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DECEMBER 1968 IN FEDERAL RESERVE THIS ISSUE A Note on Economic Developments in Italy . Capital Spending in M ajor Areas of the Fourth District . . .1 5 Annual Index to Economic Review . 22 BANK OF . 3 CLEVELAND Additional copies of the ECONOMIC REVIEW may be obtained from the Research Department, Federal Reserve Bank of Cleveland, P.O. Box 6387, Cleveland, Ohio 44101. Permission is granted to reproduce any material in this publication. DECEMBER 1 9 6 8 A NOTE ON ECONOMIC DEVELOPMENTS IN ITALY Unlike the situation in certain other major prices declined slightly (see Table I). In 1958, countries, Italy's international position has Gross National Product amounted to 1 8 ,3 4 0 been particularly strong in recent years. In billion lire (see Chart 1). Personal consump fact, while the international reserves of many tion expenditures accounted for roughly two- western the thirds of GNP, gross fixed capital formation United States and the United Kingdom, were only about one-fifth, and general government under severe pressure, Italian reserves in consumption about one-eighth. industrial nations, including creased by more than $ 3 billion during the At the end of 1957, Italy's reserve position, last decade. In an environment where rela as measured by holdings of gold and foreign tively few major nations have not been sub exch an ge and the country's position in the jected to serious internal or external econom ic International Monetary Fund, totaled $ 1 ,3 5 5 problems (or both), it may be worthwhile to million (see Chart 2). In 1958, the first post exam ine the Italian situation in some detail war surplus was recorded in the goods and to understand the recent strength of Italy's services account of the balan ce of payments. international reserve position. GENERAL BACKGROUND Germany, the United States, Switzerland, the United Kingdom, and France constituted the major markets for Italy's exports in 1958, Between 1 9 4 8 and 1958, industrial pro while m achinery, transportation equipment, duction in Italy more than doubled, reflecting and manufactured goods were the most im postwar econom ic recovery, while wholesale portant exports in terms of value. O n balance, 3 TA BLE I It a ly S e le c te d E c o n o m ic D a ta (In d ex a v e ra g e s fo r periods) Industrial Production (1958=100) 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1 II III IV 1959 1 II III IV 1960 1 II III IV 1961 1 II III IV 1962 1 II III IV 1963 1 II III IV 1964 1 II III IV 1965 1 II ill IV 1966 1 II III IV 1967 1 II III IV 1968 January February March April May June July August 44 48 55 62 64 70 77 84 90 97 98 98 101 103 106 107 110 118 123 127 129 131 135 138 141 150 154 154 151 161 163 169 172 174 174 170 166 169 172 178 182 186 191 199 204 208 215 218 209 221 223 225 226 226 230 230 228 Wholesale Prices (1958=100) Cost of Living (1958=100) Hourly Earnings (1958=100) 103 97 92 105 76 77 76 86 87 88 91 93 96 97 99 101 101 100 99 99 99 101 102 101 102 102 103 104 104 105 107 108 109 111 115 116 117 119 121 123 125 127 128 129 130 131 132 132 132 134 136 137 138 139 139 139 139 56 59 62 69 76 81 84 87 92 95 98 99 101 102 102 101 101 102 104 105 105 105 106 108 109 111 115 117 119 121 124 129 132 136 143 148 150 155 99 99 98 99 101 102 101 101 99 98 97 96 96 98 98 98 98 98 98 98 98 99 100 101 101 103 105 106 106 109 110 109 109 11 1 111 111 112 113 114 114 113 113 113 113 113 114 114 114 114 114 114 113 113 113 139 139 139 139 139 157 162 163 165 166 167 Employment (1958=100) 91 91 93 95 94 95 97 98 101 102 99 100 102 99 102 104 107 107 106 107 110 111 114 115 116 114 117 116 120 118 119 121 124 123 120 117 119 118 117 117 114 115 113 115 167 168 173 173 175 176 178 116 117 119 120 120 120 179 179 179 180 180 180 181 120 121 Sources: International Monetary Fund, Financial Statistics, various issues; 1967/68 supplement 4 Export Prices (1958=100) Import Prices (1958 = 1C 113 106 103 124 116 110 107 104 101 105 106 103 100 97 96 95 92 90 98 97 93 92 93 94 93 91 92 91 92 92 96 94 94 96 97 96 97 98 96 95 96 94 94 93 94 92 93 93 95 95 95 106 99 93 122 118 108 103 105 108 114 102 102 97 96 93 94 92 94 91 91 94 92 90 88 88 89 90 90 89 89 90 91 92 92 93 93 94 94 95 95 95 95 95 96 97 97 97 96 97 99 97 93 93 92 91 92 88 97 96 97 96 95 95 DECEMBER 1 9 6 8 C h a r t 1. I TALY: GROSS Trillions of lir e L a st e n try : 1 96 7 So u rce of d a ta : N A TIO N A L PRODUCT In t e r n a t io n a l M o n e t a r y by S E C T O R S Fund Italian export prices declined throughout the employment among the six EEC countries— early postwar years after 1947, which no 8 .3 percent.2 In addition, Italy had been doubt contributed to rising sales abroad. Nevertheless, in 1958, when the Treaty of experiencing only a 1 percent annual rate of growth in employment. Moreover, in com Rome established the Common Market (Euro parison with the other EEC members, Italy, pean Economic Community), Italy compared in 1958, had (1) the largest number of small, unfavorably with her EEC partners.1 For ex inefficient farms; (2) high tariffs on imported ample, Italy showed the highest rate of un p ro d u cts; and (3) only 2 4 p e r c e n t of its 1 In 1958, Italy had been a popular democracy for only nations, the smallest proportion of all Common ten years. After the party in power lost its absolute m a Market exports. exports going to other Common Market jority in 1953, cooperation among the parties of the political center w as necessary to maintain an effective government. Coalition governments have characterized - The six EEC countries, in addition to Italy, include Bel most of Italy's postwar political experience, with some gium, France, Luxembourg, the Netherlands, and West effects on public policy. Germany. 5 ECON O M IC REVIEW C h a r t 2. I TA LY : IN TERNA TIO N AL RESERVE POSITION B i l l i o n s of d o l l a r s So u rce of d a ta : In t e r n a t io n a l M o n e t a r y Fu n d ECONOMIC RESURGENCE: 1958-1962 composition of Italian exports occurred dur ing the 1 9 5 8 -1 9 6 2 period. For example, ex Between yearend 1 9 5 7 and yearend 1 962, ports of manufactured articles (particularly Italy's overall international reserve position consumer goods, such as shoes, knitwear, soared from $ 1 ,3 5 5 million to $ 4 ,0 6 8 million. ceram ic tiles, As shown in Table II, the goods and services nearly tripled, and exports of m achinery, account in the balan ce of payments registered transportation equipment, and chem ical prod and household appliances) surpluses through 1961, reflecting continued ucts more than doubled. Moreover, by the increases in both the volume of exports and end of 1962, approximately one-third of total receipts from foreign tourists. Betw een 1 9 5 8 exports was being shipped to other Common and 1962, total industrial production increased Market countries, compared with one-fourth by 6 0 percent, while the volume of exports in 1 9 5 8 (see Table III). more than doubled, partly reflecting the fact In 19 5 8 , agriculture accounted for nearly that export prices, on balance, declined dur 3 4 percent of total employment in Italy. In the ing the period. C ertain important shifts in the years immediately thereafter, the proportion Digitized6 for FRASER DECEMBER 1 9 6 8 TABLE II Italy Selected Balance of Payments Accounts G o o d s and Services (mil. o f $) T rad e Ba la n ce (mil. o f $) T ravel (mil. o f $) 1956 $— 2 7 0 .7 $— 7 3 1 .8 $+ 1957 — 169.4 — 769.1 + 2 15 .2 3 2 2 .7 1958 + 2 97 .6 — 3 7 2 .7 + 4 11 .3 1959 + 5 6 9 .7 — 133.0 + 448.1 1960 + 116.5 — 6 33 .0 + 548.1 1961 + 141.0 — 5 7 7 .0 + 6 47 .0 1962 — 84.0 — 9 1 0 .0 + 7 2 4 .0 1963 — 1,06 2 .0 — 1,9 0 1 .0 + 7 4 9 .0 1964 + 3 2 7 .0 — 6 4 5 .0 + 8 26 .0 1965 + 1,88 3.0 + 6 46 .0 + 1,0 6 1 .0 1966 + 1,7 8 0 .0 + 3 4 7 .0 + 1,1 9 9 .0 1967 + 1,4 1 6 .0 + 133.0 + 1,1 2 6 .0 Source: In te rn a tio n a l M o n e ta ry Fund, In te rn a tio n a l F in a n cia l Statistics, M a y 1968; e a r lie r d a ta not a v a ila b le TABLE III Italy Exports by Principal Countries of Consumption (value in millions of lire) Principal Countries o f Consumption 1 957 1958 195 9 EEC countries 3 99 ,3 1 2 3 8 0 ,1 1 3 5 0 1 ,0 0 0 6 7 3 ,6 8 3 8 1 7 ,2 3 5 1 ,0 15 ,26 6 1,120,751 United States 144,123 1 58 ,6 8 4 2 1 5 ,9 7 9 2 4 0 ,5 6 6 2 3 8 ,7 8 6 2 7 5 ,5 9 2 2 9 8 ,1 3 9 316,981 Sw itzerland 121,932 122 ,3 0 2 1 3 1 ,5 4 9 1 5 2 ,6 1 5 179 ,6 2 3 2 0 6 ,6 9 5 2 1 2 ,5 3 8 2 24 ,5 8 2 United Kingdom All other countries Total 1960 1961 1962 196 3 1964 1 ,3 76 ,16 0 9 9,22 4 1 0 9 ,2 1 4 135,741 1 56 ,3 1 2 1 7 5 ,7 3 0 1 7 4 ,7 7 9 1 6 9 ,2 0 2 2 08 ,0 1 8 8 3 0 ,5 4 5 8 4 0 ,3 5 4 8 3 6 ,2 5 2 1 ,0 5 7 ,0 6 7 1 ,2 02 ,96 0 1 ,2 4 3 ,2 4 0 1 ,3 58 ,95 6 1,5 96 ,94 4 1,5 95 ,13 6 1 ,6 1 0 ,6 6 7 1,820,521 2 ,2 8 0 ,2 4 3 2 ,6 1 4 ,3 3 4 2 ,9 1 5 ,5 7 2 3 ,1 5 9 ,5 8 6 3 ,7 2 2 ,6 8 5 Sources: United N a tio n s, Y e a rb o o k of In te rn a tio n a l T rad e Statistics, 1961 and 1964; la te r d a ta not a v a ila b le 7 EC ON O M IC REVIEW declined, falling to 2 8 percent by 1 9 6 2 .3 O n increased sharply (from $ 4 8 2 to $ 6 7 4 ) b e the other hand, employment in industry rose tween 1 9 5 8 and 1 9 6 2 . However, the shift of from 3 4 percent of total employment in 1 9 5 8 incom e distribution in favor of households to nearly 4 0 percent in 1962. As shown in with a relatively high propensity to consume Table I, wage rates in manufacturing (hourly apparently reduced personal savings avail earnings) rose substantially during the 1958- able for investment. 19 6 2 period, reflecting both increases in productivity and geographical shifts in the labor supply. Higher wages offered by in dustrial plants in northern Italy attracted MONETARY POLICY AND ECONOMIC DEVELOPMENTS: 1960-1965 large numbers of workers from the south During the summer of 1 9 6 0 , the Bank of (nearly 3 million persons between 1 9 5 0 and Italy moved to limit expansion of domestic 1964). bank liquidity, resulting from an overall Between 1 9 5 8 and 1962, GNP (in current balance of payments surplus, by instructing dollar terms) increased by about one-third. com m ercial banks to reduce their net foreign During the period, private consumption d e liabilities denominated in foreign currencies. creased slightly as a share of GNP (to 6 3 per The banks usually chose to in crease foreign cent), while gross fixed capital formation rose assets—generally by taking advantage of the to more than 2 3 percent of GNP. A gricultural preferential swap facilities provided by the production decreased from nearly 2 0 percent of GNP in 1 9 5 8 to roughly 16 percent in Bank of Italy—rather than to pay off gross liabilities. As a result, Italian com m ercial 1962, despite a per capita in crease in pro ductivity in the agricultural sector that was banks becam e substantial sources of Euro dollar funds. roughly equivalent to the increase in other sectors of the econom y.4 During 1 9 6 1 -1 9 6 2 , strong consumer de mands fed by increasingly inflationary wage In addition to major econom ic changes, a increases led to a considerable gain in the number of related developments transpired volume of imports (see Chart 3) that, in turn, during the 1 9 5 8 -1 9 6 2 period. For example, contributed to a $ 8 4 million deficit in the industrial activity continued to be con cen goods and services account in 1962, the first trated in the triangle around Milan, Genoa, deficit since 1957. Because the deficit de and Turin. In addition, expansion of indus creased domestic liquidity, moves to ease trial activity and employment as well as in domestic financial pressures were thought creased real wages led to a substantial increase necessary. In lanuary 1962, the reserve ratio in consumer dem ands—per capita incom e against com m ercial bank deposits was lowered from 2 5 percent to 2 2 .5 percent; in O ctober, 3 Almo Pennctcchielli, "Agriculture in the Italian National Economy," Banca Nazionale del Lavoro Quarterly Review, December 1965, p. 393. 4 Ibid., pp. 393-394. Digitized for 8 FRASER banks were again permitted to hold net debit balances abroad. G enerally, monetary policy during 19 6 2 was directed toward stimulating domestic econom ic development as well as DECEMBER 1 9 6 8 C h a r t 3. I TALY: IN D E X 1958= 100 L a s t e n try : So u rce V O L U M E of M E R C H A N D I S E T R A D E 2Q of d a ta : '6 8 In t e r n a t io n a l M o n e ta ry Fund allowing investment projects already in prog dissolution of the coalition government in the ress to be com pleted.5 spring of 1 9 6 3 precluded the adoption of During 1 9 6 2 , consumer demand outran the appropriate fiscal measures. Becau se of available supply of goods. As a result, whole political instability until the end of 1963, sale prices increased 4 index points (from 9 9 primary anti-inflationary action in that year to 103), while consumer prices gained 6 was carried out through monetary policy points (from 1 0 5 to 111) during the year (see under the direction of the Bank of Italy. Table I). Because of pressure for additional wage increases, the threat o f a w age-price During 1963, the Italian balan ce of pay ments situation worsened markedly. The spiral in Italy increased. By 1 9 6 3 , it was clear $ 1 ,0 6 2 million deficit in the goods and ser that serious m easures were needed to moder vices account reflected a further strong up ate the expansion of demand; however, the surge in the volume of imports and a leveling 5 Paolo Baffi, "M onetary Developments in Italy from 1961 of exports. At the same time, imposition in to 1965," Banca Nazionale del Lavoro Quarterly Review, January 1 9 6 3 of a 15-percent withholding March 1966, pp. 21-24. tax on dividends contributed directly to 9 EC ON O M IC REVIEW larger exports of capital. The measure, which ing turnover taxes on luxury products. In an required taxpayers to list stock holdings on attempt to keep monetary expansion within their tax returns, provided fiscal authorities limits of increases in real output, the Bank of with detailed information about sharehold Italy prohibited com m ercial banks from in ings by Italian residents. The export of capital creasing their net foreign indebtedness after allowed the Italian owners to rem ain anony August 1 9 6 3 . That measure allowed the b al mous, even though a substantial amount re ance of payments deficit to reduce bank turned under the name of foreigners. liquidity very severely. Seeing the need for In 1 9 6 3 , Italian com m ercial banks bor other action, the authorities moved in Feb rowed heavily from both the Italian central ruary 1 9 6 4 to affect consumer credit directly. bank and foreign com m ercial banks to meet Credit regulations were specifically aimed at domestic loan demand. As a result, Italian curbing spending on autos and other con com m ercial banks becam e substantial bor sumer durables, which had accounted for rowers of Eurodollars, using the funds pri much of the sharp rise in the volume of im marily to finance foreign trade. (The limit on ports in 1 9 6 3 . The government's stabilization program, in banks' net foreign debt was not reimposed until Septem ber 1 9 6 3 .) Italian official foreign the form of budget actions and credit regula exchange holdings d ecreased by $ 5 7 2 million tions, showed no noticeable results in early betw een 1 9 6 2 and the end of 1 9 6 3 (see 1964. In M arch 1964, fears of devaluation Chart 2). again led to a speculative attack on the lira, Betw een the fourth quarter of 1 9 6 2 and the fourth quarter of 1 9 6 3 , domestic inflationary since domestic (and foreign) confidence in the new coalition government was not yet pressures prices established. Speculation against the lira sub jumped 8 index points (from 111 to 119), sided with the announcem ent of $1 billion while wholesale prices increased 6 index in credits made available by the Federal persisted and consumer points (1 0 3 to 109). In the same period, wage Reserve System and European central banks; rates in manufacturing clim bed more than 12 in addition, a $ 2 2 5 million drawing from the percent. Domestic wage and price develop IMF in late M arch bolstered official Italian ments spilled over into export industries, with reserves. the index of export prices rising from 9 2 to 9 6 ( 1 9 5 8 = 1 0 0 ) . During Septem ber 1 9 6 3 , ru mors of devaluation triggered a speculative STABILIZATION AND RECOVERY: 1964-1967 attack on the Italian currency in foreign Stabilization policy began to show measur exchange markets and underscored the ur able effects by the second quarter of 1 9 6 4 — gency of the inflationary situation and the unemployment rose somewhat; retail sales weakening of the b alan ce of payments. The fell; and industrial production decreased. caretaker government attempted to reduce After two years of no real increases in agri the size of the budget deficit planned for the cultural production, output gains in 1 9 6 4 fiscal year ending June 3 0 , 1964, by in creas permitted prices of agricultural products to Digitized 10 for FRASER DECEMBER 1 9 6 8 decrease somewhat, and pressures on the in 1 9 6 5 still accounted for 6 2 percent of general price structure eased slightly. GNP and general government consumption As shown in Chart 3, in 1 9 6 4 , the volume for approximately 15 percent, but gross capi of imports declined sharply from 1 9 6 3 levels, tal formation rem ained high at 19 percent of and the volume of exports rose, resulting in a sharp contraction in the trade deficit (from GNP. Industrial production during the 1958- $ 1 ,9 0 1 million in 1 9 6 3 to $ 6 4 5 million in while wholesale prices rose only 13 percent. 1964). Although export prices showed little In 1 9 6 5 , the combination of (1) a 23-per- net chang e in 1 9 6 4 , import prices increased cent in crease in exports over the 1 9 6 4 volume, somewhat. Monetary policy rem ained restric (2) a rise to more than $1 billion in net 1 9 6 5 period increased almost 9 0 percent, tive until the summer of 1 9 6 4 . However, receipts from tourism, and (3) relative stability throughout 1 9 6 4 and 1 9 6 5 , the authorities in the volume of imports in the first nine encouraged com m ercial banks to make addi months contributed to a $ 1 .9 billion surplus tional reductions in net foreign liabilities, in the goods and services account for the rather than to use surplus funds for domestic year as a whole. W hen the Italian trade bal loans and investments. Such action was en an ce rem ained in large surplus during 19 6 6 couraged for reasons of banking prudence, and 1967, it becam e clear that the improved to strengthen central bank control over com trade position was more than a temporary m ercial bank liquidity in future years, and to phenomenon. Exports of manufactured goods help the United States dollar by avoiding and articles (for example, shoes, textiles, large increases in official reserves that could ceram ic tiles, and household products), chem have led to Italian gold purchases. As 1 9 6 4 ical products, m achinery (particularly textile drew to a close, foreign investment in Italy rose and the outflow of domestic capital de m achinery), and transportation equipment expanded substantially.6 In 1 9 6 7 , Italy's ex creased, reflecting increased confidence in ports of Fiats surpassed Germ any's exports of Italy's econom ic future. Volkswagens for the first time. Italian export The perform ance of the Italian economy industries generally emphasize flare, style, during 1 9 6 5 suggests that the stabilization and imagination in product design, rather program achieved its goal. Italy attained than a science-based orientation. In large greater price stability than any other W estern part, this emphasis reflects a new generation European country, as reflected in the whole of Italian businessmen that has been su ccess sale and consum er price indexes, which in ful as managers and innovators as well as in creased by only 1 .8 percent and 3,1 percent, achieving profitable operations. Many of these respectively, during the year. Although the businessmen have established new, inde total workweek was reduced, which affected current wage incom es, total employment fell pendent companies. Between Decem ber 1 9 5 8 and Decem ber only slightly. As shown in Chart 1, in 1 965, 1967, Italy's international liquidity position GNP amounted to 3 5 ,6 4 8 billion lire —almost twice the 1 9 5 8 figure. Private consumption 6 "Boom Italian Style," Fortune, May 1968, p. 137. 1 1 ECO N O M IC REVIEW rose by more than $ 3 billion—from $ 2 ,1 8 4 example, Italian-made refrigerators account million to $ 5 ,4 6 3 million (see Chart 2). In for 2 8 percent of the French market and 17 1967, the surplus in the goods and services percent of the Germ an market; Italy produces account in the Italian balance of payments 4 0 percent of the total of ceram ic tiles manu was more than $1 billion larger than that in factured in the EEC countries.7 Italy also 1958, due to increased net receipts from tour benefited from certain institutions created by ism and substantial expansion of exports. EEC members. For example, the European EVALUATION OF ECONOMIC SUCCESS Investment Bank has been a heavy lender for Italian econom ic development, while on a Italian econom ic achievem ents during the much smaller scale, the European Social Fund last decade were considerable. Some ob paid Italian workers nearly $ 3 million in servers believe that much of Italy's econom ic 1 9 6 7 to reimburse part of the costs of re success (including the strong international training and resettling the unemployed and reserve position) has largely been a matter of underem ployed.8 good fortune and fortuitous timing of eco It is not the purpose of this article to resolve nomic cycles. For example, during the 1958- whether the recent Italian success is attribut 19 6 2 boom, domestic demand provided the able to well-timed econom ic cycles, to mem initial impetus. As incomes rose, consumers bership in the Common Market, or to domestic began to demand processed food, ready econom ic policy. Most importantly, the facts made clothes, refrigerators, washing ma chines, and telephones, among others. W hen clearly show the success of the Italian econ omy. Nevertheless, at least one major prob internal demand slowed, booming markets in lem —both econom ic and s o c ia l—rem ain s; fo re ig n nation s — e s p e c ia lly G e r m a n y — namely, the chronic im balance between Italy's stimulated Italian exports, which in 1 9 6 4 con geographic north and south that must even tributed importantly to overall econom ic a c tually be overcome. tivity. W hen econom ic conditions weakened in major foreign markets, particularly G er THE SOUTH many in 1967, domestic demand in Italy again Italy's largest single econom ic and social was strong enough to sustain the economy. problem has b een the underdeveloped con Other observers credit Italy's econom ic dition of the depressed, southern part of the progress to membership in the Common Mar country. The contrast between the north and ket. The share of Italian exports going to EEC south has existed since the fourteenth century. members increased from 2 4 percent of total In 1958, when the EEC was established, the exports in 1 9 5 8 to more than one-third in area south of Rome and Teramo, which held 1968. Italy undoubtedly benefited from the approximately one-third of Italy's population, expanded market available to the nation's exports as well as from the increasing com * Ibid., pp. 238, 241. petitiveness of Italian products relative to 8 Nederlandse Overzee Bank N. V., Economic Develop those of other Common Market countries. For ments in the Common Market Countries, March 1968. 12 DECEMBER 1 9 6 8 stood in marked contrast to the developing industrial north. As a general matter, the trial development in the south. The law south was characterized by concentration of ment, since approximately 5 0 percent of the affected a substantial amount of fixed invest land ownership, chronic unemployment, and econom ic base of Italy is owned or controlled inadequate housing. by the state (for example, two huge holding In one attempt to nairrow the gap between companies of the state, I s titu to p e r la R ico - north and south, Italy initiated a land reform stru z io n e In d u stria le and E n te Naziorxale program in 1 9 5 0 that redistributed state land Idrocarburi, alone control more than 2 2 per acquired as a result of World W ar II and from cent of the nation's industrial production). A c large landowners. In conjunction with land cording to the same law, industrial sites in redistribution, the Cassa p er il M ezzo g io rn o development areas of the south would be (the Fund for the South) was established in serviced with roads and water that were 1951 to finance economic development of the financed almost entirely from the national region. During the early years of the Cassa, budget. Governmental offers of easy credit, funds were allocated to develop basic road outright grants, and remission of basic taxes and transportation systems, irrigation canals, encouraged small- and medium-sized firms to power facilities, etc. locate in the M e z z o g io r n o -11 "Betw een 1951 and 1962, the Cassa poured into the underde Despite governmental efforts to develop the veloped areas of the south an average of $ 2 8 0 south, the eastern areas of the M ezzo g io rn o million a year, on a rising s c a le ." 9 During the remain relatively isolated and largely un late 19 5 0 's, the major source of funds for the affected by the industrial development of the Cassa shifted from the Italian government to western areas. The nearly total absen ce of a the European Investment Bank, an EEC in stitution. By M arch 1968, EIB loans to Italy local market in the south limits enterprises to totaled $ 5 2 8 million, or nearly 6 4 percent of Moreover, general suspicion on the part of the the bank's total loans.10 the largest, which are usually state-owned. local inhabitants toward new factories in Tangible results of the Cassa’ s develop creases the problem of drawing willing and ment program were barely noticeable during trainable employees from the existing labor the 19 5 0 's, due largely to sporadic and un supply. organized efforts in the early years. However, a 1 9 5 7 law, which required that 4 0 percent 1968 of investment by state-owned enterprises must W ith export prices declining slightly, the be in the south, encouraged industrial de goods and services account in the Italian velopment in the area. The Italsid er steel balan ce of payments has remained in strong plant at Taranto is one example of new indus- surplus in 1968. In contrast, private capital outflows have increased substantially. On 9 "Italy: New W ave or Interlude?" The Economist, March 28, 1964, p. 1244. 10 Nederlandse Overzee Bank N. V., op. cit., p. 16. 11 "Italy: New W ave or Interlude?", op. cit., p. 1247. 13 ECON O M IC REVIEW balance, Italy's international reserve position an investment credit and assumption by the in 1 9 6 8 has improved somewhat from that in state of part of the social security charges of 1 967. In the domestic economy, business firms in the south. expansion has becom e more broadly based, As in 1964, the Italian economy has been with equipment and other capital goods, as sustained in 1 9 6 8 by a sharp in crease in well as light industry, showing gains. Never exports, offsetting weakness in domestic de theless, some weakening in consumer demand mand. The recently enacted fiscal measures and in business investment has appeared in may reduce the Italian balance of payments 1968, perhaps in part as a reaction to the surplus in 1969, but the country's supply of political and labor unrest that Italy shared international reserves seems ample enough with other European countries during the to meet the situation. Moreover, thus far Italy year. Against this background, the Italian has completely escaped the speculative cu r Parliament approved an expansionary fiscal rency runs that have proved so damaging to program in O ctober, including, in particular, other nations. 14 DECEMBER 1 9 6 8 CAPITAL SPENDING IN MAJOR AREAS OF THE FOURTH DISTRICT of business As recently estimated by Com m erce-SEC, spending plans for new plant and equipment Recent nationwide surveys total spending for new plant and equipment indicate little likelihood of a slowdown in in the United States is expected to be 4 .7 capital spending in the nation in the year percent larger in 1 9 6 8 than in 19 6 7 and to ahead. Except for variation in timing, a similar rise during the first half of 1 9 6 9 to about 9 1 9 6 8 . In the conclusion is derived from the results of the p e rc e n t a b o v e fall surveys of capital spending plans of manu manufacturing sector, where capital spending facturing and selected other business firms in in 1 9 6 8 is expected to exceed the 1 9 6 7 level several major areas of the Fourth District.1 by only a fraction of 1 percent, an increase th e total for The difference in timing is significant since of more than 10 percent is indicated for the the major surge in capital spending that first half of 1969. occurred in 1 9 6 8 in major areas of the Fourth A number of recent forecasts prepared by District is unlikely to be repeated in 1969. private organizations predict a similar ad vance in capital spending in the nation in 1 The surveys were undertaken by the Federal Reserve 1 9 6 9 as a whole. A ccording to the most Bank of Cleveland in October 1968. The surveys in north recent private survey (McGraw-Hill), overall eastern Ohio (including Cleveland) and Cincinnati are capital spending will rise 8 percent in 1969; undertaken with the cooperation of the G reater Cleveland capital spending is expected to rise 11 per Growth Association and the Greater Cincinnati Chamber of Commerce, respectively; the Pittsburgh survey is con cent in manufacturing and only about half ducted for the Federal Reserve Bank of Cleveland by the that much in nonmanufacturing, a distinct University of Pittsburgh. reversal of the pattern in 1968. 15 ECONOM IC REVIEW A sequence of increased spending by manu facturers in 1 9 6 8 and reduced spending in 1969, as revealed by the latest capital spend ing surveys in major Fourth District areas, may appear to be out of step with the se TABLE I Capital Spending by Manufacturing Firms Cleveland Metropolitan Area (Fall 1968 Survey) Year-to-Year Percent Change quence indicated for manufacturing in the 1 9 6 7 (actual) to 196 8 (planned ) nation. However, the timing of spending in regional areas should not be expected to conform in each year to the national pattern.2 Accordingly, it is appropriate to use a two-year span covered by the area surveys to com pare regional data with national data. O n that basis, a net gain in spending by manufacturing firms from the actual 1967 level to the expected 1 9 6 9 level can be observed in both the national and area figures. Inter estingly, as shown in the following data, in D u rab le g o o d s ................... 1968 (planned ) to 1 96 9 (planned ) + 59% + 21 — 10 + 74 — 39 M a c h i n e r y ....................... + 99 + 4 Electrical equipm ent — 7 — 4 P rim ary metals . . . . F a b rica te d metals . . . . . T ransportation equipm ent N o n d u rab le goods* . — 14% + 196 — 25 . . + 102 — 39 Printing and publishing . + 138 — 66 C h e m i c a l s ....................... + 41 — 47 R ubber and plastics + 135 — 49 + — 18% . . T O T A L .................................... 65% * A lso includes fo o d, textile, a p p a r e l, and p a p e r industries. Source: F e d e ra l R eserve Bank o f C levela n d each of the surveyed Fourth District areas, the expected margin of in crease for the two-year span as a whole is considerably greater than the corresponding increase for the nation. Percent Change in Capital Spending by Manufacturing Concerns 1 96 7 (actual) to 1 968 (planned ) United States* C levela n d 1968 (planned ) to 1 9 6 9 (planned ) 1 9 6 7 (actual) to 19 6 9 (planned ) CLEVELAND The most recen t survey of capital spending plans in the four-county Cleveland metro politan area indicates that spending by area manufacturers in 1 9 6 8 will exceed the total for 1 9 6 7 by 6 5 percent. Spending in 1969 is expected to drop 18 percent below the + 11% + 11% 1 9 6 8 figure (see Table I), but would still be + 65% — 18 +44 more than 4 0 percent higher than total spend ing in 1967. t N ortheastern O hio +45 — 15 + 28 Cincinnati + 37 — 3 +34 Among responding manufacturing firms in Pittsburgh + 33 — 5 + 28 the Cleveland area, six out of every ten expect * B a sed on Com m erce-SEC d a ta fo r 1 96 7 and 1 968 and the M cG raw - H ill fo recast fo r 1969. to spend more in 1 9 6 8 than in 1967, and five f Less than 1 percent. out of every ten plan to spend more in 1 9 6 9 Sources: U. S. D epartm ent o f Comm erce-Securities and Exchange Commission; M cG ra w - H ill Publications; University o f than in 1968. Only two out of every ten plan Pittsburgh; F e d e ra l Reserve Bank o f C levela n d to raise spending in both years, and less than one in ten anticipates reduced spending in 2 For example, data derived from earlier surveys by this Bank indicate that capital spending by participating manufacturing firms in 1965 and 1966 increased by less both 1 9 6 8 and 1969. Both the in crease in spending in 1 9 6 8 and than the 20-percent nationwide gain that occurred in both the reduction in y ears in the manufacturing sector. greater in the nondurable sector than in Digitized16 for FRASER 1 9 6 9 will be relatively DECEMBER 1 9 6 8 durable goods. W ith the exception of the machinery and electrical equipment indus tries, all m ajor industries expect to in crease spending in 1 9 6 8 and to reduce it in 1969. TABLE II Capital Spending by Manufacturing Firms Cleveland Metropolitan Area (Fall 1968 Survey) Percent Distribution of Total Spending by Type* M achinery manufacturers will raise spending (Between Structures and Equipment and Between in both 1 9 6 8 and 1969, while electrical Expansion and Replacement) equipment manufacturers expect to lower Structures! spending in both years. The primary metals and transportation equipm ent industries, which jointly account for more than half of total capital investment by participating area manufacturers, largely account for the pattern of the manufacturing group as a whole, with higher spending in 1 9 6 8 and reduced spend ing in 1969. The overall results of the fall survey reflect D u rab le goods P rim ary metals Expansion^ 1967 1968 1969 1 967 1968 15% 20% 21% 61% 70% 67% 10 11 72 73 74 9 1969 F a b rica te d m etals 12 16 18 68 84 55 M achinery 20 45 48 50 73 70 Electrical equipm ent 35 34 11 64 70 61 Transportation equipm ent 13 15 18 45 48 32 29 56 67 52 N o nd u rab le goods§ 20 32 no basic change in the spending intentions Printing and publishing 36 45 10 53 72 70 revealed in the spring 1 9 6 8 survey. The re Chemicals 14 30 45 68 81 92 72 90 68 60% 69% 63% sults do indicate an upward revision in the spending increase in 1 9 6 8 (from 5 0 percent to 6 5 percent), but show little change in the Rubber and plastics TOTAL 1 5 4 15% 22% 23% size of the expected d ecrease in 1 9 6 9 . More * Ba sed only supplied. upon returns in which these breakdow ns significant revisions, however, do occur at f Spending fo r equipm ent eq uals 10 0 percent less the percent shown fo r structures. the individual industry level. For example, in X Spending for rep lacem ent eq uals 10 0 percent less the percent shown fo r expansion. the m achinery, transportation equipment, and § Also includes fo o d , textile, a p p a r e l, and p a p e r industries. plastics industries, spending estimates for Source: F e d e ra l R eserve Bank o f C levela n d w ere 1 9 6 8 were substantially upgraded in the fall survey. O n the other hand, in the primary ment, printing, and chem ical industries, in and fabricated metals, chem ical, and e le c 1 9 6 8 (in some cases extending into 1969) trical equipment industries, estimates were largely account for the marked increase in moved down. Revisions of earlier estimates for such spending over 1967. 19 6 9 follow a different pattern and tend to be somewhat sm aller than those for 1 9 6 8 . The in crease in spending for plant con struction, which is usually followed by pur Participating manufacturing firms have e ar chases of equipment for new structures, is marked more than $1 out of every $ 5 of total reflected in the rising proportion of total spending in 1 9 6 8 for new structures and spending designated for expansion of manu approximately the same amount for 1 9 6 9 (see facturing facilities, from 6 0 percent in 1 9 6 7 Table II). Sizable construction projects, par to 6 9 percent in 1 9 6 8 for all manufacturing ticularly in the m achinery, electrical equip- firms (see Table II). Large-scale expenditures 17 EC ON O M IC REVIEW for expansion are somewhat surprising in light of apparent lessening of pressures on capacity. In this connection, almost six out of every ten replies to the question concerning manufacturing capacity indicate that present facilities are TABLE III Capital Spending by Manufacturing Firms and Public Utilities Eight Northeastern Ohio Counties* (Fall 1968 Survey) Year-to-Year Percent Change "about adequate/' which is 1 967 (actual) to 19 6 8 (planned ) slightly more than in the spring. Only onefourth of the firms answering the question reported "less than requ ired " capacity (down from one-third in the spring survey). M A N U F A C T U R IN G . . . . D u rab le g o o d s .................. O rd n a n ce ....................... P rim ary metals NORTHEASTERN OHIO In general, the pattern of capital spending . . . . F a b rica te d metals . . 19 68 (planned ) to 19 6 9 (planned ) + 45% — 15% + 50 — 12 + 95 + 30 + 20 — 10 — 38 . + 86 M a c h i n e r y ....................... + 98 + 4 Electrical equipm ent — 5 — 1 . . Transportation equipm ent + 169 — 24 + 30 — 24 + 8 + 26 + 138 — 66 C h e m i c a l s ....................... + 52 — 23 Rubber and plastics . — 1 — 21 spending is expected to rise by 4 8 percent PU BLIC U T IL IT IE S .................. + 63 + in 1 9 6 8 and to drop back 12 percent in 1 9 6 9 T O T A L .................................... + 48% — 12% (see Table III). Public utilities included in the * A shtabu la, C u y a h o g a , G e a u g a , Lake, Lorain, M e d in a , P o rtag e, and Summit counties. by business firms in eight counties of north N o n d u rab le goods . . . eastern O hio3 is similar to the pattern for metropolitan Cleveland, which comprises the major portion of the eight-county area. Total group will raise capital investment in the eight counties by 6 3 percent in 1 9 6 8 and by Printing and publishing . . 2 Source: F e d e ra l R eserve Bank o f C levela n d another 2 percent in 1 9 6 9 . In line with the spending. As a result of the revisions, both Cleveland area pattern, manufacturing firms the planned increases for 1 9 6 8 and the expect a 45-percent increase in capital spend planned decreases for 1 9 6 9 are slightly larger ing in 1968, followed by a 15-percent cutback than had been indicated in the spring survey. in 1969. Despite the reduction, the level of Spending plans for most individual indus anticipated spending for manufacturing in tries in the eight-county area virtually dupli 19 6 9 will be about one-fourth above the level cate the Cleveland area pattern, including of actual spending in 1967. the outsize increases in spending in 1 9 6 8 by Revisions in spending plans between the the transportation equipment and printing spring and fall surveys occurred in an over industries followed by healthy, but less sizable, whelming majority of the returns. The revi reductions in 1 9 6 9 . The rubber and plastics sions were about evenly divided between industry is the major exception. The relatively increases and decreases and, as a result, had small spending cuts planned by major tire only a small effect on the total amount of plants in the Akron portion of the area more than offset a spending in crease planned by 3 Ashiabula, Cuyahoga, G eauga, Lake, Lorain, Medina, plastics manufacturers in the C leveland area; Porlage, and Summit counlies. and as a result, there will be two consecutive 18 DECEMBER 1 9 6 8 spending reductions by the rubber and plas creases in 1 9 6 9 . The results of the most tics industry in the eight-county area. recent survey indicate an upgrading of spend CINCINNATI ing plans reported in the spring survey. At Business firms in the seven-county C in cin that time, spending by manufacturing con nati metropolitan area expect to spend 3 5 cerns in the C incinnati area was expected to percent more for new plant and equipment go up by 2 7 percent in 1 9 6 8 and to decline in 1 9 6 8 than in 1 9 6 7 and to raise spending by 21 percent in 1 9 6 9 , while spending plans in 1 9 6 9 by an additional 7 percent. Spending of public utilities had shown increases for by manufacturing firms will in crease by 3 7 1 9 6 8 and 1 9 6 9 of 3 9 percent and 10 percent, percent in 1 9 6 8 , but is expected to d ecline respectively. by 3 percent in 1969 (leaving total planned The latest spending plans of area manu spending in 1 9 6 9 one-third larger than actual facturers, which feature a substantial rise in spending in 1 9 6 7 ). Public utilities will spend spending for 1 9 6 8 and only a slight reduction one-third more in 1 9 6 8 than in 1 9 6 7 and for 19 6 9 , reflect in large part the plans of the plan another 23-percent increase in 1 9 6 9 durable goods group. Total spending by dur (see Table IV). able goods m anufacturers in 1 9 6 8 will sur In comparison with the preceding year, pass the 1 9 6 7 total by a large margin (58 three out of every five surveyed manufactur percent) and is expected to rise further in ing firms expect increased spending in 1968, 1 9 6 9 because of several large expansion pro but only two out of every five anticipate in- jects in 1 9 6 8 and 19 6 9 in the m achine tool and other segments of the m achinery industry TABLE IV Capital Spending by Cincinnati Area Firms (Fall 1968 Survey) Year-to-Year Percent Change as well as in the transportation equipment industry4 in 1969. Spending will also rise in the nondurable goods group, where several sizable expansion projects are under way in 1 96 7 (actual) to 1968 (planned) 1968 (planned ) to 19 6 9 (planned ) + 37% — + 58 + 14 + 61 — 17 M a c h i n e r y ....................... + 205 — 32 Electrical equipm ent M A N U F A C T U R IN G . . . . D u rab le g o o d s .................. P rim ary and fa b ric a te d m etals* . . 3% the chem ical and food industries. Neverthe less, the margin of increase in 1 9 6 8 in the nondurable goods sector will be smaller than in the durable goods sector, and a decline in the level of spending is expected in 1969 (see Table IV). . . + 51 + 12 . . + 27 — 13 F o o d ................................ + 22 — 8 P a p e r ................................ — 25 + 1 12 Printing and publishing . + 40 — 62 facilities show a marked rise between 1 9 6 7 C h e m i c a l s ....................... + 31 — 5 and 1968, reflecting numerous construction PU BLIC U T IL IT IE S .................. + 32 + 23 T O T A L .................................... + 35% + N o nd u rab le goods . 7% The proportions of total spending ea r marked for structures and for expansion of programs already in progress. With the com pletion of those projects in 1969, spending * Com bined in o rd er to preclude disclosure o f individual establish ment d a ta . Source: F e d e ra l R eserve Bank o f C leveland 4 Not shown separately in the table in order to preclude disclosure of individual establishment data. 19 ECO N O M IC REVIEW TABLE V Capital Spending by Cincinnati Area Firms (Fall 1968 Survey) Percent Distribution of Total Spending by Type* (Between Structures and Equipment and Between Expansion and Replacement) metropolitan area participating in the latest survey expect to spend 17 percent more for new plant and equipment in 1 9 6 8 than in 1967, with manufacturing firms in the group expecting a 33-percent increase. Although a 5-percent reduction in spending is planned Structures! M A N U F A C T U R IN G D u rab le goods Expansion* for 1 9 6 9 by both the entire group and the 1967 1968 1969 1967 1968 1969 manufacturing sector (see Table VI), planned 38% 45% 37% 69% 74% 68% 17 46 46 56 66 66 spending for 1 9 6 9 would be one-fourth larger than actual spending in 1 9 6 7 by manufactur P rim ary and fa b ric a te d metals§ 11 43 24 30 44 11 ing industries and one-tenth larger than M ach in ery 17 52 30 66 75 77 spending by all participating firms. Three- 5 29 25 46 58 49 fifths of all participating firms expect to spend 45 44 30 74 79 70 Food 55 59 43 69 73 56 Paper 56 6 48 77 75 13 Capital investment by durable goods manu Electrical equipm ent more in 1 9 6 8 than in 1967, and two-fifths N o nd u rab le goods plan to spend more in 19 6 9 than in 1968. Printing and publishing 12 60 17 37 71 57 facturers will rise in both 1 9 6 8 and 1969. In Chemicals 49 34 24 89 87 87 contrast, nondurable goods manufacturers PU BLIC UTILITIES 29 24 24 68 73 77 expect to increase spending in 1 9 6 8 by a TOTAL 36% 42% 34% 68% 74% 70% * Based o n ly up o n returns in w hich these b re a k d o w n s substantial margin, but to reduce spending w e re in 1969 to a level below the 19 6 7 total. How f Spending fo r equipm ent equals 100 percent less the percent shown fo r structures. ever, some industries — fabricated metals and s u p p lie d . | Spending for rep lacem ent eq uals 100 percent less the percent shown for expansion. electrical equipment in the hard-goods group and printing in the soft-goods group — depart § Com bined in o rd er to preclude disclosure o f individual establish ment d a ta . from the pattern indicated for either group Source: F e d e ra l R eserve Bank o f C leveland as a whole. The fall survey appears to reflect a more for structures and for expansion is expected optimistic outlook, particularly in manufactur to resume earlier proportions (see Table V). ing, than did the spring 1 9 6 8 survey. At that Replies to the question on capacity utiliza time, capital spending by all participating tion indicate that there was virtually no firms was expected to rise by only 6 percent change between the spring and fall surveys. in 1 9 6 8 and to drop by 2 0 percent in 1969. Only about one in every five manufacturing Similarly, a rise of only 5 percent in 1968, firms responding to the question report in coupled with a reduction of 12 percent in sufficient capacity, while three out of every 1969, was expected by participating manu five consider facilities adequate. facturers. PITTSBURGH of total spending in 1 9 6 8 is designated for Although more than $ 3 out of every $ 1 0 Business firms in the four-county Pittsburgh 20 new structures, that proportion is expected DECEMBER 1 9 6 8 TABLE VI Capital Spending by Pittsburgh Area Firms (Fall 1968 Survey) TABLE VII Capital Spending by Pittsburgh Area Firms (Fall 1968 Survey) Percent Distribution of Total Spending by Type* Year-to-Year Percent Change (Between Structures and Equipment and Between 1 96 7 (actual) to 1968 (planned) 1968 (planned ) to 1 9 6 9 (planned) Expansion and Replacement) Structures! M A N U F A C T U R IN G . . . . D u rab le g o o d s .................. Stone, cla y, and g lass. P rim ary metals . . . . . Fa b rica te d metals . Electrical equipm ent and m achinery*. + 33% — + 28 + 10 + 153 + 22 + 34 + 9 D u rab le goods . — 37 + 51 Stone, cla y, and glass . . + 54 — Prim ary metals . . + 4 54 — 54 + 168 — 76 Printing and publishing — +41 . M A N U F A C T U R IN G . F o o d ................................ N o nd u rab le goods . Chemicals and petroleum *....................... 58 Expansion^ 5% + 66 — 59 T R A N S P O R T A T IO N . . . . — 23 — 43 PU BLIC U T IL IT IE S .................. + 25 + 33 RETAIL T R A D E ....................... + 30 — 65 T O T A L .................................... + 17% — 5% * Com bined in o rd er to preclude disclosure o f individual establish ment d a ta . struction projects — in primary metals, e le c 1969 1967 1968 1969 11% 63% 71% 60% 22 24 58 73 61 9 1 20 -0- 10 32 9 25 6 71 83 70 9 11 23 21 24 22 33 22 11 46 62 57 67 57 2 8 Printing and publishing 35 10 Chemicals and petroleum§ 84 7 Fa b rica ted metals Electrical equipm ent and m achinery! N o ndu rab le goods Food 27 81 67 56 -0- 56 59 58 18 61 -0- 27 70 36 88 72 55 14 42 2 22 -0- PUBLIC UTILITIES 35 27 23 57 52 55 RETAIL TRADE 56 72 47 67 76 18 28% 32% 19% 48% 62% 52% TOTAL to decline sharply in 1969, as sizable con 1968 31% 23 T R A N S PO R T A T IO N Sources: University o f Pittsburgh and F e d e ra l R eserve Bank o f C levelan d 1967 31% * Based only upon returns in which these b re ak d o w n s w ere s u p p lie d . trical equipment, chem icals, and stone, clay, t Spending for equipm ent eq uals 100 percent less the percent shown fo r structures. and glass — near completion. In addition, + Spending fo r rep la ce m e n t eq uals 100 percent less the percent shown for expansion. fewer new construction projects appear to be scheduled (see Table VII). Following a marked rise in 1968, the proportion of spending ear § Com bined in o rd er to preclude disclosure o f individual establish ment d a ta . Sources: University o f Pittsburgh and C levelan d F e d e ra l R eserve Bank of marked for expansion of facilities is also expected to reced e in 1969, in line with completion of some major construction pro manufacturers responding to the question jects after 1968. consider facilities "ad eq u ate" (as was the Replies to the question on capacity utiliza case in the spring survey), the current pro tion suggest a slight tightening of pressure on portion of responses reporting capacity between the spring and fall 1 9 6 8 adequate" facilities — one in four — is nearly surveys. Although about two of every three twice as large as that indicated in the spring. ''less than 21 ANNUAL INDEX TO ECONOMIC REVIEW— 1968 MONTH JAN UAR Y A R T IC L E T IT LE Employment Patterns in the Fourth District, 1965-1967 Employment Performances of Cleveland, Pittsburgh, and Cincinnati, 1950-1966 Part II: Comparison with 13 Cities FEBRUARY An Economic Profile of Canton Savings Flows and Mortgage Lending, 1966-1967 MARCH The New Federal Budget Employment Performances of Cleveland, Pittsburgh, and Cincinnati, 1950-1966 Part III: Updating and Conclusions APRIL Recent Trends in Construction Activity An Economic Profile of Wheeling MAY Federal Reserve Open Market Operations: Matched Sale-Purchases An Economic Profile of Youngstown-Warren JUNE Preconditions of Social and Economic Progress United States Trade in Steel Capital Spending in Major Areas of the Fourth District JULY Some Aspects of International Monetary Reserves Freight Transportation and Industrial Activity in the United States AUGUST An Economic Evaluation of the Stock Market Recent Monetary Developments SEPTEMBER Growth and Composition of Government Spending, 1958-1967 Regional Patterns of Industrial Activity and Freight Transportation in the United States OCTOBER Corporate Merger Activity in the Fourth Federal Reserve District, 1950-1967 “ Economic Profile of Selected Standard Metropolitan Statistical Areas in the Fourth District NOVEMBER A Note on Private Pension Plans Freight Transportation and Industrial Activity in the Fourth District DECEMBER Digitized for 2 2FRASER A Note on Economic Developments in Italy Capital Spending in Major Areas of the Fourth District DECEMBER 1 9 6 8 SPECIAL ANNOUNCEMENT A limited number of reprints are available of the article "H ow Does M onetary Policy Affect the Econom y?" which appeared as a Staff Economic Study in the October 1968 F e d e ra l R eserve Bu lletin. The article is based on a paper presented by Maurice Mann, Vice President and General Economist, Federal Reserve Bank of Cleveland, at the Conference of University Professors, sponsored by the American Bankers Association and held at Ditchley Park, England, September 10-13, 1968. Requests for copies should be directed to the Research Department, Federal Reserve Bank of Cleveland, P. O. Box 6387, Cleveland, Ohio 44101. 23 Fourth Federal Reserve District
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