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ECONOMIC REVIEW

Additional copies of the ECONOMIC REVIEW may
be obtained from the Research Department, Federal
Reserve Bank of Cleveland, P. 0 . Box 6387, Cleve
land, Ohio 44101. Permission is granted to reproduce
any material in this publication providing credit is
given.

THE ST. LA WR ENC E
S E A W A Y A N D THE
FOURTH DISTRICT
The opening of the St. Lawrence Seaway in 1959
provided Ohio and other midwestern states w ith direct
access to ocean shipping. Although use of the Seaway has
grown rapidly since its opening, competition from other
modes of transportation and from other ports may lim it
further expansion. The Seaway has contributed to eco
nomic growth in the Fourth District by providing raw
materials as well as the least costly movement of finished

IN TH IS ISSUE

goods to and from foreign markets. Future growth of the
Seaway is, therefore, directly related to continued eco

The St. Lawrence Seaway
and the Fourth District . 3

nomic expansion of the area it serves.
This article discusses the historical context of the
development of the St. Lawrence Seaway and the types of

Capital Spending in Major
Metropolitan Areas of
the Fourth District . . . .17

cargo shipped through the Seaway and reviews the Fourth
District ports on the Seaway and the various cargoes
handled by each port. Competition from other modes of
transportation, competition from other ports, and problems
experienced w ith the Seaway are also examined.

ECONOMIC REVIEW

ST. LAWRENCE SEAWAY

wholly owns the Corporation, which is under an

For the past 300 years attempts have been

administrator appointed by the President and

made to develop the Great Lakes and the St.

approved by the Senate. The United States share

Lawrence River into a viable transportation system

of the St. Lawrence Seaway project was financed

for intra- and international commerce. As early as

by the sale of $135 m illion in interest-bearing

the seventeenth century, the French tried to

bonds to the U. S. Treasury.

construct canals around the rapids near Montreal.

A jo in t agreement was reached between the two

The first canal on the St. Lawrence River was built

nations on tolls and navigation rules. A ll tolls are

in the mid-eighteenth century to enable flat-

divided, w ith Canada receiving 71 percent and the

bottomed boats to bypass the Lachine Rapids near

United States 29 percent of all receipts. This

Montreal.

1808, Secretary of the Treasury

division was based on the share of costs incurred

Albert Gallatin suggested the construction of a

by the two government corporations; Canada

canal that would connect Lake Ontario and Lake

receives the largest portion because most of the

Erie. However, it was not until 1825 that the Erie

Seaway locks are in Canada.

Canal was completed to provide access to the East

Description. The St. Lawrence Seaway extends

Coast. The Erie Canal, which ran between Buffalo

from Montreal on the St. Lawrence River through

and the Hudson River, allowed barge traffic to

the Great Lakes to Duluth, Minnesota, at the

move to New York City from as far west as Toledo

western end of Lake Superior (see Map 1). The

and Detroit. The Welland Canal, which was dedi

1,000 miles from the Atlantic Ocean to Montreal

cated in 1829, was built to bypass Niagara Falls; it

are open water maintained

the Canadian

was extended four years later to connect Lake

government at a navigable depth of 35 feet. Over

Ontario and

Lake Erie. Although the Welland

this distance, there is a gradual rise to 20 feet

Canal was originally feared as competition to the

above sea level at Montreal. Between Montreal and

Erie Canal, it served as a complementary means of

Lake Ontario, the Seaway consists of several

transportation, and both canals prospered.

man-made lakes and seven locks that lift an

The present St. Lawrence Seaway is an exten

incoming vessel an additional 225 feet above sea

sion o f and improvement on these early attempts

level (see Map 2). Ships w ith maximum dimensions

to provide a navigable passage between the Great

of 715 feet in length, 72 feet in w idth, and 27 feet

Lakes and the ocean. Plans for the present Seaway

in depth can pass through these locks.

were introduced in 1951, when Canada announced

Crossing Lake Ontario presents few problems

that it would construct a seaway by itself if the

because many rock shoals were removed when the

United States would not join in an international

Seaway was built and there are no rapids. The

effort. A year later, the Canadian Parliament

Welland Canal between Lake Ontario and Lake

formed the St. Lawrence Seaway A uthority. In

Erie consists of eight locks that lift a ship more

1954, after several years of discussion, the United

than 325 feet from Lake Ontario to Lake Erie.

States Congress approved the creation of the Saint

The Welland Canal is currently being “ tw inned" to

Lawrence Seaway Development Corporation to

permit ships to pass in both directions in the locks.

work jo in tly w ith the Canadian A uthority to plan

This improvement is expected to be completed in

the

1972 and w ill substantially reduce the time neces

Seaway.

The

United

States Government

JUNE 1970

GREAT LAKES-ST. LAWRENCE SEAWAY

CANADA

UNITED STATES
Chicago

Source

Scarf Lawrence Seaway Development Corporation

sary to move ships through this section of the

4. To liquidate all Seaway debt through
revenue from to lls.1

Seaway. The final locks in the Seaway are the
Sault Ste. Marie (Soo) Locks, which lift ships the
remaining 23.5 feet from Lake Huron to Lake

As noted before the subcommittee, the goals

Superior. The Soo Locks are the largest on the

were not fu lly realized. The United States mid

Seaway and can lift boats 1,000 feet long and 87.5

continent economy is no more unified than it was

feet wide. Nearly all Seaway ports and channels

when the Seaway opened, nor has it been particu

are now dredged to 27 feet, the standard depth

larly stimulated by the increased opportunities for

throughout the waterway.

direct

Initial

Goals.

economist w ith

the

St.

international

trade.

addition,

the

Seaway's debt to the U. S. Treasury has increased.

Lawrence Seaway A uthority testified before a

Although the Saint

Senate Subcommittee in 1964 that the Seaway

ation's share of Seaway revenues has been su ffi

authority had established four major goals before

cient to cover the operating expenses o f the

the Seaway opened. These goals were:

Lawrence Seaway Corpor

Seaway, it has been unable to repay the Treasury

1. To stimulate growth in the "m idcontinent” and national economies.

either the interest or the principal of the money
borrowed fo r construction.

2. To facilitate the unification of the
"m id co n tin e n t”

economy

through

3. To aid in future jo in t programs with
Canada

for

development of

Great

Lakes water resources and increased
border reciprocity.

1U. S. Congress, Senate, Subcom m itte o f the Com m ittee
on Commerce. Hearings, in Connection w ith a S tudy o f

direct foreign trade.

Transportation on the Great Lakes—
St. Lawrence Seaway,
88th Cong., 2nd SeSs., 1964, pp. 177-8.
The rest o f this article w ill discuss on ly the United States
portion o f the St. Lawrence Seaway.

ECONOMIC REVIEW

M ap

PROFILE VIEW of GREAT LAKES and ST. LAWRENCE SEAWAY
SOO'LOCKS

ST. CLAIR RIVER

INTERNATIONAL
RAPIDS SECTION

WELLAND CANAL
THOUSAND ISLANDS
SECTION

SOULANGES
SECTION
LACHINE
SECTION

LAKE SUPERIOR

LAKE
ST. LAWRENCE

LAKE ST. LOUIS

LAKE ST. FRANCIS
LAKE HURON and LAKE MICHIGAN

LAKE ONTARIO

TIDE WATER SECTION

Source: Saint Lawrence Seaway Development Corporation

The initial traffic goals of the Seaway Corpor

carried out w ithin the Great Lakes and does not

ation were more realistic than some of its other

reach the St. Lawrence River. For example, iron

goals, although traffic in the first several seasons

ore is shipped between Minnesota and Cleveland,

was far lower than originally anticipated. The

and coal goes from Toledo to power plants in

original estimate of Seaway traffic in 1968 was for

Michigan and Canada. Moreover, a large share of

50 m illion cargo tons.3 The Corporation reported

bulk shipping is done on specialized boats that

that,

m illion cargo tons passed

cannot leave the Great Lakes because they are not

through the Montreal-Lake Ontario section; with

1968,

ocean w orthy or because they are too large to pass

the addition of the Welland Canal, Seaway traffic

through the Welland Canal.

amounted to 66.4 m illion cargo tons in 1968.4

Although it is sometimes d iffic u lt to differen

Types of Shipping. Two types of shipping are

tiate general cargo from bulk shipping, general

transferred through the St. Lawrence Seaway:

cargo usually includes all items that can be lifted

bulk and general cargo. The most important in

into ships as a unit or in some type of container,

terms of tonnage is bulk shipping, which includes

such as a box or barrel. General cargo includes

coal, iron ore, and farm products, particularly

such diversified items as automobiles and auto

grain. However, a large amount of bulk shipping is

mobile parts, glassware, and iron and steel prod

ucts.

U. S. Congress, op. cit., p. 178.

(Iron

and steel

products are the most

important general cargo items shipped through
Fourth District ports.) The value per ton is usually

The

St.

Lawrence

Lawrence Seaway A u th o rity and the Saint
Seaway

Development

Corporation,

Report o f the St. Lawrence Seaway,
Queen's Printer, 1969), p. 12, p. 2.

1968,

T ra ffic
(Ottawa,

much

higher on

general cargo than on bulk

shipping, and a major share of general cargo tends
to be destined for international ports.

JUNE 1970
TABLE I

FOURTH DISTR IC T PORTS
There are nine Great Lakes ports in the Fourth
Federal

Reserve District: Ashtabula, Cleveland,

Conneaut,

Fairport

Harbor,

Huron,

Tonnage Through the Port of Cleveland
1965-1969

Lorain,

Tons

Sandusky, and Toledo, Ohio, and Erie, Pennsyl
vania (see Map 1). Cleveland and Toledo are the
largest ports in terms of tonnage, while Erie,
Fairport Harbor, and Huron are the smallest.
Cleveland. The Port of Cleveland is primarily a
bulk cargo port, although in recent years the
proportion of general cargo has increased. Iron

Total
21,960,213
24,020,820
20,685,918
21 ,700,000e
21,450,000e

1965
1966
1967
1968
1969

Overseas

Canadian

536,484
581,783
631,596
1,034,234
984,353

4,300,517
4,951,215
4,459,281
n.a.
n.a.

e Estimated,
n.a. Not available.

ore, stone, limestone, and sand and gravel are the

Sources: U. S. A rm y, Corps o f Engineers and ClevelandCuyahoga County Port A u th o rity

major bulk commodities shipped through the Port

are leased to operating firms. The facilities at the

of Cleveland. All of these bulk goods, except

individual docks vary; they currently include the

stone, are imported from other ports on the Great

largest crane on the Great Lakes (with a capacity

Lakes. Iron ore is the most important commodity.

to lift up to 200 tons) as well as more than a

The docks fo r bulk cargo extend down the

dozen

smaller cranes.

In addition, there are

Cuyahoga River, and most are privately owned by

approximately

the industries that use these materials. The major

storage and 426,500 square feet of closed storage

1,725,000 square feet of open

hazard in the Port of Cleveland for ships moving

facilities. The Port A u th ority plans to spend more

bulk goods is the Cuyahoga River, which is only

than $668,000 during the 1970 season to increase

21 feet deep and has many sharp bends that

the closed storage facilities at one dock. A t the

prohibit the passage of ships more than 600 feet

same time, the Port A u th ority is attempting to

long. A planned bridge widening w ill permit ships

acquire additional land to increase dock space and

625 feet long to pass; however, new ore boats

storage facilities to expand the capacity for general

under construction that are 800 to 1,000 feet long

cargo shipping. Although container ships can be

w ill not be able to use the Cuyahoga River even

handled at the Port of Cleveland, only a few

with this improvement. If the steel companies

container ships are operating out o f Cleveland at

anticipate using these longer ore boats, it would

present.

seem that some method of unloading the ore at

Although total tonnage through the Port of

the lakefront and transporting it to the mills will

Cleveland has shown little change since 1965,

have to be devised. (A conveyor system has been

overseas tonnage has nearly doubled (see Table I).

suggested.) The alternate solution of straightening

The demand fo r bulk cargo, which accounts for

the Cuyahoga River appears to be virtually impos

most of the tonnage in Cleveland, largely depends

sible.

on the demand for the products that use these

Cleveland's general cargo docks are on the

bulk

commodities as raw materials. However,

lakefront east of the Cuyahoga River. Nearly all of

future growth of bulk cargo shipments may not be

the docks fo r general cargo are owned by the

as rapid as the growth in production, particularly

Cleveland-Cuyahoga County Port A uthority and

steel production. Because of a new process that

ECONOMIC REVIEW
removes much of the extraneous materials from

these products in western

iron ore at the mines, the ore that is shipped is of a

leading exports through the Port of Cleveland were

higher grade and more steel can be produced per

all bulk commodities: crude materials (primarily

ton of ore.

limestone); coal, coke, and briquets; stone, sand,

Europe. The other

The Port of Cleveland has actively sought new

and gravel; and petroleum and byproducts. In

markets for general cargo in the past few years,

previous years, shipments of bulk commodities to

and as a result, most of the recent expansion in the

Canada accounted for most of the exports from

volume of shipping at Cleveland has been due to

Cleveland. In 1969, however, shipments of general

general cargo. The growth in general cargo traffic

cargo to western Europe surpassed bulk cargo

continued through 1968 but declined in 1969,

shipments to Canada in both dollar value and

reflecting the overall decline in Seaway traffic in

tonnage.
Toledo. The Port of Toledo is located on the

1969.
As shown in Table II, the major im port into the

Maumee River and has a channel depth of 28 feet,

Port of Cleveland in 1969 was iron ore from the

allowing the largest lake boats to be docked. The

Quebec-Labrador range in Canada; an additional

Port of Toledo is the largest bulk cargo port on

small amount of ore came from Liberia and Chile.

Lake Erie. The major bulk commodities that are

(However, imported ore accounts for only a small

moved through this port include coal, iron ore,

portion of the iron ore coming through the Port of

agricultural products, and petroleum products,

Cleveland; most ore is shipped from the Mesabi

while the general cargoes include iron and steel

range in Minnesota. Data are not shown in Table II.)

products and automobiles.

The volume of iron and steel products imported

The bulk docks are privately owned and include

during 1969 was 476,000 tons, compared with

specialized docks fo r coal, petroleum, and grain.

855,000 tons in 1968. The decline in imports of

The coal docks have automatic loaders that can fill

iron and steel products at the Port of Cleveland

lake boats at the rate of 6,000 tons an hour. Seven

reflects the overall decline in imports of such

oil companies maintain refineries at the Port of

products to the United States. Iron and steel

Toledo, where crude oil that is piped in from

products accounted fo r 10.3 percent of imports at

Texas and

the

Oklahoma oilfields is refined into

groups

gasoline and shipped by tanker to other Great

accounted for nearly 97 percent of all imports

Lakes ports. Four large grain elevators at the Port,

from foreign countries, although more than 100

as well

different commodities were imported through

switching distance, have a capacity of 37.5 m illion

Cleveland.

bushels of grain.

Port

1969.

Six

commodity

Exports through Cleveland to foreign countries

back-up elevators w ithin

railroad

Nearly all of the general cargo docks are owned

increased by more than 200 percent between 1968

by the Toledo-Lucas County Port A u th ority and

and 1969, w ith most of the growth coming in iron

are leased to private stevedoring companies. Stor

and steel products.

age space, which has been increased by 25 percent

Exports of iron and steel

products rose from 6,000 tons in 1968 to 219,000

in the past five years, consists of 4.3 m illion square

tons in 1969. This sharp and sudden increase was
caused by a substantial rise in the demand for

feet of open storage space (2.5 times more than in

Cleveland) and 270,000 square feet of closed

TABLE II
Overseas and Canadian Waterborne Traffic
Port of Cleveland
1969*
Im ports

Exports

Tons

Percent
o f Total

Iron ore
Stone, sand, and gravel
Iron and steel plates and sheets
Iron and steel bars, rods, angles, and shapes
Crude materials, n o t elsewhere classified
Paper, paperboard, and w ood pulp
A ll other com m odities

2,876,080
1,003,217
285,368
152,672
74,679
56,348
148,398

62.6%
21.8
6.2
3.3
1.6
1.2
3.3

TOTAL

4,596,762

100.0%

Tons

Percent
o f Total

Source: U. S. Departm ent o f Commerce, Bureau o f the Census, Foreign Trade
Division

144,726
136,103
58,237
30,131
13,365
11,762
9,796
8,988
47,918

31.4%
29.5
12.6
6.5
2.9
2.6
2.1
1.9
10.5

TOTAL
* First 11 months.

Iron and steel prim ary form s
Crude materials, not elsewhere classified
Iron and steel plates and sheets
Coal, coke, and briquets
Iron and steel hoop and strip
Stone, sand, and gravel
Petroleum and byproducts
Anim al oils
A ll other com m odities

461,026

100.0%

ECONOMIC REVIEW
TABLE III

recipient of all foreign shipments from Toledo,

Tonnage Through the Port of Toledo
1965-1969

accounting for 85 percent of exports. Coal shipped
to Canada dominates the export market. The

Tons

Toledo export picture is, therefore, uncertain

Total
1965
1966
1967
1968p
1969p

Overseas

Canadian

45,016,077
43,932,128
38,830,236
34,068,247
30,305,604

1,307,085
1,424,703
1,212,996
1,480,432
1,184,265

6,998,961
6,946,496
6,050,293
n.a.
n.a.

p Prelim inary,
n.a. Not available.

because of declining coal shipments. Coal, agricul
tural products, and petroleum products account
for 98.4 percent of the commodities exported
from Toledo. Most of the important agricultural
products, including soybeans, corn, and wheat
from the Ohio and Indiana farm belt, are shipped
to Canada. In addition to the decline in shipments

Sources: U. S. A rm y, Corps o f Engineers and ToledoLucas County Port A u th o rity

of coal, shipments of most agricultural products

storage space, as well as 250,000 square feet of

and petroleum products declined between 1968

closed storage in the Foreign Trade Zone. Toledo

and 1969.

is the only port on the Great Lakes w ith a Foreign

Imports from overseas and Canada to the Port

Trade Zone where commodities are held duty free

of Toledo are more diversified than exports. Iron

until they are removed or reexported to another

ore—
the

destination. Although Toledo has only a limited

Toledo

primary
to

im port—is

shipped

mills

Middletown

steel

through
and

number of cranes for general cargo use, the large

Portsmouth, Ohio, and Ashland, Kentucky. Iron

cranes (with capacity to lift 110 tons and 72 1/2

and steel products accounted fo r 189,000 tons, or

tons) are very mobile. No increases in storage

25 percent of foreign imports in 1969. Manu

facilities are planned in the immediate future.

factured fertilizers and crude materials (primarily

Total tonnage at the Port of Toledo declined by

potash) were imported for use as fertilizer and

one-third between 1965 and 1969 (see Table III).

complement the export of agricultural products.

Most of the decline is the result of reduced coal

One

shipments, particularly to other United States

through Toledo is foreign automobiles—more than

other

im portant

comm odity

imported

ports. In addition, the Canadian market for coal,

40,000 vehicles were received in 1969.
In 1969, Canada shipped 62.6 percent of the

which is smaller than the United States market,
declined. Total coal exported from Toledo to both

tonnage

United States and Canadian ports dropped from

Toledo, but only 9.0 percent of the dollar value.

volume

imports

arriving through

35 m illion tons in 1965 to approximately 21

In contrast, West Germany accounted fo r only 8.8

million tons in 1969. This decline in coal ship

percent of the tonnage volume of imports to

ments was due to the increased use of unit trains

Toledo, but 54.7 percent o f the dollar value. This

by the railroads that deliver coal directly to the

apparent disparity can be explained by the types

final

destination

rail

instead of by join t

rail-water movement.

shipments

involved;

Canada

shipped

bulk

cargoes to Toledo, and West Germany shipped

As shown in Table IV, overseas and Canadian

general cargoes, prim arily automobiles. A pproxi

exports from Toledo were of much greater im por

mately two-thirds of the iron and steel products

tance than imports in 1969. Canada is the major

imported in 1969 were from Japan.

TABLE IV
Overseas and Canadian Waterborne Traffic
Port of Toledo
1969*
Exports

Im ports

Tons

Percent
o f Total

Iron ore
Iron and steel plates and sheets
Iron and steel bars, rods, angles, and shapes
Stone, sand, and gravel
M anufactured fe rtilizers
Road m oto r vehicles and vehicle parts
Crude materials, n o t elsewhere classified
Paper, paperboard, and wood pulp
Pig iron and fe rro alloys
A ll other com m odities

330,703
84,793
63,651
61,473
39,822
39,082
25,314
24,905
23,589
75,699

43.0%
11.0
8.3
8.0
5.2
5.1
3.3
3.2
3.1
9.8

TOTAL

769,031

100.0%

* First 11 m onths.
Source: U. S. Departm ent o f Commerce, Bureau o f the Census, Foreign Trade
Division

Tons

Percent
o f Total

Coal, coke, and briquets
Oilseeds, oil nuts, and oil kernels
Unm illed corn
Petroleum products
Unm illed wheat
A ll other com m odities

3,052,914
1,150,702
866,944
162,612
69,191
59,064

56.9%
21.5
16.2
3.0
1.3
1.1

TOTAL

5,361,427

100.0%

ECONOMIC REVIEW
Other Ports. Other Great Lakes ports in the

export of iron and steel primary forms and iron

Fourth District are Ashtabula, Conneaut, Fairport

and steel scrap. Far more important to the total

Harbor, Huron, Lorain, and Sandusky, Ohio, and

tonnage that moves through the port, however, are

Erie, Pennsylvania. Although several of these ports

shipments of limestone and petroleum products

have limited amounts of general cargo shipping,

from other United States ports on the Great Lakes

the most important commodities are iron ore,

and imports of nonmetallic minerals from Lake

coal, sand and gravel, and limestone. Generally,

ports in the United States and Canada. Shipping at

these ports bring iron ore, sand and gravel, and

Erie rose slightly in 1968, after declining for ten

limestone into Lake Erie from other Great Lakes

years. Excluding local tonnage, traffic in 1968

ports and send coal back to Canadian and United

amounted to 37 percent of the 1963 level and

States lake ports.

only 20 percent of the 1958 level. Most of this

Ashtabula is one of two of these smaller ports

decline occurred because of the loss of coal

that has some overseas traffic. Although the

shipments to other ports—2.4 m illion tons were

overseas traffic is very small in relation to inter

moved through

lake traffic (including Canadian), the commodities

520.000 tons in 1968.

Erie in

1958, in contrast to

shipped, particularly crude and synthetic rubber

Traffic at Fairport Harbor had also dropped in

and manganese and nonferrous ores, are very

recent years, as shipments of coal and sand and

important to economic activity in the Fourth

gravel

District. The major import through Ashtabula is

reversed in 1968. More than 21,000 tons of coal

iron

were

were exported in 1966, but no coal was shipped in

imported in 1968 (latest year fo r which complete

1967 or 1968. Sand, gravel, and crushed rock

data are available). In return, 1.6 m illion tons of

cargoes rose from

coal were shipped from Ashtabula, a 25-percent

341.000 tons in 1968.

increase over the volume shipped in 1967. Other

mained high in 1968 (1.67 m illion tons).

ore—more

than

5.6

m illion

tons

declined.

This

decline

was,

however,

232,000 tons in 1967 to
Limestone imports re

important commodities moving through Ashtabula

In Huron, iron ore imports totaled 2.18 m illion

include limestone and sand and gravel as well as a

tons in 1968, an increase of more than 50 percent

small amount of iron and steel products.

over the volume in 1967. Shipments of limestone

Conneaut, which is the third

largest Great

into

Huron also increased by more than 50

Lakes port in the Fourth District in terms of

percent, rising from 227,000 tons in 1967 to

tonnage, deals essentially in three commodities:

358.000 tons in 1968. Huron had no exports.

iron ore, coal, and limestone.

In 1968, 6.99

The major comm odity imported at Lorain is

m illion tons of iron ore and 827,000 tons of

iron ore (4.03 m illion tons in 1968, up from 3.00

limestone were imported, up from 6.88 m illion

m illion tons in 1967), and the major commodity

and 690,000 tons, respectively, in 1967. A t the

exported is coal. Following several years of de

same

were

clines in coal shipments, new storage facilities were

exported, up from 6.44 m illion tons the previous

built and coal shipments rose from 1.39 m illion

year. Nearly all of the coal was shipped to Canada.

tons in 1967 to 5.15 m illion tons in 1968. Lorain

Erie is the second of the smaller District ports

also imported small amounts of limestone and

time,

6.54

m illion

tons o f coal

that engages in some overseas traffic, prim arily the
12

sand and gravel.

JUNE 1970
Sandusky exports coal to ports in Canada and

smaller than optimum size. This problem has been

the United States and imports some sand and

temporarily met by adding radar equipment to aid

gravel. Coal exports rose from 5.70 m illion tons in

in docking these boats and by cutting the boats

1967 to 6.83 m illion tons in 1968. Only 11,000

apart to add an extra section in the middle.

tons of sand and gravel were received in 1968,
down from 82,000 tons in 1967.

New boats are expensive to build, and current
common carrier shipping rates do not include an

Five of these seven small ports suffered declines

allowance fo r depreciation. One alternative is, of

in traffic between 1966 and 1967, but all had an

course, to raise the rates to cover depreciation

increase

1968.

costs. Such an action could, however, have an

Increased coal traffic contributed to the gains in

traffic

between

1967 and

adverse effect on the volume of traffic relative to

traffic in 1968. Most of these small ports installed

competing modes of transportation.

special loading devices and increased their storage

Two new ore boats now under construction w ill

space. As a result, the railroads could bring coal in

be 800 feet and 1,000 feet long. These boats will

throughout the winter for shipment during the

be able to pass through the Soo locks, but w ill be

summer to Canada. Surprisingly, the unit train has

too large to go through the Welland Canal. The

not been detrimental to these ports, because unit

size of these new boats w ill not be a problem,

trains can also ship coal to the ports. Toledo is the

however, because ore is usually shipped between

only port on Lake Erie that is losing large amounts

the mines in Lake Superior and the steel mills in

of coal

These smaller ports are very

cities located on Lake Michigan and Lake Erie.

dependent upon coal traffic, and any shift in the

Both of these boats are owned by steel companies.

traffic.

method of shipping would have an important

The general cargo fleet is much larger and more

impact on the volume of traffic through these

diversified than the bulk fleet because it is not

ports.

limited to the Seaway. These ocean-going ships use
many ports around the world, only occasionally

FACTORS INFLUENCING THE SEAWAY

utilizing the Seaway. Any generalizations about

Four factors have a major influence on traffic

the age or condition of the ships are, therefore,

on the St. Lawrence Seaway: (1) the age of the

impossible, because too many different ships of

boats that are used; (2) competing forms of

too many countries are included.

transportation; (3) the competition offered by
other ports; and (4) a new form of ocean shipping

Competing Forms of Transportation. Because

(containers) that the Seaway ports have not been

waterborne commerce is generally concentrated in

able to utilize effectively. A brief look at these

high bulk, low value commodities, the primary

factors may

competitive mode o f transportation is the rail

help to

clarify some unresolved

questions.

roads, which also carry such commodities. The use
of unit coal trains has increased rapidly in recent

Equipment. Most of the bulk cargo boats in the

years. In addition, larger coal cars and longer trains

United States fleet that operate on the Great

allow

Lakes are very old and do not have the most

directly from the mine to the final user (or to a

modern

port) in a short period of time at rates that are

equipment.

Moreover,

the

boats are

large quantities of coal to be shipped

ECONOMIC REVIEW

Because

the bulk and general cargo originating in the region

shippers have no reason to prefer a specific port or

supporting the Seaway could be shipped at the

mode of transportation and because the railroads

lowest cost via the Seaway. There are, however,

competitive w ith jo in t rail-water costs.

usually provide the coal loading facilities at the

other factors that must be considered, such as the

docks, the railroads generally determine which

pricing practices of other competing forms of

port to use in jo in t rail-water movement of coal.

transportation. Common carrier rates are regu

Like coal, grain is often hauled several hundred

lated, and it is possible that other common carriers

miles to a lake port for shipment. Most grain

may be able to charge lower rates to other ports

shipped through the Great Lakes ports is exported

because of certain economies of scale.

to foreign ports. A large amount of the grain for

The second influence on the competitive posi

domestic users is already being moved by railroads,

tion of the Seaway is the length of the shipping

and the use of unit trains to move grain to East

season on the St. Lawrence Seaway. The shipping

Coast and Gulf ports is increasing.

season extends roughly from the first of April

The other major bulk commodities are primar
ily shipped by water w ith little jo in t rail-water

until

the middle of December, depending on

weather conditions. Therefore, customers who

movement. A t present, it does not appear that the

normally use the Seaway must either anticipate

use of unit trains for other bulk commodities w ill

their off-season needs and stockpile goods during

have a substantial effect on Seaway traffic. Toledo

the season or turn to alternative modes o f trans

and Chicago would be affected most in terms of

portation during the winter. The short shipping

tonnage if the use of unit coal and grain trains

season discourages potential shippers who would

were

However, the

prefer to use one means of transportation year-

smaller, less diversified ports in the Fourth District

round. Although there have been proposals to

could feel the relative loss more sharply, particu-

extend the season by two to six weeks through the

larly w ith respect to coal shipments.

increased use of icebreakers, the St. Lawrence

continue

increase.

Other Ports. There are two major influences on
the competitive position of the Seaway relative to

Seaway A u th ority has not indicated whether such
a plan w ill take effect in the near future.

other major ports in the United States. In view of

Another factor that is discouraging to Seaway

the distances involved, it would seem that most of

shippers, particularly general cargo shippers, is the
irregularity of ship arrivals. A ship w ill not stop at
a lake port unless there is sufficient cargo to

more com plete discussion o f regulatory decisions and
regulations on rate structure is beyond the scope o f this
article.

warrant the expense; therefore, general cargo
destined fo r the Seaway may have to wait several
weeks at the dock before it is loaded on a ship

Prelim inary

data indicate th a t coal shipped o u t o f

bound for the correct destination. By sending

24 m illio n tons in 1968 to 21

cargo to an East Coast or Gulf port w ith ships that

m illio n tons in 1969; in Lorain, tonnage dropped from

stop regularly, a shipper is more assured of quicker

5.1 m illio n tons in 1968 to 3.3 m illio n tons in 1969; but

overseas delivery. A t the same time, ocean ships

Toledo dropped fro m

in Ashtabula, tonnage rose fro m 1.6 m illio n tons to 3.4
m illio n tons in 1969. Other coal shipping ports showed
little change.

are always available because these ports are open
year-round.

JUNE 1970
Container Competition. One of the most impor
tant trends in transportation in the past decade has

FUTURE OF THE SEAWAY
Although the St. Lawrence Seaway has become

use o f container shipping.

an important and integral part of the transpor

Containers sim plify handling procedures at the

tation picture in the United States, it has not lived

been the growing

initial loading point, at the docks, and at the final

up to the glowing forecasts of a "fo u rth coast"

destination by requiring only one standard size

that were made at the opening of the Seaway in

container to be loaded instead of many smaller

1959.

packages. General cargo has historically been more

between the United States and Canada about the

Discussions

are

currently

under

way

d iffic u lt to load than bulk cargo, because it is

possibility of increasing Seaway tolls in the 1971

packaged in many different sizes and shapes.

season. The increased tolls would be used in part

International general cargo shipping is becoming

to repay the indebtedness of the Seaway Develop

increasingly containerized, as specialized ships are

ment Corporation to the U. S. Treasury. A study

built to hold containers and specialized docks are

made

constructed to provide storage space.

Commission, however, contends that increased

the

Upper

Great

Lakes

Regional

In the United States, container shipping is used

tolls would discourage overseas traffic on the

primarily on the East and West Coasts, w ith very

Seaway and have the final effect of increasing

little container traffic on the St. Lawrence Sea

rather than decreasing the Corporation's indebt

way. Two reasons for the limited use o f containers

edness. Changes in tolls would have little effect on

on the Seaway are the number o f ports on the

bulk traffic because most bulk cargo is moved

Seaway and the relatively small volume of general

w ithin the Great Lakes. General cargo is the fastest

cargo shipped. The most expensive part of water

growing type o f traffic, however, and a decline in

shipping is docking the ships; therefore, stopping

such traffic would hinder the growth of the large

at many ports to load containers is not econom

Seaway ports.

ically feasible. A t present, no Seaway port gener

Recently, a bill was introduced in the United

ates enough container traffic to fill a container

States Senate that would cancel all debt of the

ship. One transportation expert has, however,

Corporation and return all revenues remaining

suggested that a barge that stopped at many ports

after operating and maintenance expenses to the

and took containers to one central point, perhaps

U. S. Treasury. No other modern interstate water

Montreal, would increase the economic feasibility,

way in the United States has had to pay fo r itself

and as a result lead to increased use of containers

by means o f tolls. Eliminating the need to repay

on the Seaway.7 The relatively small volume of

the Treasury might influence the current dis

general cargo shipping, compared w ith bulk cargo,

cussions on raising Seaway tolls, or even provide

however, would seem to impede initiation of this

for the possibility of lowering tolls in the future.

service.

The Seaway would then be more comparable to
other inland waterways that do not require users'
charges.

7 Lecture by Carl Snavely, Project D irector o f Transpor

Future Prospects for Seaway Traffic. Total

ta tio n Studies, EBS Management Consultants, Inc., A p ril

traffic through the Seaway declined from

24, 1969.

m illion cargo tons in 1968 to 41 m illion cargo tons

ECONOMIC REVIEW

in 1969, a drop o f 14.5 percent.8 A large share of

traffic, the loss of coal traffic could force an

the decline was caused by a four-month strike of

increase in rates on

iron ore workers in Labrador that limited ship

movements. However, because water transport is

iron

ore and limestone

ments of this commodity. More importantly,

the least expensive way of shipping these commod

overseas traffic through the Montreal-Lake Ontario

ities, a further loss of traffic in these goods is not

section declined by 3.3 percent to nearly 15

expected.
A recent study indicated that physical improve

m illion tons in 1969.9 These losses were reflected
in lessened activity at the Fourth District ports.

ments to the Seaway would

Although

shippers; however, a longer shipping season could

Lake

Superior

iron

ore

shipments

not attract new

counteracted most of the losses from Labrador

increase tonnage because present shippers could

and iron and steel exports rose last season, total

use the Seaway fo r a longer period each year.

traffic dropped.

The growth of the general economy in the regions

The Lake Erie ports with large trade in coal

served by the Seaway could also have a positive

may be adversely affected if unit train usage

effect on traffic. Although the future of the St.

increases. Because the coal, limestone, and iron ore

Lawrence

Seaway

somewhat

uncertain

traffic has traditionally helped to subsidize each

present, several very important decisions that w ill

other

apparently be made w ithin the next six months,

providing

complementary

backhaul

particularly concerning tolls, could exert a strong

Charles F. Davis, “ Cargo Moved Through Seaway De

influence on the future growth of the Seaway.

clines in 1 9 6 9 ," Journal o f Commerce, A p ril 14, 1970.

EBS

Management

Consultants,

Inc., A n

Econom ic

Analysis o f Im provem ent Alternatives to the St. Lawrence
9lb id .

Seaway System, Washington, D. C., 1969.

JUNE 1970

CAPITAL SPENDING IN MA J OR M E T R O P O L I T A N
A R E A S O F THE FOURTH DISTRICT
The most recent semiannual survey of capital

new plant and equipment in 1970 than they spent

spending plans of manufacturing and selected

in 1969. As a result, capital spending in 1970 by

other business concerns in the Cleveland, Pitts

the

burgh, and Cincinnati metropolitan areas that was

expected to be 21 percent below the level of

conducted in the spring of 1970 by the Federal

actual spending in 1969 (see Table I). This exceeds

Reserve

the 15-percent reduction in capital spending plans

Bank

Cleveland showed

different

patterns of spending among the three areas.

entire

group

manufacturing

firms

for 1970 indicated in a similar survey in the fall of

the Cleveland and Cincinnati areas, spending for

1969. Less than one-half of the firms participating

new plant and equipment by manufacturing firms

in both surveys actually scaled down their spend

in 1970 is expected to be less than actual outlays

ing plans fo r 1970 between the two survey dates;

in 1969, while in the Pittsburgh area such spending

however, the downward revisions outweighed the

is expected to exceed the actual level of spending

upward revisions.

in 1969. For the Cincinnati area, the overall results

All but one of the manufacturing industries

of the most recent survey confirm the findings of

listed in Table I plan to reduce their capital

the fall 1969 survey. In the case of the Cleveland

spending in 1970; reductions are greater among

and Pittsburgh areas, however, the latest survey

the durable goods manufacturers than among the

revealed that spending plans have been revised

nondurable goods manufacturers. Firms in the

since the fall of 1969.

electrical machinery industry, the sole exception

CLEVELAND AREA

are planning to increase capital spending by a small

to the general pattern of reductions in Cleveland,
More than one-half of the manufacturing con

margin.

cerns that participated in the spring survey of

primary

The substantial
metal

and

cuts planned

transportation

the

equipment

spending in the four-county Cleveland

industries—
the two industries which account for

metropolitan area currently plan to spend less for

well over one-half of the capital spending by all

capital

manufacturers in the Cleveland area—
were major
i

The survey

cooperation

in
of

Cincinnati was undertaken w ith the
the

Greater

Cincinnati

Chamber

Commerce; the Pittsburgh survey was conducted fo r the

factors in determining the size of the reduction in
planned capital expenditures for both the durable

Federal Reserve Bank o f Cleveland by the University of

goods group and for all manufacturing industries

Pittsburgh.

combined.

ECONOMIC REVIEW
TABLE I

outlays fo r plant and equipment by public utilities

Capital Spending by Cleveland Area Firms
(Spring 1970 Survey)
Year— —Year Percent Changes
to

in the Cleveland area exceed actual 1969 outlays

1969 (actual)
to
1970 (planned)

1970 (planned)
to
1971 (planned)

M A N U F A C T U R IN G
Durable goods*
Primary metals
Fabricated
metals
Machinery
Electrical
equipm ent
Transportation
equipm ent
Nondurable goods*
Printing and
publishing
Chemicals
Rubber and
plastics
PUBLIC U T IL IT IE S

-2 1 %
-2 2
-3 0

-1 7 %
-1 7
-1 1

TOTAL

by 15 percent. Furthermore, the planned increase
in capital expenditures by the public utilities that
was reported in the most recent survey is slightly
larger than indicated in the fall 1969 survey. In
1971, however, capital spending by the utilities is
expected to fall 4 percent short of the level of
such spending in 1970. As a result, there would be

+21
-3 0

a net gain of 11 percent in capital expenditures by

+ 2

-1 3

reflecting an anticipation of continued increases in

-2 5
-1 3

-3 4
-1 8

-3 6
-1 5

-3 5
- 4

-3 0
+15

-1 6
- 4

-1 2 %

-1 7
-1 4

* Includes smaller industries not listed separately.

the

public

utilities over the two-year period,

demand fo r the various services of the utilities in
the near future.
The survey results also provide some indications
of the division of planned capital spending by
Cleveland area manufacturing firms and public
utilities between structures and equipment and
between modernization and expansion. Only 14
percent of the spending planned fo r 1970 by
manufacturers

Source: Federal Reserve Bank o f Cleveland

earmarked

fo r

structures,

compared w ith 22 percent in 1969 (see Table II).

An additional 17-percent cut in capital spend

The cutback in spending for structures had already

ing is planned by manufacturers in the Cleveland

been indicated in the fall 1969 survey. All durable

area for 1971, w ith virtually no difference be

goods industries listed in the table and all but one

tween the durable goods group and the nondurable

of the nondurable goods industries show a smaller

goods group. As in the case of spending plans for

share of total spending for structures in 1970 than

1970, only one industry plans to increase spending

1969, w ith

unusually

small shares in the

in 1971; namely, fabricated metals. Six of the

primary metal, fabricated metal, and electrical

eight industries listed in the table indicate back-

equipment industries. The exception is the rubber

to-back reductions in total outlays in 1970 and

and plastics group, where spending fo r structures is

1971. However, individual responses indicate that

expected to rise appreciably. Very few individual

consecutive spending cuts for both years are

firms in any industry plan to spend as much as $1

anticipated by only one out of every six manu

m illion fo r structures in 1970. Although neither

facturing firms participating in the survey. One

the number nor the dollar total o f construction

firm out of every nine plans to increase capital

projects of at least $1 m illion is expected to

investment in both 1970 and 1971.

increase in 1971, the share of spending allocated

the spending plans of the

for construction in 1971 should increase because

participating manufacturing firms, expected 1970

of the anticipated reduction in the amount of total

In contrast to

JUNE 1970
TABLE II

they were in 1969, they represent a smaller share

Capital Spending by Cleveland Area Firms
(Spring 1970 Survey)
Percent Distribution of Total Spending by Type*
(Between Structures and Equipment and
Between Expansion and Modernization)

for expansion than indicated by the fall 1969
survey. For 1971, the proportions of spending for
expansion and fo r modernization w ill be reversed,
w ith the larger share designated for modernization.
Public utilities in the Cleveland area also expect a

Expansion J

S tructures!

1969 1970 1971 1969 1970 1971
M A N U F A C T U R IN G
Durable goods §
Primary metals
Fabricated
metals
Machinery
Electrical
equipm ent
Transportation
equipm ent
Nondurable goods §
Printing and
publishing
Chemicals
Rubber and
plastics
PUBLIC U T IL IT IE S
TOTAL

22%
21
9

14%
12
4

18%
17
3

53%
51
73

54%
52
65

46%
44
62

52
39

1
23

34
29

14
59

15
60

22
44

rise in the share of spending for expansion in
1970, to be followed by a decline in 1971. In both
years, outlays designated for expansion are sub
stantially higher among public utilities than among
manufacturing firms.
Firms participating in the spring 1970 survey
also provided some judgment about the current

23
28

19
30

27
23

23
59

50
63

54
58

of the responding manufacturing firms reported

28
39

25
33

14
29

26
77

50
69

26
57

the fall 1969 survey. "Less than adequate" capac

11
22

21
28

25
30

28
73

41
86

39
81

down from 20 percent last fall. This shift appears

22%

19%

23%

57%

63%

59%

adequacy of their production facilities: 66 percent
"adequate” facilities, compared w ith 60 percent in
ity was indicated in only 14 percent of the reports,
to be in line w ith the recent nationwide decline in
capacity utilization rates.

* Based o n ly upon returns in which these breakdowns
were supplied.
t Spending fo r equipm ent equals 100 percent less the
percent shown fo r structures.
J Spending fo r m odernization equals 100 percent less the
percent shown fo r expansion.
§ Includes smaller industries not listed separately.

Manufacturing concerns that supplied infor
mation on methods o f financing their capital
investments indicated that they expect to finance
about 85 percent of their spending in 1970 and
1971 from internal sources. This proportion is the

Source: Federal Reserve Bank o f Cleveland

same as for actual spending in 1969, but somewhat
less than had been expected for 1970 in the fall

capital spending fo r the year. The public utilities
plan to

spend a larger share o f their to ta l-

increased—investment

fo r

structures

in 1970

than in 1969 and expect a small further increase in

1969 survey. About three out of every four firms
plan to rely solely on internal sources of funds to
finance capital investments in both 1970 and
1971, the same proportion as in 1969.

that share in 1971.
More than one-half of the capital spending by
manufacturing firms in the Cleveland area in 1970

C IN C IN N A TI AREA
The spring 1970 survey indicated that plant and

w ill be used fo r expansion of production capacity,

equipment spending by manufacturing concerns in

while slightly less than one-half w ill be used to

the seven-county

modernize present facilities (see Table II). A l

should be 14 percent lower in 1970 than it was in

though those proportions are virtually the same as

1969 (see Table III). This overall figure, which

Cincinnati metropolitan area

ECONOMIC REVIEW
TABLE III

Spending plans for 1970 of the four largest

Capital Spending by Cincinnati Area Firms
(Spring 1970 Survey)
Year— —Year Percent Changes
to

manufacturing industries in the Cincinnati area
move

machinery

opposite
and

directions.

Firms

transportation

the

equipment

industries indicate a substantial reduction in plant

1969 (actual)
to
1970 (planned)
M A N U F A C T U R IN G
Durable goods*
Primary and
fabricated
m etalst
Machinery
Electrical
equipm ent
Transportation
equipm ent
Nondurable goods*
Food
Paper
Printing and
publishing
Chemicals
PU BLIC U T IL IT IE S
TOTAL

1970 (planned)
to
1971 (planned)

and equipment spending in 1970; on the other

-1 4 %
—24

- 1%
+ 1

increase, and the food industry expects a moderate

hand, the chemical industry expects a sizable
increase. The planned reduction in plant and
equipment

spending

equipment

industry

w ill

the

transportation

+30
—37

+40
—23

—17

+32

—
44
—0 —
+2
—25

— 5
— 3
-1 2
+75

—50
+20
+20

+55
— 4
+20

expected fo r 1971, although less than one-half of

+ 9%

the firms participating in the survey plan to spend

the

very

substantial increase in such spending that occurred
in 1969, while the expected rise in spending in the
chemical industry comes after a severely reduced
level of actual spending in 1969.
A further small decline in capital spending by

manufacturing industries in the Cincinnati area is

less fo r new plant and equipment in 1971 than

* Includes smaller industries not listed separately,
t Combined in order to preclude disclosure o f individual
establishment data.

they expect to spend in 1970. Despite the small

Source: Federal Reserve Bank o f Cleveland

expected by the manufacturing group, substantial

relative size of the change in total spending
changes are indicated for individual industries,

reflects reduced spending in 1970 by exactly

frequently w ith the direction of change reversed

one-half of the firms participating in the survey, is

from that of the preceding year. For example,

virtually unchanged from the 15-percent reduction

manufacturers in the electrical equipment industry

in spending indicated in the fall 1969 survey.

plan to spend 17 percent less in 1970 than they

However, there were changes in the spending plans

actually spent in 1969, while they expect to

of the component groups. In the spring 1970

increase their capital spending by 32 percent in

survey, durable goods manufacturers expected a

1971. On the other hand, firms in the chemical

24-percent reduction in spending in 1970, while in

industry expect to increase 1970 capital spending

the fall 1969 survey they had expected an 18-

by 20 percent over 1969 outlays and expect a

percent reduction. Nondurable goods manufac

moderate reduction in spending in 1971. Spending

turers, on balance, currently plan to spend the

changes in the same direction fo r both 1970 and

same amount fo r capital goods in 1970 as they

1971, however, are expected in the primary and

spent in 1969. In the fall survey, nondurable goods

fabricated metal industries (increases) and in the

manufacturers had expected to reduce their spend

m a c h in e ry

ing by 10 percent in T970.

industries (reductions).

and

tra n s p o rta tio n

equipment

JUNE 1970
The Cincinnati area public utilities, which had
expected a small reduction in spending fo r 1970 at
the time of the fall 1969 survey, now plan to
spend 20 percent more in 1970 than in 1969 and
to increase capital outlays by an additional 20

TABLE IV
Capital Spending by Cincinnati Area Firms
(Spring 1970 Survey)
Percent Distribution of Total Spending by Type*
(Between Structures and Equipment and
Between Expansion and Modernization)

percent in 1971.
S tru ctu re s!

The spring 1970 survey results also indicate
that manufacturers' outlays fo r structures in the
Cincinnati area w ill be sharply reduced in 1970
and 1971, compared w ith 1969 (see Table IV).
This reflects the fact that the total number of
individual manufacturing firms reporting spending
plans for construction in the amount of $1 m illion
or more fo r either 1970 or 1971 is smaller than
the number of firms whose actual outlays in 1969
included at least $1 m illion for structures. Con
sequently, manufacturers' spending fo r structures
w ill account for 18 percent of total spending in
1970, compared w ith 37 percent in 1969. Manu

Expansion $

1969 1970 1971 1969 1970 1971
M A N U F A C T U R IN G
Durable goods §
Primary and
fabricated
m etals#
Machinery
Electrical
equipm ent
T ransportation
equipm ent
Nondurable goods §
Food
Paper
Printing and
publishing
Chemicals
PUBLIC U T IL IT IE S
TOTAL

37%
41

18%
18

20%
19

64%
59

69%
65

66%
65

22
53

7
22

11
11

20
45

9
65

3
46

46
31
33
12

27
18
19
5

31
20
6
28

69
69
44
40

62
73
46
43

60
67
31
49

47
21
26

12
19
33

1
26
36

61
87
76

53
87
75

45
83
67

35%

22%

24%

67%

71%

66%

facturers' spending fo r structures w ill increase only
insignificantly in 1971. All of the industries listed
in the table, except the chemical industry, plan
substantial reductions in the share of spending
allocated fo r structures

1970. The public

utilities, in contrast to the manufacturing indus

* Based only upon returns in w hich these breakdowns
were supplied.
t Spending fo r equipm ent equals 100 percent less the
percent shown fo r structures,

t Spending fo r m odernization equals 100 percent less the

allocated for structures in 1970, w ith further

percent shown fo r expansion.
§ Includes smaller industries not listed separately.
#C om bined in order to preclude disclosure o f individual
establishment data.

increases anticipated in 1971.

Source: Federal Reserve Bank o f Cleveland

tries, plan to raise the proportion of spending

Spending fo r structures is frequently a sign of
that is planned or in

divided between those planning to use more than

progress. The expected sharp drop in spending for

half of their total outlays for modernization and

an expansion

program

structures by Cincinnati area manufacturers in

those expecting to use more than half of their

1970 and 1971, however, is not accompanied in

total spending for expansion.) The public utilities

either year by a decline in the share of spending

expect to continue to use about three-fourths of

planned fo r expansion of facilities below the 1969

their total spending fo r expansion in 1970, but

level (see Table IV). A large proportion of the

plan to reduce the share to two-thirds in 1971.

total dollar amounts to be spent fo r machinery

More than 60 percent of the manufacturing

and equipment in 1970 and 1971 is earmarked for

firms in the Cincinnati area that replied to the

expansion. (Individual firms, however, are evenly

question concerning present manufacturing capac

ECONOMIC REVIEW
ity reported "adequate" facilities, while more than

TABLE V

20 percent considered their facilities "less than

Capital Spending by Pittsburgh Area Firms
(Spring 1970 Survey)
Year— —Year Percent Changes
to

adequate." These are virtually the same propor
tions reported in the fall 1969 survey.
Among manufacturers reporting on methods of

1969 (actual)
to
1970 (planned)

eight out of every ten expect to use only internal
sources of funds to finance capital spending in
1970 and 1971, which is slightly more than the
proportion of those who actually relied entirely on
internal sources of funds in 1969. Almost 90
percent of the amount that all responding manu
facturing firms in the Cincinnati area plan to spend
on capital goods in 1970, and an even larger share
of the 1971 total, is scheduled to be financed w ith
internally generated funds, compared w ith just
over 80 percent of

total

spending that was

financed from internal sources in 1969.

M A N U F A C T U R IN G
Durable goods*
Stone, clay.
and glass
Primary metals
Fabricated
metals
Machinery
Electrical
equipm ent
Nondurable goods*
Chemicals
N O N M AN U FAC T U R IN G $
Public utilitie s
TOTAL

1970 (planned)
to
1971 (planned)

+ 4%
t

-3 5 %
-3 7

+41
-2 0

-3 9
-5 2

+83
- 4

-5 1
-1 9

- 7
+43
+88

+59
-2 6
-3 3

+98
+ 8

-6 4
-1 8

+55%

financing their capital investments, more than

-5 5 %

PITTSBURGH AREA
In contrast to firms in the Cleveland and
Cincinnati

metropolitan

areas,

manufacturing

firms participating in the spring 1970 survey of
capital spending in the four-county Pittsburgh
metropolitan area expect to spend 4 percent more

* Includes smaller industries not listed separately,
t Less than 1 percent.
X Includes data fo r transportation and retail trade, in
a dd itio n to p u blic utilitie s.
Sources: University o f Pittsburgh and Federal Reserve
Bank o f Cleveland

for new plant and equipment in 1970 than in 1969
(see Table V). Firms in selected nonmanufacturing

spending in 1970. Manufacturing firms in the

industries

Pittsburgh area plan to reduce their spending in

(transportation, public

utilities, and

retail trade) plan to spend almost twice as much in

1971

1970 as in 1969. For both the manufacturing and

firms expect to spend 64 percent less. As a result,

the nonmanufacturing group, the results of the

the amount of spending

spring survey represent an upgrading of spending

one-fourth lower than the amount actually spent

plans fo r

in 1969 by each of the two groups of firms.

1970

reported

in a similar survey

conducted in the fall of 1969. A t that time,
surveyed

nonmanufacturing firms

by 35 percent, while nonmanufacturing
in

1971

should be

In the manufacturing group, the nondurable

expected to

goods industries expect to increase their capital

spend only 5 percent more in 1970 than in 1969,

spending by 43 percent in 1970, while firms in the

while manufacturing firms anticipated a 6-percent

durable goods industries only plan to match the

reduction in spending from 1969 to 1970.

amount

Plans fo r 1971 indicate a sharp reduction in
capital
22

spending

below the expected level of

spent in

1969. There are, however,

marked differences among the spending plans of
the component industries. Much of the additional

JUNE 1970
spending by the nondurable goods industries in the

the largest total amount of new capital investment

Pittsburgh area in 1970 reflects capital investments

by any industry in the area, plan to raise their

in the chemical industry, where the level of capital

total outlays in 1970 by only 8 percent.

spending is expected to be substantially higher

The steep drop

in the

amount nonmanu

than the severely reduced level of actual spending

facturing firms plan to spend in 1971 again shows

in 1969. In the durable goods group, the fabri

the effect of extreme shifts in spending by firms in

cated

glass

the transportation industry in the Pittsburgh area.

metal

and

the

stone, clay, and

industries indicate that spending in 1970 w ill be

The indicated 64-percent reduction in outlays

much higher than in 1969. Those increases w ill be

combines an 18-percent cut in capital spending by

offset, however, by a sizable reduction in spending

the public utilities and almost no anticipated

in the primary metal industries and by moderate

spending by the transportation firms in 1971.

cutbacks in spending planned by firms in the
machinery and electrical equipment industries.

One out of every five dollars that manu
facturing industries plan to invest in 1970, and

In 1971, capital spending is expected to decline

almost the same proportion in 1971, is earmarked

by 37 percent in the durable goods industries and

for new structures (see Table V I). The increase

by 26 percent in the nondurable goods industries

from the smaller proportion shown fo r

in the

Pittsburgh

Sizable reductions in

reflects sizable construction projects scheduled in

outlays fo r new plant and equipment are indicated

the fabricated metal and the chemical industries in

in all but one of the major industries in both the

1970 and in the electrical equipment industry in

durable and the
manufacturing.

area.

1969

nondurable goods sector of

Only

the electrical

1971. Among the nonmanufacturing industries,

equipment

the public utilities report that a fairly consistent

industry indicates increased spending fo r 1971.

proportion of total capital spending w ill be used

One electrical equipment manufacturer's m ulti

for structures (between one-fourth and one-fifth)

m illion dollar expansion project is expected to

in both 1970 and 1971. For the entire nonmanu

more than outweigh spending cuts planned by

facturing group, however, the proportion of spend

other firms in the industry. In the primary metal

ing fo r structures is expected to dip sharply in

and the machinery industries, reductions in capital

1970, because only a small portion of the greatly

outlays are expected in both 1970 and 1971.

increased amount of total spending planned by the

Spending plans of nonmanufacturing industries
represented in the survey reflect extreme flu c t

transportation industry in 1970 w ill be used for
structures.

uations from year to year. The substantial increase

Almost 40 percent of expected total capital

in capital spending that is planned by firms in the

outlays by manufacturing firms in the Pittsburgh

transportation industry2 in 1970 largely accounts

area in 1970 is designated fo r expansion of present

for the near doubling in spending by nonmanu

facilities (see Table V I). This represents a sub

1969 and 1970.

stantial increase in 1970 in the share of spending

However, the public utilities, which account for

for expansion that is distributed among most of

facturing

industries

between

the manufacturing industries. The machinery and
2 Not shown separately in Table V in order to preclude
disclosure.

electrical

equipment

industries

are

particular

exceptions. Slightly more than one-half of total
23

ECONOMIC REVIEW
TABLE VI

"adequate" capacity, w ith no difference between

Capital Spending by Pittsburgh Area Firms
(Spring 1970 Survey)
Percent Distribution of Total Spending by Type'
(Between Structures and Equipment and
Between Expansion and Modernization)

m anufacturing

and

nonmanufacturing

firms.

Although this is nearly the same relative number
of firms that reported "adequate" facilities in the
preceding survey, the proportion of responses
indicating "to o m uch" capacity has increased from

S tructurest

Expansion^:

1969 1970 1971 1969 1970 1971
M A N U F A C T U R IN G
Durable goods §
Stone, clay.
and glass
Primary metals
Fabricated
metals
Machinery
Electrical
equipm ent
Nondurable goods §
Chemicals
NONM ANUFAC
T U R IN G #
Public u tilitie s
TOTAL

12 percent to 17 percent since last fall.
Manufacturing firms in the Pittsburgh area

15%
16

20%
21

19%
21

29%
30

39%
38

36%
37

5
13

1
14

0
21

22
19

39
24

4
53

next year's capital spending from internal sources.

53
9

59
6

24
3

62
55

83
40

33
46

responding manufacturing firms plan to rely en

14
1
1

13
17
22

38
8
11

52
18
23

26
45
57

25
32
40

22
22

13
22

24
24

31
55

10
53

52
52

19%

15%

22%

30%

21%

41%

expect to finance more than 80 percent of their
capital spending in 1970 and over 90 percent of
In 1970, more than three out of every four
tirely on internal sources of financing, while in

* Based o n ly upon returns in which these breakdowns
were supplied.
t Spending fo r equipm ent equals 100 percent less the
percent shown fo r structures.
%Spending fo r m odernization equals 100 percent less the
percent shown fo r expansion.
§ Includes smaller industries not listed separately.
# Includes data fo r transportation and retail trade, in
ad d itio n to public utilitie s.
Sources: U niversity o f Pittsburgh and
Bank o f Cleveland

Federal

Reserve

1971, almost nine out of every ten firms plan to
rely solely on internally generated funds. In 1969,
less than three-fourths of the responding firms
actually used internal sources of financing only.

CONCLUDING COMMENTS
The findings of the surveys of capital spending
plans in the three areas agree in some aspects and
disagree in others w ith the pattern of capital
spending plans in the nation in 1970 revealed by
the Commerce-SEC survey conducted in April and
May 1970.
The national survey showed that the spending
plans of all manufacturing industries in 1970 were
revised downward and would exceed actual spend

outlays planned for 1970 and 1971 by the public

ing in 1969 by only 3.7 percent, rather than by

utilities is allocated for expansion. In contrast,

9.9 percent as the preceding quarterly Commerce-

virtually the entire amount that transportation

SEC survey had

firms plan to spend fo r capital outlays in 1970 is

revisions in spending plans fo r 1970 were made by

indicated. Similar downward

to be used fo r modernization of existing facilities;

manufacturing concerns in the Cleveland area,

as a result, there is a large decline in spending for

although not in the Pittsburgh and Cincinnati

expansion in the combined data for the nonmanu

areas. The revisions took the form

facturing group.

reductions in spending fo r 1970 than had been

Almost 70 percent of all firms reporting on the
status

their

present

facilities

indicated

of larger

planned in the fall of 1969. The surveys conducted
for the three areas agree w ith the national survey

JUNE 1970
in that they anticipate further sizable increases in

in capital outlays of manufacturing industries for

capital investments by the public utilities in 1971.

1970 in two of the three areas, while the national

On the other hand, the area surveys depart

survey expects a continued, if small, increase in

from the national pattern by indicating a decline

such investments in the nation in 1970.

SPECIAL ANNOUNCEM ENT
A lim ited number o f reprints are available o f the
three-part

article

"T he

Eurodollar

M arket,"

which

appeared in the March, A p ril, and May 1970 issues of
Economic

Review.

Requests fo r

copies

should

directed to the Research Department, Federal Reserve
Bank o f Cleveland, P. O. Box 6387, Cleveland, Ohio
44101.

JUNE 1970

RECE NTL Y PUBLISHED ECONOMIC C O M M E N T A R I E S
OF T H E F E D E R A L R E S E R V E B A N K O F C L E V E L A N D

"Unemployment on the Rise"
May 25, 1970

"A Re-Examination of the Outlook for 1970"
June 1, 1970

"Dimensions of Recent Economic Activity"
June 8, 1970

"Whither Bank Commercial Paper?"
June 15, 1970

"Bank Credit — 1970"
June 22, 1970

Economic Commentary is published weekly and is available w ithout charge. Requests to be added to
the mailing list or fo r additional copies of any issue should be sent to the Research Department,
Federal Reserve Bank of Cleveland, P. O. Box 6387, Cleveland, Ohio 44101.

Full text of Economic Review (Federal Reserve Bank of Cleveland) : June 1970

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