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CONFIDENTIAL (FR)
CURRENT ECONOMIC AND FINANCIAL CONDITIONS
August 14,
By the Staff
Board of Governors
of the Federal Reserve System
1974
TABLE OF CONTENTS
Section
II
DOMESTIC NONFINANCIAL SCENE
orders and shipments
.
.
.
.
.
.
.
. . . . . .
. . . . .
. . . . . .
.
Second quarter GNP and related items
. . . . .
Industrial production .
Retail sales . . . . . . . . . . . .
Unit sales of consumer durables . .
Conference Board survey of consumer
attitudes and buying plans . ........
Manufacturers'
. . .
.
. . . . . . . .
Inventories
. . . .
Cyclical indicators
Construction and real estate
Labor market . . . . . . .
Earnings . . . . . . . . . . .
. . . . .
. . . . .
..
..
. .
. .
. . . .
.
Collective bargaining
. . ....
Consumer prices
Wholesale prices . . . .
Agriculture
. . . . . .
. . .
. . .
. .
. . .
. .
. .
. .
. .
.
. . .
. ......
. . .
. .
.
. .
.
.
..
. .
. . .
. .
.
. .
.
. . . .
..
. .
.. .
.
. .
INTERNATIONAL DEVELOPMENTS
10
12
13
17
19
-
19
21
24
25
.
. .
-
. . .
. . .
. ..
. . ..
. . .
. . ...
.
. . . . . .
. . . . .
. . .
. . . . . .
. . ..........
. . . . . . . . .
. . . . . . . .
. .
.
. .
..
. .
. .
. .
. .
. .
. . .. .
. . . .
. .
.
. . .
.
. .
.
. . ..
. . .
.. ...
.
.
.
-
.-
3
8
10
13
14
16
19
24
2
IV
Foreign exchange markets ...................
.
.
* . *.
Euro-dollar market . . . . . . . .
U.S. balance of payments . . . . . . . . . . . . . . . . . . .
.
. .
. . . . . .
. . . . . . . . . .
U.S. foreign trade
Trade developments in the major
. . . . .
. . . . . . . . . . .
industrial countries . .
APPENDIX A:
9
-
.
.....................
. .
6
-
-
...
.
. . .
.
. . . . . .
. . .
.. . .
. . . .
. . .
. . .. . .
.
. . ..
. . ..
. . . .
.
-
1
2
3
5
-
.
. .
. . . .
. . . .
...
III
Bank credit . . . . . . . . . .
Nonbank financial intermediaries
Consumer credit
. . . . . . ..
Short-term interest rates . . .
Treasury coupon market . . . . .
Long-term securities markets ....
Mortgage market .
. . . . .
Agricultural finance . .
. . .
Federal finance
. ..
. .
. .
. .
. .......
DOMESTIC FINANCIAL SITUATION
Monetary aggregates
Page
Highlights of the 1974 Annual GNP Revisions . . . .
-
1
3
5
8
-
14
- A-1
DOMESTIC NONFINANCIAL
SCENE
August 14, 1974
II
--
T - 1
SELECTED DOMESTIC NONFINANCIAL DATA
AVAILABLE SINCE PRECEDING GREENBOOK
(Seasonally adjusted)
Latest Data
Per Cent Change From
Three
Preceding
Periods
Year
Period
Earlier
Earlier
(At Annual Rates)
Period
Release
Date
Data
Civilian labor force (mil.)
Unemployment rate
Insured unemployment rate
Nonfarm employment, payroll (mil.)
Manufacturing
Nonmanufacturing
Private nonfarm:
Average weekly hours (hours)
Hourly earnings ($)
Manufacturing:
Average weekly hours (hours)
Unit labor cost (1967=100)
July
July
June
July
July
July
8/2/74
8/2/74
7/24/74
8/2/74
8/2/74
8/2/74
91.2
5.3
3.4
77.0
19.9
57.1
July
July
8/2/74
8/2/74
36.9
4.20
36.7 1/
4.18 1/
36.6 1/
4.08 1/
37.2 1/
3.91 1/
July
June
8/2/74
7/29/74
40.3
131.6
40.1 1/
12.9
39.3 1/
13.2
40.7 1/
Industrial production (1967=100)
Consumer goods
Business equipment
Defense & space equipment
Materials
July
July
July
July
July
8/16/74
8/16/74
8/16/74
8/16/74
8/16/74
125.7
130.0
129.7
81.2
129.3
Consumer prices (1967=100)
Food
Commodities except food
Services 2/
June
June
June
June
7/21/74
7/21/74
7/21/74
7/21/74
147.0
160.0
136.4
Wholesale prices (1967=100)
Industrial commodities
Farm products & foods & feeds
July
July
July
8/8/74
8/8/74
8/8/74
160.9
June
7/17/74
3/
Personal income ($ billion)-
Mfrs. new orders dur. goods ($ bil.)
Capital goods industries:
Nondefense
Defense
3.3
5.2
3.3
1.9
5.1
.8
1/
1/
1.0
5.6
.0
7.4
3.8
5.0
3.4
.1
- 1.1
.4
1/
1/
2.6
4.7
2.7
2.0
.3
2.5
8.6
9
2.6
4.7
5.6
3.0
1.9
-. 8
-2.2
5.4
.1
-1.2
11.6
3.8
16.0
12.0
10.5
3.0
14.9
10.6
11.1
14.7
10.6
9.3
157.6
170.2
44.6
32.9
78.1
22.2
31.7
20.4
25.1
1141.8
7.8
8.8
-.
150.9
10,1
8.8
9.0
(Not at Annual Rates)
.1
11.2
- 4.2
4.2
- 1.4
3.0
-20.5
13.10
11.2
6.2
10.2
-15.5
June
June
June
7/31/74
7/31/74
7/31/74
7/31/74
46.7
13.3
11.6
1.7
June
June
June
8/13/74
7/31/74
8/13/74
1.48
1.64
1.32
June
7/31/74
.694
July
July
8/9/74
8/9/74
46.3
11.9
4.0
2.1
4.5
2.6
8.2
7.7
Auto sales, total (mil. units)Domestic models
Foreign models
July
July
July
8/8/74
8/8/74
8/8/74
9.5
8.2
1.3
2.6
2.1
6.0
3.2
3.9
-1.3
-17.3
-15.6
-27.0
Housing starts, private <thous.)Leading indicators (1967=100)
June
June
7/17/74
7/29/74
Inventories to sales ratio:
Manufacturing and trade, total
Manufacturing
Trade
Ratio:
Mfrs.' durable goods inventories to unfilled orders
Retail sales,
GAF
1/
total ($ bil.)
Actual data.
2/
June
Not seasonally adjusted.
I/
1/
1595.0
175.4
3/ At annual cate.
1/
1.45-1.611.29-
S1/
1.44F
1.621/
1.28.722-
-
8.1
.4
'6.4
1.3
1
14/
1/
.766-
-25.9
f6.8
II
- 1
DOMESTIC NONFINANCIAL DEVELOPMENTS
Second quarter GNP and related items.
Gross national
product rose $24.7 billion in the second quarter according to
preliminary Commerce Department estimates.
The revised estimate
of the first quarter increase was essentially unchanged at $14,8
billion.
In real terms, GNP declined at a 1.2 per cent annual rate
in the second quarter following a 7.0 per cent first quarter drop.
The implicit GNP price deflator rose at an 8.8 per cent annual
rate in the second quarter, and the gross private product fixedweighted price index rose at a 12.3 per cent rate, compared to a
14.1 per cent rate in the first quarter.
The Commerce estimates indicate that consumer spending
rose $26 billion in the second quarter; in real terms this was about a
2 per cent rise at an annual rate following a very sharp first
quarter decline.
Durable goods purchases (mainly reflecting increased
auto buying) rebounded after dropping sharply in the first quarter.
The pace of business capital spending picked up a bit in the second
quarter, but almost all of the increase was due to price increases;
inventory investment was about $2 billion below the first quarter.
Net exports of goods and services at close to zero were off sharply
from the first quarter as import increases--mainly reflecting an
increased volume of oil imports at sharply higher prices--far outstripped export expansion.
Government purchases rose less than in
the first quarter as growth in State and local outlays slowed.
II
- 2
Personal income and disposable income both rose more
rapidly than in the first quarter but the increase in personal
consumption outlays was even more rapid.
As a result the saving
rate declined to 7.6 per cent from 8.9 per cent in the first
quarter (which, itself, was down from the record high 9.5 per
cent in the fourth quarter of 1973).
Industrial production.
Industrial production in July was
virtually the same as in May and June.
The total index at 125.7 per
cent of the 1967 average was 0.8 per cent below a year earlier.
A
moderate rise in production of consumer goods was about offset by
a large drop in output of construction products.
Production of
both business equipment and industrial materials were unchanged.
Auto assemblies were scheduled to increase 10 per cent
in July, but, mainly because of strikes at parts supplying factories,
rose only 2 per cent.
August.
These strikes have continued so far into
Output of other durable consumer goods in July was unchanged
and production of nondurable consumer goods rose moderately.
Out-
put of business equipment reached a peak in May and has been
maintained at that level in both June and July.
Steel production in July was also unchanged, as was output of other durable goods materials and nondurable goods materials.
(Confidential until released, August 15 -
p.m.)
II
- 3
INDUSTRIAL PRODUCTION
(1967=100,
1973
July
seasonally adjusted)
rMay
1974
p June
e July
Per cent change
Year
Month
ago
ago
Total index
Market groupings:
Final products
Consumer goods
Business equip.
Materials
126,7
125.7
125.6
125.7
.1
-. 8
122.1
132.9
123.0
130.9
122.5
130.3
129.8
129.2
121.8
129.4
129.7
129.4
122.3
130.0
129.7
129.3
.4
.5
0
-. 1
.2
-2.2
5.4
-1.2
Industry groupings:
Manufacturing
Durables
Nondurables
Mining & utilities
126.5
123.8
130.6
130.4
125,6
122.2
130.7
128.3
125.3
121.8
130.4
127.9
125,5
122.1
130.5
128.5
.2
.2
.1
.5
- .8
-1.4
- .1
-1.5
Note:
Industrial Production is confidential until released Thursday,
August 15, 1974.
Retail sales,
Sales in July rose 4.0 per cent from June,
continuing the improved pattern of sales suggested by the upward
revisions in the data for May and June.
All major categories of
stores reported higher sales, but the largest increase was in the
automotive group which rose almost 10 per cent.
Total sales excluding
autos and nonconsumer items, however, were also strong, with a gain
of almost 3 per cent.
Upward revisions in previous estimates of sales for May
and June raised the increase from the first to second quarter to
2.9 per cent from 2.5 per cent.
But in real terms, sales remained
at the reduced first quarter level.
II
-4
RETAIL SALES
(Seasonally adjusted, percentage change from previous period)
May
1974
June
July
1974
QI
Q II
Total sales
1.5
2.9
1.4
- .9
4.0
Durable
-2.8
4.3
2.5
-1.9
6.3
Auto
-8.1
5.4
2.7
- .6
9.9
4.2
3.8
2.4
-3.2
2.8
Furniture &
appliances
3.5
2.2
.9
Food
4.3
1.7
1.1
- .4
- .1
2.8
General
merchandise
Gasoline
3.8
3.9
2.0
8.3
1.6
2.3
-1.2
2.1
1.8
2.6
Total, less auto and
nonconsumption items
3.6
2.5
1.
- .7
2.9
GAF
3.8
1.7
2.0
-1.3
2.1
.
.2
-1.8
3.0**
Nondurable
Real*
*
-2.1
Deflated by all commodities CPI, seasonally adjusted.
** Estimated.
2.9
II
- 5
Unit sales of consumer durables.
Sales of new domestic-
type autos in July were at an 8.2 million unit annual rate, slightly
above June but a sixth below July last year.
Large car sales continued
their steady improvement from the lows last winter, but were down 18
per cent from a year earlier.
Meanwhile, small cars were the same as
in the preceding two months but 8 per cent below July 1973.
A sales
pick-up at the end of the month was due in part to consumers'trying to
beat the big price increases announced for the 1975 models as well as
taking
advantage of manufacturers' rebates to dealers on sales of
some small cars.
Stocks of domestic-type new cars increased slightly in
July, the first monthly increase this year.
The supply stood at 56
days' sales at the end of July compared to 55 days in June and 51 days
last July.
Estimates of foreign auto sales in July indicate sales rose
to a 1.3 million unit rate, a little above the June rate but a quarter
below July last year.
On a seasonally adjusted basis, the import share
was 13.5 per cent in July, about the same as in June but below the
15.2 per cent of a year ago.
Factory sales of major home appliances, TVs, and radios in
the first three and a half weeks of July were down considerably from
both June and a year earlier.
All home goods in the index shared this
decline with the exception of freezers and washers which were above
sales a month earlier.
II
- 6
SELECTED SALES OF CONSUMER DURABLES
Seasonally adjusted
July
Annual
Auto sales, total
Foreign
Domestic
Large
Small
11.5
1.8
9.7
7.0
2.7
I/
e/
151
160
77
148
Per cent change from
1974
May
rates,
9.1
1.2
7.9
5.4
2.5
Indexes,
Home goods factory
unit sales
TV's 1/
Radios 1/
Major appliances
Per cent change from
1974
1973
1973
153
165
115
148
June
July
Year ago
Month ago
millions of units
9.2
1.2
8.0
5.5
2.5
3
8
2
4
0
9.5
1.3
8.2
5.7
2.5
-17
-27
-16
-18
- 8
1967=100
157r
177
137
144r
1 40e
1 50
115
131e
-11
-15
-16
-9
-7
-6
49
-11
Includes domestic and foreign label imports.
Estimated on the basis of data through July 20.
Conference Board survey of consumer attitudes and buying plans.
The survey taken in late May and early June suggested a continuation
over the near-term of the pattern of limited discretionary purchases.
Consumer attitudes were less pessimistic than at the height of the
energy crisis but little changed from the relatively depressed levels
of the April survey.
The insignificant drop in the composite index of
consumer confidence reflected small downward shifts in appraisals of
the outlook for the economy in the second half of the year.
Evaluations
of present business and employment conditions were almost identical
II
- 7
to the previous bi-monthly survey while there was a slight increase in
the number of respondents expecting income increases in the next six
months.
More strength was indicated in the composite index of
buying plans, which rebounded from the previous survey, but this index
was still historically low.
purchase plans for used cars.
Moreover, most of the improvement was in
Very few families were planning to buy
homes and major durable appliances.
II - 8
CONSUMER EXPECTATIONS AND INTENTIONS
1974
1973
MayJune
JanuaryFebruary
---- Composite Series:
Consumer Confidence Index
Buying Plans Index
93.4
111.1
56.0
89.2
MarchApril
MayJune
1969-1970=100---
85.9
87.6
83.3
97.5
------ Appraisal of Present Situation----(Per cent)
Business Conditions
Good
Bad
Employment
Jobs plentiful
Jobs not so plentiful
31.3
12.5
18.1
22.7
22.8
17.1
22.4
17.1
20.8
54.5
12.6
55.3
17.5
55.5
17.8
55.2
---
Business Conditions
Better
Expectations for Six Months Hence---(Per cent)
17.9
10.9
19.7
17.4
Worse
Employment
More jobs
13.2
33.4
13.8
14.9
16.1
9.8
16.5
14.9
Fewer jobs
Income
Increase
Decrease
20.9
40.9
20.6
20.9
28.7
5.8
23.4
10.6
27.9
8.0
28.8
8.4
----- Plans to Buy Within Six Months-----(Per cent)
Automobile
New or used
New
Used
Home
New or used
Major appliances
Total plans
8.3
4.3
3.6
5.1
2.7
2.1
5.3
3.2
1.8
7.0
3.7
3.1
3.2
2.7
2.8
2.9
37.9
33.4
31.1
31.9
II - 9
Manufacturers' orders and shipments.
New orders for durable
goods were about unchanged in June (p), following a 5.9 per cent
increase in May.
Machinery and aircraft orders were off, but
primary metals rose strongly.
Nondefense capital goods orders were
down 1.4 per cent following a 1.0 per cent drop in May.
With prices
continuing to rise sharply, total durable goods orders, in real terms,
fell 2.6 per cent in June and nondefense capital goods orders were
off 3.7 per cent.
For the second quarter, new orders for durable goods rose
9.4 per cent (not at annual rate) following a 1.6 per cent drop in
the first quarter.
All market categories except defense capital
goods (reflecting a sharp drop in aircraft orders) showed a marked
improvement in the second quarter.
Nondefense capital goods orders
rose 4.9 per cent following a 2.1 per cent first quarter increase.
In real terms, however,
new orders for durable goods were
up only 3.0 per cent in the second quarter,
decline in
the first
quarter.
following a 4.9 per cent
Nondefense capital goods orders edged
up 0.4 per cent in the second quarter, following no
change in the
previous period.
Shipments of durable goods were up 0.8 per cent in May and
unfilled orders grew by 3.1 per cent.
- 10
II
MANUFACTURERS'
NEW RDERS FOR DURABLE GOODS
(Per cent changes)
Q I from
1974
Q II from
Q IV 1/
Durable goods, total
Excluding defense
Excluding primary metals &
motor vehicles and parts
Primary metals
Motor vehicles & parts
Household durables
Nondefense capital goods
Defense capital goods
Construction & other
durables
Durable goods total, in 1967
- 1.6
Q I 1/
June from
May (P)
9.4
10.2
-
- 1.9
2.2
- 3.4
-17.1
4.0
32.8
11.0
- 1.9
4.5
2.3
1.1
2.1
5.7
4.8
4.9
- 7.9
- 9.1
- 1.4
-20.5
2.0
4.7
2.1
- 4.9
3.0
- 2.6
.1
.8
Nondefense capital goods,
in 1967 $
.0
.4
- 3.7
1/ Changes between quarters are based on quarterly average levels.
Inventories.
Book value of manufacturing and trade
inventories increased at a $47 billion annual rate in June (p),
following a $48 billion rise in May.
For the second quarter the
increase in inventories was at an annual rate of $40 billion, up
slightly from the $37 billion first quarter rate.
However, the rapid
increase in second quarter prices indicates a substantial reduction
in GNP inventory investment.
The $28 billion annual rate of rise in manufacturing stocks
in June occurred mainly in durable goods, particularly machinery and
II
blast furnaces and steel mills.
tion in
- 11
By stage of processing, the accelera-
rate of increase was most noticeable in
inventories.
finished goods
$7 billion
Wholesale trade inventories increased at a
rate in June following a $9 billion rise in May.
Retail inventories
rose at an annual rate of $12 billion in June, up from the $9 billion
May rate.
in
Retail auto stocks rose $1 billion in June after declining
each of the previous four months.
BUSINESS INVENTORIES
(Change at annual rates in seasonally adjusted
book values, $ billions)
1974
1973
Q
Manufacturing,
Durable
Nondurable
Trade, total
Wholesale
Retail
Auto
total
Q II
36.5
36.9
39.7
47.1
19.0
12.8
6.3
17.5
6.6
10.9
22.5
14.3
8.2
14.4
9.7
4.7
27.2
17.0
10.2
12.5
5.1
7.3
28.4
18.6
9.7
18.8
7.2
11.6
4.4
Manufacturing & trade
QVI
- 2.5
- 1.0
1.4
June (p)
The manufacturing and trade inventory-sales ratio increased
to 1.48 in June.
The ratio of inventories to unfilled orders at
durable goods producers declined further to 0.694 in June.
II
- 12
INVENTORY RATIOS
1973
1974
June (p)
May
1.46
1.60
1.93
1.21
1.45
1.61
2.02
1.17
1.48
1.64
2.04
1.20
1.30
1.15
1.41
1.33
1.16
1.45
1.29
1.08
1.46
1.32
1.11
1.50
.786
Trade, total
Wholesale
Retail
May
1.44
1.59
1.90
1.21
Inventories to sales:
Manufacturing and trade
Manufacuring, total
Durable
Nondurable
June
.765
.702
.694
Inventories to unfilled orders:
Durable manufacturing
Cyclical indicators.
The Census composite index of leading
indicators fell 0.4 per cent in June (p),
revised 1.4 per cent rise in May.
following a sharply upward-
The Boston FRB deflated leading
index (with no trend adjustment) declined 1.5 per cent in June and
the Census deflated coincident index edged down.
CHANGES IN COMPOSITE CYCLICAL INDICATORS
(Per cent change from prior month)
Jan.
12 Leading, trend adjusted
1974
Apr.
Mar.
1.8
1.3
1.5
.3
1.4
.6
.7
.7
.5
.2
.2
2.7
.1
1.8
- .2
1.2
- .3
5 Coincident
5 Coincident,
6 Lagging
Feb.
deflated
-1.6
1.2
- .1
.7
.0
2.3
May
June (p)
- .4
Leading indexes prior to trend adjustment
Census undeflated
Boston FRB deflated
1.4
.1
1.0
.4
1.2
.5
- .1
- .6
1.0
- .1
- .8
-1.5
II
-
13
Of the eight leading series available for June, those
increasing were the ratio of price to unit labor cost, industrial
materials prices and common stock prices.
Initial claims for unemploy-
ment insurance (inverted), the average workweek in manufacturing, new
orders for durable goods, and contracts and orders for plant and
equipment all declined; private building permits were unchanged.
Of the indicators currently available for July, the average
workweek increased but common stock prices declined.
Construction and real estate.
The seasonally adjusted total
value of new construction put in place changed little in July from
the upward revised June rate.
Except for a further rise in Federally-
owned public construction outlays, all major types of expenditures
were virtually unchanged from a month earlier.
Expenditures for
private residential building in July continued nearly a fifth below
their February 1973 peak, but despite some slackening in new commercial
building, private nonresidential expenditures were only slightly below
the recent high in May 1974.
In constant dollars, total construction
outlays remained 13 per cent below the January 1973 peak.
II
- 14
NEW CONSTRUCTION PUT IN PLACE
(Seasonally adjusted annual rates, in billions of dollars)
1973
QIV
Residential
Nonresidential
Public
State and local
Federal
Total - 1967 dollars
135.0
134.7
136.7
136.5
98.5
99.3
99.3
54.3
47.5
49.4
49.1
49.6
49.7
49.5
49.9
33.2
Private
--
July 1/
Per cent change in
July from
June 1974 July 1973
101.8
36.3
37.4
37.2
+ 1
28.4
4.9
31.2
5.1
32.5
4.9
32.1
5.0
+10
85.7
Total - current dollars
1/
QI
1974
QII(P)
83.3
82.3
81.1
-- 6
-6
-
--
--
+ 7
+18
--
+20
+ 4
- 9
In no
Data for July 1974 are confidential Census Bureau extrapolations.
case should public reference be made to them.
Means change less than 1 per cent.
Merchant builder sales of new single-family homes declined a
tenth in June from a month earlier.
Sales, while up in the second
quarter as a whole, remained well-below year earlier levels, due in
part to the shortage and high cost of permanent financing for buyers
and reflecting remaining uncertainty over energy-related locational
considerations.
As a result, builder backlogs of unsold units have
declined only slightly from their peak almost a year ago, and, at the
current sales rate, represented nearly ten months' supply in June.
The
median price for the mix of unsold new units declined in June as the
II - 15
median price of homes sold edged up.
Existing-home sales, which had
improved in April and May, continued below their year earlier level
in June.
Even so, the median price on used homes sold increased to
$32,860--13 per cent above June 1973.
SALES,
STOCKS AND PRICES OF NEW SINGLE-FAMILY HOMES
Homes
Homes
sold 1/
for sale 2/
(thousands of units)
Months'
supply
Median price of:
Homes sold Homes for sale
(thousands of dollars)
1973
726
680
566
483
426
436
453
446
7.0
7.7
9.6
11.1
30.4
32.7
33.5
34.0
29.4
31.2
32.1
32.9
QII (p)
525
570
453
434
10.4
9.1
35.2
35.5
34.0
35.0
April (r)
May (r)
June (p)
574
598
539
449
441
434
9.4
8.9
9.7
35.7
35.4
35.5
34.3
34.7
35.0
QI
QII
QIII
QIV
1974
QI (r)
1/
2/
Seasonally adjusted annual rate.
Seasonally adjusted, end of period.
The average residential rental vacancy rate edged up further
in the second quarter of 1974, reflecting the still relatively large
number of new multi-family completions and the reclassification of some
unsold single-family homes and condominiums into the rental market.
II - 16
At 6.3 per cent, the vacancy rate was the highest for any second
quarter since 1967, but was still well below average rates of over
8.0 per cent experienced in the early 1960's.
Regionally, second
quarter rates were higher than a year earlier in all but the West.
Homeowner vacancy rates, while down somewhat from the first quarter,
were also above the second quarter of 1973.
II
Labor market.
- 17
Labor market indicators generally continue to
reflect the approximate stability prevailing since early in
However,
ployment,
the year.
some signs of weakness have appeared in nonfarm payroll emwhich declined 120,000 in July to a level 180,000 below May.
This decrease was due in part to increased strike activity,
largely
concentrated in construction, which was up by 40,000 workers in the
past month and by 70,000 since May.
in retail trade,
While employment continued to rise
services and State-local government,
facturing and construction.
it
fell in manu-
Factory job losses in July were widely
distributed while improvement was confined primarily to small gains
in the primary metal and chemical industries.
Also, payroll employment
was revised downward by 30,000 for May and June.
CHANGES IN PAYROLL EMPLOYMENT
(In
thousands; seasonally adjusted)
Employment
(July, 1974)
Average monthly change
July 1973April 1974June 1974July 1974
July 1974
July 1974
Total nonfarm
76,951
-122
3
123
Goods-producing
Construction
Manufacturing
24,041
3,500
19,867
-178
-66
- 6
-102
- 84
-53
-18
-15
5
Service-producing
Trade
Services
State-local gov't.
52,910
16,612
13,397
11.467
56
37
34
25
69
21
50
14
129
27
47
38
The average workweek in manufacturing increased by .2 hour
in July to 40.3 hours,
the same as in May,
but the increase was con-
centrated in a few nondurable goods industries.
Average hours and over-
time in manufacturing were both down by .7 hour since peaking early in
1973.
- 18
II
The civilian labor force increased by some 250,000 in July,
the third consecutive monthly gain after showing little
previous three months.
change in the
The recent labor force increases have been due
chiefly to women entrants.
Since April,
the number of adult women in
the labor force has increased by 800,000; adult males rose by 140,000;
and teenagers declined by 80,000.
This labor force growth has been
largely matched by a rise in household employment.
employment has dropped by 220,000 since April,
have increased by 400,000.
However,
full-time
while part-time jobs
The part-time increase is
consistent with
the relatively large influx of women workers into the labor force and
perhaps reflects an attempt by families to maintain real income levels
in
the face of declining real earnings.
The unemployment rate edged up to 5.3 per cent in July after
holding in
a 5.0 - 5.2 per cent range since the beginning of the year.
Unemployment rates for most groups showed little
significant change.
A rise in average duration of unemployment to 10.1 weeks
9.8 weeks in June,
in July,
apparently reflected a somewhat reduced rate of hiring.
SELECTED UNEMPLOYMENT RATES
(Per cent, seasonally adjusted)
1973
Oct.
July
Total
Males 20+
Females 20+
Teenagers
from
Jan.
1974
June
July
4.7
3.1
4.8
14.4
4.6
3.0
4.4
14.0
5.2
3.4
5.2
15.6
5.2
3.5
5.1
15.6
5.3
3.5
5.2
16.2
White collar
Blue collar
2.9
5.2
2.6
5.1
3.2
6.0
3.1
6.2
3.3
6.1
Household heads
State insured
2.7
2.7
2.7
2.6
3.0
3.1
3.1
3.4
3.0
3.4
II - 19
Earnings.
The steep rise in the average hourly earnings index
for private nonfarm production workers moderated somewhat in July.
However,
the index has risen by 8 per cent from July 1973, and its rate
of growth has accelerated over the past three months.
ending in June,
(It
In the 12 months
real average hourly earnings declined by 2.6 per cent.
should be noted that the earnings table contains less industry
detail than usual because of revisions still
under way.)
HOURLY EARNINGS INDEX*
(Seasonally adjusted, per cent change, annual rates)
July 1973July 1974
Total private nonfarm
Jan. 1974July 1974
April 1974July 1974
9.2
8.0
8.7
10.2
Manufacturing
13.1
11.1
Mining
Trade
8.5
9.5
*Excludes the effects of fluctuations in overtime premium in
facturing and shifts of workers between industries.
Collective bargaining.
10.8
12.4
15.7
12.8
manu-
Wage rate adjustments in major
collective bargaining agreements accelerated sharply in the second
quarter with settlements including workers in the steel, construction,
food,
and transit industries.
In the second quarter first-year wage
increases averaged 9.2 per cent compared with 6.2 per cent in the first
quarter and 5.8 per cent average for 1973.
There was a significant
increase in the number of workers covered by new settlements--l.6
million in the second quarter compared to 500,000 in the first quarter.
Another measure of wage rate change in major collective bargaining situations (1,000 or more workers) was newly published by the
Bureau of Labor Statistics this quarter.
The new series, the "effective"
- 20
II
wage change, is designed to measure quarterly wage changes provided in
new contracts including deferred increases and cost-of-living raises.
The effective wage increased at a 9.6 per cent annual rate in the
second quarter--up sharply from the 4.8 per cent rate of increase in
the first quarter and the 7.0 per cent average rise in 1973.
Accelera-
tion was most evident in the construction industry, but a speed-up
was also apparent in manufacturing.
The more rapid rate of increase in
the effective wage rate this quarter was primarily due to an acceleration
in the size of first year adjustments.
Escalator clause payouts pro-
vided 1.6 per cent, annual rate, in the second quarter--up slightly from
the first quarter and last year.
Escalator provisions now cover
approximately 4.5 million (45 per cent) of the workers in major bargaining units.
In other collective bargaining developments, the Communications
Workers and the Bell Telephone System reached agreement on a new 3-year
contract that provides large wage and fringe benefit increases and
cost-of-living protection.
The new agreement, which affects about
700,000 workers, will increase wages and benefits by 12 per cent in
the first year (with wage increases alone amounting to 7.1 - 10.7
per cent, depending on salary level), and by a total of 7.5 per cent
in the last two contract years, excluding possible cost-of-living raises.
The company has estimated that if the Consumer Price Index rises by
about 7 per cent in the second contract year (August 1975-August 1976)
and by 6 per cent in the third year, the total wage and fringe package
for the three years would raise costs by 35.8 per cent.
II
- 21
the manufacturing
About 50,000 workers in Western Electric,
arm of AT&T,
voted not to go along with the industry wide agreement and
Wages and work rule changes appear to be the
are currently on strike.
primary issues.
WAGE RATE CHANGES IN COLLECTIVE BARGAINING AGREEMENTS
(Per cent change from preceding quarter, annual rate)
19 7
1974
1973
93
1972
1
2
3
4
1
2
Wage decisions-First year
Over-life of contract
7.3
6.4
5.8
5.1
5.5
4.8
6.2
5.7
5.8
5.3
5,5
4.5
6.2
5.3
9.2
7.4
Wages & benefitsFirst year
Over-life o£ contract
8.5
7.4
7.1
6.1
7.1
5.6
7.8
6.7
7.2
6.3
6.1
5.6
6.9
5.9
9.0
7.5
6.6
N.A.
N.A.
7.0
7.3
7.0
4.8
4.0
5.6
7.6
7.6
6.4
9.2
8.4
11.6
4.8
6.4
3.2
4.8 9.6
5.6 10.8
5.2 6.0
N.A.
Construction
1,000 or more workers.
5,000 or more workers.
Excluding construction.
4.8
2.0
11.6
4.0
1.2
2.4 14.4
1/
Effective wage rateTotal
Manufacturing
3/
Nonmanufacturing-
1/
/
3/
Consumer prices.
Consumer prices continued to rise rapidly
in June--at an 11.5 per cent annual rate, seasonally adjusted--to a
level 11 per cent above June 1973.
Food and energy prices rose less
than in May but advances for other commodities and services were larger.
II
(Percentage changes,
CONSUMER PRICES
seasonally adjusted annual rates)-
Relative
importance
Dec. 1973
Dec. 1973
to
Mar. 1974
March
to
June 1974
May
to
June 1974
Addendum
All items less food
and energy
components 3/ 4/
Services less home
finance 2/3/5/
Commodities less food,
used cars, home
purchases 3/
9.2
14.2
10.9
11.5
24.8
38.6
36.5
Food
Commodities less food
Services 2/
5/
Sept. 1973
to
Dec. 1973
100.0
All items
1/
2/
3/
4/
- 22
11.0
7.6
9.4
19.4
16.0
9.2
3.1
15.8
11.0
3.8
16.0
12.0
68.8
5.5
8.6
12.8
14.6
29.9
7.2
10.2
11.4
11.6
30.9
10.1
19.0
14.4
16.1
Not compounded for one-month changes.
Not seasonally adjusted.
Confidential--not for publication.
Excludes food, gasoline and motor oil, fuel oil and coal, and gas and
electricity.
Home financing costs excluded from services reflect property taxes and
insurance rates--as well as mortgage costs--which in turn move with
mortgage interest rates and house prices.
Food prices rose moderately--despite substantial further
declines for meats and poultry--reflecting advances for restaurant meals,
imports,
be little
and other items not of U.S.
change in
farm origin.
In July there may
food prices according to preliminary (confidential)
USDA estimates for their market basket,
may boost the August index.
but a reversal in
meat prices
Farm-retail spreads continue high.
II - 23
ENERGY PRICES AND THE CPI,¹ 1973
(Percentage changes, seasonally adjusted annual rates)2/
Relative
importance
Dec. 1973
1972
to
Dec. 1973
Sept. 1973
to
Dec. 1973
Dec.
Dec.
1973
to
Mar. 1974
March
to
June 1974
May
to
June 1974
Gasoline and
motor oil, fuel
oil and coal
4.0
23.4
77.3
99.3
26.6
17.4
Gas and
electricity
2.4
6.9
11.1
28.2
16.1
11.7
6.9
10.8
11.4
13.3
All items less
8.3
energy components 93.6
1/
Confidential--not for publication.
2/ Not compounded for one-month changes.
While gasoline and fuel oil prices rose less than in recent
months,
advances for other nondurables,
household durables and new cars
were even larger than in May, and used car prices spurted further.
tionally large increases for medical,
Excep-
housekeeping and home maintenance
services weighed heavily in the rate of rise of service costs.
The rise
in these items in the six months since December 1973 already exceeds
that during the full year 1973.
RECENT PRICE CHANGES, SELECTED COMPONENTS
(Per cent change, seasonally adjusted, not annual rates)
Dec. 1972 to
Dec. 1973
Non food commodities:
Apparel
Other nondurables 1/
Household durables
4.1
3.6
4.1
Services:
Medical
5.8
Housekeeping and
7.7
home maintenance
fuels, alcohol and tobacco.
Excluding
1/
Dec. 1973 to
June 1974
4.6
7.4
5.5
5.9
10.2
II - 24
Wholesale prices.
The wholesale price index rose between
June and July by 3.7 per cent, seasonally adjusted (not at an annual
rate), to a level 20 per cent above a year earlier.
The index reflected
a sharp increase in prices of farm and food products, following four
months of decline, and a further huge rise in prices of industrial
commodities, which have risen 2 per cent or more in each of the last
seven months.
WHOLESALE PRICES
(Per cent changes at seasonally adjusted
compound annual rates) 1/
Mar.
'74
June '74
to
July '74
June '73
to
Dec. '73
Dec. '73
to
MA tr. '74
11 commodities
20.4
10.9
24.5
12.2
44.6
Farm products
10.1
10.4
10.8
-29.3
77.3
Industrial commodities
Crude materials
Intermediate materials
Finished goods
Producer
Consumer
Nondurable, excl. foods
Durable
25.1
49.1
28.0
17.4
14.6
18.9
25.0
9.2
10.9
40.4
11.7
7.1
5.3
8.1
11.3
2.8
32.3
88.7
32.6
23.1
13.2
28.3
40.4
11.3
35.7
10.4
43.7
25.9
27.2
32.9
73.0
36.9
22.8
25.1
21.7
24.4
17.3
July '73
to
to
June '74
25.3
30.9
15.0
Consumer finished foods
13.2
17.3
-16.7
18.5
Note: Farm products include farm products a nd processed foods and feeds.
Not compounded for one-month changes.
1/
July '74
43.7
The index of farm and food products advanced 6.4 per cent,
seasonally adjusted, as large increases were posted for livestock, meats,
grains,
and soybeans.
II
- 25
The index of industrial commodities rose 2.7 per cent,
seasonally adjusted, reflecting large and widespread increases.
Of
particular importance were increases for metals and metal products,
fuels, machinery and equipment,
chemicals,
and woodpulp and paper
This index in July was 25 per cent above the level of a year
products.
earlier.
Agriculture.
After a four month decline of almost 20 per cent,
prices received by farmers have moved generally upward since mid-June.
By mid-July they had advanced 6 per cent to a level about even with a
Higher prices for livestock, grain, and soybeans contributed
year ago.
to the increase, partly offset by lower prices for milk, dry beans,
and cotton.
After further sharp advances in the latter part of July,
prices stabilized for a period in early August, but have again started
upward on further news of drought damage to crops.
On August 13,
steer, hog, and corn prices were about 10 per cent above July 15 levels,
while soybeans were 20 per cent higher.
Despite recent sharp increases, farm prices in mid-August may
be near the levels of a year ago.
From July to August last year farm
prices advanced by a record 20 per cent.
The recent crop price increases resulted mainly from news
of deterioration of harvest prospects caused by drought.
Based on
August 1 conditions, the Agriculture Department estimated corn production
at 4.96 billion bushels and soybean production at 1.31 billion bushels.
II
- 26
These levels are 12 per cent and 16 per cent, respectively, below last
year's production.
Some small improvement in soybean prospects may
result from recent rains in growing areas, but most of the damage to
corn is reported to be beyond repair.
Most of the strength in livestock prices resulted from
seasonal declines in the supply of cattle for slaughter, aggravated somewhat by more-than-seasonal declines in hog and poultry marketings.
Pre-
liminary estimates of total meat and poultry production in July,
seasonally adjusted, was 2 per cent below the June level.
Two per cent
larger beef production, seasonally adjusted, was more than offset by
4 per cent declines in pork and poultry production.
The number of cattle on feedlots on July 1 was a quarter
below the near-record level of a year earlier, but most of the decline
reflects fewer cattle weighing less than 900 pounds.
Cattle weighing
more than 900 pounds, which will be marketed over the next four months,
were only 3 per cent below a year ago.
These substantial supplies are
expected to be augmented by sizeable marketings of cattle direct from
pasture,
thereby providing ample quantities of generally lower quality
beef.
Curtailed feedlot operations may continue to provide a
relatively heavy flow of cattle since the feeding period will likely be
shortened to about
three months as compared to the 6 to 8 months that
was common until recently.
With larger marketings of grassfed cattle,
the resulting lower usage of feed may help reduce pressure on limited
grain supplies.
DOMESTIC FINANCIAL
SITUATION
III-T-1
SELECTED DOMESTIC FINANCIAL DATA
(Dollar amounts in billions)
Indicator
Monetary and credit aggregates
Total reserves
Reserves available (RPD's)
Money supply
Ml
M2
3
M
Time and savings deposits
(Less CDs)
CDs (dollar change in billions)
Savings flows (S&Ls + MSBs)
Bank credit (end of month)
Market yields and stock prices
wk. endg.
Federal funds
"
Treasury bill (90 day)
"
Commercial paper (90-119 day)
New utility issue Aaa
Municipal bonds (Bond Buyer)
1 day
FNMA auction yield
wk. endg.
Dividends/price ratio (Common
wk. endg.
stocks)
(12/31/65=50)
NYSE index
end of day
Latest data
Period
Level
Total of above credits
e - Estimated
Year
ago
SAAR (per cent)
24.0
17.3
9.3
16.7
9.4
10.3
July
July
37.3
35.1
July
July
July
281.2
600.2
934.0
.9
5.2
4.4
4.5
6.8
5.4
July
July
July
July
319.0
85.3
334.1
686.7
9.1
2.0
1.4
13.1
8.8
9.9
2.8
10.5
5.6
8.7
7.7
11.7
21.4
5.9
11.9
Percentage or index points
8/7/74
-1.46
.84
-.54
-.
43
-.37
.22
.80
.39
.57
.55
.58
.78
1.70
8/5/74
12.09
8.42
11.55
9.82
6.58
10.12
7/31/74
8/5/74
4.61
41.53
.47
-2.07
.66
-6.80
1.67
-15.40
8/7/74
8/7/74
8/9/74
8/8/74
-. 06
1.47
1.30
1.00
1.41
Net change or gross offerings
Year to date
Current month
1974
1973
1974
1973
Credit demands
Business loans at commercial
banks
Consumer instalment credit outstanding
Mortgage debt outst. (major holders)
Corporate bonds (public offerings)
Municipal long-term bonds (gross
offerings)
Federally sponsored Agcy. (net borrowing)
U.S. Treasury (net cash borrowing)
Net change from
Month
Three
months ago
ago
July
June
May
May
2.9
1.1
5.2
2.3e
3.3
1.6
5.7
1.0
21.3
5.7
21.7
9.7e
22.3
11.0
27.3
4.9
May
Aug
July
2.1e
.8e
1.83
1.9
1.6
-.7
10.5e
9.4e
-1.6
9.7
10.8
1.1
76.7
87.1
16.2
14.4
III - 1
DOMESTIC FINANCIAL SITUATION
Monetary aggregates.
There was a pronounced retardation in
the rates of growth of the monetary aggregates in July.
A balanced and
substantial slowing of the rate of expansion of both the demand deposit
and currency components of M1 reduced its growth to the lowest rate
since January.
In recent months, currency and coin had been contributing
substantially to growth in M1, but in July this component grew at about
one-third the 10 per cent pace of the first half.
The slowing in M1 largely accounted for the downturn in the
rate of growth of M2,
as growth in time and savings deposits other than
large CD's declined only moderately.
In contrast, the slower growth of
M3 reflected the continuing deterioration of deposit inflows to thrift
institutions.
Loan demand at commercial banks was strong in early July,
continuing a surge in lending that began in late June.
With U.S.
Government deposits declining and small time and savings deposits not
growing rapidly enough to support the expansion of loans, banks bid
aggressively for CD's.
Although there are reports of individual banks
experiencing difficulty in selling CD's, particularly outside their
regional markets, the aggregate figures do not suggest that growth of
CD's at banks outside New York and Chicago was retarded materially by
investor resistance to regional issuers.
In July, outstanding CD's at
these banks rose $2.0 billion on a month-end basis, more than in most
other months of 1973 and 1974.
With demand for funds strong, rates on
CD's rose until mid-month when loan growth slowed and banks lowered
their offering rates.
In addition, New York City banks borrowed heavily
III - 2
MONETARY AGGREGATES 1/
(Seasonally adjusted changes)
1973
QIV
QII
QI
1974
May
June
July
Per cent at annual rates
M1 (Currency plus private
demand deposits)
8.9
7.1
7.0
4.7
7.7
.9
M2 (M1 plus commercial bank
time and savings deposits
other than large CD's)
11.0
9.9
7.8
5.3
9.7
5.2
M3 (M2 plus time and savings
deposits at mutual savings
banks and S&L's)
9.8
9.4
6.5
4.4
7.4
4.4
Adjusted bank credit proxy
3.3
8.5
20.9
16.8
13.3
9.4
6.1
15.6
23.6
22.9
16.1
12.9
12.6
12.5
8.5
5.8
11.5
9.1
Time and savings deposits
at commercial banks
a.
b.
Total
Other than large
CD's
(Billions of dollars)2/
Memoranda:
a.
b.
c.
U.S. Government
demand deposits
Negotiable CD's
Nondeposit sources
of funds
1/
2/
-1.3
-1.3
-. 4
1.6
5,2
-. 7
5.8
-. 1
2.1
-1.1
2.0
--
.4
.6
1.1
-. 4
.9
Staff estimates.
Change in average levels month-to-month or average monthly change
for the quarter, measured from last month in quarter to last month
in quarter, not annualized.
III - 3
from the Euro-dollar market,taking advantage of relatively low deposit
rates at their foreign branches induced by the influx of funds from oilexporting countries.
Growth of the adjusted credit proxy decelerated,
but remained high by historical standards.
Bank credit.
Growth in total loans and investments at all
commercial banks (last Wednesday-of-the-month series, seasonally
adjusted) accelerated in July, interrupting the slackening trend that
began in April.
Loan growth accounted for all of the expansion, with
business loans increasing at a 20 per cent rate, nearly as high as in
May, and loans to nonbank financial institutions and security loans also
registering substantial growth.
Banks liquidated a large volume of U.S.
Treasury securities in July to acquire funds for lending, but holdings
of other securities, which banks had been purchasing in volume in
recent months, remained unchanged.
Through most of July, security loans at banks were essentially
unchanged, but they ballooned at month-end when the System sold $2.6
billion in RP's and the Federal Financing Bank sold $1.5 billion in
bills.
The increase in security loans to brokers and dealers associated
with these sales, which presumably is temporary, contributed almost
4 percentage points to the rate of growth of total loans and investments
in July.
The strength in business loans at banks in July represented
a continuation of developments that began in late June, when investors
became increasingly reluctant to accept the risk of nonprime paper and
forced many commercial paper issuers into the banks.
Moreover, in late
June rates on top-grade commercial paper rose above the prime rate, thus
inducing prime borrowers to turn to bank credit as well.
Adverse condi-
tions in bond markets during late June and early July also may have
III - 4
COMMERCIAL BANK CREDIT¹
(Seasonally adjusted changes at annual percentage rates)
1973
QIV
Total loans and investments2/
U.S.
Treasury securities
Other securities
Total loans2/
Business loans2/
Real estate loans
Consumer loans
QI
QII
6.3
15.9
11.5
-25.5
25.8
6.4
--
17.6
6.8
9.1
9.9
13.4
--
7.1
17.4
12.7
11.5
6.2
22.4
4.6
15.9
10.1
22.2
12.2
5.4
23.0
12.2
4.4
20.9
13.7
2.9
1974
May June
10.2
(Average monthly change,
of dollars)
7.8
July
13.1
8.5 -35.7
12.3 -19.7
10.7
7.6
4.4
4.3
billions
Memorandum:
Security loans
Loans to nonbank
financial institutions
1/
2/
--. 3
Last-Wednesday-of-month series except
are adjusted to the last business day
Includes outstanding amounts of loans
banks to their own holding companies,
foreign branches.
-. 1
-. 1
.3
.8
.5
1.5
.3
2.2
-1.5
1.8
for June and December, which
of the month.
reported as sold outright by
affiliates, subsidiaries, and
III -5
caused some corporations to turn to short-term financing at banks,
pending improvements in the long-term markets.
But more broadly, avail-
able data suggest that strength in business borrowing stems from the
low rate of internal funds generation in the corporate sector after
taxes and adjustment for inventory valuation, further accumulation of
inventories, and inflated working capital needs.
Growth in business loans at large New York City banks was
extremely rapid in the first half of July, accounting for almost half
of the increase at all large banks in that period.
After mid-month,
however, the large New York City banks reduced their lending to business.
Large banks outside New York also expanded their business loans
rapidly early in July and only slightly after mid-month.
There are
reports that the sharp growth in New York in early July reflected, in
part, tight lending conditions at regional banks which were reluctant
to meet all of the intense demand for loans by issuing CD's or relying
on nondeposit sources of funds.
The demand for credit at large banks early in July was
centered in manufacturing firms, both durable and nondurable, and
public utilities; loans to such firms accounted for almost three-quarters
of the growth of business loans at large banks in that period.
After
mid-month outstanding loans in these categories contracted, as did
total business loans.
Sales of bankers acceptances also contributed
substantially to the decline.
Almost the entire contraction of out-
standing acceptances was accounted for by sales of acceptances to foreign
branches and to the market by one large New York City bank which had
acquired a sizeable volume of acceptances early in the month for this
purpose.
III
- 6
By month's end, conditions in the commercial paper market
had improved as rates declined and spreads between prime and nonprime
paper narrowed.
During July, dealer-placed paper showed the largest
increase since February.
Consequently, total short-term business
borrowing--borrowing at banks plus issuance of dealer-placed commercial
paper--accelerated.
In contrast to growth of dealer-placed commercial paper,
there was a run-off of finance company paper.
Direct issuers reported
that they were encountering investor resistance to declining interest
rates at the end of July, and many finance companies turned to bank
lines.
REIT's continued their recent heavy borrowing at commercial
banks, and the increase in bank loans to these and other nonbank financial institutions was the largest of the year.
The decline in outstanding
directly-issued paper at the end of July largely offset the growth of
dealer-placed commercial paper.
With bank-related paper growing
moderately, total commercial paper outstanding showed little change
from the June level.
III - 7
RATE SPREADS AND CHANGES IN BUSINESS LOANS AND COMMERCIAL PAPER
(Amounts in billions of dollars, seasonally adjusted monthly changes)
Prime rate
less 30-59
day commercial
paper rate
Business
loans
at all
commercial
banks 1!
(per cent)
Annual
rate of
change in
total
Dealer
placed
commercial
paper 2(
Total
(per cent)
Average monthly changes
-
2.1
.1
2.2
16.1
QIV
--
.6
1.1
1.7
12.3
197 4 -- QI
QII
---
2.9
3.2
.4
.1
3.3
3.3
23.7
22.1
1973--Oct.
Nov.
Dec.
+.52
+.38
-. 04
-. 1
1.2
.7
2.4
1.0
-. 1
2.3
2.2
.6
16.7
15.7
4.2
1974--Jan.
Feb.
Mar.
+.42
+.85
-. 09
2.0
1.2
5.6
1.7
1.6
-2.0
3.7
2.8
3.6
26.0
19.3
24.4
Apr.
-. 08
4.8
-. 2
4.6
30.6
May
June
+.39
+.38
3.0
1.8
.5
.1
3.5
1.9
22.7
12.1
+.04
2.9
.7
3.6
22.7
1973--QIII
July
est.
Weekly pattern:
.............
3
idiiidiui
iiiij
ij
ioir
iiiiiHi..j
ols a
ii
+ . 05
31
+.45
:
:;
;
; : : : : : ; : : ;
: :
+.55
7
; ; ; ; ; ; ; ; : ; ; ;
-. 25
24
2/
e/
-. 13
17
1/
.
....
-. 23ii
10
Aug.
...............
+.73
+.28
+.08
...................
.95
19
26
July
5
12
1974--June
::::::::::
::::::::::::::::::::::::::::::::::::::::::
:::::::::::::::::::::::::::
i!iiii^
^iiiii^
Changes are based on last-Wednesday-of-month data and are adjusted for outstanding
amounts of loans sold to affiliates.
Measured from end-of-month to end-of-month.
Estimated.
III - 8
COMMERCIAL PAPER
(Seasonally adjusted, billions of dollars)
Monthly or average monthly change 2/
July
June
May
QII
QI
Outstanding
July 31
1974 e/
Total commercial 1/
1.0
.3
1.1
-. 3
.2
45.7
Bank-related
Nonbank-related
.4
.6
.3
--
.3
.8
-. 1
-. 1
.1
.1
7.0
38.7
Dealer-placed
.4
.1
.5
.1
.8
14.5
Directly-placed
.2
-. 2
.3
-. 2
-. 7
24.1
paper outstanding
1/
2/
e/
Seasonally adjusted figures are unavailable for bank-related paper.
The unadjusted data for bank-related paper are combined with
seasonally adjusted nonbank-related data to obtain the total for
commercial paper outstanding.
Changes shown are changes in levels end-of-month to end-of-month
or average monthly change for the quarter, measured from end-ofmonth in quarter to end-of-month in quarter, not annualized.
Estimated.
Nonbank financial intermediaries.
Estimates based on sample
data indicate that deposit flows at thrift institutions deteriorated
markedly during July, with both mutual savings banks and savings and
loan associations experiencing net deposit outflows for the month.
After adjustment for seasonal patterns,
the S&Ls had a growth rate of
about 3.0 per cent and the MSBs an attrition rate of about 1.5 per
cent.
If
universe data confirm the sample results,
the combined growth
of 2.0 per cent would be the second lowest since January 1970--only
marginally above the 1.7 per cent rate in August of last year.
III - 9
DEPOSIT GROWTH AT NONBANK THRIFT INSTITUTIONS
(Seasonally adjusted annual rates, in per cent)
Mutual
savings banks
S avings and loans
associations
Both
1973 - QI
QII
QIII
QIV
7.0
7.1
1.3
5.1
12.3
11.4
4.9
9.3
10.7
10.1
3.8
8.1
1974 - QI
10.1
1.4
5.4
8.7
4.2
May
June p/
July e/
p/
e/
5.2
QII p/
-0.2
4.4
-1.5
2.9
8.3
3.0
2,0
7.2
2.0
Preliminary.
Estimated on the basis of sample data.
At both sets of institutions, disintermediation accelerated
during the latter part of the month.
At S&Ls,
interest credited) indicate that deposits,
sample data (excluding
after showing no change
during the first 10 days of July, declined $100 million during the
second 10 days and $400 million during the last part of July.
the large New York City MSBs,
At
too, a large portion of the monthly
net loss occurred during the final part of the month.
Presumably,
the July 31 payment date for the Citicorp note and the further
irregular advances in some market rates contributed to this pattern
of outflows.
During July, FHLB advances to S&Ls increased by about
$900 million--slightly more than the $800 million average for May
III - 10
and June. During the first few business days of August, advances continued strong, averaging over $50 million a day, but the volume has
moderated most recently.
Data for the sample of 17 large New York City MSBs show
continued deposit losses during the first 5 business days of August-with this year's loss totaling $54 million versus a loss of $18
million a year ago and a record $170 million net outflow in the comparable July period.
Although no early August data are available
for S&Ls, the heavy volume of FHLB advances and the large number of
noncompetitive tenders at recent Treasury note auctions are suggestive
of continuing deposit outflows at these institutions.
The continued high level of interest rates also had an
impact on policy loans at life insurance companies.
In June, the
net increase in policy loans was relatively high--about the same as
in May--but remained below the record increases in August and September
of 1973.
Nevertheless, industry reports suggest that life companies
had anticipated increased demand for policy loans and therefore had
maintained an adequate level of liquidity to meet it.
Consumer credit.
Growth in total consumer credit out-
standing slowed in June to a seasonally adjusted annual rate of $13.8
billion, or 7 1/2 per cent, with smaller gains in both instalment
and noninstalment credit.
The slowing mainly reflected the decrease
in retail sales for the month; increases in nonautomotive consumer
goods credit and noninstalment charge account balances were considerably
III - 11
smaller than in the first 2 months of the second quarter.
For the
second quarter as a whole, outstanding consumer credit advanced at
a $17.2 billion seasonally adjusted annual rate, more than double the
$8.2 billion rate in the first quarter, but well below the $26.1
billion peak in the fourth quarter of 1972.
CONSUMER CREDIT
Period
Net change for
all
lenders 1/
Total
Instalment
Market share of
commercial bank 2/
Excluding
Total
credit cards
1973 - QI
QII
QIII
QIV
25.3
24.1
21.9
18.8
24.0
20.0
21.0
15.3
42.6
41.9
42.3
42.3
37. 9
36. 8
37. 2
36.77
1974 - QI
8.2
17.2
8.8
14.0
41.9
41.5
35. 7
35. 2
18.0
19.7
13.8
13.8
15.1
13.0
41.2
41.1
42.2
35. 1
34. 7
35. 7
QII
April
May
June
Billions of dollars, seasonally adjusted annual rate.
1/
2/ Per cent of gross extensions of instalment credit, seasonally
adjusted.
The commercial bank share of gross extensions of consumer
instalment credit contracted to 41.5 per cent in the second quarter,
compared with 41.9 per cent in the first quarter and 42.2 per cent
during 1973.
If bank credit cards are excluded from the computation,
the commercial bank share of the "traditional" instalment credit
market showed a somewhat larger decline.
Nearly one-fourth of the
volume of commercial bank instalment lending so far this year has been
III - 12
generated by credit cards; in 1973 credit card volume accounted for
less than one-fifth of bank credit extensions.
Although developments in the automobile market have had a
substantial restraining effect on consumer instalment credit growth,
commercial banks have continued to extend more than three-fifths of
the automobile loans granted during the first half of 1974,
Banks on
the West Coast took the lead in lengthening new-car contract maturities
beyond 36 months some time ago, but more recently some of the major
automobile finance companies also have begun lengthening.
Over the
past year the proportion of new car contracts with maturities beyond
36 months has been rising steadily, reaching about 8 per cent in May
for commercial banks and 7.7 per cent in June for finance companies.
However, the finance company average maturity is held
down by the relatively conservative lending policy of the largest
company--GMAC; according to confidential data, almost one-fifth of
the Chrysler and 15 per cent of the Ford contracts in June had terms
over 36 months.
Higher prices on the 1975 models are likely to further
spur the growth of "extended-maturity" financing, especially if the
new models encounter strong buyer resistance.
Meanwhile, delinquency rates on consumer instalment loans
at commercial banks continued to rise in June.
The percentage of all
loans delinquent for 30-89 days rose to 2.37 per cent, seasonally
adjusted, from 2.20 per cent in April and 1.75 per cent a year ago.
The increase was particularly sharp for personal loans and FHA home
improvement loans.
Delinquencies on indirect auto loans rose 10
basis points to 2.09 per cent.
III - 13
Short-term interest rates.
Private short-term interest rates
have declined significantly on balance since the July FOMC meeting,
ing mainly to a substantial easing in
the intra-meeting period,
the Federal funds market.
respond-
Early in
bank CD and commercial paper rates had fallen as
much as 100 to 125 basis points.
But as the funds rate has tended to
stabilize around 12 to 12.25 per cent in
these
the past couple of weeks,
rates moved back into closer alignment with the funds rate and at present are
about 1/2 to 3/4 of a percentage point below their mid-July levels.
SELECTED SHORT-TERM INTEREST RATES
(Per cent)
Daily rates
1974
1973
Feb.
lows
July
FOMC
July 16
9.05
9.00
8.50
6.93
6.80
6.37
7.53
7.81
7.75
10.38
10.50
10.50
8.13
7.75
7.50
11.05
11.00
9.49
Aug.-Sept.
Highs
July
30
Aug.
6
Aug.
13
7.45
7.58
7.68
7.84
8.37
8.33
8.65
8.64
8.41
8.73
8.74
8.51
12.25
12.25
12.00
11.88
11.88
11.25
11.25
11.25
11.13
11.63
11.63
11.50
11.63
11.75
11.63
7.85
7.50
12.50
11.75
11.90
11.25
12.00
11.50
12.15
12.00
12.20
12.00
7.01
9.38
9.23
9.22
9.49
n.a.
12.00
12.00
8.75
Statement week ended
July
July
24
17
12.00
12.00
12.00
July
31
Aug.
7
12.60
12.29
12.09
July
23
Treasury bills
3-months
6-months
1-year
Commercial paper
1-month
90-119 days
4-6 months
Large negot. CD's 1/
3-months
6-months
Federal agencies
1-year
Bank prime rate
10.00
Federal funds rate
(weekly average) (10.84)
(8.81)
13.04
1/ Highest quoted new issues.
five days of the statement week.
2/ Average for first
Aug 2/
14
12.03
III - 14
In contrast to the easing in private short-term markets, significantly tighter conditions have developed in the Treasury bill market in
the past few weeks.
After having been relatively depressed by the strong
technical condition of the market and by investor preferences for top
quality instruments, bill rates have advanced 125 to 150 basis points
since the last FOMC meeting largely in response to an influx of additional
supplies to the market.
During this period, the Treasury has auctioned
$1.5 billion of September tax anticipation bills and $1.5 billion of 9-month
Federal Financing Bank bills--the first security offering of this institution--and has added $200 million to the August 5 and August 12 weekly
bill auctions.
Some of these issues apparently received a mixed reception
from investors, and dealer positions in short-term Treasury bills (which
include the Federal Financing Bank issue) have increased from a nominal
level for the statement week encompassing the July FOMC meeting to an
average of somewhat more than $2.0 billion in the latest statement week.
Upward pressures on bill rates have been generated by prospective
as well as actual additions to supply.
Under-Secretary Bennett has indicated
that unless the Arab oil countries begin to acquire special issues from
the Treasury, the Treasury will need to raise around $3.5 billion in the
market before September 15 and that such financing probably would be
centered in the Treasury bill market.
Part of this financing need is being
covered by the ongoing expansion of the weekly bill auction and the remainder
may be in the form of a short-term tab or a strip of bills.
Treasury coupon market. Yields on Treasury coupon issues also have
III - 15
risen significantly on balance since the mid-July meeting.
At that time,
such yields were low relative to those on corporate and municipal bonds,
reflecting the net short dealer positions in coupon issues and investor
anticipations that investments in Treasury special issues by OPEC nations
might result in some net debt retirement in conjunction with the August 15
But such investments failed to materialize,
refunding.
and a full rollover
of the $4.3 billion of publicly held debt maturing on August 15 became
Consequently,
necessary.
coupon rates began to rise, and this upward
movement was reinforced by the Treasury announcement of a financing package
designed to extend the average maturity of its debt.
YIELDS ON TREASURY COUP. N ISSUES
(Per cent)
Aug.-Sept.
highs
Feb.
lows
July
FOMC
July 16
July
23
July
30
Aug.
6
Aug.
13 (p)
Constant maturities
8.13
7.58
7.83
5-years
10-years
20-years
6.72
6.93
7.41
8.42
7.88
8.32
8.15
7.79
8.22
8.47
7.89
8.32
8.53
7.97
8.51
8.60
6.08
8.63
Details on the three securities auctioned by the Treasury are
presented in
the following table.
The high coupon rate offered on all
three securities proved very attractive to individuals.
Altogether non-
competitive awards amounted to roughly half of the $4.4 billion of new
securities issued,
a record participation by non-competitive bidders.
Dealers were awarded about $1.3 billion of the new issues and have
III
- 16
met with reasonable success in distributing them, reducing their
holdings at present to about $1.0 billion.
AUGUST REFUNDING
Awards
Maturity Coupon Non-competitive
($ bil.)
(per cent)
Yield
Auction
Current
Dealers average
(per cent)
($ mil.)(per cent)
Issue
Amount
($bil.)
Note
2.25
33 mos
9.0
1.4
517
8.59
8.56
Note
1.75
6 yrs.
9.0
.8
545
8.75
8.65
Bond
.4
24-3/4 yrs.
8.50
.04
241
8.63
8.67
Long-term securities markets.
Long-term rates after
fluctuating in July declined slightly in early August.
still
are at historically high levels,
Although yields
the market atmosphere has improved
since early July when long-term rates were rising rapidly and the market
was dominated by fears that more companies would reveal financial problems
similar to those of Franklin National and Consolidated Edison.
in
the corporate market have been selling well,
Issues
and the rate of post-
ponement of prospective offerings has let up from the heavy pace of
late June and early July.
III - 16A
SELECTED LONG-TERM INTEREST RATES
New Aaa
utility
bonds 1/
Recently offered
Aaa utility
bonds 1/
Long-term
State and2 /
local bonds
U.S. Government
bonds (10-year
constant maturity)
9.43 (6/19)
9.20 (6/26)
7.12 (5/28)
8.06 (5/29)
7.72 (12/11)
8.16 (12/18)
5.33 (12/10)
6.29 (12/18)
1971 - High
Low
8.26 (7/30)
7.02 (2/5)
8.23 (1/1)
7.17 (12/31)
6.23 (6/24)
4.97 (10/21)
6.89 (7/20)
5.87 (1/14)
1972 - High
Low
7.60 (4/21)
6.99 (11/24)
7.49 (4/21)
7.15 (12/1)
5.54 (4/13)
4.96 (12/7
6.58 (9/27)
5.87 (1/14)
1973 - High
Low
8.52 (8/10)
7.29 (1/12)
8.32 (8/10)
7.28 (1/5)
5.59 (8/3)
4.99 (10/11)
7.55 (8/10)
6.42 (1/3)
1970 - High
Low
1974 - High
Low
10.30 (8/2)
8.05 (2/6)
10.28 (8/2)
8.13 (1/4)
6.95 (7/12)
5.16 <2/7)
7.98 <8/9)
6.93 (2/15)
July
5
12
-10.25
9.79
10.16
6.64
6.95
7.68
7.82
19
10.11
26
Aug.
1/
2/
r/
2
9
FRB series.
Bond Buyer.
Preliminary.
Revised.
--
10.30
9.82p
10.02
6.78
7.88
10.09
6.34
7.77
10.28r
10.1 6 p
6.70
6.58p
7.90
7. 9 8p
III - 17
The rise in interest rates over the past few months and the
market's preference for higher quality issues have prompted increased
caution on the part of underwriters.
Most issues coming to market now
receive only one or two bids, whereas in previous years they would
typically receive three, and individual syndicate members generally
are taking down smaller proportions of each offering.
In response to
this phenomenon the SEC recently has released for comment a proposal
to suspend the requirement for competitive bidding on common stock
issues of public utility holding companies.
Specific exceptions still
will have to be obtained for preferred stock and debt issues, and many
companies are requesting these.
Recently, both Columbia Gas and
Georgia Power successfully executed negotiated offerings that had been
postponed in early July due to a lack of bids.
Stock prices have fluctuated considerably during the last
six weeks.
They reached their lowest levels since 1971 at the end of
July, but currently are at about the same level as the time of the
last FOMC meeting.
Trading volume has been averaging about 12
million shares a day.
The volume of corporate security offerings in July was
substantially less than previously expected, as rising bond rates
at the beginning of the month precipitated almost $700 million of
postponements, cancellations, and reductions in size of prospective
bond issues, mostly of utilities and financial firms.
In recent
weeks several more utilities have announced cut-backs in proposed
III - 18
plans for capital expansion, and two industrial firms, Ford and
Goodyear, also made similar announcements.
The volume of corporate security offerings is expected to
be unseasonably heavy in August and to remain so in September, mainly
because of continued demand for public bond financing.
Long-term,
fixed rate instruments are making up a smaller proportion of the
total bond calendar and issuers are showing continued interest in
attracting individual investors into the bond market.
The calendar
for August includes $475 million of fixed rate, intermediate maturity
offerings, which averaged $350 million per month in the first half of
the year, and $675 million of floating rate notes, which first appeared
in July.
Increased policy loans and the desire for liquidity by life
insurance companies are expected to keep the volume of private placements relatively low, and unfavorable market conditions also have
kept the volume of prospective stock offerings at low levels.
CORPORATE AND MUNICIPAL LONG-TERM SECURITY OFFERINGS
(Monthly or monthly averages, in millions of dollars)
1973
Year
Corporate securities Total
1st Half e/
1974
QIII f/
July
Aug. Sept .
2,779
3,011
3,001
2,900
2,900 3,200
Public bonds
Privately placed bonds
Stock
1,125
725
929
1,952
507
552
2,067
467
467
2,100
400
400
2,100 2,000
400
600
400
600
State and local government
securities
1,942
2,095
1,600
1,400
1,700 1,700
e/
Estimated.
f/ Forecast.
III - 19
Issuance of bonds by State and local governments was substantially less than expected in July, as the rise in yields early in
the month prompted $526 million of postponements of scheduled offerings,
and there were virtually no new additions to the calendar during the
month.
Some of these postponements were due to legislated interest
rate ceilings, but underwriters report that many prospective issuers
still have relatively good cash positions and can easily afford to
delay financing in an unfavorable market.
Also, an increasing pro-
portion of the calendar has consisted of pollution control bonds and
other types of revenue issues which are particularly rate sensitive.
The volume of municipal offerings is expected to increase somewhat in
August and September but still remain below the monthly average in the
first half of the year.
Mortgage market.
Reflecting the expansion in commitment
activity last fall and early this year, seasonally-adjusted net
mortgage debt formation in the second quarter rose to an annual rate of
$65 billion--up $7 billion from the recent low in the fourth quarter
of 1973.
However, the net expansion of mortgage debtat private
financial intermediaries--particularly the nonbank thrift institutions-slowed markedly in the latter part of the quarter while direct and
indirect support by Federal and related agencies increased.
Net
purchases of mortgages by both FNMA and FHLMC were at record levels in
May and June, and net advances to S&L's by the FHLBanks were quite high
for the quarter.
III - 20
Seasonally adjusted new mortgage commitments at S&L's declined
substantially in June for the second consecutive month, and by the end
of June outstanding commitments had dropped to the lowest level in
over 2 years.
Preliminary data indicate that both new and outstanding
commitments declined further in July.
Furthermore, S&L's continued to
report funds in short supply in all 12 of the FHLBank Districts through
the first week of August.
Average contract interest rates on new commitments for 80 per
cent conventional home loans at selected S&L's rose by 36 basis point
from early July to a level of 9.50 per cent by August 7.
These rates
have now reached as much as 10 per cent on the West Coast where state
usury ceilings are relatively liberal.1/
However, home mortgage yields
in most areas of the country have remained below yields on new issues
of high-grade utility bonds, and thus investment in home mortgages has
continued to be relatively unattractive to diversified lenders.
Offerings in the August 12 FNMA purchase commitment auction
remained modest, and average yields on accepted bids rose to 10.12
per cent on FHA/VA mortgages and to 10.16 per cent on high loan-to-value
1/
Sixteen states currently have interest rate ceilings of 9-1/2 per
cent or less, and an additional 17 states have ceilings of 10 per
cent; California has a 10 per cent ceiling but exempts loans closed
by banks and S&L's. Illinois raised its usury ceiling from 8 to
9-1/2 per cent on July 15--a factor partly responsible for the large
jump in the series on average rates during that week. The ceiling
in the District of Columbia was raised to 10 per cent from 8 per
cent, effective August 1.
III - 21
CONVENTIONAL HOME MORTGAGES
AT 120 S&L's
Average
going rate on
80% loans
(per cent)
Basis point
change from
month or week
earlier
---
1/
Spread(basis
points)
107 (9/12)
(8/8)
-12
Number of
Federal Home Loan Bank
districts with funds
in short supply
12 {Aug.-Sept.)
0 (Jan.--Mar.)
1973 - High
Low
8.85 (9/28)
7.43 (1/26,
1974
Jan.
Feb.
Mar.
Apr.
May
8.52
8.42
8.41
8.73
9.03
- 4
-10
- 1
+32
+30
27
32
-23
-25
- 6
4
0
0
6
12
-17
-17
-42
-40
11
12
12
11
2/2,
2/9)
June
7
14
21
28
9.0,6
9.11
9.07
9.10
+
+
+
July
5
12
19
26
9.14
9.19
9.37
9.42
+ 4
+ 5
+18
+ 5
n.a.
-106
-74
n.a.
12
12
12
12
2
9
9.47
9.50
+ 5
+ 3
-83
-32
12
12
Aug.
1/
3
5
4
3
Average mortgage return before deducting servicing costs minus average yield
on new issues of Aaa utility
bonds paying interest semi-annually and with 5year call protection.
Mortgage yields shown may be converted to equivalents
of semi-annual interest investments by adding 16 basis points to the gross
yields between 8.59 and 8.85 per cent, and 17 basis points to yields above
this level.
III - 22
ratio conventional home mortgages.
Negotiated purchases of FNMA's
one-year convertible standby commitments have remained rather low
recently despite the record-high auction yields.
Field reports
suggest that, in addition to low current and expected levels of newloan production, most warehoused loans have already been committed.
In order to bring nominal rates on Federally-underwritten mortgages
closer in line with the market, the maximum contract interest rate
on FHA and VA loans was raised by administrative action to 9-1/2 per
cent from 9 per cent, effective August 14.
The decline in use of FNMA support has come at a time when
activity under the FHLMC, FHLB, and GNMA subsidy programs announced by
the Administration in May has remained strong.
By mid-July, the FHLMC
had issued commitments for the entire $3 billion authorized for purchase
of 8-3/4 per cent mortgages; actual purchase of the loans is scheduled
to begin August 20.
The new program of subsidized FHLBank advances
has been proceeding at about the scheduled pace of $500 per month.
Activity under the GNMA Tandem Plan, which has been quite sluggish
relative to the other subsidy programs, picked up somewhat in July as
GNMA issued commitments to purchase below-market-rate mortgages on about
22,000 units; the unused authorization under this program amounts to
about 175,000 new units.
One reason for the small pickup might be the
policy announced near the end of June to accelerate the purchase of
mortgage by GNMA--thus allowing mortgage originators to lower their
costs at a time of record-high warehousing interest rates.
FNMA AUCTION RESULTS
HOME MORTGAGE COMMITMENTS
1973 - High
551 (9/3)
Low
25 (10/15,
289 (9/3)
17 (10/15)
9.37 (9/17)
7.69 (1/8)
171 (8/20)
9 (10/1)
88 (4/16)
7 (10/1)
9.68 (9/17)
7.84 (1/2)
11/26)
11
25
351
1,154
285
333
8.44
8.62
74
126
50
34
8.47
8.64
Apr.
8
22
1,061
334
267
169
8.95
9.18
164
80
63
41
9.00
9.21
May
6
20
256
218
111
9.34
9.48
74
41
30
24
9.44
9.63
3
17
85
39
72
9.54
9.54
26
22
21
11
9.70
9.69
1
15
29
272
380
152
103
194
73
9.65
9.90
9.98
40
60
37
24
30
18
9.76
9.90
10.02
Aug. 12
208
98
10.12
46
19
10.16
1974 - Mar.
June
July
NOTE:
83
32
Average secondary market yields are gross before deduction of the fee of 38 basis points paid
They reflect the average accepted bid yield for home mortgages
for mortgage servicing.
prepayment period of 12 years for 30-year loans, without special adjustment for
assuming a
FNMA commitment fees and FNMA stock purchase and holding requirements on 4-month commitments.
The maximum size of
Mortgage amounts offered by bidders relate to total bids received.
but the March 25 and April 8 auctions when the
competitive offers was $3 million in all
maximum was suspended.
III - 24
According to revised Department of
Agricultural finance.
Agriculture estimates, net farm income in
the last half of 1973 rose
much more rapidly than previously indicated and has since dropped
more sharply.
At
seasonally adjusted annual rates, gross farm receipts
declined by 8 per cent between the fourth quarter of 1973 and the
second quarter of 1974,
farm production expenses rose by 8 per cent,
and net farm income declined by 37 per cent.
FARM INCOME
1971
1972
1973
Q4
1973
60.6
47.6
14.4
69.9
52.4
18.4
97.0
64.7
36.2
106.7
69.0
42.7
4,957
6,409
12,743
Q1
1974
(SAAR)
Q2
1974
Total (billions of
dollars):
Gross income
Production expenses
Net income
Net income per farm
(dollars)
The upward revision of last fall's
explain previously-reported
98.4
74.5
26.9
15,250 13,180 9,610
farm income helps to
sharp increases in
farm capital expenditures
and land prices--such as the 12 per cent jump in
the first
105.0
72.1
36.9
land prices during
quarter of 1974 reported by Seventh District rural bankers.
An active farm land market and higher production expenses combined to
produce continued rapid increases in
half of this year.
farm borrowing through the first
III - 25
NET CHANGE IN OUTSTANDING FARM DEBT
(First half of year)
1966-70
average
1971
1972
1973
1974
Net change (millions of dollars)
Production credit associations
Federal Land Banks
904
393
642
373
716
516
857
984
1,238
1,229
Percentage change
Production credit associations
Federal Land Banks
18.6
17.6
11.7
12.9
15.8
7.0
5.5
6.5
10.8
11.2
In contrast to the relative stability typically exhibited by
farm loan interest rates at rural banks,
both the first
there were sharp increases in
and second quarters of 1974,
but average farm loan
rates at rural banks remained well below those at larger banks.
Federal Land Bank variable billing rates on both new and outstanding
farm real estate loans--based on the average cost of funds to the
Land Banks--also continued well below money market rates.
III - 26
AVERAGE INTEREST RATES ON NEW FARM LOANS
July 1
1970
July 1
1972
7.78
8.00
7.44
7.61
7.69
8.30
8.39
8.60
7.81
8.38
8.49
6.46
8.03
8.13
7.90
8.18
8.26
8.05
8.53
8.65
8.43
8.82
9.05
8.70
N.A.
N.A.
7.34
7.55
8.61
8.35
9.69
9.30
Production credit associations c
N.A.
7.07
8.16
9.34
9.55
Federal Land Banks c
8.67
7.42
7.35
7.83
8.06
Life insurance companies
9.48
8.32
8.49
9.00
N.A.
July 1
April 1
1974
1973
(per cent)
July 1
1974
Rural commercial banks:
Chicago F. R. District:
Feeder cattle loans
Real estate loans
8.60
Minneapolis F. R. District:
Short-term loans
Intermediate-term loans
Long-term loans
Banks reporting for G.10 release:
Feeder cattle loans
Other production loans
a
10.48 b
9.73
a/ Mostly larger commercial bank s, most common rates in first week of month.
b/ Data for June 1974.
c/ Simple averages estimated by Federal Reserve Board staff. Federal Land
Bank rates are not adjusted for required purchase of stock.
d/ Average rate on farm mortgage commitments in the quarter ending the day
before date shown.
III - 27
The July 1 surveys of rural banks in the Chicago and Minneapolis Districts reflected these underlying developments.
The bankers
anticipated further increases in demand for certain non-real-estate
loans, particularly in the crop production and storage areas, but
declines for cattle feeder machinery, and real estate loans.
The
bankers reported that the rate of farm loan repayments was falling
from its high year-end level, and that loan renewals were rising.
The
availability of funds at rural banks had been reduced and measures of
their degree of tightness--such as the proportion of banks with a
loan/deposit ratio higher than desired or the proportion seeking new
farm loan accounts--were moving rapidly toward their 1970 levels.
III - 28
Federal finance.
For the current fiscal year, we now project
unified budget receipts of $294.8 billion and outlays of $304.5,
resulting in
a deficit of $9.7 billion.
Our estimate of Federal
spending has been increased beginning in the spring of 1975 to reflect
a larger public employment program than assumed previously.
Expendi-
tures under this program are now expected to reach a level of $4.0
billion--at annual rates--by the second quarter of 1975.
However,
the effect of recent House and Senate Committee action that could
possibly reduce defense spending in
porated in our projection.
fiscal 1975 has not been incor-
During the fiscal year just ended,
the
unified budget deficit was $3.5 billion.
It
may be noted that the recent revisions in the NIA
accounts show a considerably lower effective tax rate for corporations and a slightly lower one for individuals.
ter of 1974,
for instance,
For the first quar-
the effective Federal tax accrual rate on
corporate profits has been reduced from 37 to 34 per cent, while the
rate on personal income (excluding transfer income) went from 12.7 to
12.6 per cent.
Various components of the NIA revisions also have
affected our estimate of the high-employment budget,
which now shows
a $1.6 billion deficit for calendar 1974 as compared to a $3.0 billion
surplus in the July Greenbook.
The high employment budget still
a large move toward fiscal restraint by the first half of 1975,
a surplus of $12 billion is
projected.
shows
when
While the high employment
budget exaggerates the degree of discretionary restriction because
inflation blows-up high employment receipts, the staff's measure cited
above partially corrects for this bias.
III - 29
The staff and conventional measures of the high employment budget are
compared in the text-table below.
The percentage change in
(nominal) Federal expenditures is
also a useful measure of fiscal impact, particularly at this time,
because there are no significant tax changes-other than the socialsecurity wage base increase--during the projected period.
Following
an 8 per cent rise in calendar 1973, Federal spending (NIA basis)
grew at an unusually rapid annual rate of 14.8 per cent in the first
half of calendar 1974, and is
same rate in the last half.
growth in spending is
rate.
expected to continue to grow at the
In the first half of 1975, however,
expected to slacken to a 10.3 per cent annual
The higher growth rates during 1974 are partly due to two
recent social security benefit hikes.
The next hike is
scheduled for
July 1975.
PROJECTED HIGH-EMPLOYMENT SURPLUS
(Billions of dollars, annual rates)
1973-H2
Staff estimate 1/
1975-H1
-4.5
-3.0
-. 1
12.1
5.3
Conventional measure
1/
Calendar year halves
1974-H2
1974-H1
9.9
11.8
19.7
Adjusted to remove a large part of the impact of expected inflation.
Recently,
the House Ways and Means Committee made some tenta-
tive decisions on tax reform measures whose net effect would raise
revenues by $.5 billion.
Final Committee action is
expected sometime
III - 30
in September.
Among other proposals the bill includes: (1) increases
in the low-income allowance and the standard deduction, (2) a series
of changes regarding itemized deductions, (3) a sliding-scale effective tax rate on long-term capital gains designed to "unlock" investors,
and (4) a completely new form of the "minimum tax" which would increase
revenues somewhat.
In addition to these reforms, the package contains
a modified version of the "Oil and Gas Energy Tax Act of 1974", which
the Committee approved earlier but did not send to the House because
of procedural disputes.
of depletion allowances.
The revised version would speed up the removal
Due to uncertainty about the prospects for
passage of this legislation, present staff receipts estimates include
only the revenue effects of the energy-tax bill which are also contained in the Administration's June estimate.
III
- 31
PROJECTION OF TREASURY CASH OUTLOOK
(In billions of dollars)
Total net borrowing
Weekly and monthly bills
Tax bills
Coupon issues, net
As yet unspecified new
borrowing
Special foreign series
Budget agency transactions
with the public
Net Federal Financing Bank
transactions with the
public
Debt repayment
Plus:
Other net financial sources a/
Plus:
Budget surplus or deficit (-)
Equals:
Change in cash balance
Memoranda:
Level of cash balance,
end of period
Derivation of budget
surplus or deficit:
Budget receipts
Budget outlays
July
1.8
Aug
2.0
.8
1.2
1.5
.1
Oct.
1.5
-1.5
3.5
-.6
-.8
--
1.5
.1
1.5
--
-.3
-1.5
-4.2
-1.7
3.5
-6.0
b/ -1.2
5.5
-4.6
-2.7
-.1
6.5
5.3
10.8
6.2
20.9
25.1
23.7
25.4
28.5
25.0
19.5
25.5
4.3
1.8
.8
2.5
Maturing coupon issues
held by public
Net borrowing by government-sponsored agencies
Sept.
2.0
3.0
e--estimated.
a/ Checks outstanding less checks paid and other accrual items.
b/ Actual
1.5
FEDERAL BUDGET AND FEDERAL SECTOR IN NATIONAL INCOME ACCOUNTS
(In billions of dollars)
...
,_1974
Fiscal
Year
*
Fiscal 1975 e/
Adm. Est. F.R.
5-30-74
Board
Calendar Years
1973
1974
Actual
PRB e/
T*
Federal Budget
F...
.R.B. Staff Estimates
Calendar Quarters
1974
1975
TT*
TTT
TV
T
TT
Unadjusted data
Surplus/deficit
Receipts
Outlays
-3.5
264.8
268.3
Cash operating balance,
-9.7
294.8
304.5
3.0
3.4
Means of financing:
Net borrowing from the public
Decrease in cash operating balance
Other 1/
-11.4
294.0
305.4
n.a.
n.a.
n.a.
12.0
2.6
-4.8
n.a.
6.6
-2.9
end of period
9.2
-7..9
250.4
258.3
7.9
.7
-. 7
10.4
-7.3
280.9
288.2
-7.1
60.5
67.6
9.2
2.6
-4.5
7.8'
9.7
80.1
70.4
-2.4
73.1
75.5
-7;5
67.2
74.7
3.4
2.0
-6.4 5.8
-.8 -1.6
1.7
-2.5
-1.8
6.4
3.0
-1.9
8.4
9.2
10.8
7.8
"7.2
88.0
-- 7.0
66.5
73.6
80.8
2.0 -2.2
4.2 -3.0
.8 -1.9
3.6
M
t•
6,6
6
Is»
2/
Memo- :
Sales of financial assets
to the public 3/
4/
Borrowing from the public:Budget agency
Federal Financing Bank
Treasury borrowing, net
Sponsored agency borrowing 5/
1.5
n.a.
1.3
)n.a.
--
1.7
14.9
5.7
) n.a.
3.6
4.1
.1
.4
-.1
4.8
.4
.1
5--
n.a.
n.a.
n.e.
n.e.
8.1
16.3
4.4
15.6
National Income Sector
Surplus/deficit
Receipts
Expenditures
*
*
-. cule-rjce
Actual
-3.8
-12.1
-5.6
302.2 6/258.5
314.3
264.2
6.0
siae
n.a.
to
e--projected
-6.3
5.6
1,5
4.3
6.3
1.6
3
.8j
3.6
3.7
1.2
1.1
n.e.)
n.e.
)
n.e.
n.e.
n.e.
n.e.
Seasonally adjusted, annual rates
-3.5e -12.8
273.1 6/304.3
276.6
317.1
High Employment surplus/deficit
(NIA basis) 7/
3.0
--
1.8
n.e.-hot estimated
-6.6
~
-4.7
291.6
296.3
-1.6
.- o
-1.5 -1.7 -5.5 -10.0 -12.6
279.4 289.5 296.8 30.8 305.3
281.0 291.2 302.3 310.8 317.9
-3.0 -3.1
vial
n.a.--not available
-2.9
2.8
9.3
p-rimiar
-17.7
308.2
325.9
14.8
p--preliminary
Footnotes continued
1/
Includes such items as deposit fund accounts and clearing accounts.
2/
The sum of sponsored and budget agency debt issues, financial asset sales, and borrowing by
the Federal Financing Bank does not necessarily reflect the volume of debt absorbed by the
public, since both the sponsored and budget agencies acquire a portion of these issues.
Most of the market activities of budget agencies are expected to be handled by the Federal
Financing Bank in fiscal year 1975.
3/
Includes net sales of loans held by the Government National Mortgage Assn., Federal
Housing Adm., and Veterans Adm. Receipts from these sales are netted against Federal
Budget Outlays shown above.
4/
Budget agencies such as U.S. Postal Service, Export-Import Bank, and Tennessee Valley
Authority, borrow directly from the public or from the Federal Financing Bank. The Federal
Financing Bank in turn borrows from the public or from the Treasury. To avoid double counting
only net borrowing from the public is shown in the table.
5/
Federally-sponsored credit agencies, i.e., Federal Home Loan Banks, Federal National Mortgage
Assn., Federal Land Banks, Federal Intermediate Credit Banks, and Banks for Cooperatives.
6/
Quarterly averages exceed fiscal year total by $1.7 billion for fiscal 1974 and $.6
for fiscal 1975 due to spreading of wage base effect over calendar year.
7/
Estimated by F.R. Board Staff.
billion
INTERNATIONAL
DEVELOPMENTS
Second quarter data
STRICTLY CONFIDENTIAL
Until released by
Department of Commerce
CONFIDENTIAL (FR)
IV -- T - 1
8/14/74
Payments
of
Balance
U.S.
(In millions of dollars; seasonally adjusted)
1974 p/
1973
YEAR
10
14,388
2,727
470
-74
70,277 22,299
-69,807 -23,373
3,918
2,801
Goods and services, net 1/
Trade balance 2/
Exports 2/
Imports 2/
Service balance
-1.943
-3,472
Remittances and pensions
Govt. grants & capital, net
U.S. private capital (- = outflow)
Direct investments abroad
Foreign securities
Bank-reported claims --
liquid
"
"
other
Nonbank-reported claims -- liquid
"
"
"
other
-220
-647
-2,248
-2,983
-412
-881
12.444
6.822
Foreign capital (excl. reserve trans.)
1,127
2,537
Direct investmentsin U.S.
U.S. corporate stocks
2,758
376
New U.S. direct investment issues
1,223
25
70
296
Other U.S. securities (excl. U.S. Treas.)
Liquid liabilities to:
4.436
4.573
Commercial banks abroad
2,978
4,589
Of which liab. to branches 3/
(309) (3,381)
1,082
577
Other private foreign
376
-593
Intl. & regional organizations
1,420
426
Other nonliquid liabilities
Liab. to foreign official reserve agencies
U.S. monetary reserves (increase, -)
Gold stock
Special drawing rights
IMF gold tranche
Convertible currencies
BALANCE (deficit -)
Official settlements,
Net liquidity, S.A.
"
"
, N.S.A.
Liquidity, S.A. 4/
"
, N.S.A.
Basic balance, S.A.
"
"
, N.S.A.
*
-573
8,363
-8,936
-350
-1,197
-6,113
131
-65
-1,477
-1,628
-86
-101
-180
-2,524
61
5
50
277
2.852
1,954
(-1,165)
606
292
-19
8
2.590
2,216
(1,758)
120
254
961
555
(-970)
244
162
-836
4.849
796
2.030
209
-210
-358
-219
-X6
9
--
-33
233
-209
-1
-29
3
-32
-244
-85
-165
-57
-16
-28
-577
-1,954
-1,604
-2,796
-3,167
-2,915
465
S.A.
N.S.A.
-996
7,510
-8,506
5.095
-2,620
Errors and omissions
JUNE*
-7.391
-4,872
-807
-1,103
-4,773
-841
-1,704
-1,709
24,023
-25,732
MAY*
-396
-1,183
,14.101
2Q
-5,304
-7,796
-9,740
-744
1,044
1,488
-869
-48
-3,529
-2,850
2,065
2,453
-4,491
-4,104
-6,277
-6,695
-7,343
-7,810
Monthly, only exports and imports are seasonally adjusted.
"net exports" in the GNP, except for latest revisions.
2/ Balance of payments basis which differs a little
from Census Basis
3/ Not seasonally adjusted.
4/ Measures by changes in U.S. monetary reserves, all liabilities to foreign official
reserve agencies and liquid liabilities to commercial banks and other foreigners.
1/ Equals
IV - 1
INTERNATIONAL DEVELOPMENTS
Foreign exchange markets.
The weighted average exchange value
of the dollar has increased on balance by more than 1 per cent from its level
four weeks ago.
The dollar held steady in July, but has moved up sharply
during the past two weeks.
WEIGHTED AVERAGE EXCHANGE RATE CHANGES
(from May, 1970 Parities)
U.S. Dollar
German Mark
Italian Lira
Japanese Yen
Monthly aves.
Oct.
-21.5
31.0
-9.2
13.5
Jan.
-11.5
22.0
-13.0
11.0
April
-17.3
30.3
-16.1
13.4
June
-17.0
30.5
-18.1
11.2
July
-16.9
29.0
-17.1
8.0
Weeks ended:
Aug. 7
-16.5
28.3
-17.3
4.6
14
-15.8
27.6
-17.6
4.8
Exchange market activity, in both the spot and forward markets,
has recovered from the precipitous decline that accompanies the Herstatt
Bank failure.
Volume is now reported to be averaging 75 per cent of
the pre-Herstatt levels, with the decline in volume confined to non-commercial transactions.
The upward movement in the dollar began with release of June
U.S. trade figures which showed a decline in the trade deficit from May.
IV-
2
In the past week and a half, the dollar was further strengthened by market
anticipations that the political turmoil surrounding the office of the
President would soon be resolved.
The inaugural commitments by President
Ford to combat inflation have also increased market confidence in the
dollar.
The System has taken advantage of the strengthened position
of the dollar and has repaid over $200 million in swap drawings on the
Bundesbank in the past two weeks.
Since the closure of the Herstatt Bank on June 26, the German
mark has declined gradually but steadily in exchange markets.
Downward
pressure on the mark resulted from a larger than expected reduction in
the German trade surplus and from activity by German banks to cover their
short dollar positions in advance of the July 31 reporting date on their
net external position to the Bundesbank.
To moderate the decline in the
mark, the Bundesbank has sold nearly $200 million since mid-July and has
intervened with substantial sales of Belgian francs and guilders.
The
Netherlands Bank and the National Bank of Belgium have also intervened
with purchases of marks to keep the snake within its agreed upon margins.
After gaining strength in July, the Italian lira has depreciated
in the past two weeks and the Bank of Italy has already sold over $150
million in August.
The Bank of Italy purchased $445 million in July.
The major factor contributing to the strength of the lira in July had
been heavy Euro-dollar borrowing by Italian banks.
This source of strength
evaporated when the Bank of Italy instructed the banks not to increase
their net foreign liabilities.
IV - 3
The weighted average exchange value of the Japanese yen has
dropped sharply during the past four weeks.
Since the beginning of July,
the yen has depreciated by nearly 5 per cent and it has declined more
than 8 per cent since April.
The yen has weakened as both U.S. and Euro-
dollar banks have been reluctant to increase their dollar loans to the
Japanese and as Japanese officials have also discouraged such borrowing.
To accommodate the commercial banks needs for dollars, the Japan Ministry
of Finance has deposited substantial amounts of dollars with the commercial
banks.
In addition, quotas have been raised on the quantities of yen that
foreign banks operating in Japan can hold.
Euro-dollar market.
from their peaks of mid-July.
Euro-dollar interest rates have declined
The decline has been uneven among maturities,
however, as overnight rates fell much more than three-month rates.
The
former have fallen about 2 percentage points from their highs, while the
latter have declined by less than one per cent.
This shift in the term
structure was also reflected in U.S. domestic money market rates, as can
be seen from the table on the next page.
U.S. banks' liabilities to their own foreign branches rose by
some $800 million on a daily average basis from the week ended July 10
to the week ended August 7, with all of the rise occurring around midJuly.
This increase resulted from substantial downward pressures on very
short term Euro-dollar rates associated with the investment of large amounts
of funds in that market by OPEC countries.
Borrowings from their head
offices abroad by U.S. agencies and branches of foreign banks also surged
during July and early August.
IV -4
SELECTED EURO-DOLLAR AND U.S. MONEY MARKET RATES
Average for
month or
week ending
Wednesday
(1)
Overnight
(2)
(3)
Differential
(4)
3-month
Euro-$
(5)
60-89 day
(6)
Differential
Euro-$
Funds
(1)-(2)(*)
Deposit
CD rate
(4)-(5)(*)
9.73
10.47
-0.74 ( 0.11)
10.48
10.05
10.88 0.82 (0.89)
11.08 0.96 (1.04)
1974-Apr.
Federal
0.43 (0.47)
May
June
10.94
11.40
11.32
11.75
-0.38 ( 0.57)
-0.35 ( 0.64)
11.70
12.04
July
12.18
12.88
-0.70 ( 0.36)
13.52
11.70
1.82 (1.98)
13.42
1974-July 10
17
12.23
24
11.02
31
11.31
Aug. 7
11.21
14p/11.40
13.32
13.04
12.60
12.29
12.06
12.06
0.10
-0.81
-1.58
-0.98
-0.85
-0.66
( 1.27)
( 0.25)
(-0.62)
( 0.00)
( 0.12)
( 0.33)
13.80
14.02
12.87
13.31
13.60
13.19
12.00
11.88
11.50
11.50
11.63
11.63
1.80
2.14
1.37
1.81
1.97
1.56
*/
P/
(1.96)
(2.33)
(1.49)
(1.97)
(2.14)
(1.70)
Differentials in parentheses are adjusted for the cost of required reserves.
Preliminary
SELECTED EURO-DOLLAR AND U.S. COSTS FOR PRIME BORROWERS
(1974; Friday dates)
1) 3-mo. Euro-$ loan a/
2) 90-119 day com'l. paper b/
3) U.S. bank loan:
a) predominant prime rate
b) with 15% comp. bal's. c.
c) with 20% comp. bal's. c/
Differentials:
(1) - (2)
(1) - (3a)
(1) - (3b)
(1) - (3c)
a/
b/
c/
July 12
14.69
12.38
July 26
14.06
11.63
Aug.
2
13.75
11.63
Aug.
12.00
14.12
15.00
12.00
14.12
12.00
14.12
15.00
12.00
14.12
15.00
2.31
2.43
2.69
2.06
-0.06
-0.94
2.12
1.75
-0.37
-1.25
2.80
2.56
0.44
-0.44
0.57
-0.31
15.00
3/4 per cent over deposit bid rate.
offer rate plus 1/8 per cent.
prime rate adjusted for compensating balances.
9
14.56
11.76
IV -5
Contributing to the easing of Euro-dollar interest rates in
recent weeks were actions by monetary authorities in Italy and Japan to
discourage borrowings by Italian and Japanese commercial banks, who had
previously been heavy borrowers in that market.
The Japanese Ministry
of Finance deposited $650 million with Japanese banks in late July and
early August in an effort to reduce the pressures on those banks to borrow
abroad.
Japanese banks had been paying premiums of up to 2 per cent on
Euro-dollar deposits as potential lenders had become wary of extending
further credit to those banks.
The relationship between Euro-dollar and U.S. loan rates for
prime borrowers has changed little in recent weeks, as indicated on the
previous page.
U.S. banks continued to lend heavily abroad in July,
particularly to Japanese banks as the latter increased borrowing from U.S.
banks as their credit standing in the Euro-dollar market deteriorated.
U.S. balance of payments.
Only very partial information is avail-
able about changes in the U.S. international payments position in July.
The
weighted average exchange value of the dollar was about the same as the June
average.
Based on preliminary data, the official settlements balance, in
July, is estimated to be in deficit by about $1-3/4 billion (not seasonally
adjusted, not annual rate), but over half is probably attributable to inflows
of official funds from oil producing countries.
exporting countries at the FR Bank of
Official holdings of oil
New York increased by about $1 billion
in the month, and there was probably also some increase in the large part of
the oil producers'funds that is customarily held with U.S. commercial banks.
IV -6
For the second quarter, U.S. liabilities to official institutions
of the major oil exporting countries rose by almost $2-1/2 billion, compared
to an increase of about $1 billion in the first quarter; the official settlements balance in the second quarter (including these liabilities to oil
exporting countries) was in deficit by $4.5 billion (seasonally adjusted,
not at annual rate) compared to a $1.0 billion surplus in the first quarter.
Liabilities to official institutions other than the major oil producers
increased by about $2 billion in the second quarter, mostly to Germany and
Japan.
The $5-1/2 billion decline in the official settlements balance
from the first quarter to the second quarter (see table below) is attributable
largely to a substantial increase (about $3-1/2 billion) in bank-reported
net capital outflows and a large deterioration in the trade balance as
described in the section that follows.
Bank-reported claims on foreigners
increased by over $7 billion in the second quarter (seasonally adjusted), an
increase $1-1/2 billion greater than in the first quarter (see table).
Of
the total second quarter increase, $5-1/2 billion was reported by U.S.
commercial banks and the remainder by U.S. agencies and branches of foreign
banks.
U.S. acceptance credits (included in these bank claims) increased
by nearly $2-1/2 billion in the second quarter compared to a $1 billion
increase in the first quarter.
Much of the lending in both the first and
second quarters was to Japan with total banking claims on Japan increasing
by $4-1/2 billion in the half year to a total of about $11 billion; half of
IV - 7
U.S. BALANCE OF PAYMENTS
(billions of dollars, seasonally adjusted)
1Q-74
Trade balance
-.1
Change
-1.7
-1.6
+ 2 .0e
-.
(-.9)
-5.6
+4.7
(-4.3)
-7.2
+2.9
(-3.3)
-1.5
-1.8
(+.0)
-.
6
(-.0)
-.
4
(-.1)
+.3
+.7
(+.4)
+.3
(+.0)
-.
4
(-.4)
+1.8
-4.0
-5.8
-.5
+.3
Service transactions, net
+2.8
Selected private capital flows
Bank-reported transactions, net
Claims, net
Liabilities, net
Securities transactions, net
U.S. purchases of foreign securities, net
Foreign purchases of U.S. securities
other than Treasury issues, net
(of which: stocks)
Sum of above
Other transactions (residual)
-.8
Official settlements balance
+1.0
of which: liabilities to official agencies
of oil exporting countries, n.s.a. (-1.0)
(increase -)
Note:
2Q-74
8
e
-4.5
-5.5
(-2.4)
(-1.4)
Second quarter data are STRICTLY CONFIDENTIAL until released
by the Department of Commerce.
that increase were acceptance credits.
On the liability side, there was a
nearly $3 billion increase in borrowings from private foreigners reported
by U.S. banks in the second quarter, about $1-3/4 billion less than in the
first quarter.
Of the second quarter increase in liabilities, about
$3/4 billion was reported by U.S. agencies and branches of foreign banks;
on June 30, the net foreign liability position of these foreign banks was
about $1 billion, compared to about $2 billion on both March 31 and
December 31.
IV - 8
Net transactions in securities other than U.S. Treasury issues
in the second quarter were about in balance, as they were in the first
quarter.
U.S. net purchases of foreign securities were about $300 million
less in the second quarter than in the first quarter mainly because of
smaller purchases of Canadian new issues.
Foreign net purchases of U.S.
securities were about $350 million less than in the first quarter, almost
entirely because of the reduction of net purchases of U.S. stocks to nearly
zero.
Sales of offshore Euro-bond issues by U.S. corporations were also
virtually nil in the second quarter, as they were in the first quarter,
probably reflecting in part the termination of the OFDI program in January.
Net service transactions in the second quarter are estimated (on
a very preliminary basis) to have been in surplus by about $2 billion compared
to a first quarter surplus of $2-3/4 billion.
The reduction in the surplus
was largely attributable to a decline in estimated net investment income
receipts, largely reflecting increased foreign participation in U.S. oil
company operations abroad.
The sum of the changes in the trade and capital transactions
described above accounts for slightly more than the $5.5 billion decline in
the official settlements balance from the first to second quarters. This
would suggest only a small improvement in other balance of payments accounts
for which data are not yet available.
U.S. foreign trade.
In June the U.S. trade deficit fell from the
extraordinarily large deficit in May as exports rose sharply and imports rose
IV - 9
much more moderately.
For the second quarter the trade balance was in deficit
by nearly $7 billion at an annual rate (balance of payments basis) compared
with a very small deficit in the first quarter and substantial surpluses
in the last two quarters of 1973.
U.S. MERCHANDISE TRADE, BALANCE OF PAYMENTS BASIS
(billions of dollars, seasonally adjusted annual rates)
1973
1973
1974
Ma
Year
1Q
2Q
3Q
4Q
1Q
2Q
EXPORTS
Agric.
Nonagric.
70.3
17.9
52.4
60.9
14.7
46.2
66.7
16.5
50.2
72.6
19.0
53.6r
80.9
21.2
59.7
89.2
23.6
65.6
96.1
22.5
73.5
IMPORTS
Fuels
Nonfuels
69.8
8.8r
6 1 .0r
64.7
6.7
58.1
68.2r
7.9r
60.3r
70
. 3r
9.1r
61.2r
76
.0r
11.6r
6 4 .5r
89.5 102.9 102.1r 107.2
20.5
28.3r 28.5r 28.2r
.0r 7 4.6 r 73.6r 7 9 .1r
6 9
TOTAL BALANCE
+0.
-3.8
-1.5r
+2.3r
+4.8r
-0.
-7.6r
- 4 . 8r
-3.4r
BALANCE excl. fuel
imp. & agr. exp.
Note:
5
r
-8.6r -11.9 -10.1
3r
-6.8
-1.1r
June
.1r 100.4
20.6
22.4
.5r 77.9
6 9
90
-12.0r
-4.1r
-6.9
-1.2r
Details may not add to totals because of rounding.
The worsening in the trade balance from the first
to the second
quarter of this year resulted primarily from the very large increase in the
value of fuel imports --
40 percent higher than in the first
quarter --
and, to a much smaller extent, a downturn in value of agricultural exports.
However,
the trade deficit may increase much less steeply in the next few
quarters.
With prices of oil apparently leveling off and only a moderate
further increase expected in the volume of oil imports, the value of fuel
imports is expected to rise less sharply in the coming months.
At the same
IV - 10
time the disappointing prospects for the new harvests of U.S. grain and soybeans
have resulted in a sharp run-up in the prices of these commodities, and these
higher prices should prevent the value of agricultural exports from slipping
much below the current high level, even if quantities are reduced.
Apart from agricultural exports and fuel imports, there was a small
trade deficit in the second quarter of about $1 billion at an annual rate,
down substantially from the $3-1/2 billion deficit rate in the first quarter.
Higher prices continued to play a major role in the further large
increases in the values of exports and imports from the first to the second
quarters.
While prices of agricultural exports showed almost no change
between the two quarters, in contrast to the sharp quarter-to-quarter
increases during the last two years, prices of nonagricultural exports
continued to rise strongly in the second quarter (over 20 percent at an
annual rate) --
mainly in nonagricultural industrial materials.
While a
large part of the rise in prices of total imports from the first to the second
quarter resulted from the further rise in prices of oil imports, prices of
other types of imports also moved up very sharply (by about 35 percent at
an annual rate) in the second quarter.
The increase in prices of nonfuel
imports was widely distributed over all major categories --
foodstuffs,
capital equipment, industrial materials (other than fuels), cars and other
consumer goods.
After adjustment for these price changes in exports and imports,
the trade balance in real terms in the second quarter showed a moderately
IV - 11
larger surplus than in the first quarter.
The continuing strength in the
trade balance in real terms has served to cushion, to some degree, the very
pronounced slowdown in U.S. goods output (as measured in the GNP) in the first
half of this year.
CHANGES IN U.S. FOREIGN TRADE VOLUMES AND IN
U.S. REAL GNP GOODS OUTPUT
(changes from previous period in billions of 1967 dollars, SAAR)
GNP goods
output
Net
Exports
Exports
Imports
16.2
2.9
4.8
1.9
2.7
3.7
2.2
-1.4
Q-3
1.3
1.2
.9
-.3
Q-4
1974:
Q-1
Q-2
1973:
6.9
2.4
2.2
Q-1
-17.6
.5
1.1
.5
1.7
2.2
.5
.4
Q-2
-.3
While the value of fuel imports rose very sharply from the first
to the second quarter, there was actually a small decline in the value of
fuel imports since April.
The volume of oil imports which averaged about
6.7 million barrels per day in April (compared with a daily average of
5.8 million barrels in the first quarter) actually drifted downward to
6.3 million barrels per day in June.
The decline of U.S. oil consumption
this year below last year levels is the principal explanation for the leveling
off in imports.
At the same time the average unit-value for oil imports
has also shown little change from April through June, holding at about
IV -
12
$11.60 per barrel in each of these three months.
oil imports from high-priced sources --
The pronounced shift in
Canada, Venezuela and Nigeria --
to
a relatively lower-price source, Saudi Arabia, probably accounts for the
leveling off of the prices of oil imports in recent months.
U.S.
CRUDE OIL IMPORTS FROM SELECTED COUNTRIES
1973
Q-II
Per
Mil.
cent
bbl.
Total
Canada
Venezuela
Nigeria
S. Arabia
318
101
48
36
33
100
32
15
11
10
1974
Dollars
per
bbl
2.93
3.15
2.82
3.28
2.47
Mil.
bbl.
Q-II
Per
cent
339
80
34
52
34
100
24
10
15
10
Dollars
per
bbl.-
Mil.
bbl.
11.69
10.47
11.14
14.01
10.20
10
20
9
12
20
June
Dollars
Per
per
cent
bbl.100
18
8
11
18
11.65
11.18
11.07
13.58
10.33
1/ FOB foreign port.
The quantity of nonfuel imports,
change from the first
in
the aggregate,
showed little
to the second quarter but there were divergent movements
by major commodity groups.
There were sharp increases in the volume of
imports of capital equipment, and autos from Europe and Japan, with a more
moderate increase in consumer durables.
sharply in volume,
While imports of foods dropped
and there was virtually no change in
total imports of nonfuel industrial materials,
in
the quantity of
steel imports began to arrive
increased amounts in May and June, notably from Japan.
Imports of capital equipment have risen about in
increase in domestic fixed investment expenditures,
line with the
but the number of cars
IV - 13
imported has been far in excess of domestic sales of such cars; stocks are now
equivalent to six months of current sales, an unusually large ratio.
The significant development in exports in the second quarter was
the very strong showing in exports of nonagricultural commodities, which
more than compensated for the slowdown in agricultural exports.
Shipments of
nonagricultural industrial materials rose sharply in both quantity and price,
particularly in items which are in short supply world-wide -paper --
steel, chemicals,
or as in aluminum where U.S. prices are still below world prices.
Deliveries of civilian aircraft were exceptionally large in the second
quarter and delivery schedules of the aircraft companies indicate that these
heavy exports may be maintained through 1975.
picked up sharply in the second quarter.
Exports of machinery also
However, foreign orders were
virtually unchanged during the months of the second quarter, suggesting a
possible decline in machinery exports around the beginning of next year.
IV -
14
Trade developments in the major industrial countries.
With
a large deterioration expected in the trade balances of the major
industrial countries this year owing to the sharp rise in oil prices,
two important questions are:
(1) how much of that deterioration has
already occurred; and (2) how has the over-all trade position of
individual countries been affected.
On the basis of the data now
available for the first half of this year, it is clear that there was
a huge deterioration in the first quarter, followed by a further -though less sharp --
deterioration in the second quarter.
One rough
measure of these trends is the aggregate trade balance for the seven
key industrial countries listed in Table 1.
This balance, measured
at a seasonally adjusted annual rate, deteriorated from about zero in
the fourth quarter of last year to a deficit of about $15 billion in
the first quarter of this year.
In the second quarter, the aggregate
deficit rose further though less sharply, to an annual rate of about
$26 billion.
All of the listed countries except Germany and Canada experienced
a substantial deterioration in their trade balances in the first quarter.
The largest deteriorations occurred in the United States, France,
Italy and Japan, with the U.K. experiencing a further moderate increase
in its trade deficit.
In the second quarter, the United States, France
and the U.K. experienced a further substantial deterioration, while
the Canadian surplus declined significantly from the first quarter.
Japan's trade balance, however, improved in the second quarter.
Table 1.
INTERNATIONAL TRADE BALANCES OF MAJOR INDUSTRIAL COUNTRIES
(In billions of U.S. dollars at seasonally adjusted annual rates) 1 /
1973
1972
1973
France
1.2
1.4
Germany
6.4
12.5
Italy2/
-6.7
United Kingdom
-1.7
Q1
Q4
Q1
2.0
1.5
0.8
-2.7
-4.4
-1.0
8.5
11.7
16.5
13.9
20.6
20.6
15.9
-5.6
-4.6
-6.0
-5.3
-6.5
-12.1
-12.5
-11.0
-5.8
-3.4
-4.0
-6.0
-9.7
-11.9
-13.1
-13.4
-2.0
-3.8
-4.2
-10.7
-10.3
-7.6
1.6
1.7
1.5
1.0
-1.0
2.3
4.2
0.4
-6.8
-6.9
-14.8
-25.6
-25.0
-15.2
-18.8
-18.1
Japan
5.2
-1.4
4.2
Canada
1.5
2.0
2.1
0.3
-3.8
United States
Total
Total (excl.
U.S.)
-7.0
1974
Q3
1.5
Q2
2.7
-1.5
4.9
3.4
4.4
2.8
6.8
0.2
11.9
3.1
8.2
4.3
4.5
-4.0
Q2
June
Note: Customs data from national country sources with imports c.i.f. in Germany, Italy and Japan -otherwise f.o.b. The U.S. and U.K. data are on a balance-of-payments basis.
1/ Data converted to dollars on the basis of average exchange rates as published in the Federal
Reserve Bulletin.
2/ Data not seasonally adjusted.
Table 2.
PERCENTAGE CHANGES IN SEASONALLY ADJUSTED EXPORTS AND IMPORTS:
MAJOR INDUSTRIAL COUNTRIES 1/
Japan:
Canada:
U.S.:
1973
Q1
Q2
Q3
Q4
Q1
15.1
16.2
15.7
14.5
21.7
22.5
2.4
4.4
7.0
6.2
3.8
5.6
1.9
3.7
22.2
32.7
9.4
12.6
Exports
Imports
11.9
9.6
9.6
7.2
19.7
13.0
2.6
2.4
4.8
1.1
2.6
-2.0
5.9
10.3
16.0
6.5
3.5
7.4
12.9
15.4
15.9
13.8
19.5
44.0
-19.8
-3.6
31.5
32.2
9.4
4.2
12.4
14,9
3.1
23.1
15.0
10.6
10.6
9.5
3.8
15.4
25.2
40.7
0.8
5.8
6.0
6.9
6.9
12.5
1.3
12.6
11.5
15.5
14.9
12.3
18.2
18.3
4.9
4.6
13.9
43.9
1.2
5.9
-4.6
14.7
5.2
9.8
16.2
15.9
18.4
32.4
15.6
11.4
14.0
10.3
13.0
19.5
25.6
24.8
5.5
8.3
4.7
2.1
0.7
5.9
9.2
9.4
9.2
10.7
2.0
3.8
9.6
13.3
14.0
22.6
44.1
25.4
15.1
8.0
9.5
5.2
8.8
3.2
11.4
8.8
10.3
15.9
7.7
15.9
Exports
Imports
Germany:
U.K.:
1972
Exports2/
Imports
France:
Italy:
1974
1973
1966-70
Average
Exports
Imports
Exports
Imports
Exports
Imports
Exports
Imports
Q2
Note: Percentage changes are based on country trade data in local currencies.
1/ 1966-70 data measure average annual rates of change; 1972 and 1973 data measure percentage
increase over previous year; quarterly figures show percentage change from previous quarter,
at quarterly rates.
2/ Data not seasonally adjusted.
IV - 17
For the major industrial countries discussed above, the
largest part of the rise in trade values this year has reflected an
increase in unit values.
The volume of exports, however, has also
increased for most countries except Canada, and the volume of imports
has increased for most countries except Germany and, in the second
quarter, the United States.
This year's rise in export prices has
generally been outstripped by the sharp upswing in import prices, the
latter mainly reflecting the rise in oil prices.
The bulk of the
export expansion that has occurred this year in value terms reflects
higher exports of raw materials and intermediate goods, rather than
finished goods.
If trade in oil is
excluded from the data, only Italy and
Canada (second quarter) among the major countries have had a deterioration
in their non-oil trade balances this year.
Since late 1972, German exports have generally increased at
a much faster rate than imports, the result being an increasingly
large trade surplus.
Whereas the German trade surplus was DM 20 billion
in 1972, it rose to a record level of DM 33 billion in 1973 and for
the first six months of 1974 was running at a seasonally adjusted
annual rate of almost DM 54 billion ($20.6 billion). The value of
exports in the first half of this year was 31 per cent higher than
in the same period a year earlier, while the value of imports was up
20 per cent.
During the January-May period the monthly trade surpluses
IV - 18
generally exceeded DM 4.5 billion, and while the June surplus declined
to DM 2.5 billion, this may not yet signify any change in trend, since
a similar drop occurred in May-June last year.
The recent strength of German external trade is partly due
to cyclical considerations and certain special factors.
The type of
products that have been leading the German export boom suggest that
Germany has been a major beneficiary of the cyclical boom in industrial
materials, particularly those with high levels of value-added.
Produc-
tion and delivery disruptions in several major trading partners have
also given German producers an edge, resulting in superior German
"delivery capacity."
Other factors include the higher levels of
inflation and demand in other countries, as well as the continuing
weakness of German domestic demand.
Until recently, nominal changes in German exports and imports
were dominated by quantity movements.
During 1965-72 the average
annual increase in the unit value of exports was less than 1 per cent
and it was only 1.6 per cent in 1973.
The unit value of imports showed
no trend increase during 1965-72, but rose 4.9 per cent in 1973.
Very
steep increases in both indexes, however, were registered in the
closing months of last year and the first part of this year, overall
export unit values being 14 per cent higher in January-April 1974
than in the same period a year earlier.
With regard to the volume of
trade, export volume continued to expand during January-April of this
IV - 19
year and was 19 per cent higher than in the same period a year earlier,
while the volume of imports was 1.5 per cent lower.
Despite a 10.5 per cent decline in the volume of German oil
imports in the first four months of this year, as compared to the
same period a year earlier, the value of oil imports rose from DM 2.7
billion in January-April 1973 to DM 7.2 billion in January-April 1974.
This rise in the cost of oil imports has been more than offset by the
substantial rise in aggregate exports and the sluggishness of non-oil
imports.
The deterioration in the United Kingdom's trade balance,
which began in early 1973, continued through the first half of this
year.
Data just released on the July trade deficit show virtually no
change from the June level.
Exports in the first half of this year
were 33 per cent higher than in the same period a year earlier, while
imports were up 60 per cent.
Most of the rise in the value of trade
reflected an increase in prices.
For the first five months of this
year export unit values were up 25 per cent over the same period last
year, while import unit values were up 57 per cent.
Of greatest
significance was the four-fold increase in the price of crude oil
imports between the third quarter of last year and the second quarter
of this year.
As a result of these developments, there has been a steady
deterioration in the trade balance.
Of the total deterioration in the
trade balance of £3.9 billion (seasonally adjusted annual rate) from
IV - 20
the second quarter of 1973 through the second quarter of this year,
£3.4 billion was due to the increase in the value of imports of
petroleum and petroleum products.
When trade in these products is
excluded, Britain's trade deficit increased throughout 1973, but so
far this year has been declining.
In the second quarter of this year
it stood at £1.7 billion, or approximately $4 billion, at a seasonally
adjusted annual rate.
The commodity details of British trade in volume terms is
available only through the end of 1973, but these data indicate that
the total volume of exports in 1973 rose about 14 per cent, with the
increase in non-manufactured and manufactured goods being virtually
the same.
The volume of imports also increased 14 per cent in 1973,
with considerable variation among categories:
imports of food and
tobacco increased 3 per cent, basic materials 12 per cent, and manufactured
goods 21 per cent.
A breakdown in value terms, however, presents a different
picture, particularly on the import side.
Because of the relatively
rapid increase in prices of food and raw materials, the increase in
1973 in the value of imports of food, beverages and tobacco (31 per cent)
and basic materials (49 per cent) was much greater relative to imports
of manufacture goods (46 per cent).
Similarly, in the first half of
1974 the value of imports of industrial materials and fuels increased
very rapidly, largely --
though not entirely --
because of price increases.
IV - 21
After registering a growing surplus for four years, France's
trade balance changed to a large and growing deficit in the first and
second quarters of this year.
Prior to the onset of the oil crisis
last October, French officials had expected that the 1974 trade surplus
would be somewhat larger than the 1973 surplus of 6-1/2 billion francs,
but it is now anticipated that there will be a deficit of about 20
billion francs.
Recent calculations by the Ministry of Finance indicate that
the average monthly cost of oil imports this year will be about 2-1/2
billion francs.
Available data indicate that the anticipated 1974
trade deficit will be largely due to the higher bill for oil imports.
The French authorities are extremely concerned about the
sharp deterioration in their trade position and recently inaugurated
an export expansion and domestic "austerity program" which is aimed
at cutting domestic demand while transferring any free capacity to the
foreign sector.
One of the program's goals is to reduce the present
trade deficit by one-half by mid-1975 and to eliminate it altogether
by the end of 1975.
The authorities have liberalized the granting of
export credits and an extensive export promotion drive is underway
which focuses on an expansion of exports to oil producers with large
populations, to countries with raw materials other than oil and to
the East European countries.
IV - 22
Preliminary data for early 1974 indicate that while the
volume of exports rose faster than the volume of imports, the sharp
rise in import prices, particularly for oil imports, more than offset
the underlying favorable trend in the volume of trade.
With the
terms of trade turning unfavorable, there has been a very adverse
impact on the nominal trade balance, despite the fact that volume
sales are way up and foreign demand for French goods --
particularly
grains, semi-finished products and, to a lesser extent, capital goods -remains dynamic.
After deteriorating substantially in 1973, the Italian trade
deficit reached alarming proportions during the first four months of
this year.
Measured on a seasonally unadjusted customs basis with
imports c.i.f., the trade deficit in January-June 1974 was 3,949 billion
lire ($6.1 billiod), whereas the entire 1973 deficit on a comparable
basis was 3,254 lire ($5.6 billion).
In May, however, the trade
deficit decreased to 573 billion lire ($910 million), the lowest level
since January.
The improvement in the May trade deficit was probably
due in part to the import deposit scheme imposed in the same month.
In June, the trade deficit worsened slightly, but not to the levels
of March-April.
A further improvement, at least in the non-oil deficit,
should occur as the restrictive monetary and fiscal policies imposed
earlier, begin to take effect.
IV - 23
Very preliminary estimates for the first half of 1974
indicate that there was a worsening of the non-oil trade balance as
exports rose 38 per cent, at an annual rate, and imports 66 per cent
over the levels of the second half of 1973.
Much of this non-oil
deterioration reflected a continued worsening of the terms of trade,
with
export unit values rising at an annual rate of 27 per cent compared
to a 44 per cent increase in import unit values.
The volume of imports
also increased faster at a rate of 15 per cent, compared to an 8 per
cent rise in the volume of exports.
(Italian authorites, however,
have expressed some doubt as to whether the price movements are completely
genuine or reflect over- and under-invoicing of imports and exports,
respectively.)
Despite the sharp rise in the cost of oil imports, Japan's
trade position --
after worsening sharply in the first quarter --
improved from the first to the second quarter of this year.
of exports accelerated in
The value
the second quarter while imports, reflecting the
sluggish economic conditions domestically, continued to decelerate.
As a result, the seasonally adjusted trade deficit at an annual rate
dropped from $10.7 billion in the first quarter to $10.3 billion in
the second quarter.
Preliminary data on the volume of trade indicate that exports
in the first half of this year were 9.7 per cent higher than in the
same period a year earlier, while imports were up only 7.9 per cent.
IV - 24
Export and import prices both continued to rise during the first half
of the year, but the terms of trade tended to stabilize following a
sharp decline in February due primarily to the increase in oil import
prices.
The underlying trade trends excluding oil imports indicate
a growing surplus on trade account.
During the second quarter the
trade balance excluding oil, rose steadily from $1.1 billion in April
to $1.6 billion in June.
Assuming a continuation during the rest of
the year of these recent trends, Japan should be able to offset a substantial portion of the higher cost of oil imports.
There was a moderate deterioration in the Canadian trade
account
in the first half of this year, partly reflecting a 4 per cent
increase in the volume of imports (not seasonally adjusted) in the
first half of 1974 over the same period a year earlier and a decrease in
the volume of exports (not seasonally adjusted) of 8 per cent.
Since
export prices rose by about 33 per cent over the same period, the value
of exports (not seasonally adjusted) rose by 23 per cent.
Import prices
were up by about 25 per cent, and the value of imports rose by about
31 per cent.
For 1974 as a whole, the Canadian trade surplus is expected
to decline by about C$1/2 billion from its 1973 level of about C$2.2
billion.
In contrast to the other major industrial countries, Canada
is self-sufficient in petroleum.
Thus Canada's petroleum (both crude
IV - 25
and petroleum products) trade surplus increased to C$304 million (not
seasonally adjusted) in the first quarter of this year compared to
C$151 million in the same period a year earlier.
There has, however,
been a substantial decline in Canada's non-oil trade balance.
The
non-petroleum trade surplus (not seasonally adjusted) was only C$54
million in the first quarter of this year compared to C$272 million
a year earlier.
APPENDIX A:
Highlights of the 1974 Annual GNP Revisions *
The July 1974 revisions of GNP data for 1971, 1972, and
1973 indicate current dollar GNP rose a bit less in 1971 but a bit
more in 1972 and 1973 than earlier indicated. In real terms, however,
the differences between the revised annual averages and the earlier
estimates are negligible. The quarterly pattern for 1973 remained
relatively unchanged: however, there was slightly more rapid real
growth in the first and fourth quarters and less in the second and
third than earlier indicated. The largest change was in the third
quarter when the implicit deflator rose considerably faster than
previously estimated.
Overall, in current dollars, the upward revision in 1973
amounted to $5.8 billion. The most significant revision was in the
change in business inventories which was revised upward by $7.4 billion
(almost half of this in the farm sector) for the year as a whole with
the largest revisions occurring in the third and fourth quarters.
Inventory investment in the fourth quarter is now indicated to have
been at an annual rate of almost $29 billion. There was virtually
no revision in the IVA. The estimate of net exports was lowered by
about $2 billion. Other changes were minor and essentially offsetting.
The level of national income was lowered a bit in 1971 and
was raised by $4.7 and $11.7 billion in 1972 and 1973, respectively.
The 1972 increase was mainly in corporate profits, rental income of
persons and proprietors income. In 1973 the revision was entirely
due to an $11.8 billion upscaling of farm proprietors' income; there
were small upward changes in other categories and a $3.5 billion
downward revision in before tax corporate profits.
Personal income estimates were revised upward sharply in
1972 and 1973 as was disposable income. The 1973 revision was largely
due to the revision in farm incomes. Personal outlays were only
slightly increased in 1973. As a result, personal saving and the
saving rate both moved sharply upward. The saving rate in 1973 is
now estimated at 8.2 per cent of disposable income rather than the
6.2 per cent indicated earlier. In the fourth quarter of 1973, it
is now estimated that consumers saved at a 9.5 per cent rate as
opposed to the earlier indication of 7.3 per cent. The 9.5 per
cent saving rate was the highest quarterly rate since the series
began in 1947.
*Prepared by James August, Economist, National Labor Force and Trade
Section, Division of Research and Statistics.
A-
2
The Federal Government is now estimated to have incurred
a $5.6 billion deficit (NIPA) in 1973 rather than a $.9 billion
surplus with much of the revision resulting from a lower estimate of
State and local governments recorded
corporate profits tax accruals.
a surplus of $9.2 billion in 1973--down from the earlier estimated
$10.5 billion.
A-3
CONFIDENTIAL
July 24,
- FR
1974
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Changes in Periods Indicated; Based on Seasonally Adjusted Annual Rate Data)
1970-IV to 1971-IV
Revised
Former
Estimates Estimates
1971-IV to 1972-IV
Revised
Former
Estimates Estimates
1972-IV to 1973-IV
Revised
Former
Estimates Estimates
---------------------- Billions of Dollars----------------------Gross National Product
Final purchases
Private
Excluding net exports
92.4
92.2
73.3
78.3
91.4
91.1
72.3
78.5
115.0
112.1
93.6
94.9
121.5
Personal consumption expenditures
Durable goods
Nondurable goods
Services
55.1
18.6
12.4
24.1
55.5
19.3
69.2
16.2
27.2
25.8
73.4
16.9
27.5
Gross private domestic investment
Residential construction
Business fixed investment
Change in business inventories
Nonfarm
23.4
13.7
9.5
.2
-1.4
23.4
28.6
9.4
Net exports of goods & services
Exports
Imports
-5.0
.2
4.8
Gov't. purchases of goods & services
Federal
Defense
Other
State and local
18.9
1973-IV to 1974-I
Former
Revised
Estimates Estimates
Seasonally Adjusted
138.3
128.4
103.5
87.2
139.3
121.4
97.6
83.0
14.7
27.3
15.1
13.2
14.8
26.8
16.9
14.9
29.0
72.6
2.7
38.9
31.0
66.7
.0
41.2
25.4
19.4
- .6
12.7
7.3
16.7
- .4
12.3
5.0
.5
24.5
-2.9
17.5
9.8
9.4
34.3
-3.1
19.4
17.9
13.6
-15.0
-4.7
2.3
-12.5
-12.3
-14.0
16.3
2.9
4.4
29.4
9.1
14.7
5.6
6.0
-6.2
-1.2
5.0
-1.3
16.7
18.0
-1.9
16.5
18.4
16.3
36.7
20.4
14.6
35.1
20.5
-1.9
14.0
15.8
,2.0
17.6
15.6
S.2
6.6
12.5
18.8
5.7
- .5
6.3
13.1
18.5
1.5
.0
1.5
17.0
20.5
4.7
2.6
2.0
15.8
24.9
4.1
.6
3.5
20.8
23.8
3.2
.6
2.6
20.5
12.2
5.3
3.3
2.0
6.9
9.9
3.1
.5
2.6
6.9
Gross national product in
constant (1958) dollars
39.7
39.8
53.3
55.1
32.3
31.5
-13.6
-15.2
Personal income
Wage and salary disbursements
Transfer payments
Disposable personal income
Personal saving
1
Saving rate (per cent)-
61.5
40.4
11.6
53.2
-2.8
8.1
62.9
39.6
11.6
54.6
-2.0
8.1
91.7
61.6
15.5
68.3
102.8
68.5
10.0
89.1
12.7
6.2
114.3
69.5
9.9
101.3
30.4
8.2
15.5
9.0
5.5
13.6
-5-6
6.6
13.2
10.6
S.1
-3.4
6.2
99.2
61.2
15.7
76.3
.3
6.6
Corporate profits and I.V.A.
Corporate profits before tax
Cash flow, net of div. (domestic)
17.5
17.1
16.6
16.5
16.9
17.2
15.4
19.2
13.4
17.4
21.5
16.0
13.1
21.3
12.1
6.6
14.5
9.4
1.0
16.6
5.8
1.3
16.0
5.8
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
Surplus or deficit (-)
14.2
19.4
-5.2
14.1
18.3
-4.2
33.4
32.3
1.1
32.2
34.3
-2.1
37.4
9.3
28.1
32.7
9.4
23.3
11.3
12.7
-1.4
11.1
10.4
1.5
1.6
12.2
15.2
7.6
3.3
State and local government surplus
or deficit (-), (N.I.A. basis)
5.8
4.5
13.7
-14.5
-1.4
-1.2
Change in business inventoriesNonfarm
6.1
4.5
6.3
4.9
15.4
11.4
5.5
5.0
16.9
13.1
3.9
10.9
11.3
74.4
61.5
84.4
3.3
2.4
-1.5
4.3
High employment surplus or
deficit (-)
3/
Net exports of goods & services4/
Personal saving-
Federal government surplus or,
deficit (-), (N.I.A. basis)High employment budget'/
12.3
23.9
13.8
9.3
.3
-
6.4
1/
-19.7
14.5
8.6
7.8
.8
.2
-4.6
60.2
60.5
49.8
52.6
-22.2
3.2
-21.9
3.0
-15.9
.4
-17.5
-1.7
----------------------Gross National Product
Gross Private Product
Gross Private Nonfarm Product
GNP in constant prices
GPP in constant prices
GPNFP in constant prices
GNP Implicit Price Deflator
GPP Fixed-Weighted Price Index
6.0
5.6
115.9
95.4
97.3
9.3
9.3
8.9
5.5
6.0
6.0
3.6
3.9
6.0
6.5
-13.6
8.0
7.3
5.8
54.8
.9
-1.3
-5.7
-1.9
-5.2
3.3
-12.0
-10.9
11.2
-4.9
8.9
8
In Per Cent Per Year------------------9.2
9.3
8.9
5.5
6.0
6.0
3.5
3.8
10.6
10.9
10.8
7.0
7.5
8.2
3.3
3.5
11.2
11.3
11.1
7.3
7.8
8.4
3.7
3.4
11.5
11.8
9.9
4.0
4.1
4.3
7.3
7.8
11.6
12.0
9.
3.9
4,0
3.8
7.4
8.3
4.•5/
3.
.3--6.3/
-7. 8
- .111.5-,
13.61-
4. ý/
4.0
3.-/
-7.*/
-7.8-/
-90'12.3-'
14.1-
Average saving rate during the period indicated.
2/ Inventory investment during the periods indicated.
3/ Net exports
during the period indicated.
4/ Personal saving during the period indicated.
5/ Average surplus or deficit during
the period imdxcated. 6/ At compound rates.
A-4
CONFIDENTIAL - FR
July 24, 1974
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Quarterly figures are seasonally adjusted.
Expenditures and income
figures are billions of dollars, with quarter figures at annual rates.)
1973
I
1974
II
III
1248.9
1238.9
969.9
970.7
1277.9
1267.2
993.9
993.4
1308.9
1297.0
1020.1
1013.4
1344.0
1315.1
1028.7
1019.4
1358.8
1341.9
1045.6
1034.3
1383.5
1368.4
1064.9
1064.7
Personal consumption expenditures
Durable goods
Nondurable goods
Services
781.7
132.4
323.3
325.9
799.0
132.1
332.7
334.2
816.3
132.4
343.8
340.1
823.9
124.3
352.1
347.4
840.6
123.9
364.4
352.4
866.8
130.2
375.2
361.4
Gross private domestic investment
Residential construction
Business fixed investment
Change in business inventories
Nonfarm
199.0
58.5
130.5
10.0
6.5
205.1
58.7
135.6
10.7
7.7
209.0
58 1
139.0
11.8
7.4
224.5
53.6
141.9
28.9
24.0
210.5
48.4
145.2
16.9
13.1
213.0
48.7
149.2
15.1
11.9
.8
88.8
89.5
.5
95.4
94.9
6.7
103.7
96.9
9.3
113.6
104.3
11.3
131.2
119.9
.2
138.6
138.4
Gov't. purchases of goods & services
Federal
Defense
Other
State and local
269.0
106.4
75.0
31.4
162.6
273.3
106.2
74.0
32.2
167.1
276.9
105.3
73.3
32.0
171.6
286.4
108.4
75.3
33.1
177.9
296.3
111.5
75.8
35.7
184.8
303.5
113.9
76.1
37.8
189.6
Gross national product in
constant (1958) dollars
GNP implicit deflator (1958
832.8
150.0
837.4
152.6
840.8
155.7
845.7
158.9
830.5
163.6
828.0
167.1
Gross National Product
Final purchases
Private
Excluding net exports
-
Net exports of goods and services
Exports
Imports
= 100)
1013.6
667.6
869.5
65.3
7.5
1039 2
683.8
892.1
69.6
7.8
Corporate profits and I.V.A.
Corporate profits before tax
Cash flow, net of div. (domestic)
103.9
120.4
109.3
105.0
124.9
112.7
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
Surplus or deficit (-)
249.1
260.2
-11.2
255.0
262.4
-7.4
-5.2
-2.9
13.2
10.4
Total labor force (millions)
"
Armed force
Civilan labor force
Unemployment rate (per cent)
90.0
87.6
5.0
90.8
2.3
88.5
4.9
91.3
2.3
89.0
4.7
Nonfarm payroll employment (millions)
Manufacturing
74.6
19.6
75.3
19.8
Industrial production (1967 = 100)
Capacity utilization, manufacturing
(per cent)
Major materials (per cent)
123.1
Housing starts, private (millions, A.R.)
Sales new autos (millions, A.R.)
Domestic models
Foreign models
Personal income
Wage and salary disbursements
Disposable income
Personal saving
Saving rate (per cent)
High employment surplus or deficit
(-)
State and local government surplus or
(N.I.A. basis)
deficit (-),
I
IIp
1099 3
717.0
939.4
89.3
9.5
1112.5
727.6
950.6
84.4
8.9
1133.8
744.9
965.9
73.3
7.6
105.2
122.7
110.9
106.4
122.7
110.3
107.7
138.7
116.1
n.a.
n.a.
n.a.
261.8
263.4
-1.7
268.3
270.6
-2.3
279.4
281.0
-1.5
n.a.
291.2
n.a.
.2
.8
4.1
n.a.
8.4
4.6
3.4
n.a.
92.2
2.3
89.9
4.7
92.8
2.3
90.5
5.2
92.9
2.2
90.6
5.1
75.7
19.8
76.6
20.1
76.7
19.9
77.1
19.9
124.8
126.7
127.0
124 9
125.3
82.8
93.0
83.3
93.4
83.3
93.5
82.6
92.3
80.5
90.2
80.1
90.1
2.39
12.19
2.21
12.03
10.17
1.85
2.01
11.33
9.66
1.67
1.58
10.15
8.51
1.64
1.63
9.04
7.49
1.55
1.57
9.20
7.95
1.25
2.4
10.27
1.92
1068.0
698.2
913.9
73.2
8.0
IV
-
III
IV
A-5
CONFIDENTIAL - FR
July 24,
1974
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Quarterly figures are seasonally adjusted.
Expenditures and income
figures are billions of dollars, with quarter figures at annual rates.)
1972
1971
I
II
III
IV
I
II
III
IV
1027.8
1020.0
1047.3
1039.1
1061.3
1057.5
1083.2
1077.8
1115.0
1110.0
1143.0
1135.1
1169.3
1159.1
1204.7
1193.7
792.1
807.8
821.8
835.7
858.9
881.3
904.0
931.1
789.2
808.0
821.7
839.1
866.0
888.2
908.8
936.4
Personal consumption expenditures
Durable goods
Nondurable goods
Services
650.5
100.6
273.0
277.0
662.1
102.1
277.8
282.2
672.1
105.6
279.5
287.0
683.8
107.4
283.4
293.0
701.5
112.1
288.4
301.0
720.6
116.2
297.4
307.0
736.8
121.2
302.0
313.6
757.2
124.3
310.9
322.0
Gross private domestic investment
Residential construction
Business fixed investment
Change in business inventories
Nonfarm
146.6
37.3
101.4
7.9
6.0
154.0
41.6
104.3
8.1
6.8
153.5
44.9
104.8
3.8
2.4
160.8
47.6
107.8
5.4
4.4
169.4
51.8
112.7
5.0
4.1
175.5
52.9
114.7
8.0
7.0
182.1
54.5
117.5
10.2
9.6
190.2
56.7
122.5
11.0
10.4
Net exports of goods and services
Exports
Imports
2.9
65.2
62.3
- .2
66.5
66.6
.1
68.2
68.1
-3.4
62.0
65.4
-7.1
69.1
76.1
-6.9
68.8
75.7
-4.8
73.3
78.1
-5.3
78.5
83.8
227.9
231.3
235.7
242.1
251.1
253.8
255.1
262.6
95.9
96.2
97.9
100.5
105.6
105.9
102.7
105.2
71.8
70.8
70.0
72.1
75.9
75.9
72.6
74.7
24.1
132.0
25.5
135.1
27.9
137.8
28.5
141.6
29.7
145.5
30.0
147.9
30.1
152.4
30.5
157.4
Gross national product in
constant (1958) dollars
GNP implicit deflator (1958 = 100)
736.9
742.1
747.2
759.1
770.9
786.6
798.1
814.2
139.5
141.1
142.0
142.7
144.6
145.3
146.5
148.0
Personal income
Wage and salary disbursements
Disposable income
Personal saving
Saving rate (per cent)
841.2
559.7
728.6
59.7
8.2
859.6
569.2
744.1
63.4
8.5
869.6
576.8
751.3
60.3
8.0
885.8
586.3
761.8
58.6
7.7
913.3
608.1
774.7
53.3
6.9
930.9
620.1
790.0
49.0
6.2
950.3
631.4
807.2
49.3
6.1
985.0
647.5
838.1
58.9
7.0
74.2
78.7
78.7
83.5
79.4
85.7
82.4
86.7
86.5
92.3
89.5
96.0
92.9
100.2
99.8
108.2
73.9
78.1
81.1
84.9
89.0
93.1
95.1
100.9
194.2
212.1
-18.0
197.0
220.3
-23.4
199.3
221.9
-22.7
203.4
226.9
-23.5
220.9
235.8
-14.9
224.1
243.7
-19.6
228.4
238.2
-9.8
235.6
261.2
-25.6
3.8
.0
2.3
5.3
5.2
-3.0
3.7
-14.4
1.4
3.3
4.1
4.6
-1.7
14.4
9.2
19.1
89.6
2.4
87.1
5.3
Gross National Product
Final purchases
Private
Excluding net exports
Gov't. purchases of goods & services
Federal
Defense
Other
State and local
Corporate profits and I.V.A.
Corporate profits before tax
Cash flow, net of div. (domestic)
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
Surplus or deficit (-)
High employment surplus or deficit (-)
State and local government surplus or
deficit (-), (N.I.A. basis)
Total labor force (millions)
Armed forces
Civilian labor force
Unemployment rate (per cent)
86.4
3.0
83.5
6.0
86.5
2.8
83.6
5.9
87.1
2.8
84.3
5.9
87.7
2.7
85.0
5.9
88.4
2.5
85.8
5.9
88.7
2.4
86.3
5.7
Nonfarm payroll employment (millions)
Manufacturing
70.3
18.6
70.5
18.5
70.7
18.5
71.1
18.5
71.8
18.6
72.5
18.9
89.3
2.4
86.9
5.6
73.0
19.0
Industrial production (1967 = 100)
Capacity utilization, manufacturing
(per cent)
Major materials (per cent)
105.8
107.0
106.4
107.3
110.7
113.8
116.3
120.2
75.0
86.4
75.6
87.3
74.7
83.2
74.6
84.3
75.6
87.0
77.9
88.7
79.4
90.6
81.5
92.3
1.83
9.87
8.32
1.54
2.02
9.83
8.21
1.63
2.09
10.49
8.85
1.64
2.20
10.70
9.31
1.39
2.41
10.19
8.65
1.54
2.28
10.66
9.15
1.51
2.36
11.21
9.59
1.61
2.39
11.69
9.90
1.79
Housing starts, private (millions, A. R.)
Sales new autos (millions, A. R.)
Domestic models
Foreign models
73.8
19.3
A-6
July 24, 1974
CONFIDENTIAL - FR
CHANGES IN GROSS NATIONAL PRODUCT
AND RELATED ITEMS
1973
I
II
1974
III
IV
I
IIp
III
IV
-------------------- Billions of Dollars---------------------Gross National Product
Inventory change
Final purchases
Private
Net exports
Excluding net exports
Personal consumption expenditures
Durable goods
Nondurable goods
Services
Residential fixed investment
Business fixed investment
Government
Federal
State and local
44.2
-1.0
45.2
38.8
4.5
34.3
24.5
8.1
12.4
3.9
1.8
8.0
6.4
1.2
5.2
29.0
.7
28.3
24.0
1.3
22.7
17.3
- .3
9.4
8.3
.2
5.1
4.3
-. 2
4.5
31.0
1.1
29.8
26.2
6.2
20.0
17.3
.3
11.1
5.9
S.6
3.4
3.6
- .9
4.5
GNP in constant (1958)
Final purchases
Private
18.6
20.2
19.1
4.6
4.1
4.3
3.4
3.1
3.3
dollars
-------------------
In
35.1
17.1
18.1
8.6
2.6
6.0
7.6
-8.1
8.3
7.3
-4.5
2.9
9.5
3.1
6.3
14.8
-12.0
26.8
16.9
2.0
14.9
16.7
- .4
12.3
5.0
-5.2
3.3
9.9
3.1
6.9
24.7
-1.8
26.5
19.3
-11.1
30.4
26.2
6.3
10.8
9.0
.3
4.0
7.2
2.4
4.8
4.9
-15.2
-2.5
-1.0
-5.8
-7.0
-9.0
-6.1
- .3
e1/rPer Yea-----Cent
P er Cent Per Year-- -------------------
Gross National Product
Final purchases
Private
15.5
16.0
17.7
9.6
9.5
10.3
10.1
9.7
11.0
11.2
5.7
3.4
Personal consumption expenditures
Durable goods
Nondurable goods
Services
13.6
28.7
16.9
4.9
9.2
- .9
12.1
10.6
8.9
.9
14.0
7.3
3.8
-22.3
10.0
8.9
Gross private domestic investment
Residential construction
Business fixed investment
19.8
13.3
28.8
12.8
1.4
16.6
7.8
-4.0
10.4
33.1
-27.6
8.6
-22.7
-33.5
9.6
4.8
2.5
11.5
Gov't. purchases of goods & services
Federal
Defense
Other
State & local
10.1
4.6
1.6
12.3
13.9
6.5
.7
-5.2
10.6
11.5
5.4
-3.3
-3.7
-2.5
11.2
14.4
12.3
11.4
14.5
15.5
14.6
11.9
2.7
35.3
16.4
10.1
8.9
1.6
25.7
10.8
GNP in constant (1958) dollars
Final purchases
Private
GNP implicit deflator
2/
Private GNP fixed weight index-
9.5
10.4
12.0
5.5
7.4
2.2
2.0
2.5
7.3
8.1
1.6
1.5
1.9
8.3
8.4
2.3
-3.3
-5.1
8.6
9.1
-7.0
-2.8
-3.5
12.3
14.1
-1.2
Personal income
Wage and salary disbursements
Disposable income
12.1
13.0
15.8
10.5
10.1
10.8
11.6
8.7
10.1
12.2
11.2
11.6
4.9
6.0
4.9
7.9
9.9
6.6
Corporate profits and I.V.A.
Corporate profits before tax
17.5
53.3
4.3
15.8
.8
-6.9
4.6
.0
5.0
63.3
n.a.
n.a.
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
25.0
-1.5
9.8
3.4
11.1
1.5
10.3
11.4
17.6
I1.3
n.a.
15.3
4.5
5.4
3.7
4.7
2.2
1.2
4.4
4.5
.8
-2.9
1.9
.1
Nonfarm payroll employment
Manufacturing
Industrial production (1967 = 100)
Housing starts, private (mzllions, A.R.)
Sales new autos (millions, A.R.)
Domestic models
Foreign models
10.0
1.0
18.2
15.9
31.8
1/
lates of change are on a compounded basis.
2/
Using expenditures
in
1967 as weights.
5.6
-27.0
-5.3
-3.8
-12.9
6.2
-32.0
-21.3
-18.6
-35.0
1.0
-61.4
-35.5
-39.8
-5.9
4.5
8.4
6.7
7.5
8.1
7.6
8.4
-1.3
14.7
5.9
13.1
21.9
12.4
10.6
-6.5
11.6
-37.1
-20.0
- .5
-. 2
8.8
12.3
1.3
-14.2
7.2
27.1
-58.2
A-7
CONFIDENTIAL
- FR
July 24,
1974
CHANGES IN GROSS NATIONAL PRODUCT
AND RELATED ITEMS
1971
I
II
1972
III
IV
I
II
III
IV
------------------- Billions of Dollars--------------------Gross National Product
Inventory change
Final purchases
Private
Net exports
Excluding net exports
Personal consumption expenditures
Durable goods
Nondurable goods
Services
Residential fixed investment
Business fixed investment
Government
Federal
State and local
36.0
2.8
33.3
28.7
.1
28.6
22.2
12.5
1.9
7.9
3.5
2.9
4.6
1.1
3.5
19.5
.2
19.1
15.7
-3.1
18.8
11.6
1.5
4.8
5.2
4.3
2.9
3.4
.3
3.1
14.0
-4.3
18.4
14.0
.3
13.7
10.0
3.5
1.7
4.8
3.3
.5
4.4
1.7
2.7
21.9
1.6
20.3
13.9
-3.5
17.4
11.7
1.8
3.9
6.0
2.7
3.0
6.4
2.6
3.8
31.8
- .4
32.2
23.2
-3.7
26.9
17.7
4.7
5.0
8.0
4.2
4.9
9.0
5.1
3.9
28.0
3,0
25.1
22.4
.2
22.2
19.1
4.1
9.0
6.0
1.1
2.0
2.7
.3
2.4
26.3
2.2
24.0
22.7
2.1
20.6
16.2
5.0
4.6
6.6
1.6
2.8
1.3
-3.2
4.5
35.4
.8
34.6
27.1
- .5
27.6
20.4
3.1
8.9
8.4
2.2
5.0
7.5
2.5
5.0
GNP in constant (1958)
Final purchases
Private
17.6
15.6
15.9
5.2
4.9
4.9
5.1
8.6
6.4
11.9
10.6
7.7
11.8
12.2
11.0
15.7
13.3
13.3
11.5
9.7
11.7
16.1
15.6
14.4
dollars
----------------- In
1/
Per Cent Per Year---------------------
Gross National Product
Final purchases
Private
15.3
14.2
15.9
7.8
7.7
8.2
5.5
7.3
7.1
8.5
7.9
6.9
12.2
12.5
11.6
10.5
9.4
10.8
9.5
8.7
10.7
12.7
12.5
12.5
Personal consumption expenditures
Durable goods
Nondurable goods
Services
14.9
70.0
2.8
12.3
7.3
6.1
7.2
7.7
6.2
14.4
2.5
7.0
7.1
7.0
5.7
8.6
10.8
18.7
7.2
11.4
11.3
15.5
13.1
8.2
9.3
18.4
6.3
8.9
11.5
10.6
12.3
11.2
Gross private domestic investment
Residential construction
Business fixed investment
29.6
48.3
12.3
21.8
54.7
11.9
-1.3
35.7
1.9
20.4
26.3
12.0
23.2
40.2
19.5
15.2
8.8
7.3
15.9
12.7
10.i
19.0
17.2
18.1
Gov't. purchases of goods & services
Federal
Defense
Other
State & local
8.5
4.7
-4.3
38.9
11.3
6.1
1.3
-5.5
25.3
9.7
7.8
7.3
-4.4
43.3
8.2
11.3
11.1
12.6
8.9
11.5
15.7
21.9
22.8
17.9
11.5
4.4
GNP in constant (1958) dollars
Final purchases
Private
GNP implicit deflator
2/
Private GNP fixed weight index-
10.1
9.0
11.5
4.7
4.5
2.8
2.7
3.3
4.8
5.0
2.8
4.8
4.4
2.6
3.4
6.5
5.8
5.2
1.9
2.3
6.4
-6.6
7.4
5.5
3.7
8.4
7.1
8.8
Personal income
Wage and salary disbursements
Disposable income
9.2
9.9
12.7
9.0
7.0
8.8
4.7
5.4
3.9
7.7
6.8
5.7
Corporate profits and I.V.A.
Corporate profits before tax
60.7
61.6
26.6
26.7
3.6
11.0
16.0
4.7
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
10.8
6.9
5.9
16.4
4.8
2.9
Nonfarm payroll employment
Manufacturing
-
1.2
.1
1.3
-1.4
7.9
30.9
256.5
351.4
21.4
4.6
49.8
-1.3
-5.4
22.7
Industrial production (1967 = 100)
Housing starts, private (millions, A.R )
Sales new autos (millions, A.R.)
Domestic models
Foreign models
1/
Rates of change are on a compounded basis.
2/
Using expenditures in
1967 as weights.
2.1
12.3
1.1
-11.1
10.1
.0
4.1
6.8
-16.3
1.3
12.7
12.1
5.4
13.8
2.5
6.0
5.1
7.6
3.3
3.6
8.2
8.1
9.2
4.1
3.8
13.0
15.7
6.9
7.9
8.1
8.1
8.6
7.5
9.0
15.4
10.6
16.2
21.4
28.4
14.6
17.0
16.1
18.7
33.2
36.0
8.5
9.3
39.1
16.6
5.9
14.1
7.9
-8.7
13.2
44.6
.6
-1.6
2.4
.7
4.0
2.5
4.0
5.2
2.8
2.6
4.5
7.1
-2.2
15.5
29.7
35.1
4.5
3.4
22.3
t.2
22.3
-48.2
13.3
43.7
-17.8
-25.5
49.7
11.7
-20.4
19.6
25.3
-8.5
9.1
15.4
22.2
20.8
30.9
14.1
4.7
18.4
13.4
52.0
1.9
A-8
CONFIDENTIAL
July 24, 1974
- FR
GROSS NATIONAL PRODUCT AND RELATED ITEMS
(Expenditures and income figures are billions of dollars.)
1966
1967
1968
1969
Gross National Product
Final purchases
Private
Excluding net exports
749.9
735.1
578.3
573.0
793.9
785.7
605.6
600.4
864.2
930.3
922.5
712.5
710.6
Personal consumption expenditures
Durable goods
Nondurable goods
Services
466.3
70.8
206.9
188.6
492.1
73.1
215.0
204.0
536.2
Gross private domestic investment
Residential construction
Business fixed investment
Change in business inventories
Nonfarm
121.4
25.0
81.6
14.8
15.0
116.6
25.1
83.3
126.0
30.1
7.5
Net exports of goods and services
Exports
Imports
5.3
43.4
38.1
5.2
46.2
41.0
Gov't. purchases of goods & services
Federal
Defense
Other
State and local
156.8
77.8
60.7
17.1
79.0
Gross national product in
constant (1958) dollars
GNP implicit deflator (1958 = 100)
Personal income
Wage and salary disbursements
Disposable income
Personal saving
Saving rate (per cent)
Corporate profits and I.V.A.
Corporate profits before tax
Cash flow, net of div. (domestic)
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
Surplus or deficit (-)
High employment surplus or deficit (-)
State and local government surplus or
deficit (-), (N.I.A. basis)
Total labor force (millions)
Armed forces
Civilian labor force
Unemployment rate (per cent)
Nonfarm payroll employment
Manufacturing
(millions)
1970
1971
1972
1973
1294.9
1279.5
1003.1
999.2
977.1
1054.9
972.6
753.1
1048.6
749.5
814.6
1158.0
1149.5
893.8
899.8
579.5
90.8
245.9
242.7
617.6
667.1
103.9
278.4
284.8
729.0
118.4
299.7
310.9
805.2
130.3
338.0
336.9
136.3
31.2
6.9
139.0
32.6
98.5
7.8
7.7
153.7
42.8
104.6
6.3
4.9
179.3
54.0
116.8
8.5
7.8
209.4
57.2
136.8
15.4
11.4
2.5
50.6
48.1
1.9
55.5
53.6
62.9
59.3
-. 2
65.4
65.6
-6.0
72.4
78.4
3.9
100.4
96.4
180.1
90.7
72.4
18.4
89.4
199.6
98.8
219.5
96.2
74.6
21.6
123.3
234.2
97.6
71.2
26.5
136.6
255.7
104.9
74.8
30.1
150.8
276.4
100.8
210.0
98.8
78.4
20.4
111.2
658.1
113.9
675,2
117.6
706.6
122.3
725.6
128.2
722.5
135 2
746.3
141.4
792.5
146.1
839.2
154.3
587.2
394.5
511.9
32.5
6.4
629.4
423.1
546.3
40.4
7.4
688.9
464.9
591.0
39.8
6.7
750.9
509.7
634.4
38.2
6.0
808.3
542.0
691.7
56.2
8.1
864.0
573.6
746.4
60.5
8.1
944.9
626.8
802.5
52.6
6.6
1055.0
691.6
903.7
74.4
8.2
82.4
84.2
66.8
78.7
79.8
66.1
84.3
87.6
68.6
79.8
84.9
70.0
69.2
74.0
68.2
78.7
83.6
79.5
92.2
99.2
94.5
105.1
122.7
90.8
142.5
142.8
151.2
163.6
-12.4
175.0
181.5
-6.5
197.3
189.2
8.1
192.0
203.9
-11.9
198.5
220.3
-21.9
227.2
244.7
-17.5
258.5
264.2
-5.6
-13.1
-11.2
5.7
3.2
2.9
2.1
-1.9
-
.2
-6.1
8.2
857.1
657.5
655.0
84.0
230.8
221.3
88.8
7.1
78.3
20.5
91.3
263.8
262.6
100.6
4.5
4.3
3.6
814.4
9.2
5.9
89.0
2.4
86.5
5.6
91.0
2.3
88.7
4.9
70.6
18.5
72.8
18.9
75.6
19.8
-
.3
.7
1.8
3.4
78.9
3.1
75.8
3.8
80.8
3.4
77.3
3.8
82.3
85.9
3.2
82.7
4.9
86.9
2.8
78.7
3.6
84.2
3.5
80.7
3.5
64.0
19.2
65.9
19.4
67.9
19.8
70.3
20.2
70.6
19.3
3.5
74.4
32.2
169.8
12.3
-1.6
1.3
106.6
84.1
Industrial production (1967 = 100)
Capacity utilization, manufacturing
(per cent)
Major materials (per cent)
97.9
100.0
105.7
110.7
106.7
106.8
115.2
125.6
9 .9
92.1
87.9
87.4
87.7
89.3
86.5
90.0
78.3
86.2
75.0
85.3
78.6
89.6
83.0
93.0
Housing starts, private (millions, A.R.)
Sales new autos (millions, A.R.)
Domestic models
Foreign models
1.16
9.04
8.38
.66
1.29
8.34
7,57
.77
1.51
9.64
8.62
1.02
1.47
9.57
8.46
1.11
1.43
8.40
7.12
1.28
2.05
10.24
8.68
1.56
2.36
10.93
9.32
1.61
2.05
11.44
9.67
1.77
A-9
CONFIDENTIAL -
July 24, 1974
FR
CHANGES IN GROSS NATIONAL PRODUCT
AND RELATED ITEMS
1966
1967
1968
1969
1970
1971
1972
1973
Billions of Dollars-------------------------
-------------------------Gross National Product
Inventory change
Final purchases
Private
Net exports
Excluding net exports
Personal consumption expenditures
Durable goods
Nondurable goods
Services
Residential fixed investment
Business fixed investment
Government
Federal
State and local
65.0
5.2
59.8
40.1
-1.6
41.6
33.5
4.5
15.8
13.1
-2.2
10.3
19.8
10.9
8.9
44.0
-6.6
50.6
27.3
- .1
27.4
25.8
2.3
8.1
15.4
.1
1.7
23.3
12.9
10.4
70.3
-1.1
71.4
51.9
-2.7
54.6
44.1
10.9
15.8
17.3
5.0
5.5
19.5
8.1
11.4
66.1
.7
65.4
55.0
- .6
55.6
43.3
6.8
15.1
21.4
2.5
9.7
10.4
.0
10.4
46.8
-3.3
50.1
40.6
1.7
38.9
38.1
.5
17.9
19.9
-1.4
2.1
9.5
-2.6
12.1
77.8
1.8
76.0
61.3
-3.8
65.1
49.6
12.6
14.6
22.2
11.6
4.0
14.7
1.4
13.3
103.1
2.2
100.9
79.4
-5.8
85.2
61.8
14.5
21.6
26.1
11.2
12.2
21.5
7.3
14.2
136.9
6.9
130.0
109.3
9.9
99.4
76.2
11.9
38.0
26.0
3.2
20.0
20.7
1.7
19.0
GNP in constant (1958) dollars
Final purchases
Private
40.3
35.4
23.5
17.1
23.3
9.6
31.4
32.7
25.3
19.0
18.7
20,6
-3.1
- .4
6.2
23.8
-22.5
18.5
46.2
-44.4
46.1
46.7
43.0
45.2
In Per Cent Per Year ---------------------------
--------------------Gross National Product
Final purchases
Private
9.5
8.9
7.4
5.9
6.9
4.7
8.9
9.1
8.6
7.1
7.6
8.4
5.0
5.4
5.7
8.0
7.8
8.1
9.C
9.6
9.7
11.8
11.3
12.2
Personal consumption expenditures
Durable goods
Nondurable goods
Services
7.7
6.8
8.3
7.5
5.5
3.2
3.9
8.2
9.0
14.9
7.3
8.5
8.1
8.1
6.5
9.7
6.6
.6
7.3
8.2
8.0
13.8
5.5
8.5
9.3
14.0
7.7
9.2
10.5
10.1
12.8
8.4
Gross private domestic investment
Residential construction
Business fixed investment
12.3
-8.1
14.4
-4.0
.4
2.1
8.1
19.9
6.6
10.3
8.3
10.9
-1.9
-4.3
2.1
12.8
37.2
4.0
16.7
26.2
11.7
16.8
5.9
17.1
Gov't. purchases of goods & services
Federal
Defense
Other
State & local
14.5
16.3
21.2
1.8
12.7
14.9
16.6
19.3
7.6
13.2
10.8
8.9
8.1
11.4
12.8
5.2
.0
.1
- .5
10.3
4.5
-2.6
-4.8
5.9
10.9
6.7
1.5
-4.6
22.7
10.8
9.2
7.5
5.1
13.6
10.4
8.1
1.6
- .5
7.0
12.6
6.5
2.6
3.6
1.9
3.2
2.8
4.7
4.9
4.8
4.0
3.8
2.7
2.7
3.7
4.8
4.7
- .4
- .1
1.1
5.5
4.8
3.3
3.1
3.9
4.6
4.3
6.2
6.0
6.7
3.3
3.3
5.9
5.5
7.2
7.2
6.7
9.5
9.9
8.2
9.0
9.6
7.3
7.6
6.3
9.0
6.9
5.8
7.9
9.4
9.3
7.5
11.7
10.3
12.6
7.1
9.8
-5.3
-3.1
-13.3
-12.8
13.7
13.0
17.2
18.7
14.0
23.7
13.8
8.0
GNP in constant (1958) dollars
Final purchases
Private
GNP implicit deflator
Private GNP fixed weight index
5.8
4.8
2.7
2.7
Personal income
Wage and salary disbursements
Disposable income
9.0
9.9
Corporate profits and I.V.A.
Corporate profits before tax
8.3
-4.5
8.2
-5.2
Federal government receipts and
expenditures (N.I.A. basis)
Receipts
Expenditures
Nonfarm payroll employment
Manufacturing
Industrial production (1967 = 100)
Housing starts, private (millions, A.R.)
Sales new autos (millions, A.R.)
Domestic models
Foreign models
8.2
14.3
15.6
6.1
14.6
15.7
10.9
12.7
4.2
-2.7
7.8
3.4
8.0
14.5
11.1
5.2
6.4
3.0
1.2
3.1
2.1
3.5
2.0
.4
-4.1
.1
-4.2
3.0
2.2
9.8
-20.9
-3.2
-4.4
15.8
2.1
10.9
-7.7
-9.7
16.5
5.7
16.7
15.6
13.8
32.6
4.7
-2.7
- .6
-1.8
9.0
-3.6
-2.3
-12.3
-15.9
15.5
.1
43.2
21.9
21.9
21.8
7.9
14.9
6.7
7.4
3.3
6.5
5.6
6.3
3.9
4.7
9.0
-13.2
4.7
3.7
9.8
@FedFRASER