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IDAHO
ALASKA
ASHINGTON
65ue
Reducing Our Payments Deficit
A Progress Report . . .
UTAH
District Business Highlights .
GON
CALIFORNIA
ARIZONA
NEVADA
F
recently released, indicating that
the United States balance of payments
deficit in the first quarter of 1963 totaled $3.2
billion at a seasonally adjusted annual rate,
stimulated re-examination of the progress
achieved so far in reducing our payments
gap. The failure of the deficit to decline below
the figure for the final quarter of 1962 gener
ated pessimism in some quarters, which was
counteracted only in part by official assur
ances that progress had been, and is being,
made toward balancing our international ac
counts. Preliminary estimates that the outflow
of funds continued into the second quarter of
1963 at an undiminished rate and that there
was little improvement in our payments posi
tion resulted in a special Presidential message
to Congress detailing further constructive
steps to reduce the payments gap.
A look at the detailed balance of payments
accounts for the first three months of 1963
presents the casual observer with a rather
bleak picture. The merchandise trade surplus,
at a seasonally adjusted annual rate, was only
$4.1 billion, compared with $4.3 billion for
1962 as a whole.1 The surplus on nonmilitary
service items in the first quarter of 1963 was
little changed from the 1962 figure, and there
was only a small reduction in the net outflow
of funds on military transactions. As a con
sequence, the balance on goods and services
of $4.8 billion at an annual rate (including
Government-financed shipments) was about
the same as in 1962.
The first quarter outflow of United States
Government grants and other capital at a
$3.7 billion rate was larger than both the pre
ceding quarter and 1962 as a whole because
advance loan repayments were negligible in
ig u re s
1 If Government-financed exports are excluded, the excess of ex
ports over imparts on private account was only $2.0 billion in
1962 and $1.6 billion at a seasonally adjusted annual rate in the
first quarter of 1963, compared with $3.2 billion in 1961. The
deterioration from 1961 to 1962 in the privately financed trade
surplus was due to a strong upsurge in imports in 1962 in re
sponse to the quickened pace of domestic economic activity.
EJiltioni of Dollars
4.0 -
3.0 -
2.0
1 . 0
-
-
1958
1959
I 960
1961
1962
1st Qlr.
1963
Note: First quarter 1963 at a seasonally adjusted annual rate.
Source: United States Department of Commerce.
the most recent quarter. Total recorded net
United States private capital outflows were
significantly higher at $3.8 billion. Private
capital exports were bolstered by acquisition
of stock in a French automobile firm by a
major United States automobile producer and
by a record volume of foreign security flota
tions in the United States capital market, while
additional private capital moved overseas into
purchases of existing foreign securities. These
outflows were partly counterbalanced by re
payment of long- and short-term bank loans
(particularly by Venezuela and Japan) and
some return flow of funds to the United States
by foreign banks that had repatriated dollar
funds at the end of 1962 for window-dressing
purposes. There was a small net inflow of
funds on short-term private capital account in
the first quarter, on a seasonally adjusted ba
sis, mainly because of loan repayments. In
the same quarter, foreigners also were net in
vestors in the United States in private port
folio and other long-term investments and in
special nonconvertible long-term Treasury se
curities, although the Treasury transactions
FEDERAL
RESERVE
B ANK
OF
SA N
FRANCISCO
U N IT E D S T A T E S B A L A N C E O F P A Y M E N T S , 1958 -63
(billions of dollars)
Current account
M erchandise exports
M erchandise imports
Trade balance
M ilitary sales
M ilitary expenditures
Balance
N onm ilitary service exports
N onm ilitary service imports
Balance on services
B alance on goods and services
C ap ital account and grants
Remittances and pensions
U. S. Government capital
Grants and loans (gross)
Repayments
Total
U. S. private capital
Direct investments
Long-term capital
Short-term capital
Total
Foreign nonliquid capital
Private liabilities
Government liab ilities
B alance on grants and capital
Errors and omissions
O v er-all balance (deficit —)
1962
1st Qtr.
1963*
1 9.9
-1 4 .5
5.4
0.4
- 2 .9
- 2.5
8.0
- 5.4
2 .6
5.4
2 0 .5
-1 6 .1
4.3
0.6
— 3.0
- 2.4
8.7
- 5.8
2.9
4.8
2 0 .0
-1 6 .0
4.1
0 .7
- 3 .0
— 2.2
8.7
- 5.8
3.0
4.8
0.7
-
0 .7
-
0.7
-
0 .9
-
-
4.3
1.3
3.0
-
-
4.1
1.3
2.8
-
-
3.4
0.6
2.8
-
4.3
0 .7
3.7
—
-
1.7
0.9
1.3
3.9
-
1.6
1.0
1.5
4.2
—
-
1.5
1.2
0.5
3.3
- 2.2
— 1.8
0.2
- 3.8
-
0.6
0.1
6.9
0.9
2.4
-
0.2
0.9
6 .0
1.0
2 .2
0.1
0.5
7.8
0.2
3.2
1958
1959
1960
1961
16.3
-1 3 .0
3.3
0.3
- 3.4
- 3.1
6.5
- 4.5
2.0
2.2
16.3
-1 5 ,3
1.0
0,3
- 3.1
- 2 .8
6.9
- 4.9
2 .0
0.1
19.5
- 1 4 .7
4 .7
0.3
- 3.0
- 2 .7
7.2
- 5.4
1.7
3.8
-
0.7
-
0,8
-
-
-
3,0
1.1
2 .0
-
-
3.1
0.5
2.6
-
1.2
1.4
0.3
2.9
—
-
1.4
0 .9
0.1
2.4
*
0.9
s
0.3
*
— 4.3
0.4
- 3.7
- 7 .0
- 0.7
— 3.9
2
-
6.2
0.4
3.5
-
*Less than $50 million.
‘ Seasonally adjusted annual rate. 5Not shown separately.
Note: Minus sign indicates outflow. Data may not add to totals due to rounding.
Source: United States Department of Commerce.
were on a much smaller scale than in the pre
ceding quarter. The movement of foreign
funds into the United States was the largest
since the stock market break in May and June
of 1962 which had acted to dampen the inter
est of foreign investors in United States secu
rities. Unrecorded transactions (errors and
omissions), on the other hand, added to the
outflow of funds from the United States, but
at a substantially lower rate than in the third
and fourth quarters of 1962.
The net result of these transactions — a
deficit larger than in the last quarter of 1962
and at an annual rate almost 50 percent great
er than the payments gap for all of 1962 —
was not very encouraging. But a number of
extenuating circumstances tend to brighten
the picture. In the first place, special transac
tions that helped to keep the deficit down
were substantially lower than in any of the
preceding four quarters. Merchandise trade
for the first quarter, moreover, was distorted
by the dockworkers’ strike that began in late
December and lasted through most of Janu
ary, tying up foreign trade operations on the
East and Gulf Coasts. Exports were affected
more adversely by the work stoppage than
were imports. At the end of March, a backlog
of cargo was reported to be still awaiting ship
ment. Other balance of payments develop
ments during the quarter, although seemingly
minor, promise longer term beneficial effects
for our payments position. These include the
maintenance of military sales at the higher
levels recorded in 1962 as a partial offset to
our military expenditures abroad, some signs
of a revival of foreign investor interest in
United States securities, the small net inflow
of short-term capital, continuation of the
Treasury program to strengthen United States
July 1963
MONTHLY REVIEW
defenses against short-term capital flows, and
Treasury sales to foreign monetary authorities
of special nonmarketable securities denomi
nated in foreign currencies to minimize gold
losses. The rise in direct investments abroad
and the absence of advance debt repayments
in the latest three-month period are not neces
sarily adverse for our over-all balance of pay
ments position since these two types of flows
by their very nature occur at discrete inter
vals. The distribution of gold and dollar gains
among foreign countries through transactions
with the United States also continued to be
more favorable than it had been in 1960 and
1961. With the exception of France, which
accumulated sizable amounts of gold and dol
lars in the first quarter, most of our deficit was
incurred with countries that tend to hold a
major share of their reserve gains in the form
of dollars.
The reception accorded the announcement
of the first quarter deficit to some extent re
sembled public reaction to many recent bal
ance of payments developments— a reaction
that tends to underrate the action that has
been taken to eliminate our payments imbal
ance and to strengthen the United States pay
ments position over the longer run. In this
connection, it should be stressed that the ap
pearance of sizable United States deficits was
not an overnight phenomenon but a develop
ment that emerged gradually over a number
of years as the economies of the war-torn
countries recovered and as international pay
ments were freed from many of the restric
tions of the immediate postwar period. It is
therefore unrealistic to expect all the neces
sary structural adjustments to be completed
in a period of two or three years since many
of these adjustments necessitate basic changes
in both Government and private policies, pro
cedures, and attitudes and in international
trade and payments relationships. Conse
quently, it might be useful at this time to ex
amine the principal measures that have been
taken at home and abroad to improve our
payments position and to increase the effec
tiveness of the international payments mech
anism, in order to place our current perform
ance in somewhat better perspective. Too
much emphasis has been placed on gold
losses, which — although a manifestation of
the underlying imbalance in our payments
position— are strongly influenced by the geo
graphical distribution of dollar gains, while
too little attention has been paid to the more
fundamental, far-reaching but slower acting
developments that have been taking place.
Short-term capital outflows down
to more manageable proportions
The sizable short-term capital outflows
(including the outflow through unrecorded
transactions) in the latter part of 1960, which
Distribution of foreign gold and
dollar gains recently has been somewhat
more favorable
D E F IC IT
SU RPLU S
B illio n s of D o lla r s
3___________
TOTAL
Wasttrn Europa
Canada
Latin America
All Other
In te rn a tio n a l
In s titu tio n s and U n allo cate d
Source: United States Department of Commerce.
0
FEDERAL
RESERVE
BANK
P R IV A T E S H O R T - T E R M
C A PIT A L.
_
IH FLO Hr
-
SA N
FRANCISCO
gold market to discourage speculation against
the dollar, and measures adopted by the ma
jor European countries to stem the inflow of
short-term funds. Short-term capital outflows
from the United States have since been re
duced significantly, and short-term capital
movements now finance mainly international
trade and service transactions. The so-called
errors and omissions figure, however, re
mained large in 1962, possibly reflecting
leads and lags in payments with Canada and
Japan when these two countries experienced
payments difficulties. Gold and dollar accru
als to western European countries from un
recorded transactions were almost halved be
tween 1961 and 1962.
Billions of Dollars
1 .0
OF
1.0
2.0
UNRECORDED TRANSACTIONS
Defenses against disruptive
short-term capital movements
have been strengthened
1950
1959
I960
1961
I95Z
1st Qlr.
1963
Note: First quarter 1963 at a seasonally adjusted annual rate.
Source: United States Department of Commerce.
reached a record rate of $3.5 billion in the
fourth quarter of that year and occasioned a
heavy run on the dollar, have now fallen to
more manageable proportions. The 1960
crisis was brought about by the cumulated
weight of various developments which con
verged in the fall of that year. Persistent pay
ments deficits despite large surpluses on mer
chandise trade, increases in short-term capital
exports because of boom conditions abroad,
more attractive yields on foreign short-term
investments, and more favorable prospects
for capital appreciation combined with sizable
gold losses, rumors of dollar devaluation, and
fears of renewed inflation in the United States
to trigger the run on the dollar. The flight from
the dollar was arrested by a series of measures,
principal among which were official denials of
any intention to devalue our currency, adap
tation of United States monetary and debt
management policies to take balance of pay
ments considerations into account more ex
plicitly, British intervention in the London
An impressive and effective arsenal of
weapons has been developed since 1960 to
deal with future massive flows of hot money
between countries. At home, the Treasury
and the Federal Reserve System have cooper
ated to maintain short-term rates at levels
that help to minimize the outflow of short
term funds from this country through debt
management and open market operations. As
a further step, in March 1961, the Treasury
began operations in the foreign exchange mar
kets to reduce fluctuations in exchange rates
and thus weaken possible speculation against
the dollar. Early in 1962, the Federal Reserve
System also initiated operations in foreign
exchange by concluding a series of foreign
currency swaps with foreign central banks.
These swaps provide credit facilities in for
eign currencies to the parties concerned. Un
der the terms of these swaps, either party may
draw foreign currencies for use in the ex
change markets when needed to dampen
sharp exchange rate fluctuations and to com
bat speculative pressures on exchange rates.
In the latter half of 1962, the Treasury started
to sell special foreign currency bonds of 15
July 1963
MONTHLY REVIEW
month’s maturity or
longer to foreign
monetary authori 2.0
ties. The proceeds
have been added to
the Treasury’s hold 1.0
ings of convertible
currencies or serve
to absorb dollars
held by countries
that might otherwise 1.0
use the dollars to
-i—i— l— I— i__ i__ 1 .. i..I - I . I___ i__ i _ i __ I__ L_1__ L_
purchase gold from
the Treasury.
Additional meas
ures were taken by
the Federal Reserve
System to reduce the
incentive to invest
sh ort-term funds
a b r o a d . T h e in 1.0
crease in January
1962 in the maxi
mum interest rate
payable on savings
d ep o sits and on
tim e d e p o s its of
m o r e th a n s ix
m onths’ m aturity
was designed partly
__ _________!___ :___ ____!___ !___ j ___ i , i
to increase the at
tractiveness of such
*Not available.
holdings to foreign
1 Change in reporting basis from average tender rate to market rate.
Source: Board of Governors of the Federal Reserve System.
ers.
4 percent in the maximum rate payable on
The three-year suspension in October 1962
of interest rate ceilings on time deposits held
time deposits with a maturity of more than
90 days and less than 1 year.
by foreign monetary authorities and certain
international financial institutions under Reg
After the run on the dollar in late 1960,
major financial centers abroad took action to
ulation 0 also was intended to achieve similar
results. The latest steps— taken in mid-July
lower their interest rates and discourage cap
1963 for balance of payments reasons— in
ital imports, so that the incentive to shift funds
cluded an increase in the discount rate of Fed
abroad has been narrowed or even eliminated
in some cases. Germany and Switzerland in
eral Reserve Banks from 3 percent— which
had been in effect since September 1960— to
stituted various measures to discourage the
3Vi percent, and a boost from 3 Vi percent to
influx of foreign capital, and they deliberately
Percent Per Annum
German Interbank L o o n R o te Vs.
Euro-D ollar Deposit R a le
In Favor of Frankfurt (+ )
-
In Favor of London (~ )
U.S. 3 - Month Treasury B ills Vs.
U.K. 3-Month Treasury G ills
fn Favor of London (+)
-
In Fovor of the United States ( - )
-
i .. i . . l
■t
I
i
<
___ !___ i___ i___ i____i___ i___ i___ i___ i___ i____i„
I
i
i
i
i
U.S. 3 - Month Treasury S ills Vs.
Canadian 3 - Month Treasury B ills
In Favor of Canada f+)
In F a v o r o f th e U n ited S t a t e s {—)
1
J
S
N
1960
M
J
1961
i
M
J
1962
S
M
M
1963
I
FEDERAL
100
RESE RV E
BANK
placed greater reliance on weapons other than
interest rate policy to restrain domestic ex
pansion because higher interest rates would
have tended to draw more funds toward them
with consequent adverse balance of payments
repercussions. Interest rate differentials be
tween the United States and Canada and be
tween the United States and the United King
dom, at the present time, provide relatively
little incentive for short-term investment
abroad on a covered basis. The Bank of Eng
land’s discount rate was steadily reduced from
the crisis level of 7 percent established in July
1961 to its present level of 4 percent as the
domestic economy and balance of payments
position of the United Kingdom strengthened.
The Canadian bank rate similarly was cut
from the 6 percent level fixed in June 1962 to
V/z percent by May 1963. Various other cen
tral banks also have aligned their domestic
interest rates more closely with rates in other
countries so as to reduce the flow of interestsensitive balances between countries. Some
funds, however, are reported still to be mov
ing into the Euro-dollar market and into
Canadian commercial and finance company
paper.
Multilateral financial assistance also has
evolved since March 1961, when massive
financial support was given for the first time
to a major currency in difficulties— the pound
sterling— through an informal arrangement
among several European central banks that
is popularly known as the Basle Agreement.
The success of this emergency aid in halting
the flight from sterling led to the establish
ment of more formal arrangements that could
be relied upon in case of unexpected specula
tive attacks on the leading currencies. Under
the aegis of the International Monetary Fund,
a $6 billion standby arrangement has been set
up with ten major countries (including the
United States) to supplement the resources
of the International Monetary Fund. Less for
malized arrangements are also being used, as
evidenced by the more than $1 billion in
OF
SA N
FRANCISCO
financial assistance given Canada during the
exchange crisis of last June and the help ex
tended to the United Kingdom more recently.
The operations of a so-called “gold pool,”
whereby various central banks cooperate in
avoiding disorderly conditions in the London
gold market, reportedly have also served to
minimize fluctuations in the price of gold and
thus restrain speculative pressures.
These defenses against disruptive shifts of
short-term capital, combined with improved
confidence in the leading international cur
rencies and a narrower spread between inter
est rates in the United States and foreign
countries, have made interest rate considera
tions somewhat less pressing. This does not
imply, however, that interest rate differentials
will no longer be a problem for this country
or for other major countries, but it does mean
that current arrangements should provide
adequate safeguards against repetition of sit
uations similar to the one that occurred in
1960. Testing of these defenses has taken
place on several occasions: in the spring of
1961 when concerted official international
action was taken following the German and
Dutch revaluations; during the Canadian cri
sis of June 1962; in January 1963 when the
United Kingdom-Common Market negotia
tions broke down; and, most recently, in
March 1963 when rumors of sterling deval
uation circulated in the exchange markets.
Various forms of international cooperation
thus can be called upon to deal with tempo
rary, reversible, and speculative short-term
capital movements — and to allow time for
longer term adjustments to take effect. The
Federal Reserve System had negotiated by
the end of June 1963 a total of $1.55 billion
in swap facilities with ten foreign central
banks and the Bank for International Settle
ments. Total drawings at the initiative of
either the System or foreign central banks
have exceeded $600 million since the begin
ning of System operations, but, at the end of
February 1963, System drawings outstanding
July 1963
MONTHLY REVIEW
were considerably less than $100 million. By
May 31, 1963 the Treasury had sold $630
million in foreign currency bonds, of which
$605 million were in the 15- to 24-month
maturity range, in addition to operations in
both the spot and the forward exchange mar
kets.
United States action to correct
basic payments imbalance
Some further immediate relief for our bal
ance of payments has been obtained through
measures such as the reduction in the duty
free exemption for American tourists travel
ing abroad from $500 to $100, some widen
ing of the preference for United States bidders
over foreign bidders in vying for Government
contracts, and tying of foreign aid to pur
chases in the United States. More impor
tantly, various steps have been taken to im
prove the basic payments position of this
country on a more permanent basis. The
adaptation of monetary and debt management
policies— and greater flexibility in their use—
to take into account directly and specifically
both domestic and international considera
tions is now an integral part of Government
policy in dealing with either deficits or sur
pluses in our international payments accounts.
Foreign exchange operations similarly help to
produce longer range benefits for our balance
of payments through their impact on the in
ternational payments mechanism.
Reduction of dollar drains through United
States military expenditures abroad and
through foreign aid has also been effected.
Since United States military spending over
seas is determined largely by our political
responsibilities and not by economic consid
erations, it cannot readily be cut simply in
order to improve our payments position, al
though measures to minimize the balance of
payments costs of the program are being
taken. The sharing of the financial burden of
mutual defense increasingly has been assumed
Billion* of 001101*1
4 .0 -
M ilita r y E xp e n d itu re s
M ilita ry Cash R e c e ip ts
3 .0 -
2 .0
-
1.01958
1959
I
960
(961
I
96 Z
1s t
Qtr.
1963
"Receipts include $470 million in advance payments in 1962 and
$92 million at an annual rate in the first quarter of 1963.
Note: First quarter 1963 at a seasonally adjusted rate.
Source: United States Department of Commerce.
by countries that are financially able to help
— partly by increasing their military pur
chases in this country. Germany and Italy, for
example, have agreed to increase their mili
tary procurement in the United States to
offset our military costs in their respective
countries. To the extent, also, that United
States foreign aid does not take the form of
direct exports of goods and services from the
United States, there is a net drain on our bal
ance of payments from this source. Greater
participation by other countries in assistance
to less developed areas, however, has shown
little progress because the extension of aid
oftentimes is impeded by the structure of in
ternal money and capital markets and by con
tinued strong domestic demand for invest
ment capital in the potential creditor country.
The expedient, therefore, of tying American
aid to purchases in the United States has been
adopted pending the elimination or easing of
these major obstacles. The proportion of
grant aid spent in the United States has been
rising steadily for the last three years. Other
forms of spending by Government agencies
abroad also have been subject to more careful
FEDERAL
102
RESE RVE
B ANK
scrutiny in order to effect economies wher
ever possible. At the present time, for ex
ample, reactivation of the barter program in
volving exchange of United States surplus
agricultural commodities for certain Govern
ment imports is reported to be under study.
Although savings from the various programs
mentioned may not be very large individually,
collectively they can contribute meaningfully
to a reduction of our payments deficit.
It is in the area of merchandise trade, how
ever, that most of the improvement in our
payments position will have to come in the
long run. Merchandise trade constitutes the
major share of both our payments and re
ceipts. The authority given the President in the
Trade Expansion Act of 1962 to negotiate
reciprocal reductions in tariffs and other bar
riers to trade provides an excellent opportu
nity for the United States to expand markets
abroad for its products. The so-called “Ken
nedy round” of tariff negotiations will take
place early next year. Success would lead to
an expanding volume of world trade in which
United States traders can share if they main
tain or improve their competitive standing.
The prospects for boosting our exports also
have been enhanced by the vigorous export
promotion program conducted by the Gov
ernment to inform domestic manufacturers of
the opportunities for trading abroad and to
assist them in marketing their output over
seas. Additional incentive to sell in foreign
markets has been provided by an export
credit insurance program, which covers both
political and commercial risks for shortand medium-term transactions, established
through the joint efforts of the privately or
ganized Foreign Credit Insurance Association
and the Export-Import Bank. Since its inau
guration early last year, the FCIA has been
able to reduce its premiums several times be
cause of favorable operating results.
Measures to speed up our rate of economic
growth— intended primarily for the domestic
economy— tend to have desirable balance of
OF
SAN
FRANCISCO
payments effects. The liberalized deprecia
tion allowances and provisions for investment
tax credits, for example, should increase the
efficiency and productivity of domestic pro
ducers and strengthen their ability to compete
both at home and abroad. Development of
export markets, however, is slow, so that the
benefits to our balance of payments will not
be apparent for some time.
The special message sent by President Ken
nedy to Congress on July 18 reaffirmed the
intention of the United States to maintain the
value of the United States dollar and its con
vertibility into gold at $35 per ounce, called
for one new piece of legislation, and outlined
other steps being taken to correct our pay
ments imbalance. Because United States cap
ital had moved into foreign long-term port
folio investments at a record annual rate of
$1.5 billion in the first six months of 1963 and
at a $1.2 billion rate in 1962, a temporary
new tax on United States investor purchases
of long-term securities (both equity and
debt) of designated foreign countries is being
proposed.1 The tax would be set at 15 percent
on purchases of foreign stocks and graduated
according to maturity on bonds and other debt
securities with maturities over three years,
with a maximum of 15 percent on securities
over 28Vi years in maturity. It is estimated
that the net effect of the tax would be to re
duce the return to United States investors by
an average of 1 percent, bringing yields on
foreign securities more into line with yields on
comparable domestic securities, and to cut
the outflow through portfolio investment to
$600 million a year and increase tax revenues
by approximately $100 million a year. An
other new development was the announce
ment that the United States had concluded an
agreement with the International Monetary
Fund for a 1-year standby credit of $500
million. The net effect of the standby arrange
ment would be to permit the United States to
1 Securities of less developed countries and of selected interna
tional institutions are to be exempted from the new tax.
July 1963
MONTHLY REVIEW
absorb dollars that would otherwise be sold
in the exchange markets against convertible
currencies by countries wishing to make re
payments to the Fund, and thereby lessen
pressures on the exchange rate for the United
States dollar. In addition, efforts to cut Fed
eral spending abroad by the Department of
Defense, for strategic materials, and through
foreign aid, and programs to increase exports
and foreign travel in the United States are to
be pursued even more vigorously than before.
The net savings resulting from stepped-up
activity in these areas are estimated to total
$900 million over the next 18 months. The
over-all gain, including the new tax on foreign
security transactions and the impact of higher
short-term rates on capital outflow, is ex
pected to reduce our payments deficit by
about $2 billion, according to Administration
sources.
Measures taken abroad to restore
international payments equilibrium
The task of reducing the basic payments
deficit and of curbing movements of liquid
funds has been significantly eased for the
United States by the measures taken simul
taneously by various foreign countries, some
of which have already been mentioned above.
These include the German and Dutch cur
rency revaluations in March 1961 when their
efforts to check inflows of short-term capital
by other means were failing to stem the tide.
Germany also modified its policy on foreign
exchange swaps with German commercial
banks in accordance with its aim to minimize
unstable flows of funds. The German central
bank at the end of 1962 further requested
German banks to hold to a minimum their
repatriation of funds for year-end windowdressing purposes for the same reason. France
and Italy, in addition, have initiated a series
of measures in the last few months to ration
alize their money and capital markets as a
means of enhancing their effectiveness in
channeling domestic savings into productive
investment. These latter moves may tend, at
the same time, to reduce the dependence of
these countries on foreign capital and may
even lead eventually to the opening of these
capital markets to foreign borrowers. Interna
tional capital transactions in general also have
been increasingly freed from restrictions, thus
facilitating more multilateral financing of in
ternational payments.
In other instances, action taken by various
countries in the domestic or international
sphere increasingly have been influenced by
considerations of their possible impact on
other countries. Thus, countries that have had
substantial payments surpluses, such as Ger
many, France, the Netherlands, and Italy,
have arranged advance debt repayments to
the United States, while Italy and France have
tried to contain inflationary pressures partly
by relaxation of import restrictions or lower
ing of import tariffs. A stronger payments
position was also responsible for the abolition
by France and the Benelux countries of re
strictions on trade with Japan-— restrictions
which had been permitted under Article 35 of
the General Agreement on Tariffs and Trade,
while steady increases in Canada’s foreign
exchange reserves resulted in the complete
removal by the end of March 1963 of the
temporary surcharges imposed on imports in
June 1962.
International cooperation— whether in the
form of inter-central bank assistance and con
sultation or multilateral financial arrange
ments (such as the International Monetary
Fund’s standby arrangement) or in the in
creased recognition by individual countries
that national policies can have widespread
international repercussions — thus has been
an outstanding development of the past few
years. International cooperation has proved a
fruitful avenue of approach to the problem of
easing balance of payments adjustments in a
world where trade and payments have been
increasingly liberalized.
103
FEDERAL
RESERVE
BANK
Surplus and deficit nations both
responsible for international
payments equilibrium
104
If international cooperation had not been
generally accepted, the international pay
ments mechanism would have been seriously
weakened. As it turned out, nations with bal
ance of payments surpluses and countries in
deficit have pooled their resources and their
efforts to bring their payments into better bal
ance. In the early postwar period, the United
States — as a surplus nation — undertook a
massive program of foreign aid, which re
sulted in a major redistribution of its large
holdings of gold. The revaluation of the Ger
man mark and Dutch guilder was dictated pri
marily by international considerations, while
the financial assistance granted to Canada in
1962 was extended by deficit and surplus
countries alike. Meanwhile, several of the
countries that have experienced payments
deficits— such as Canada, the United King
dom, and Japan— generally have tried to fol
low orthodox monetary and fiscal policies to
restrain expansionary pressures and thus bal
ance their international accounts.
The postwar period has brought home
clearly the necessity and desirability of par
ticipation by both surplus and deficit coun
tries in the attainment of international pay
ments equilibrium. Pursuit of an independent
course without regard to other countries would
lead to the transmittal of inflationary or defla
tionary pressures from one country to another
at the expense of international specialization
and the optimum allocation of resources. Nev
ertheless, the question arises as to the extent
to which international cooperation should be
carried. How much inflation or exchange ap
preciation should a surplus country, for ex
ample, undertake in order to help a deficit
country? And, conversely, how much defla
tion or devaluation should a deficit country
be expected to bear?
There are no hard and fast rules governing
OF
SA N
FRANCISCO
these situations because the variables are
many and the environments in which they
operate diverse. Some of the problems in
volved, however, might be pinpointed by a
brief examination of the German revaluation.
At the time of the appreciation of the
Deutschemark, the German economy was
strong, production was expanding, and the
balance of payments was persistently register
ing sizable surpluses. Credit restraint, how
ever, was ineffective because high interest
rates attracted a substantial inflow of both
foreign and overseas German capital. The 5
percent appreciation was decided upon by
the German authorities as an adjustment suf
ficient to bring German costs and prices into
better alignment with cost-price relationships
in other major industrial countries, after tak
ing into account expected trends in the econ
omy. The German authorities correctly an
ticipated that demand pressures and supply
limitations— particularly of labor— would be
come more important in the ensuing months
and years and would thus bring about a fur
ther adjustment. By the end of 1962, Ger
many’s surplus had been eliminated. A surplus
has reappeared this year, however, mainly
due to an influx of capital attracted by favor
able yields on securities offered on the Ger
man capital market, where credit demands
still are strong and the supply of savings lim
ited. The shift back to a surplus within a rela
tively short span of time— and at a time when
domestic inflationary pressures still are con
sidered a problem — points up the need for
constant adaptation of the policies of a sur
plus country to changes both in its own in
ternal position and in its relationships with
other countries.
In the case of a deficit country, what are
the limits on its policies? Should it be ex
pected to adopt deflationary policies affecting
the domestic economy and maintain them
until its international payments have been
brought into balance, without regard to sub
stantial underutilization of productive capac
MONTHLY REVIEW
July 1963
C H A N G ES IN O F F IC IA L GOLD AND FOR EIGN E X C H A N G E H O LD IN G S
OF S E L E C T E D C O U N TR IE S , 1959-62
(millions of United States dollars)
19591
1960
1961
1962
Europe
+
19
—
247
+
20 0
France
+
736
+
35 0
Germany
— 1 ,0 85
Italy
+
894
+
Netherlands
—
97
+
Spain
+
152
0
+
Austria
Belgium
+
Switzerland
United Kingdom
—
20
192
+
229
+
—
35
+
869
+
671
195
—
95
127
+
33 9
+
22
403
—
27
+
28
+
372
+
27 9
261
+
435
+
+
160
+
48 9
—
+
85
—
515
40
+
228
+
483
338
+
35 6
183
—
310
.— .
Jap an
+
524
+
502
A ll other
+
992
—
519
A ll foreigners
+ 1,6 88
International M onetary Fund
+
48
128
235
-—
+ 2 ,2 0 4
Can ad a
9
+
+ 4,36 8
+
109
+
+ 2,221
■
—
513
113
+ 1,107
+
584
1Country data adjusted to include gold payments to the International Monetary Fund in 1959 when quotas were enlarged. Figures for the
International Monetary Fund are adjusted to exclude increases in gold and convertible currency holdings due to the enlargement of
quotas.
Source: International Monetary Fund, International Financial Statistics.
ity and unemployment? For countries that
are important trading nations, the danger ex
ists that deflationary policies will carry the
deflation to other countries and cause a cumu
lative downward spiral in international eco
nomic activity. For key currency countries,
the limits may be even more restricted be
cause the deflation would reduce the avail
ability of international means of payment.
Under these circumstances, a higher rate of
economic growth, stimulated by expansionary
measures, clearly constitutes a more worth
while line of approach.
International payments position of
most major countries stronger
At the present time, the international pay
ments positions of most major countries are
stronger than at any time during the postwar
period. The economies of Japan, Canada, and
the leading countries of Europe have been
expanding steadily, and their international
reserves have been built up to generally ade
quate levels, although in some cases through
special financial assistance. The less devel
oped countries, however, are still faced with
payments problems, mainly due to a funda
mental imbalance between domestic savings
and consumer and investment demand rather
than because of a shortage of international
liquidity.
Nevertheless, a number of major problems
continue to confront various countries. The
surplus in Germany’s international accounts
has reappeared against a background of labor
shortage and price and wage pressures. The
large surpluses accumulated by France have
shown few signs of declining, despite a de
terioration in its merchandise trade balance.
France has gained reserves consistently since
the franc was devalued in December 1958, be
cause the currency adjustment placed France
in a very strong competitive position. Con
tinued accumulation of reserves by France
has tended to exert pressure on the payments
positions of other countries, despite efforts by
France to keep its reserves down by advance
debt repayments. Japan and Canada, after
surmounting balance of payments difficulties
last year, have turned their attention to the
105
FEDERAL
RESE RVE
BANK
OF
SAN
FRANCISCO
5urly earnings have favored the
1953=100
1953 =100
1953=100
'F o r France and the Netherlands, hourly wage rates in manufacturing.
Source: Organization for Economic Co-operation and Development.
stimulation of domestic economic expansion
without worsening their payments positions.
The United Kingdom has also oriented its
economic policies toward a broad expansion
ary program as the best means of stepping up
its rate of economic growth and of strength
ening its balance of payments.
Recent shift in price-cost relationships
favor the United States
106
The failure of United States balance of pay
ments statistics to show some visible improve
ment in our payments position indicates the
need for continued efforts to reduce our pay
ments deficit. This task should be facilitated
by the relative movement of costs and prices
in the United States and in some of the lead
ing industrial countries. Since 1957, and par
ticularly in the last two years, price increases
in the United States have been relatively
small. Both wholesale prices and consumer
prices have risen more rapidly in the major
European countries than they have in the
United States. Costs, especially of labor, have
climbed sharply as labor shortages have be
come widespread in most European coun
tries. Hourly earnings in Germany, for ex
ample, have risen much more sharply and
steadily than have earnings in the United
States. Wage increases within the past year in
many European countries have been outstrip
ping increases in productivity, in contrast with
the situation in earlier years when productiv
ity gains exceeded wage increases.
As a consequence, the competitive posi
tion of United States manufacturers in foreign
markets and in their own domestic markets
has improved. Wage increases here generally
have remained within the limits of productiv
ity gains. In view of the existence of substan
tial unused capacity and unemployed labor
resources, the United States is in a position
to maintain— or possibly even widen— this
advantage. In contrast, the approach of a
number of European countries and of Japan
to capacity production and shortages of
skilled labor will tend to limit further in
creases in productivity. The narrowing of the
disparity in prices and costs between the
United States and other major industrial
countries may prove to be of major signifi
cance. Continuation of this trend may con
tribute importantly to bolstering our balance
of payments position over the longer run be-
July 1963
MONTHLY REVIEW
cause it strengthens our competitive position
and improves our ability to export.
Recent price-cost developments favoring
the United States to some extent are a natural
outgrowth of postwar trends. The rapid rise
in productivity in the European countries in
the early postwar period was made possible
by the extensive replacement of obsolete or
war-damaged plant and equipment with
modern productive facilities and by the avail
ability of plentiful supplies of labor. Govern
ment spending and investment demand— fol
lowed by rising exports— were the principal
forces behind economic expansion. Rising
levels of production in turn have led to rising
levels of consumer demand, which now is
competing actively with the investment sector
for materials and labor. The resultant price
pressures partly reflect the strength of these
competing demands, with the consumer sec
tor striving to increase its share in the larger
national product even if this means bidding
up prices.
Problems still face the United States
Despite the favorable turn in price-cost
relationships, the United States cannot afford
to become complacent about its balance of
payments. The payments gap still is large,
and further progress is liable to be slow be
cause reduction of the hard core of imbalance
will take time. Unpredictable shifts in the
payments positions of other countries, more
over, may delay, rather than accelerate, our
progress from time to time. In the meantime,
the United States may continue to lose gold
as long as countries view their dollar holdings
as excessive in relation to their requirements
and as long as they believe that a high ratio
of gold to total international reserves is an
indispensable adjunct of economic strength
and security. Because of the limited supplies
of new gold, such an attitude tends to over
look the possibility that achievement of a
more balanced set of international payments
and reserve relationships would reduce the
magnitude of swings in the payments position
of individual major countries and thus would
reduce their need for gold. International fa
cilities to meet short-term fluctuations in any
country’s payments, moreover, have been
strengthened, and these, too, should help both
to reduce the needs of individual countries for
large reserves of gold and to increase the
safety of holding reserves in the form of major
currencies.
Economic as well as noneconomic consid
erations dictate the maintenance of United
States foreign aid. The underdeveloped state
of capital markets abroad also dims the pros
pects for an early substantial reduction in
foreign long-term borrowing in the United
States. Japan, for example, has announced
its intention of increasing its reliance on for
eign capital for long-term investment. Until
other countries are able to supply capital
market facilities that are as broad and as resil
ient as the United States capital market, our
international responsibilities as a key currency
country will include supplying long-term cap
ital to the rest of the world. The temporary tax
on foreign security transactions proposed by
President Kennedy does not bar foreigners
from our capital market but will tend in effect
to equalize the costs of borrowing in the
United States with borrowing costs abroad.
Where capital is not obtainable elsewhere, the
United States capital market still will consti
tute an important source of funds. Moreover,
it can play a useful role in bringing together
foreign dollar holders who are interested in
investing in dollar-denominated securities.
Of more immediate concern is the nearterm outlook for United States merchandise
trade. The evolution of the European Com
mon Market countries into a large, competi
tive trading bloc has resulted in a significant
expansion of trade because of the area’s gen
erally liberal policies. But in certain fields of
particular interest to the United States, recent
developments have given some cause for dis
quiet. Agricultural policy, for example, has
iq 7
FEDERAL
RESERVE
BANK
tended to be restrictive of trade— a disad
vantage to the United States since the Com
mon Market is the largest single dollar market
for our agricultural commodities. Limitations
on admission to Common Market member
ship also may tend to have adverse repercus
sions on the freer flow of goods, services, and
capital. Continued expansion in the major in
dustrial countries, although at a slower rate
than in 1961-62, indicates, however, that
United States exports will continue to in
crease.
The disappointing rate of economic growth
that has characterized the United States econ
omy in recent years has been an indirect, but
nonetheless crucial, factor affecting our bal
ance of payments. The incentive for manu
facturers to expand and modernize their plant
and to increase output has been weakened,
while more sophisticated investors have sought
greener pastures overseas in the absence of
adequate and equally attractive investment
outlets at home. The competitive position of
American manufacturers at home and abroad,
as a consequence, has therefore suffered. A
program to reduce the tax burden on the
economy through tax reduction and reform,
in addition to other measures to stimulate our
growth rate, therefore might have a favorable
impact on our payments position. Our exports
would become more competitive in world
markets as production was carried on more
efficiently and at lower cost, while importcompetitive industries would find their mar
ket position improved, even though imports
would tend to rise in response to higher levels
of economic activity and this would off
set some of the expansion in exports. The
strength of the economy would encourage
direct and portfolio investment in this coun
try by United States and foreign investors as
opportunities for more profitable employ
108
OF
SA N
FRANCISCO
ment of funds opened up here. Foreigners
would show increased willingness to hold dol
lars. Increased reliance on fiscal policy at this
time should benefit both the domestic econ
omy and our balance of payments. Fiscal
policy shares with monetary policy the re
sponsibility for maintaining economic growth
at levels of relatively full employment and
stable prices.
Constant shifts in payments relationships
and in particular accounts within the balance
of payments underscore the necessity of every
country remaining alert to the significance
and implications of payments developments
for their domestic economy and for their re
lations with the rest of the world. The socalled “balance of payments discipline” has
consciously and increasingly been integrated
into national policies because of the realiza
tion that domestic objectives can be blocked
effectively by offsetting developments in the
international arena. In some countries, the
discipline of the balance of payments is im
mediate and cannot easily be ignored, even
temporarily, particularly in countries where
foreign transactions are a major determinant
of income and output. In the United States,
on the other hand, exports and imports of
goods and services each account for 5 percent
or less of gross national product, and the do
mestic impact of balance of payments devel
opments is relatively obscured. In such a
situation, remedies to correct a payments im
balance that are appropriate for a country
heavily dependent on foreign trade may not
be equally effective or practicable. Neverthe
less, no real conflict exists between a country’s
long-range internal and external requirements
because the basic objectives of each are iden
tical, namely, a strong and healthy economy
whose currency is highly regarded both at
home and abroad.
July 1963
MONTHLY REVIEW
District Business Highlights
by a number of key indica
tors, the pace of business activity in the
Twelfth District about matched that in the na
tion during May and June. Following a sharp
drop in employment in April, which carried
the unemployment rate in the District1 to 6.0
percent of the labor force (compared with 5.4
percent in March), employment rose slightly
in May and the unemployment rate in the Dis
trict dipped to 5.9 percent. Nationally, the
unemployment rate, which rose to 5.7 percent
in April from 5.6 percent in March, increased
further to 5.9 percent in May— the same rate
as in the District. At this level, the unemploy
ment rate was higher than the 5.5 percent rate
which prevailed in both the District and the
nation a year ago. However, during this 12month period, employment and the labor
force increased at a faster rate in the District
than in the nation; consequently, the num
ber of unemployed rose somewhat less rapidly
in the District.
Although total employment in the District
rose during May, manufacturing employment
again fell for the fourth consecutive month.
The decline centered in the Pacific Coast
States, where employment in defense-related
manufacturing industries (ordnance, electri
cal equipment, and aircraft) dipped to a level
2 percent below the 1963 high which pre
vailed in January. Nevertheless, in May, total
nonfarm payroll employment in all but two
(Washington and Idaho) of the nine District
states exceeded year-ago levels; California,
with a gain of almost 200,000, accounted for
90 percent of the total increase in the District
over the 12-month period.
In June, the rate of unemployment in the
Pacific Coast States was unchanged from the
May figure of 5.9 percent, whereas the nas m e a su re d
A
1Previously reported for the Pacific Coast States only, seasonally
adjusted labor force data are now available for all states in the
Twelfth District except Alaska and Hawaii.
tional rate declined to 5.7 percent. Civilian
employment remained virtually unchanged,
with an increase in agricultural employment
offsetting a slight loss in the nonagricultural
sector. The decline in nonfarm employment
was again concentrated in manufacturing and
was accentuated by the labor dispute in the
lumber industry in Oregon and Washington.
Weakness continued in the defense-related in
dustries, as producers of aircraft and electrical
equipment laid off additional workers. The
reduction in aircraft employment occurred in
Washington, with the number of such workers
in California remaining at the April-M ay
level. However, employment in the ordnance
industry in California increased by 0.7 per
cent in June, the first monthly increase since
February of this year.
District department store sales rose 10 per
cent in May, on a seasonally adjusted basis,
about recouping the April decline. In June,
sales fell slightly below the May level, ac
cording to preliminary data. In both the
District and nation, department store sales
during the first half of 1963 have exceeded
year-ago levels by about 4 percent. New car
registrations in California also continued at
high levels in May and June. Registrations
during the first six months were about 14 per
cent above those in the corresponding period
of 1962, surpassing a 10 percent gain in sales
nationally.
Private housing starts in the West1 rose by
about 6 percent in May, following a similar
gain in April. Preliminary figures for June in
dicate a decline of 5 percent. The increase in
May was somewhat larger than the national
gain, and the June decline was less in the Dis
trict than in the nation. Various “advance in
dicators” of District construction activity also
continued to post strong gains in May. The
1The 13 western states, including Alaska and Hawaii.
FEDERAL
RES ERV E
BANK
value of total construction contracts awarded
in District states1 rose sharply to $1.1 billion
in May, representing a gain of 32 percent over
April. The value of construction awards dur
ing the first five months of 1963 was 23 per
cent above that of a year ago, compared with
only a 5 percent gain in the nation. As com
pared with a year ago, all District states for
which data are available, except Oregon, re
corded a larger volume of construction awards
through May of this year, although the gains
ranged from a low of about 1 percent in Wash
ington, which had a high level of activity last
year associated with the World’s Fair, to a
1All District states, except Alaska and Hawaii.
OF
SAN
FRANCISCO
high of 58 percent in Nevada. According to
April data, the number of building permits
authorized in the District during the first four
months of the year also was maintained at a
high level, surpassing that of a year ago by
about 20 percent. District states showing par
ticularly strong gains over last year were
Nevada and California, while Hawaii and the
Pacific Northwest States recorded a lower vol
ume of permits than last year. The generally
high and rising volume of contract awards
and building permits, together with a continu
ing ample supply of mortgage funds, indicates
a continuing high level of construction activity
in the Twelfth District in the months ahead.
Reprint Available
Reprints of the report “Federal Reserve Open Market
Operations in 1962” by Robert W. Stone, Manager of
the System Open Market Account and Vice President of
the Federal Reserve Bank of New York, which appeared
in the April 1963 issue of the Federal Reserve Bulletin
are available on request from the Federal Reserve Bank
of San Francisco or the Board of Governors of the Fed
eral Reserve System, Washington, D. C.
110
FE DE RAL
RESERVE
BANK
OF
SAN
FRANCISCO
BANKING AND CREDIT STATISTICS AND BUSINESS INDEXES— TWELFTH DISTRICT'
(Indexen:
Year
and
Month
1929
1933
1939
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1962
June
July
August
September
October
November
December
1963
January
February
March
April
May
June
19 5 7 * 1 9 5 9 — 1 0 0 .
Condition items of all member banks5' 7
Demand
U.S.
Total
Loan 8
and
Gov't
deposits
time
discounts securities adjusted1 deposits
2,239
495
1,234
1,790
1,609
720
951
1,486
1,967
1,450
1,983
2,267
7,997
9,220
6,639
10,515
9,418
7,942
8,699
11,196
11,124
7,239
11,864
9,120
12,613
12,169
9,424
6,452
13,178
11,870
10,679
6,619
12,729
12,077
13,812
8,003
16,537
13,375
12,452
6,673
13,034
17,139
6,964
13,060
18.499
14,163
15,116
8,278
Bank debits
index
31 cities*- s
7,689
7,532
7,309
7,471
7,471
7,501
7,608
13,101
13,535
13,255
13,446
13,969
14,012
14,431
16,511
16,587
16,655
16,772
16,934
16,827
17,093
143r
144r
144r
143
142r
144r
146
21,035
21,403
21,480
21,714
2t,894
22,140
7,454
7,130
7,130
7,103
7,009
7,153
13,917
13,527
13,646
14,175
13,427
13,610
17,390
17,532
17,760
17,868
18,111
18,264
146
149
152
147
152
152
Year
P e tro le u m
and
1929
1933
1939
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1962
M ay
June
July
August
September
<>ctober
November
December
1963
January
February
March
April
May
19
8
14
69
71
80
88
94
96
109
117
125
141
19,625
19,669
20,017
20,165
20,460
20,589
21,102
In d u s tria l production (p h y sical v o lu m e
m onth
D o lla r a m o u n t * in m illio n* of d o lla r s )
Lu m b er
C rud e
Bank rates
on
short-term
business
loans8’ 1
Total
nonagri
cultural
employ
ment
‘86
85
90
95
98
98
104
106
108
113
86
84
90
96
101
96
103
103
103
109
5,52
112
113
113
114
114
114
115
108
109
109
110
111
110
111
102
106
105
107
104
102
101
123
123
124
122
121
128
127
106
105
105
106
106
105
106
116
116
116
110
116p
111
111
111
110
110JJ
90
105
105
127
128
130
118
129
107
107
107
107
106
5.49
5^50
5.46
5.53
)5
store
sales
(value)5
18
11
19
74
74
82
91
93
98
109
110
115
123
Retail
food
prices
7, 1
4.14
4.09
4.10
4.50
4.97
4.88
5.36
5.62
5.46
53
34
38
93
93
92
94
97
101
101
103
104
W a te rb o rn e Foreig n T ra d e In d e x 7’ »* “
Ex p o rts
Cem ent
D e p 't
Car
loadings
(number)®
110
56
83
108
103
112
112
103
96
101
95
94
104
7
R efin e d
Total
mf’g
employ
ment
7
E le c tric
pow er
T o ta l
D ry Carg o
Im p o rts
S te e l'
Copper
Tanker
T o ta l
84
35
62
101
102
101
107
104
93
98
109
98
95
97
91
54
70
112
114
111
111
109
106
98
96
95
96
96
61
39
49
90
95
92
96
100
103
96
101
104
108
111
34
17
35
77
82
83
90
97
93
99
108
101
105
111
16
92
105
85
102
108
114
94
92
102
111
100
89
15
70
100
98
90
104
114
113
101
86
112
119
128
13
11
17
61
69
73
82
89
95
97
107
115
124
96
55
82
86
71
67
84
101
117r
89
95
122
126
61
43
81
56
57
72
105
124
86
90
123
134
193
i90
lOlr
113
96
117r
91
96
96
108
120r
104
20
12
16
33
51
44
52r
75
95
92
112
133r
134
D r y Ca rg o
55
iir
61r
70
71
80
86
93
95
113
117r
116
Tanker
*
' 1
18
41
28
35
69
97
91
112
142r
145
96
94
98
95
98
98
104
103
96
96
96
97
96
97
97
97
108
112
115
114
113
112
113
113
111
94
115
117
115
120
115
121
107
103
84
89
90
88
91
100
136
130
112
115
119
127
127
127
131
128
128
134
134
132
135
134
104
82
116
105
96
93
154
145
121
85
130
121
105
91
157
104r
59
74
76
61
72
99
143
137
156
154
168
137
158
163
134
138
132
122
136
122
154
127
124
137
170r
172
186
145
161
183
140
101
94
104
89
96
96
97
98
9S
113
111
110
108
112
122
118
122
105
111
lOOp
114p
127p
138p
145p
125
130
134
...
1 Adjusted for seasonal variation, except where indicated. Except for banking and credit and department store statistics, all indexes are based upon
data from outside sources, as follows: lumber, National Lumber Manufacturers’ Association, West Coast Lumberman’s Association, and Western
1’ine Association; petroleum, cement, and copper, U.S. Bureau of Mines; steel, U.S. Department of Commerce and American Iron and Steel Institute;
electric power, Federal Power Commission; nonagricultural and manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state
agencies; retail food prices, U.S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. Departm ent
of Commerce.
2 Annual figures are as of end of year, monthly figures as of last Wednesday in month.
3 Demand deposits, excluding
interbank and U.S. Government deposits, less cash items in process of collection. Monthly data partly estimated.
* Debits to total deposits
except interbank prior to 1942. Debits to demand deposits except U.S. Government and interbank deposits from 1942. _
s Daily average.
6 Average rates on loans made in five major cities, weighted by loan size category.
7 Not adjusted for seasonal variation.
8 A new
index now combining not only Los Angeles, San Francisco, and Seattle food indexes but also Portland. Reweighted by 1960 Census figures on popu
lation of standard metropolitan areas.
* Commercial cargo only, in physical volume, for the Pacific Coast customs districts plus Alaska and
Hawaii; starting with July 1950, “special category” exports are excluded because of security reasons.
10 Alaska and Hawaii are included in
indexes beginning in 1950,
p—Preliminary.
r—Revised.
* Less than 0.5 percent.
112
@FedFRASER