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llIIF ::i:iIillS: •sill \»<-i: "mm 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 38 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 40 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. 42 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 44 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 46 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 48 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