15,374
15,950

10,334
14,016
14,600

1,366
1,358
1,350

1
During the period Dec. 31, 1942-June 30, 1945, agricultural loans to dealers, processors, and farmers'
cooperatives covered by purchase agreements of the Commodity Credit Corporation, which are now classified as commercial and industrial loans; consequently, beginning Dec. 31,1945, these items may not be entirely comparable.
2 Estimates based on data for weekly reporting member banks.
Source: Board of Governors of the Federal Reserve System.




79

MIDYEAR ECONOMIC EEPORT OF T H E PRESIDENT

TABLE XX.—Adjusted deposits of all banks and currency outside banks, 1929-47
[Millions of dollars]

End of month

1929—June
December.
1933—June
December.
1937—June
December.
1938—June
December.
1939—June
December
1940—June
December
1941—June
December
1942—June
December
1943—June
December
1944—June
December
1945—June
December
1946—June
December
1947—January __
February.
March
April
May
_

Total
justed and
currency
outsidex
banks

United
States
Government
deposits 1

55,171
54,713
41,680
42, 548
57, 258
56, 639
56, 565
58, 955
60,943
64,099
66,952
70, 761
74,153
78, 231
81,963
99,701
110.161
122,812
136,172
150.988
162. 784
175, 401
171,237
167,107
165,900
165, 400
165,100
165. 200
164,900

381
158
852
1,016
666
824

Other deposits and currency"outside banks
Demand
deposits
adjusted2

Total
54, 790
54, 555
40,828
41, 532
56, 592
55,815
55, 966
58,066
60,151
• 63,253
66,124
70,008
73,400
76, 336
80,126
91,299
102,113
112, 388
116,666
130, 225
138,403
150, 793
157,821
164,004
162,800
161, 500
161,300
162.400
162,800

792
846
828
753
753
1,895
1,837
8,402
8.048
10,424
19,506
20, 763
24,381
24,608
13,416
3,103
3,100
3,900
3,800
2,800
2,100

22, 540
22, 809
14,411
15,035
25,198
23,959
24, 313
25, 986
27,355
29,793
31,962
34,945
37. 317
38,992
41,870
48,922
56,039
60,803
60,065
66,930
69,053
75,851
79,476
83, 314
82.500
80,600
80,400
81,300
81,500

Currency
outside
banks

Time
deposits3
28,611
28,189
21,656
21, 715
25,905
26, 218
26, 236
26, 305
26,791
27.059
27,463
27, 738
27,879
27.729
27,320
28,431
30,260
32, 748
35, 720
39,790
44,253
48,452
51,829
53,960
54,200
54, 700
54,900
55,100
55,300

3,639
3,557
4,761
4,782
5,489
5,638
5,417
5,775
6,005
6,401
7,325
8,204
9,615
10,936
13,946
15,814
18,837
20,881
23,505
25,097
26,490
26,516
26,730
26,100
26,200
26,000
26,000
26,000

1 Beginning with December 1938, includes United States Treasurer's time deposits, open account.
2 Includes demand deposits, other than interbank and U. S. Government, less cash items in process of
collection.
* Includes deposits in commercial banks, mutual savings banks, and Postal Savings System.
Source: Board of Governors of the Federal Reserve System.
TABLE XXI.— U. S. Government foreign transfers and loanst 1946-47
[Millions of dollars]
1946

Type of transfer or loan
Unilateral transfers:
Straight lend-lease
UNRRA _
Civ. supplies for occupied territories
Other government transfers (net)
Total unilateral transfers
Long-term loans:
Lend-lease credits
Surplus property credits _
.
Export-Import Bank
U.K. loan
_ .
International Bank and Monetary Fund
Other
._
Total long-term loans
Repayments
Net long-term loans
Total Government loans and transfers
Less: International Bank and Fund 2
Government, excluding Bank and Fund.

I

II

109
532
107
-32
716

46
414
207
45
712

6
382
115
125
628

271
135
137

173
414
333

78
110
231
400

_
-...
..
--

1947

IV

III

159
17

I

II
0)
(0

381

274
225
-26
473

24
201
270
200
164
2

180
280
500
2,904
26

861
20
841

3,890
36
3,854

8

4,327
2,904
1,423

0)

194
125
62

543
22
521

1,079
19

836
18

1,060

818

1,237

1,772
159

1.446

1,222
164

1,237

1,613

1,446

1,058

(1)

0)
0)
0)
0)
0)
950
159

0)

(0

159

1 Not available.
2
Deducted because these institutions had not begun operating by Mar. 31,1947. The U. S. Government
investment in them was, therefore, not available tofinancepurchases of goods and services from the United
States.
Source: Department of Commerce.




80

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE XXII.—Exports, including reexports, by continents
1936-38
quarterly
average

Continent

1947

1946
II

I

III

IV

I

III

Millions of dollars
Total.

742

2,284

2,485

2,351

2,620

3,596

4,000

North America _
South America
Europe
Asia .
Oceania
Africa

183
69
311
125
23
32

500
236
1,117
269
33
129

585
275
1,093
365
28
140

649
263
969
342
26
103

810
379
919
367
30
116

912
571
1,378
488
64
183

1,030
670
1,490
510
75
225

__

Percentage of total
Total
North America
South America
Europe
Asia
Oceania
Africa

100.0

100.0

100.0

100.0

100.0

100.0

100.0

24.7
9.3
41.9
16.8
3.1
4.3

21.9
10.3
48.9
11.8
1.4
5.6

23.5
11.1
44.0
14.7
1.1
5.6

27.6
11.2
41.2
14.5
1.1
4.4

30.9
14.5
35.1
14.0
1.1
4.4

25.4
15.9
38.3
13.6
1.8
5.1

25.8
16.8
37.3
12.8
1.9
5.6

i Preliminary; estimates for June included.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.

TABLE XXIII.—General imports, by continents

Continent

1946

1936-38
quarterly
average

1947
III

IV

Millions of dollars
Total
North America.
South America.
Europe
Asia
Oceania
Africa

622

1,096

1,191

1,237

1,411

1,412

1,480

150
81
178
187
10
16

364
254
165
193
41
78

398
275
210
201
35
72

424
263
192
217
62
81

462
303
229
296
45
76

496
309
186
306
46
70

567
319
186
273
60
75

Percentage of total
Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

North America.
South AmericaEurope
Asia
Oceania.
Africa

24.1
13.0
28.6
30.1
1.6
2.6

33.2
23.2
15.1
17.6
3.7
7.1

33.4
23.1
17.6
16.9
2.9
6.0

34.3
21.3
15.5
17.5
5.0
6.5

32.7
21.5
16.2
21.0
3.2
5.4

35.1
21.9
13.2
21.7
3.3
5.0

38.3
21.6
12.6
18.5
4.0
5.1

1

Preliminary; estimates for June included.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Commerce.




81

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE XXIV.—Recorded exports of selected commodities from the United States
1936-38,
quarterly
average

Commodity'and unit of measure

Wheat, including
flour
million bushels..
Corn
do
Meat products
million pounds..
Edible fats
do....
Eggs, dried
do
Dairy products:
Condensed and evaporated milk
do
Dried m i l k . . .
do...
Butter, butter oils, and spreads
do
Cheese.
._.
..
do
Coal, anthracite and bituminous.._
million long tons..
Iron and steel-mill products
1,000 long tons..
Steel sheets
do
Tobacco, unmanufactured
...
million pounds..
Cotton, raw, excluding, linters
.1,000 bales..
Refrigerators, electric, household
thousands..
Radio receiving sets.
do
Passenger cars, new...
do
Motortrucks, busses and chassis, new.
do
Crude petroleum, domestic
million barrels..
Motor fuel and gasoline
do
Lubricating oils
do
Gas and fuel oil, including residual fuel oil
do
Sawed timber
million board feet..
Boards, planks, scantlings, etc
do
Freight cars, mostly over 10-ton capacity, but including mine,
industrial, and other
number..
Locomotives, electric, steam, Diesel, and gasoline
do
1
Less than one-half the unit indicated.
| Source: Department of Commerce.

1946
First
quarter

1947,
first
quarter

Fourth
quarter

16
13
35
41

100
1
575
120
14

65
3
64
65
16

22
82
109
15

7
2

1,323
70
112
1,358
39
142
48
32
16
9
2
10
62
241

338
118
10
85
9
1,097
131
143
863
14
55
9
24
7
14
3
7
39
143

138
56
1
37
10
1,143
113
209
920
44
403
50
59
12
8
3
5
40
93

95
53
1
33
12
1,463
140
159
1,058
49
430
63
70
8
11
4
7
70
182

364
69

2,804
574

9,471
537

17,432
539

0)

(0
0) 3

TABLE XXV.—United States production and exports of selected nonfood commodities

Commodity and unit of measure
1939

1946

Exports as percent
of production

Exports

Production
First
quarter,
1947

1939

1946

First
quarter,
1947

1939

First
1946 quarter,
1947

Pet. Pet. Pet.
Rolled steel products
10.6
7.2
1,000 short tons.. 34,955 53,073 14,995 2,528 4,800 1,583
9.0
14,129 20,067 6,007 1,071 1,523
7.6
Plates and sheets
do
7.7
7.6
463
Tin plate and terne plate
379
2,834
348
17.1
132 13.6 13.4
770
2,561
do
386
5 3 8.1
256
10.7
150
1,396
4,883 4,792
Tubular products *
__.do
699
4.0
7.0
234
10.1
286
5,913 10, 055 2,827
Bars
do
3.8 17.2
445
66
16.6
126
760
2,588
1,753
Rails
do
Lumber (sawmill products)
649
3.8
4.4
2.1
7,200 1,104
270
million board feet.. 24,975 30,300
419 40,551 42,210
53.5
Freight cars
1,000 dollars>__ 63,249 208,216 78, 921
.7 19.5
Motortrucks, busses and chassis, new*
20.9
171
115
335
70 16.2 18.2
940
710
1,000 units..
Motortruck and automobile tires
4.1
2,465
2.1
3.0
1,182
82,298
1,028
25,000
57,612
(casings)
thousands..
Refrigerators, electric household
124
6.3
5.4
103
7.7
49
636
1,908
1,979
1,000 units..
5.3
832
9.6
5.5
430
Radios, receiving sets
do — 10,318 15,000 4,500
552
Boots and shoes other than rubber
13
3
.7
2.5
529
1.7
2
120
424
million pairs..
22
151
2.1
2.5
1,905
.7
7,031
Wearing apparel—million dollars *._ 3,351
47
Petroleum, crude, domestic
72
43
5.7
2.5
432
1.9
1,733
8
million barrels.. 1,265
263
11.4
Refined mineral oils.million dollars.. 2,307
(6)
(8)
(8)
(8)
(8)
(6)
Motor fuel and gasoline
6.7
6.3
41
49
11
5.7
193
776
611
million barrels.,
4.7
46
33
9.7
3.9
719
179
7
468
Gas and fuel oils
..do
12
11
30.7
46
4 33.6 23.9
13
35
Lubricating oil
do
8
7.1
104
7.7
8
2 11.7
69
28
Kerosene
do
i Total tubular products in 1939; excludes cast iron pipe and fittings in 1946 and January-March 1947.
* Estimated value of shipments to United States railroads and to foreign markets.
* Exports data cover complete cars only; they exclude shipments of parts for assembly abroad.
* Value of production is estimated; data include wearing apparel except footwear.
* Not available.
Source: Department of Commerce.




82

MIDYEAR ECONOMIC /REPORT OF THE PRESIDENT

TABLE XXVI.—Distribution of United States food supplies moving into consumption
channels, 1939 and 1946

Total
distribution

Commodity and period

Meat (carcass equivalent):

1939
_
1946
Dairy products (milk equivalent):
1939.
1946
Food fats and oils (excluding butter): 2
1939
1946
Canned fruits (processed weight):
1938-39 pack year.
__
1946
Fresh fruits (farm weight):
1939
1946
Canned vegetables (processed weight):
1938-39 pack year
1946
Fresh vegetables (farm weight):
1939
1946
Wheat 3 (grain equivalent):
1939
_
1946
Corn 3 (grain equivalent):
1939
1946
Eggs (fresh egg equivalent):
1939
1946..

_

Million
pounds

Exports Military Civilian
and ship- distridistriments bution i bution

Million
pounds

Pounds
132.8
152.8

Percent
1.4
5.0

2,506

108, 556
112,791

824
811

.4
5.0

365
646

50

4,247
4,343

32.2
31.2

7.9
12.8

2,361
3,111

359
140

94

2,002
2,877

15.2
20.7

15.2
4.5

21, 359
21,786

1,277
1,166

484

20,082
20,136

152.4
144.9

6.0
5.4

4,163
7,014

57
230

4,106
186

31.3
47.5

1.4
3.3

32,040
39,198

134
494

425

31,906
38, 279

242
275

.4
1.3

Million
bushels
571
844

Million
bushels
93
280

478

218
211

16.3
33.2

180
185

33
17

6

147
162

62.5
65.2

18.3
9.2

Million
dozen

Million

Million
dozen

Million
dozen

Number
311
378

.1
8.0

17,739
23,335

Million
pounds
246
1,156

108,985
121,401

6,104

4,612
5,039

3,418
4,916

Million
pounds
945

429

dozen

3

395

17,493
21,234

Million Million
bushels bushels
75

137

3,415
4,384

1 Includes food for civilian feeding programs in liberated and occupied areas.
a Actual weight except for margarine which is on a "fat content" basis.
Excludes amounts used for animal feed, industrial raw materials, and seed.
Source: Department of Agriculture.

8




Exports
Per
and shipcapita ments as
civilian percent
distri- of total
bution
distribution

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

67

TABLE VII.—-The labor force, 1940-47
[Thousands]
Civilian labor force
Year or month

1940 monthly average.
1941 monthly average.
1942 monthly average.
1943 monthly average.
1944 monthly average.
1945 monthly average.
1946 monthly average
1946:
January
February
March
April
May
June
July
August
September
October
November
December
1947:
January..
February
March
April
May....
June

__

Total labor
force (including
armed
forces)

Total
civilian
labor
force

Employment
Total

UnemAgricul- ployment
tural

56,030
57,380
60,230
64,410
65,890
65,140
60,820

55,640
55,910
56,410
55,540
54,630
53,860
57,520

47,520
50,350
53,750
54,470
53,960
52,820
55,250

37,980
41,250
44,500
45,390
45,010
44,240
46,930

9,540
9,100
9,250
9,080
8,950
8,580
8,320

8,120
5,560
2,660
1,070
670
1,040
2,270

59,490
59,130
59,630
60,300
60,570
62,000
62,820
62,200
61,340
61,160
60,980
60,320

53,320
53,890
55,160
56,450
57,160
58,930
60,110
59,750
59,120
58,990
58,970
58,430

51,020
51,240
52,460
54,120
54,850
56,360
57,840
57, 690
57,050
57,030
57,040
56,310

44,300
44,300
44,930
45,950
45,970
46,350
47,870
48, 550
48,300
48,410
49,140
49,100

6,720
6,940
7,530
8,170
8,880
10,010
9,970
9,140
8,750
8,620
7,900
7,210

2,300
2,650
2,700
2,330
2,310
2,570
2,270
2,060
2,070
1,960
1,930
2,120

59, 510
59,630
59,960
60,650
61,760
64,007

57,790
58,010
58,390
59,120
60,290
62,609

55,390
55, 520
56,060
56,700
58,330
60,055

48,890
48,600
48,820
48,840
49,370
49,678

6,500
6,920
7,240
7,860
8,960
10,377

2,400
2,490
2,330
2,420
1,960
2,555

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




Nonagricultural

68

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

TABLE VIII.—Number of employees in nonagricultural establishments, 1989-47 *
[Thousands]
Manufacturing
Year or month

Durable
goods

Nondurable
goods

Mining

30,287
32,031
36,164
39,697
42,042
41,480
39,977
40,712

10,078 4,357
10, 780 4,975
12,974 6,485
15,051 8,179
17,381 10,297
17, 111 10,200
15,302 8,477
14,365
7,102

5,720
5,805
6,488
6,873
7,084
6,912
6,825
7,263

845
916
947
983
917
883
826
836

1,150
1,294
1,790
2,170
1,567
,094
,082
,493

2,912
3,013
3,248
3,433
3,619
3,798
3,872
4,023

6,705
7,055
7,567
7,481
7,322
7,399
7,654
8,448

4,610
4,781
5,016
5,148
5,187
5,169
5,274
5,954

3,987
4,192
4,622
5,431
6,049
6,02&
5,967
5,595

38,745
38,148
39,184

6,601
5,731
6,324
6,904
7,035
7,172
7,307
7,486
7,590
7,623
7,721
7,731

7,020
7,109
7,141
7,124
7,199
7,219
7,390
7,445
7,441
7,550
7,617

864
864
857
542
753
864
873
886
884

8,056
8,090
8,197
8,329

874

:,085
, 101
,203
,356
,438
,532
,627
,713
,747
,753
,713
,644

3,932
3,943

40,258
40,680
40,877
41,466
41,848
42,065
42,439
42,928

13,499
12,751
13,433
14,045
14,159
14.371
14,526
14,876
15,035
15,064
15,271
15,348

9,234

5,696
5,776
6,840
5,984
5,965
5,961
5,975
5,984
5,990
6,054
6,098
6,119

5,613
5,62$
5,671
5,661
5,695
5,614
5,488.
5,502
5,605
5.551
5,475
5,638

41,795
41,849
42,043
41,823
41,916
42,226

15.372
15,475
15,511
15,429
15,230
15,259

7,781
7,857
7,893
7,892
7,780
7,816

7,591
7,618
7,618
7,537
7,450
7,443

883
880
879
856
881
889

,515
,502
,534
,619
,688
,761

4,015
4,011
4,021
3,836

8,555
8,507
8,563
8,551
8,547
8,567

6,071
6,107
6,120
6,106
6,155
6,222

5,384
5,367
5,415
5,42&
5,447
5,407

Total
Total

1939
1940
1941
1942
1943
1944
1945
1946

monthly average
monthly average
monthly average
monthly average.
monthly average
monthly average
monthly average
monthly average

1946:
January
February
_._
March
April..
_
May
June
July
August
September
October....
November.'
December
1947:
January
February
March
April...
May
June2

FiTransnance,
portaservice, GovContion
strucand
Trade and
erntion public
miscel- ment
utililaneties
ous

3,991
3,946
3,996
4,051
4,103
4,064
4,093
4,101
4,071

4,121

8,342
8,337
8,402
8,523
8,667

i Number of employees in nonagricultural establishments 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. Proprietors, self-employed persons, domestic servants, and personnel of the armed
forces are excluded. Not comparable with estimates for nonagricultural employment of the civilian labor
force derived from data in appendix B, table VII, because latter include self-employed, proprietors, and
domestic servants and are based on population enumeration whereas estimates in this table are based on
establishment
reports.
8
Preliminary.
NOTE.—Detail will not necessarily add to totals because of rounding.
Source: Department of Labor.




MIDYEAR ECONOMIC REPORT OF THE PRESIDENT

69

TABLE IX.—Average gross weekly earnings in selected industries^ 1989-47
Manufacturing
Year or month
Total

$26.50
28.44
34.04
42.73
49.30
52.07
49.05
46.49

$21.78
22.27
24.92
29.13
34.12
37.12
38.29
41.02

$23.88
24.71
30.86
35.02
41.62
51.27
52.25
58.03

41.15
40.58
42.15
42.88
42. 51
43.31
43.38
44.99
45.39
45.73
45.79
46.96

43.67
42.57
44.79
45.71
45.10
46.32
46.24
48.02
48.36
48.90
48.62
49.57

38.75
39.01
39.83
40.13
39.93
40.28
40.46
41.89
42.34
42.45
42.87
44.24

54.16
57.37
58.30
30.15
34.20
64.44
52.27
62.84
61.65
62.49
61.54
69.56

47.10
47.29
47.72
47.50
48.46
48.91

49.60
49.74
50.33
50.34
51.71
52.39

44.47
44.67
44.90
44.42
44.93
45.08

69.54
65.30
64.90
54.77
66.56
(2)

1939 monthly average.. _ $23.86
1940 monthly average. _. 25.20
1941 monthly average. __ 29.58
1942 monthly average. __ 36.65
1943 monthly average. _ _ 43.14
1944 monthly average... 46.08
1945 monthly average. _. 44.39
1946 monthly average. _ _ 43.74
1946:
January
February
March
April
May
June
July
August
September
October
November
December
1947:
January
February
March
April
May
June 3

Private
Bitu- build- Class I
Hotels
ruinous
ing
steam Tele- w noie- Retail (year
Dura- Noncoal
conrail- p h o n e sale
trade round)
ble durable mining struc- roads
firau.6
rftf i fi
goods goods
tion
$30.39 $30.71 $31.94
31.70 31.32 32.44
35.14 34.04 32.74
41.80 38.39 33.97
48.13 43.48 36.30
52.18 45.69 38.39
53.80 45.49
0)
56.24 50.99 44.04

$29.85
30.39
32.32
35.56
39.40
42.29
44.07
48.06

$21.17
21.17
21.49
23.24
24.88
26.58
28.31
32.55

$15.25
15.52
16.09
17.62
20.21
22.65
24.53
26.95

52.89 43.29
53.04 43.84
52.87 43.01
54.29 47.76
53.63 46.39
55.23 51.05
56.25 51.78
56.67 52.60
58.49 51.28
59.20 52.64
57.65 51.59
60.32 50.53

41.19
44.37
43.76
44.09
44.82
44.93
44.82
44.19
44.10
44.30
44.40
42.98

45.14
46.07
46.31
47.13
47.48
47.88
48.06
48.14
49.54
49.44
49.80
51.20

30.54
30.77
31.12
31.40
31.45
32.39
33.64
33.81
33.76
33.19
33.04
33.73

26.21
26.43
26.57
26.64
26.65
26.70
26.63
27.15
26.98
27.27
28.15
28.40

59.97
58.92
61.23
60.53
62.38
(2)

43.37
43.31
42.51
32.26
37.08
(2)

50.05
50.87
50.80
51.13
51.57
(2)

35.02
35.27
35.31
35.93
36.43
(2)

28.62
28.91
29.09
29.41
29.23

52.47
(2)
(?)

82
()
New series, beginning April 1945; includes only employees subject to provisions of the

i Not available.
Fair Labor Standards Act and is not comparable with preceding series, which includes all employees.
* Not available.
3 Preliminary.
Source: Department of Labor.




70

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE X.—Average hourly earnings in selected industries, 1939-47
Manufacturing
Year or month
Total

1939 monthly average.
1940 monthly average.
1941 monthly average.
1942 monthly average.
1943 monthly average.
1944 monthly average.
1945 monthly average.
1946 monthly average.
1946:
January
February...
March
April.
May
June
July
August
September
October..
November
December.._
1947:
January
February
March
April
May
June3

_.

_

Private
Bitu- building
minous
Dura- Nonconcoal
mining
ble durable
strucgoods goods
tion

Class I
steam Tele- Whole- Retail Hotels
(yearsaie
rail- phone cola
trade round)
roads
trade

$0,932 $0.707 $0,822
.958
.711
.827
1.010
.745
.820
.819
.843
1.148
1.252
.892
.870
1.319
.911
.934
1.380
.938
0)
1.478 1.111 1.124

$0.633
.661
.729
.853
.961
1.019
1.023
1.084

$0,698
.724
.808
.947
1.059
1.117
1.111
1.156

$0,582
.602
.640
.723
.803
.861
.904
1.012

$0,886
.883
.993
1.059
1.139
1.186
1.240
1.401

1.004
1.002
1.035
1.058
1.071
1.084
1.093
1.112
1.126
1.130
1.139
1.148

1.070
1.064
1.103
1.131
1.147
1.165
1.177
1.186
1.201
1.202
1.210
1.216

.941
.953
.975
.988
.996
1.003
1.009
1.036
1.050
1.056
1.065
1.077

1.259
1.265
1.274
1.239
1.321
1.474
1.457
1.466
1.480
1.460
1.477
1.491

1.402
]L.422
L.411
L.423
L.431
L.444
L.473
1.482
1.510
L.526
L.549
:L.569

.935
.949
.929
1.045
1.069
1.117
1.116
1.112
1.132
1.113
1.124
1.128

1.030
L.095
1.105
L.131
L.143
L.147
L. 135
1.129
1.148
L.137
L.131
]L. 132

1.161
1.170
1.180
1.186
1.208
1.220

1.224
1.229
1.237
1.244
1.277
1.294

1.094
1.107
1.119
1.122
1.131
1.138

1.491
1.491
1.484
1.481
1.464
(2)

.L.

1.126
(2)
(2)
(2)
(2)
(2)

1.132
1.141
1.124
L.147
L.188
(2)

594
1.598
1.610
1.634
1.656
(2)

$0.715 $0.536
.739
.542
.793
.568
.614
.860
.933
.670
.985
.724
1.029
.773
1.144
.878

$0.324
.332
.348
.386
.451
.505
.550
.612

1.070
1.095
1.101
1.121
1.135
1.146
1.155
1.148
1.179
1.172
1.186
1.202

.828
.835
.841
.851
.859
.876
.888
.893
.908
.907
.917
.919

.604
.602
.600
.599
.596
.598
.602
.614
.620
.626
.642
.651

1.197
1.230
1.231
1.229
1.241
(2)

.953
.957
.960
.973
.986
(2)

.648
.654
.642
.642
.643
2
)

1
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.
2
Not available.
3 Preliminary.
Source: Department of Labor.




71

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT
1

TABLE XI.—Consumers price index, 19S9~47
For moderate-income families in large cities
[1935-39=100]
Year or month
1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly

average.
average.
average.
average.
average.
average.
average.
average.

1946:
January
February
March
April
May
June
July
August
September
October.
November
December
1947:
January
February
March
April
May
June, 2

_

All items

Clothing

Rent

Fuel, elec- House
tricity, furnishings
and ice

Miscellaneous

99.4
100.2
105.2
116.5
123.6
125.5
128.4
139.3

95.2
96.6
105.5
123.9
138.0
136.1
139.1
159.6

100.5
101.7
106.3
124.2
129.7
138.8
145.9
160.2

104.3
104.6
106.2
108.5
108.0
108.2
108.3
108.6

99.0
99.7
102.2
105.4
107.7
109.8
110.3
112.5

101.3
100.5
107.3
122.2
125.6
136.4
145.8
159.2

100.7
101.1
104.0
110.9
115.8
121.3
124.1
128.8

129.9
129.6
130.2
131.1
131.7
133.3
141.2
144.1
145.9
148.6
152.2
153.3

141.0
139.6
140.1
141.7
142.6
145.6
165.7
171.2
174.1
180.0
187.7
185.9

149.7
150.5
153.1
154.5
155.7
157.2
158.7
161.2
165.9
168.1
171.0
176.5

0)
(0

110.8
111.0
110.5
110.4
110.3
110.5
113.3
113.7
114.4
114.4
114.8
115.5

148.8
149.7
150.2
152.0
153.7
156.1
157.9
160.0
165.6
168.5
171.0
177.1

125.4
125.6
125.9
126.7
127.2
127.9
128.2
129.8
129.9
131.0
132.5
136.1

153.3
153.2
156.3
156.1
155.8
157

183.8
181.5
189.5
188.0
187.6
190

179.0
180.2
184.3
184.6
184.4

8

117.3
117.5
117.6
118.4
117.6

179.1
180.8
182.3
182.4
181.6

* Usually surveyed quarterly.
2 Estimates based on incomplete data.
a Not available.
Source: Department of Labor.




Food

108.4

0)
0)
108.5

(0
108.7
108.8

(0

108.8
108.9
109.0
109.0
109.2

%

137.1
137.4
138.2
139.1
138.7

72

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT
TABLE XII.—Wholesale price index, 1989-47
[1926=100]
Other than farm products and foods

Year or month

1939 monthly average. _.
1940 monthly average.._
1941 monthly average. -.
1942 monthly average...
1943 monthly average. - .
1944 monthly average.._
1945 monthly average. -_
1946 monthly average...
1946:
January
February
March
April
May
June
July
August
September
October..
November
December
1947:
January
February
March
April
May.
June *

_

__
_.

77.1
78.6
87.3
98.8
103.1
104.0
105.8
120.9

65.3
67.7
82.4
105.9
122.6
123.3
128.2
148.6

70.4 81.3
71.3 83.0
82.7 89.0
99.6 95.5
106.6 96.9
104.9 98.5
106.2 99.7
130.4 109.3

95.6
100.8
108.3
117.7
117.5
116.7
118.1
136.2

107.1
107.7
108.9
110.2
111.0
112.9
124.7
129.1
124.0
134.1
139. 7
140.9

129.9
130.8
133.4
135.4
137.5
140.1
157.0
161.0
154.3
165.3
169.8
168.1

107.3
107.
109.4
110.8
lll.fi
112.9
140.2
149.0
131.9
157.9
165.4
160.1

100.8
101.3
102.2
103.3
103.9
105.6
109.5
111.6
112.2
115.8
120.7
124.7

119.4
119.6
119.8
119.8
120.4
122.4
141.2
138.9
141.6
142.4
172.5
176.7

101.6
102.2
104.7
107.9
108.8
109.2
118.1
124.0
125.7
128.6
131.6
134.7

141.5
144.5
149.5
147.7
146.9
147.7

165.0
170.4
182.6
177.0
175.7
177.9

156.2
162.0
167.6
162.4
159.8
161.0

127.6
128.5
131.1
131.8
131.7
131.8

175.1
173.8
174.
166.4
165.6

136.6 97.7 138.0 169.7
138.0 97.9 137.9 174.8
139.6 100.7 139.9 177.5
139.2 103.4 140.3 178.8
138.9 103.3 141.4 177.0

1
Preliminary estimates based on weekly data.
«Not available.
Source: Department of Labor.




73.1
71.7
76.2
78.5
80.8
83.0
84.0

94.4
95.8
99.4
103.8
103.8
103.8
104.7
115.3

90.5 76.0
94.8 77.0
103.2 84.4
110.2 95.5
111.4 94.9
115.5 95.2
117.8 95.2
132.2 101.5

84.9
85.1
85.0
86.1
86.1
87.8
90.3
94.4
94.3
94.2
94.5
96.1

105.7
106.6
108.4
108.8
100.4
ll2.2
113.3
114.0
114.2
125.8
130.2
134.7

120.0 96.0 106.2
120.9 95.9 106.5
124.9 96.0 106.9
126.5 96.1 107.5
127.8 96.5 108.3'
129.9 96.4 110.4
132.1 99,3 111.9
132.7 98.4 112.6
133.8 98.4 113.6
134.8 99.9 115.3
145.5 118.9 118.2
157.8 125.7 120.2
128.1
129.3
132.2
133.2
127.1

86.3 74.8
88.5 77.3
94.3 82.0
102.4 89.7
102.7 92.2
104.3 93.6
104.5 94.7
111.5 100.2

123.3
124.6
125.8
127.4
128.8

95.3
95.. 6
95.6
95.7
97.0
98.5
101.3
102.0
102.1
104.0
106.5
108.9
110.3
110.9
115.3
115.7
116.1

MIDYEAR ECONOMIC REPORT OF T H E PRESIDENT

73

TABLE XIII.—Index of prices paid and of prices received by farmers and parity
ratio, 1939-47
[1910-14=100]

Year or month

1939 monthly
1940 monthly
1941 monthly
1942 monthly
1943 monthly
1944 monthly
1945 monthly
1946 monthly

Prices paid
(including
interest
and taxes)

average.
average.
average.
average.
average.
aveiage.
average.
average.

1946:

January
February
March
April
May
June._
July
August
September
October
November
December
1947:
January
February
March
April.
May...
June

_.

_

__

1 August 1909-July 1914=100.
* Ratio of prices received to prices paid (including interest and taxes).
Source: Department of Agriculture.




Prices
receivedl

Parity
ratio 2

124
125
132
150
162
170
174
194

95
100
124
159
192
195
202
233

77
80
94
106
119
115
116
120

177
179
180
181
185
188
199
204
200
207
212
213

206
207
209
212
211
218
244
249
243
273
263
264

116
116
116
117
114
116
123
122
122
132
124
124

215
221
227
230
229
230

260
262
280
276
272
271

121
119
123
120
119
118

74

MIDYEAR ECONOMIC REPORT OF THE PRESIDENT
TABLE XIV.—Industrial production index, 1939—47
[1935-39=100, seasonally adjustedl

Year or month

1939 monthly average
1940 monthly average
1941 monthly average
1942 monthly average
1943 monthly average
1944 monthly average
1945 monthly average
1946 monthly average
1946:
January
February
March
April
May
June—
July...
August
September
October
November
December
1947:
January
February
March
April
May
June*

Total
industrial
production

Minerals
Total

Durable

Nondurable

109
125
162
199
239
235
203
170

109
126
168
212
258
252
214
177

109
139
201
279
360
353
274
192

109
115
142
158
176
171
166
165

106
117
125
129
132
140
137
134

160
152
168
165
159
170
172
178
180
182
183
182

163
154
173
176
167
176
177
184
186
188
191
190

166
138
183
190
175
193
202
208
212
214
214
211

161
167
166
164
161
162
157
164
165
168
173
174

141
141
137
104
115
139
146
144
146
145
136
137

189
189
190
186
185
183

196
197
198
194
192
190

221
222
225
222
220
220

177
176
176
172
169
166

146
146
148
142
152
149

i Estimates based on incomplete data.
Source: Board of Governors of Federal Reserve System.




Manufactures