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CONFIDENTIAL (FR)

CURRENT ECONOMIC AND FINANCIAL CONDITIONS

By the Staff
Board of Governors
of the Federal Reserve System

August 25, 1965

I - i

IY BROAD PEVIEW

The broad advance in economic activity appears to be continuing but no comprehensive data are available to show whether the sharp
advances in production and employment from June to July -- smaller than
seasonal declines -- were carried forward into more than seasonal
increases in August.

In commodity markets industrial prices have edged

up a little but price changes have continued to be selective, without
any general response to developments in Vietnam.

Steel ingot production

is declining in anticipation of reduced shipments of finished steel in
September, assuming a wage settlement is at hand.
Financial markets have shoun signs of nervousness during
August, with yields moving gradually higher in all maturities of U.S.
Governiment securities and also on both new and seasoned corporate bonds.
This atmosphere has been partly a reflection of market discussion of
sterling difficulties and of possible domestic inflationary developments,
and partly a result of supply pressures arising from the still sizable
dealer inventories of longer-term Government securities and the
unseasonably large current and prospective flow of corporate offerings.
Interest rates continued generally stable on municipal bonds, mortgages,
and private short-term market instruments.

Bank loans and investments seem headed for an expansion of
significantly more than seasonal dimensions in August, following a strong
June inctease and July decline.

Loan increases account for the bulk of

the recent rise, with business loan expansion continuing vigorous relative
to usual seasonal patterns.

I-

2

The money supply grew at a 5 per cent annual rate in July but
has shown little further increase on average thus far in August.

Money

growth has been uneven during 1965; for the year to date it has averaged
about a 3 per cent annual rate.

Time deposit expansion at commercial banks

picked up in July and August, with both CD's and savings deposits
sharing in the more vigorous expansion.

The rate of increase in time

deposits since midyear has approached the high rates posted in the first
two months of 1965; and, as was true in that earlier period as well,
stronger time deposit growth seems to be accompanied by less vigorous
increases in inflows to other savings intermediaries.
According to early indications, the U.S. payments position moved
back into deficit in August, following a surplus in the second quarter
and approximate overall balance in July.

August 24,

1965.

I -- T - 1
SELECTED DOMESTIC NONFINANCIAL DATA
(Seasonally adjusted)
Latest
Amount
Per cent
Period Latest Preced'g Year
Year
Period Period
Ago
Ago*
July '65 76.2
75.7
74.2
2.7
"
3.4
3.6
3.7
-7.5
I"
4.5
4.7
5.0

Civilian labor force (mil.)
Unemployment (mil.)
Unemployment (per cent)

60.5

60.4

58.3

18.1
7.9
34.5

18.0
7.9

17.3

34.4

33.2

3.9
4.5
1.7
4.1

Industrial production (57-59=100)
Final products
Materials

143.6
140.8
146.5

142.4
140.1
144.3

132.9
132.3
133.6

8.1
6.4
9.7

Wholesale prices (57-59=100)1/
Industrial commodities
Sensitive materials
Farm products and foods

102.9
102.1

102.8
102. 1
102.5
103.5

100.4
100.8
99.1
98.1

2.5

5.7

109.6
105.2
107.9
117.5

108.0
104.3
106.2
115.1

1.9
0.8
3.7
2.2

Nonfarm employment, payroll (mil.)
Manufacturing
Other industrial
Nonindustrial

102.3
103.7

Consumer prices (57-59=100)1/
Commodities except food
Food
Services

June '65 110. 1
if
105.1
11
110.1
11
117.6

Hourly earnings, mfg. ($)
Weekly earnings, mfg. ($)

July '65 2.63
"
107.68
"

Personal income ($ bil.)2/
Retail sales, total ($ bil.)
Autos (million units)2/

GAF ($ bil.)
Selected leading indicators:
Housing starts, pvt. (thous.)2/
Factory workweek (hours)
New orders, dur. goods ($ bil.)
New orders, nonel. mach. ($ bil.)
Common stock prices (1941-43=10)1/

528.8

23.8
9.0
5.5

23.3

1,459
41.0
22.0
3.2
84.91
June '65 113.4

Gross national product ($ bil.)2/
Real GNP ($ bil. 1958 prices)2/

QII-65
"

data.
*Based
on unrounded
unrounded data.
*Based on

2.62
2.54
107.14 102.97

530.6

Inventories, book val. ($ bil.)

665.9
601.4

7.7

496.1

14.3
12.5
16.3

1.3

3.2

3.5
4.6

7.0

14.2

8.3

14.7
17.4
18.1

21.9
7.6
5.1

17.9
7.1

1,562
41.0
20.9
3.1

1,500
40.6

-2.7
1.0

85.04

8.9
5.2

change
2 Yrs.
Ago*
4.1
-17.7

21.3

3.5

2.9

83.22

9.8
2.0

-8.2
1.5
20.3
22.5
22.9

112.8

106.6

6.3

11.1

656.4
597.5

624.2
575.9

6.7
4.4

14.2
10.4

seasonally adjusted.
1/
Not seasonally adjusted.
1/ Not

2/ Annual rates.

2/ Annual rates.

August 24,
I --

1965

T - 2

SELECTED DOMESTIC FINANCIAL DATA
Week ended Four-Week
Aug. 20
Average
Money Market-/ (N.S.A.)
Federal funds rate (per cent)
U.S. Treas. bills, 3 mo., yield (per cent)
Net free reserves 2/ (mil. $)
Member bank borrowings 2/ (mil.
Security Markets (N.S.A.)
Market yields 1/ (per cent)
5-year U.S. Treas. bonds
20-year U.S. Treas. bonds
Corporate new bond issues, Aaa
Corporate seasoned bonds, Aaa
Municipal seasoned bonds, Aaa
FHA home mortgages, 30-year 3/
Common stocks S&P composit index 4/
Prices, closing (1941-43=10)
Dividend yield (per cent)

Banking (S.A., mil. $)
Total reserves
Bank loans and investments:
Total
Business loans
Other loans
U.S. Government securities
Other securities
Money and liquid assets:
Demand dep. & currency
Time and savings dep.
Nonbank liquid assets

4.13
3.82
-153
491

4.11
3.82
-168

4.21
4.26
4.67
4.50

Last six months
High
Low

533

4.13
4.00
13
620

2.00
3.77
-233
270

5.44

4.19
4.24
4.62
4.48
3.16
5.44

4.22
4.26
4.67
4.50
3.17
5.45

4.12
4.19
4.42
4.42
3.03
5.44

86.69
3.05

86.20
3.06

90.10
3.15

83.06
2.89

Change
in
July

Average
change
last 3mos.

3.15

Annual rate of
change (%)
1 year
3 mos.

23

47

2.4

5.8

-700
800
-600
-1,500
600

1,400
1,000
900
-1,000
500

6.1
18.5
9.8
-20.3
14.6

10.6
10.9
12.0
-3.9
17.0

700
1,700
-500

500
1,400
200

3.5
12.3
0.9

3.8
15.2
5.5

N.S.A.--not seasonally adjusted. S.A.--seasonally adjusted.
2/ Averages for statement week ending August 18.
1/ Average of daily figures.
4/ Data are for weekly closing
3/ Latest figure indicated is for month of July.
prices.

I - T-3

U.S.

BALANCE OF PAYMENTS

1965
May

June

Julyp

1964
QIII
QIV

QI

QII

1964
Year

Seasonally adjusted annual rates, in billions of dollars
0.4

Balance on regular transactions

-

3.0

-

Trade balance 1/
Exports 1/
Imports 1/

4.0
25.8
-21.8

5.5
26.9
-21.4

5.1
27.0
-21.9

3.7
22.4
-18.7

-

7.2
26.8
-19.6

2.4

-

3.1

8.0

7.7

6.7
25.5
-18.8

6.7
25.3
-18.6

1.0

8.0

5.3

Current account balance

6.2

1.6

0.8

1.3

Capital account balance

- 7.8

-12.5

- 9.1

- 9.7

Govt. grants & capital 2/
U.S. private direct inv.
U.S. priv. long-term portfolio
U.S. priv. short-term
Foreign nonliquid
Errors and omissions

- 3.3
- 4.0
- 2.7
1.2

-

- 3.7

-

Services, etc., net

(0.3)

1.0
- 0.4

4.1
3.3
3.3
2.3

-

0.8

0.4
-

- 1.7

2.2
2.4
1.6
1.2

3.6
2.4
2.0
2.1
0.4
- 1.2

Monthly averages, in millions of dollars
Deficit on regular transactions
(seas. adjusted)
Additional seasonal element
Financing (unadjusted)
Special receipts 3/
Liabilities increase
Nonofficial 4/
Official 5/
Monetary reserves decrease
of which: Gold sales
/Memo:

Official financing/6/

-

63

0

-

50

(-

125)

44
17

-

27
55

0

62 - 184
) 217 37
- 342
196
171
(313) (117)
(80)

-176)

-

-

(134)(-

517
-

7'2
2.2

1

198

340
1

56
57
217
187
50 - 2817
129
300
23
23
28 1 - 50
(197)
(27 7)
(57)(- 7)
27)(-

6)

259

-143

(301) (153)

259
29
129
86
14

( 10)
(129)

1/ Balance of payments basis which differs a little from Census basis.
2/ Net of associated liabilities and of scheduled loan repayments.
3/ Advance repayments on U.S. Govt. loans and advance payments for military exports:
assumed zero in absence of information.
4/ Includes international institutions (except IMF), commercial banks and private
nonbank.
5/ Includes nonmarketable bonds.
6/ Decrease in monetary reserves, increase in liabilities to foreign official
institutions, and special receipts.

II

- 1

THE DON 1ESTIC ECON1 N

Industrial production.

Output of consumer goods changed little

in June and July but output of business equipment and of materials rose
considerably further, bringing the total index of industrial production
to 143.6 per cent of the 1957-59 average.

At this level it was 8 per

cent above a year ago.
Auto assemblies in July were at the level prevailing since
April -- an annual rate of about 9-1/2 million units, and in August, after
allowance for the model changeover cutback, they will be at or close to
the July rate.

Production of home goods, apparel, and staples in July

continued at slightly below early spring levels.

Business equipment,

including both commercial and industrial machinery, rose further in
July and was 4 per cent above the March-April average.
Output of iron and steel as well as most other metal materials
increased in July reflecting in part the possibility of a strike in the
steel industry.

Inventories of steel mill products at manufacturing

consumers, at a record level at the end of June, apparently increased
further in July.

Steel ingot production declined in August reflecting

the expected sharp curtailments in September production of finished steel,
assuming that there will be either a settlement or a strike rather than
another deferment.
Output of most nondurable materials, including chemicals, paper,
rubber, and petroleum, also rose further in July.

Gross national product.

Gross national product in the second

quarter was at a seasonally adjusted annual rate of $665.9 billion, $9.5

II - 2

billion more than in the first quarter.

In terms of constant prices,

GNP was 4.4 per cent higher than a year earlier.
The second quarter gain of $9.5 billion compares with an increase
of $15.3 billion in the first quarter.

The second quarter estimates,

based on the Commerce Department's recently revised income and product
series, indicate a trifle more expansion in overall activity than the old
figures but basically the same pattern of developments.
One effect of the revision of the income and product accounts
was to raise the estimate of gross national product for recent periods -by $6.1 billion for 1964, by $7.6 billion in the first quarter of this
year and by $7.9 billion for the second quarter of this year.

The growth

trend in output for the entire postwar period is little changed by the
revision but the trend for recent years is raised somewhat.
measures of income were also raised.

The aggregate

Further comments on the revisions --

substantial for some components -- appear in Appendix A.

Labor market.

Demands for labor have continued to respond

strongly to rising levels of expenditure for goods and services.

The

increase in nonfarm employment in July was large, about in line with the

accelerated increase shown earlier this year.

Moreover, the employment

rise outpaced rapid growth in the labor force and unemployment in July
moved down to 4.5 per cent in July, the lowest rate since 1957.

Long-

term unemployment has also been reduced.
Employment in nonfarm establishments increased by 165,000 in
July and was 2.3 million higher than a year ago -- the largest July to

II - 3

July increase since 1958-1959.

Manufacturing employment increased 90,000

in July with almost the entire gain in the five metal-producing and
fabricating industries; other hard goods showed only small gains and
nondurable goods employment declined somewhat in July.

MANUFACTURING EMPLOYMENT
(Seasonally adjusted)
Per cent increases at annual rates
Jan. 1964 to
Jan. to July
June to July
1965
1965
July 1965
Manufacturing
Metal and metal
fabricating industries 1/
Other manufacturing

6

5

4

13
1

9
2

7
2

1! Includes steel and other primary and fabricated metals, autos and
other transportation equipment, machinery and electrical equipment.

Much of the vigor of the expansion in manufacturing employment
over the past year and a half is attributable to gains in the metals and
mecal-fabricating industries, which account for about two-fifths of all
manufacturing employment.

After rising in the early recovery period,

employment in the metals group leveled off in 1962 and 1963 but since the
start of 19S4 it has expanded by 703,000, while in all other manufacturing
industries employment has increased by only 300,000.
Shortages of metal workers continue to be reported for some
skills and in certain labor market areas.

But for the most part, needs

for higher skills are being met by a longer work week, upgrading of
employed workers and expansion of private and public training programs.
Most of the need for less skilled workers, until recently, had been met

II - 4

by the rehiring of laid-off workers.

But vith the unemployment rate among

blue collar workers relatively low, employers increasingly have been taking
on available younger workers, without previous experience, for entry
occupations.

The workweek has declined somewhat from the very high first

quarter level, possibly indicating some easing in the labor supply situation.
Employment in trade and public and private services continued
to advance further in July.

Over the past year employment in these

industries advanced by 4 per cent, as compared with 4.5 per cent in manufacturing accounting for three-fifths of the rise in total nonfarm
employment.

Expansion in these activities has not generally been limited

by shortages of professional managerial or other skills.
Youth. This summer an unprecedented number of young workers
entered the labor force reflecting the rapidly groving population in
these age groups and particularly the number reaching age 18.

Betveen

May and July 2.9 million teenagers and 0.6 million young persons 20-24
years sought jobs after schools closed for summer vacation, a total of
3.5 million or 800,000 more than last year.

Over the year from July 1964

to this July, the 14 to 24 year group accounted for 1.6 million of a 2.2
million increase in the labor force.

Sustained economic activity and

campaigns by business and government to find employment opportunities for
young people no doubt contributed to the sharply stepped up rate of
growth in the labor force.
Sufficient jobs were available to absorb the large increase of
young entrants in the labor force this summer.

While the number of

unemployed teenagers in July was about the same as last year, it was lower

II -

than earlier this year.

5

About one-third of the employmeut rise for teen-

agers from July 1964 was in service activities, largely in private household work and educational services.

State and local government jobs.

About one-fourth was in Federal,

More teenagers than a year ago were also

employed in durable goods manufacturing and retail trade.
Approximately one-third of the new entrants have graduated from
high school and college and will remain relatively permanent members of
the labor force.

The others are mostly temporary summer workers who can

be expected to return to school in the fall.

However, because of favorable

business conditions, a somewhat larger number than usual may not return
to school, remaining in the labor force this fall to look for permanent
jobs.
Labor costs.

Earlier it had been thought that unit labor costs

might be showing some upward tiend in the second quarter because of some
firming in wages and some slowdown in productivity gains.

However, upward

revisions in the production index in the second quarter and the rather
sizable gain in output shown for July now indicate that unit labor costs
have remained stable in recent months.

In July the unit labor cost index

was at the Hlay level and well below any other July in

the current upsving.

Average hourly earnings in manufacturing in July were $2.62,
up 9 cents, or 3.6 per cent from a year earlier.
higher rate of increase than in the previous year.

This is a somewhat
However, it mainly

represents the effects of more overtime pay rather than any acceleration
in the rise in basic wages.

If adjustments are made for overtime pay,

the rate of increase in manufacturing wages shows little upward trend.

II -

Minimum wages.

6

The last step in raising minimum wages under the

1961 Amendments of the Fair Labor Standards Act will become effective in
The minimum wage will increase 10 cents to $1.25 an

early September.

hour for 810,000 workers, mainly in the lower paying trades and service
industries; it is estimated the annual cost will be $162 million.

About

29.5 million workers or 45 per cent of total private employment will now
be covered by the $1.25 minimum.
Meanwhile, the House Education and Labor Committee has approved
and sent to the House a bill to further raise the minimum wage to $1.75 an
hour and include an additional 7 million workers under the Act.

The

minimum wage for workers now covered would increase in 3 annual steps
starting with $1.40 on July 1, 1966 and reaching $1.75 an hour on July 1,
1968.

Covered for the first time would be workers in hotels, motels,

restaurants, laundries, private hospitals, and regular employees on large
farms.

The bill also lowers the current annual sales-volume exemption in

certain industries, thereby including additional workers in retail trade,
construction and motion picture theatres.

Newly covered workers would

start with a $1.00 minimum wage on January 1, 1966 and would advance by
5 steps to the $1.75 an hour minimum on July 1, 1970.

Provisions for

double time for overtime proposed by the Administration have beem eliminated
from the bill.

It is uncertain whether final action will be taken before

Congress adjourns this fall.

Prices.

The industrial commodity price index was unchanged

from mid-June through July, but apparently has risen 0.1 per cent in
August.

Now at an estimated 102.2 per cent of the 1957-59 average, the

II - 7

industrial commodity total has risen about 1.5 per cent from a year ago.
The total wholesale price index has declined slightly from the peak reached
in mid-July, according to the weekly estimates.

Prices of foodstuffs,

which accounted for most of the rise in the total index earlier this year,
have edged downward in recent weeks as a result of increased market supplies.
Prices have recently been advanced for some paper products, and,
mainly because of Mexican export restrictions, for sulphur and sulphuric
acid.

But most of the upward pressure on the industrial price level

continues to be concentrated in metals and machinery.

The index of steel

mill products reached a new high in July as producers raised prices on
certain types of sheet.

And quantity discounts on a wide variety of steel

products were changed -- but with the effect on average steel prices still
unclear.

In early August prices of stainless sheet, already a fourth

below the 1957-59 average, were reduced further.
Nonferrous market conditions are mixed.

Early in August, copper

producers advanced prices on a range of shapes, but later they rescinded
some of the increases.

Prices of copper scrap continue to edge upward

indicating further tightness.

Aluminum production remains at capacity,

and many market observers expect a rise in the ingot price this fall.
Zinc shortages, however, have eased, mainly because of a seasonal decline
in demand, and lead prices appear to be coming under downward pressure
as production from new mines increases.

The price of tin continues

to fluctuate at advanced levels, causing strong pressures to find substitutes; next year different forms of "tinless" tinplate are expected to
be in volume production.

II - 8

Uhile the price index for electrical machinery has changed
little over the past year, as in the preceding two years, indexes of
metalworking and construction machiner, have risen over 3 per cent from
a year ago, reflecting mainly strong demands.

Orders for durable goods. According to the "advance" figures,
new orders received by manufacturers of durable goods rose 5 per cent
in July, following two months of decline, and were 3 per cent above the
second quarter average.

Large July gains were reported in new orders for

defense oriented products and products of machinery and equipment industries.
Even though shipments by durable goods manufacturers rose further
in ,

',

the backlog of unfilled orders increased rather sharply, to a

level nearly one-eighth higher than a year earlier; shipments were up
5 per cent.

ORDERS FOR MANUFACTUIERS' DURABLE GOODS
(Per cent change)
New orders
July 1965
from 2nd
July 1965
qtr. 1965
from
average
July 1964
All durable goodIs
Excluding defe:nse products
Excluding iron and steel
Excluding defense products
and iron and steel
Machinery and equipment
Defense products
Iron and steel

3.5
8
5

3.1
4
3

Unfilled orders
July 1965
from
July 1964
12
16
11

15
17
6
27

II -

Retail sales.

9

Retail sales rose 2 per cent in July, according

to the "advance" estimate and were C-1/4 per cent higher than a year
earlier.

The sharp gain from June to July, which lifted total sales to

a new high,

reflected large increases at furniture and appliance,

apparel,

and general merchandise stores and more moderate increases in most other
types of stores.

Auto sales rose slightly from their already high June

level.

New car sales and stocks.

Sales of new domestic automobiles

in the first 10 days of August were lower than a month earlier by about
the usual seasonal margin and were 8 per cent above a year ago.

Total

deliveries for the model year ending in September will be about 8.8 million
vehicles, including a half million imported cars, an increase of 6 per
cent over the 1964 model year.
Dealer inventories on August 10 were moderately lower than a
month earlier, but almost a quarter higher than on that date last year.
They are still unusually high relative to sales and some auto industry
economists expect weakness to develop in the used car market with the
unusually large sales of nearly-old model cars to be made.

Consumer credit.

Demands for auto credit have continued strong

this summer, but in line with the swift pace of auto sales.

About 7

out of every 10 new cars and 6 out of 10 used cars have been purchased
on credit, proportions about the same as usual for this season.
The expansion in auto credit so far this year, at a $3.6 billion
annual rate represents a somewhat greater share of total instalment

II

- 10

credit expansion than last year, just as consumer outlays for autos have
represented a greater share of consumption expenditures.

While typical

minimum downpayments and maximum maturities have not been changing, contracts with the most liberal terms are accounting for a gradually increasing share of the total at commercial banks; three-fourths of all
new car contracts now being xritten call for a 3G-month payoff, up from
65 per cent five years ago.

Personal income.

Personal income rose somewhat further in

July to a seasonally adjusted annual rate of $530.6 billion and was 7.0
per cent above a year earlier, according to the recently revised estimates.
The July rise in the total was rather small -- only 0.3 per cent -mainly because of a large drop in farm proprietors' income, which had increased

sharply in the spring months.

Excluding agricultural income,

the July increase was larger than the increases of Hay and June.
Wages and salaries rose 0.6 per cent, which was somewhat above
the average for the first half of the year.
widespread.

Increases in payrolls were

Half of the increase was in manufacturing, with the largest

gains there in metals and machinery.
Personal interest and transfer payments edged up slightly in
July.

Business and professional proprietors' income, rental income, and

dividends were little changed.
Revised annual and quarterly data for personal income and its
major components for the period since 1960 are shown in Table A - T-2.

II

Residential building.

-

11

Seasonally adjusted private housing

starts declined in July, but the decline wvs associated with a 2 per
cent upward revision in
level still

the already advanced June rate and was to a

somewhat above the low reached last January.

On a three-

month moving average basis, starts in the Hay-July period were at an
annual rate of 1.51 million --

fairly near the HIay-July rate last year

and the average rate for all of 1964.
Seasonally adjusted building permits were also down in July
from an improved June rate.

The decline vas moderate, however, and was

concentrated in permits for structures of 5-or-more units,
shown some recovery in recent months.

which had

Regionally, total permits dropped

in the Northeast and South, maintained their earlier reduced rate in
the Uest, and turned sharply upward in

the North Central states.

PRIVATE HOUSING STARTS AND PER-MITS

July 1/
(thousands
of units)

Per cent
change from
Month ago I Year ago

Starts (total)

1,459

- 7

- 3

Permits (total)
1 family
2-4 family
5-or-more family

1,230
708
97
425

- 2
1
17
- 9

- 3
4
- 6
-11

1/ Seasonally adjusted annual rate; preliminary.

The number of single-family homes for sale by speculative
builders declined further in June, and amounted to only 4 months' supply
at the improved June rate of sales.

This compared with about 5 months'

supply in June of the preceding two years.

II - 12

Vacancy rates in rental dwellings financed with FHA-insured
mortgages averaged 6.5 per cent in mid-March, according to FHA's annual
occupancy survey.

This rate was below the high of 7.2 per cent in 1950,

and was only slightly above last year's figure.

The year-to-year change

was similar to that shown by Census Bureau estimates for total rental
vacancy rates.

Crop production.

With weather conditions generally favorable

in most farm areas thus far in 1965, a record harvest is expected from
an acreage only slightly larger than that of 1964.
are in prospect for all major crops.

Increases in yields

Largest increases in production

are forecast for those crops most adversely affected by last year's drought
in the Corn Belt.

Gains in output of 15 per cent and 27 per cent,

respectively, are in prospect for corn and sorghum grains, and an increase
of 23 per cent for soybeans.
moderately larger.

Output of food grains is expected to be

Declines are indicated for tobacco, cotton, and

sugar crops because of reductions in acreage.
The prospective average yields of 7 per cent above 1964 and
5 per cent above the previous record of 1963 are in line with the sharply
rising trend of the past 10 years which has been interrupted only by the
dry weather of 1964.

In a recent report to the Senate Agriculture

Committee, Dr. Wilcox of the Legislative Reference Service attributes
the increases to four main factors:

increased drawbar power and improved

implements which permit more timely and effective field operations; the
development of higher yielding crop varieties; the increased use of chemicals
to control pests and weeks; and most important, the greater use of

II

- 13

fertilizers, particularly the use of nitrogen, which has doubled in the
past 10 years.

Another factor contributing to higher yields has been

expansion in acreages of crops grown under irrigation.

Dr. Wilcox suggests

that further increases in yields are highly probable mainly as a result
of further increases in fertilizer use and other improvements in farm
practices.

In the next 5 to 10 years he sees probable increases of

a third in corn yields and from a tenth to a fifth in wheat and cotton
yields.
A recent USDA study shows that corn yields in the Corn Belt
adjusted by a weather index increased from 30 bushels per acre to 70
bushels between 1929 and 1962.

Hybrid seed, generally adopted between

1933 and 1940, accounted for about 20 bushels of the 40 bushel increase.
Yields were nearly stable in the five years after 1943.

Since 1954,

expanded use of fertilizer, chemicals, closer planting, and other
supporting practices has pushed yields up another 20 bushels.

1-

.C-

8/24/65

ECONOMIC DEVELOPMENTS - UNITED STATES
SEASONALLY ADJUSTED

GROSS NATIONAL PRODUCT
BILLIONS OF DOLLARS
ANNUAL RATES
O U 665 9

CURRENT

Q n 601 4

DOLLARS
J

/.,

-/

-

I550

. .A

)

1958 DOLLARS
-

-sr1

-,--1_
1960
1962
___....,....I__.,.______

_I

1964

WORKWEEK AND LABOR COST IN MFG.
IOU's

AVERAGE WEEKLY HOURS

.

"''l"""'

PRICES
NOT S A

CONSUMER

ALL
- ITE

S

-

-

mUNE

------

0

l-C-2

8/24/65

ECONOMIC DEVELOPMENTS - UNITED STATES
SEASONALLY ADJUSTED

NEW ORDERS AND HOU

INCOME AND SALES

MILLIONS OF UNITS
ANNUAL RATES

I

HOUSING

I

STARTS

TOTAl
3 M O

V

MdV

J15

AV

I l i. . ,

,

I

BUSINESS INVESTMENT

RETAIL SALES
I1960 61100
1

I1I

6

BILLIONS OF DOLLARS

IIII II II

NEW ORDERS

MACHINERY

,

4

AND EOUPMENT

JU Y

L

'
--

NEW

1

1964

1962

1960

J.S. AUTOS
UNITS

1000 MFRS-

IJULY

4

APPROPRIATIONS

135 5-

SIo

_lJ^

IV /

CAPITAL

4

60

BILLIONS OF DOLLARS
ANNUAL RATES
Q01 521

-'~1

I'

A

-- '50

G.A.F.

\

100

NEW PLANT AND EQUIPMENT

EXPENDITURES,

1
1III

'''

1960

1962

FINANCE-N.I.

'I''I

40
0
I luiuijlubj3 0

[I

1960

1964

ACCOUNTS

II

BIlLUONS OF DOLLARS-NIA 8ASIS
ANNUAL

TOTAL

-/

4

FEDERAL

"

RATES

I

130

1 964

1962

INVENIORY/SALES

KAIIOS

In

Iluii

n

2

.00

Q It 123 7

--

"'w2s120

MANUFACTURERS

.75

EXPENDITURES EI0n
JUNE 162

:'

,o,

RECEIPTS

-inn

--------------

-

-

1.50

NJ
SDISTRIBUTORS
J l

lltJUNE
I 28

.25

- -

1960

1962

1964

1960

1962

1964

-

------- -1

.00

III - 1

DOMESTIC FINANCIAL SITUATION
Bank credit.

A significant seasonally adjusted August expansion

of bank credit seems in prospect, although the rise is likely to be less
than the extraordinary increase of August a year ago.

Loans and invest-

ments of weekly reporting member banks showed a contraseasonal rise
of $550 million during the first two weeks of August.
Continued marked increases in loan portfolios were the chief feature
of the credit expansion at reporting banks,

Government security

holdings declined, but total investments changed little --

as holdings

of municipals and other securities registered an offsetting gain.
(Purchases of other securities were heaviest at banks outside New York
City, where savings accounts and other time deposits rose rapidly.)
Though the growth of total loans over the two veeks was no larger than
last year, it was substantially greater than in the comparable period
of most earlier years.
As in other recent months, the major source of the rise in
loan volume during early August was heavy business credit demands.
Manufacturers of durable goods continued to add large amounts to their
indebtedness to banks, and wholesale trade firms also were heavy borrowers.
Increasing outlays for inventories and fixed capital, which have increased external financing requirements of firms in these industries
throughout 1965, may thus be continuing in August.
In meeting demands for loan accommodation by business and
other customers this year, banks have cut deeply into their portfolios

III - 2
of Treasury securities.

The seasonally adjusted decline in bank owner-

ship of Governments during the first seven months, in fact, exceeded
the growth of business loans over the same period.

But banks have

not yet felt compelled to restrict their acquisitions of mortgages,
as they did in earlier periods of economic expansion when business
credit demands were heavy.

Real estate loans recorded an average

monthly increase of about $350 million in the first seven months of
1965 -- approximately in line with last year's rate of increase -- and
further growth is in prospect for August, judging by reporting bank
data for the first two weeks.

Sharp increases in time deposits have

probably been a key factor in sustaining bank demands for mortgages.

Time deposits and money.

Growth in commercial bank time

deposits accelerated in July to a seasonally adjusted annual rate of
15 per cent, the highest rate since February, and this higher rate of
advance continued in the early weeks of August.
Large increases in outstanding CD's at banks outside New York
City in July, and at New York City banks in early August, contributed
to the increased rate of expansion.

But increases in savings accounts

at weekly reporting member banks--and apparently at other banks also-have been unusually large.

The advance in time deposits at country

member banks seems to have moderated in the third week of August, but
there is little doubt that the month will record another strong gain
in time accounts at all commercial banks.
In contrast with the recent sharp increase experienced in
time deposits, growth in the money stock moderated in July to a 5 per cent

III - 3

annual rate, after an exceptional increase in June.

Thus far in

August, the money supply has shown little growth, even though Treasury deposits at commercial banks have declined on a seasonally adjusted basis.

On an average daily basis, the seasonally adjusted

money stock in the first three weeks of August was virtually unchanged from the same period a month earlier.
Bank reserves.

Member bank borrowings over these three weeks

were moderately higher than the average for July, but so also were
excess reserves.

Consequently, net borrowed reserves, at a $172 mil-

lion average for the three weeks, were close to the $178 million level
of June and July./
The effective rate on Federal funds was 4-1/8 per cent on
14 of the past 15 trading days.

Fractional amounts of Federal funds

traded at 4-1/4 per cent during a few recent days.

U.S. Government securities market.

Yields in the Treasury

bond and bill markets have risen in recent weeks.

Since late July,

the average yield on Treasury bonds due in more than 10 years has
moved up 5 basis points to the highest level since the spring of 1964.
YIELDS ON U.S. GOVERNMENT SECURITIES
Date
3-month
Clsn bid)
bbills
s
(Closing bids)

6-month
bl
bills

3 years

5 years

10 years

20 years

1965
Highs
Lows

4.00
3.76

4.05
3.81

4.18
4.00

4.22
4.08

4.27
4.17

4.26
4.17

1965
July 28
Aug. 10
Aug. 24

3.81
3.85
3.87

3.88
3.94
3.97

4.09
4.14
4.18

4.15
4.19
4.27

4.20
4.24
4.27

4.21
4.24
4.27

1/ Based on average of daily figures for all reserve weeks ending in
the month, as used in the reserve memorandum to the FOIC.

III - 4

The recent rise in Treasury bond yields has occurred in an
atmosphere of growing market discussion of possible inflationary developments in the economy and a potential need for tighter monetary policy in
the months ahead.

Factors contributing to this market environment have

included the uncertain economic impact of developments in Viet Nam on
an economy already operating at an advanced rate and entering a period
of seasonally high business activity.

Further contributing to the bond

market's halting performance have been uncertainties as to the dimensions
of the steel wage settlement and the possibility of a sterling crisis.
Against this background, U. S. Government securities dealers have intensified their efforts to reduce sizable positions in intermediate- and
long-term Treasury bonds.

The dealers have encountered only indifferent

investment demand in the market and they have continued to absorb some
selling of Treasury securities on switches into corporate bonds whose
yields have risen more than those on Treasury bonds in recent months.
While the recent advance of Treasury bond yields did stimulate some net
investment demand around mid-August, a large part of the reduction in
dealer bond positions in recent weeks has continued to be accounted for
by official account buying.

The accompanying table shows net dealer

positions in Treasury notes and bonds on selected dates since their
recent peak on May 10.

III - 5

DEALER POSITIONS IN TREPSUPY POTES AND BONDS ON SELECTED RECENT DATES
(Par values in millions of dollars)
Date
(1965)

1 - 5 years

May 10
May 28
June 30
July 30
Aug. 24

213
78
170
9
175

Securities maturing in:
5 - 10 years
Over 10 years
626
480
374
308
177

247
234
278
307
220

Treasury bill rates inched slightly higher during the first
three weeks of August.

Market demand for bills continued strong dur-

ing the first half of the month but has tapered off somewhat recently
and is expected to be seasonally less robust until around mid-September.
Other short-term rates have shown little net change over
recent weeks.
Corporate and municipal bond markets.

As in the Treasury

bond market, yields on corporate bonds have moved higher since late
July due chiefly to changed investor expectations about the likely
future course of interest rates.

Yields on seasoned corporate issues

of top quality have risen to their highest level since the spring of
1960, and yields on new issues adjusted to an Aaa basis have advanced
about 10 basis points, breaking through the previous high of 4.60 per
cent reached during the period of peak market congestion last June.
While yields on municipal bonds have recently edged down very slightly
from their early July highs, a sharp increase in the advertised inventories of municipal dealers during the past week suggests that some
shift in the balance of pressures has been developing in this market
as well.

III - 6

YIELDS

New
1964
High
Low

State and local government
Bond buyer
s
Moo
oody'smixed (mixed cualities)
ualities)

Corporate
Aaa
Seasoned

4.53
4.30

4.45
4.35

3.16
2.99

3.32
3.12

4.67 (8/20)
4.33 (1/29)

4.50 (8/20

3.17 (7/8)
2.94 (2/11)

3.30 (7/1)

4.41 (3/12)

4.56
4.58

4.48
4.47
4.48
4.50

3.16
3.16
3.15
3.15

3.25
3.25
3.23
3.23

1965

High
Low
Ueek ending:
July 23
Aug. 6
Aug. 13
Aug. 20

4.64
4.67 2/

3.04 (2/11)

Despite the advance in the average yield on Treasury bonds
since late July, the spread between this series and that on new

cor-

porate bonds has widened to the largest margin since early 1962.

Be-

cause yields on seasoned corporate issues respond more sluggishly to
market influences, the spread between Moody's Aaa series and yields on
Treasury bonds has narrowed from 34 to 30 basis points.

At this level,

however, the spread is substantially wider than that generally prevailing between early 1963 and early 1965.
the prospects

Revised lender estimates of

for further yield advances on corporate and Treasury

bonds also raise the possibility of changes in the earlier trend toward
somewhat more liberal terms on mortgage loans.

III - 7

Public offerings of new corporate bonds have been in unseasonably large volume during August and somewhat larger than
initially estimated.

Volume has been substantially lighter than

during the second quarter, however, and unsold balances of new nonconvertible debt issues have been kept at a low level, as underwriters have terminated syndicates quickly in the face of rising
yields.

This places underwriters in a good technical position to

bid for the more sizable flow of offerings scheduled for this week
and for September.
New issue volume in the municipal bond market has been
relatively light during August.

This moderation of new offering

pressures relative to July helps to explain the continued stability
of yields in this market.

It permitted dealers to reduce their ad-

vertised inventories from $900 million in early June to less than
$700 million in mid-August.

More recently, however, their adver-

tised inventories have expanded to more than $800 million.
BOND OFFERINGS(In millions of dollars)
Corporate
Public
Private
offerings
placements

State and local govt.
/

1965-

1964

1965-

1964

1965

Jan.-Aug. average

470

339

616

463

936

927

June
July
Aug

748
540
450

468
234
183

980
500
500

623
411
433

972
1,000
700

939
943
799

1964

1/ Includes refundings--data are gross proceeds for corporate offerings and principal amounts for State and local government issues.

III - 8

Stock market.

Common stock prices, as measured by Standard

and Poor's 500 stock index, have risen a little more than 1 per cent
on balance during August and are now about 6 per cent above the June 28
low.

They remain about 4 per cent below the record high reached last

May.

Trading volume has averaged close to 5 million shares per day,

considerably more than in July and well above the usual level of August
activity.

Customer credit in the stock market declined to $6.8 billion

at the end of July with reductions in net debit balances reported by
member firms of the New York Stock Exchange accounting for the entire
3.5 per cent decline during the month.

Iortgage markets.

While savings inflows to specialized

mortgage lenders, particularly savings and loan associations have continued
to weaken, mortgage funds generally have remained ample and lender demands for conventional mortgages generally have continued at a high rate.
In July, the FHA-secondary market yield series was again unchanged at
5.44 per cent.

Contract interest rates for conventional first mortgages

on homes, as reported by the Federal Housing Administration, also remained
about unchanged in July from earlier levels.

For loans on new homes, the

average was 5.80 per cent; for loans on existing homes, 5.85 per cent.
Purchases in the secondary market by the Federal National
Mortgage Association, while far below earlier peaks, were above sales
again in July, and were at the highest level since the spring of 1962.
Part of the recent advance appears to reflect some lessening of interest
by private institutional lenders in low-rate Federally-underwritten
mortgages.

III - 9

Delinquencies of 30 days or more on home mortgages edged up
to 3.0 per cent in the second quarter of the year, according to the
regular survey conducted by the Mortgage Bankers Association of
America.

The rate exceeded a year earlier for the first time since

the end of 1963.

Both conventional and Government-underwritten mortgages

shared in the shift.

The average rate of foreclosures reported for

loans held or serviced by the MBA sample also edged higher.

Except

for conventional loans, however, foreclosure rates continued below a
year earlier.

Im-c-1

8/24/65

FINANCIAL DEVELOPMENTS - UNITED STATES

U.S. GOVT.
SAVINGS BONDS
AND SHORT TERM SEC.TIME DEPOSITS t
COMMERCIAL BANK
S A
n
In
I
I
1964
1962
1960
:

MARKET YIELDS-

BANK ASSETS
n

BILLIONS OF DOLLARS]J
SEASONALLY ADJUSTED
RATIO SCALE

T

ULY 182

TOTAL LOANS
JULY 136 7

LOANS
LESS REAL ESTATE
IJULY

U.S.

GOVT.

887

SECURITIES,

I,-

.---- " OTHER SECURITIES
AND REAL ESTATE LOANS
1960

1962

1964

JULY 56 1

U S. GOVT. SEC.

IV - 1

INTERNATIONAL DEVELOPMENTS

U.S. balance of payments.

Incomplete data suggest the re-

appearance of a sizable deficit in U.S. payments in August.

The deteri-

oration appears larger than could be accounted for on seasonal grounds.
Preliminary data for July indicate approximate balance on regular payments
transactions, after rough allowance for seasonality.
basis, there was a deficit of $200 million.)

(On an unadjusted

Statistics on trade and

capital transactions in July and August are not yet available.
The Commerce Department released its preliminary estimates of
the balance of payments in the second quarter on August 17.

These esti-

mates show a seasonally adjusted surplus on regular transactions of $132
million for the quarter.

For the first half of the year, the over-all

deficit is now estimated to have been $1-1/4 billion on an annual rate.
The published figure for the second quarter surplus is
is somewhat smaller than earlier estimates, mainly because special transactions in the form of net advance payments on military exports were
higher than anticipated.

(The figures on such net advance payments are

based on gross receipts from foreign countries for military purchases
less estimated deliveries; the latter are very rough estimates on a
current basis because of long lags in Defense Department reporting and
the figures are subject to substantial revision.)

More complete and

detailed estimates for the second quarter balance of payments will be
available in mid-September.
Export and import data do not yet go beyond June.

July export

data, when available, will remain difficult to interpret because of the
seaman's strike affecting American bottoms.

This strike probably delayed

IV - 2

government-financed exports more than "commercial" shipments and thus
Recent data on new export orders for

curbed aid disbursements as well.

durable goods, which cover about one-third of all exports, show an
increase in the second quarter after little change over the previous
Some of the increase results from orders for new jet aircraft,

year.

which may not be for delivery for two years or more.

But there was also

a noticeable pickup in new orders for electrical and nonelectrical
machinery, as shown in the following table.
NEW EXPORT ORDERS FOR DURABLE GOODSi-

(monthly averages, millions of dollars, not seasonally adjusted)
1964

1965

I

II

III

IV

I

II

June

668
71

713
84

678
83

694
71

675
100

779
117

898
206

Machinery

367

394

361

377

366

423

457

Other

230

235

234

246

209

239

235

Total
Aircraft

1/ Excluding motor vehicles and parts.
Imports in the second quarter,as reported previously, were up
19 per cent, or $3.5 billion at an annual rate, from a year earlier.

More

detail on the composition of this advance is now available and presented
in the table below. Totals shown for the second quarter include some
arrivals delayed by the dock strike in January-February, which for some
categories may exaggerate the increases from a year earlier.
About one-third of the increase in total imports between the
second quarter of 1964 and the second quarter of 1965 resulted from higher
imports of steel and nonferrous metals.

Imports of other industrial

supplies also accelerated, the rate of increase (13 per cent) being more
than double that of the previous year. An equally marked acceleration occurred in the increase in capital equipment imports;in addition to heavy

IV - 3

deliveries of commercial jet aircraft in the second quarter, imports of a wide
range of machinery items were up from a year earlier by nearly 50 per cent.
Consumer goods imports advanced by a further one-fifth over this period,
though this rate of increase may have been somewhat slower in recent
months.
The rise in U.S. imports has benefited Japan in particular.
About half the increase in

steel imports has been from Japan,

one-third of the growth in

imports of consumer goods,

sets, and motorcycles.

The bulk of the increase in

and about

notably radios,

TV

capital goods imports

has come from Western Europe.

(In

U.S. IMPORTS
millions of dollars)

Second quarterl/
ker cent

1962

1963

1964

1964

8,887

9164

9,766

9,802

11,781

20

1,833
530
1,102

1,856
692
1,140

1,911
826
1,263

1,856
839
1,226

2,139
1,501
1,605

15
79
31

843

935

1 161

1,148

1,647

43

652
130

750
95

920
90

904
84

1,316
151

46
80

2 708

2,888

3,388

3,246

3966

22

787
509
293

812
570
321

973
754
347

888
768
316

1,128
903
419

27
18
33

Food, Beverages and other 3,967

4 178

4,370

4,245

4,550

7

17,164

18,685

18,440

21,944

Industrial Supplies
of which:
Petroleum
Steel
Non-ferrous metals
Capital Equipment
of which:
Machinery
Aircraft
Consumer Goods
of which:
Apparel & other
non-durables
Passenger cars
Electrical appliances

Total

1/

16,405

Annual rates, not seasonally adjusted

1965

Change

19

IV - 4

Prices and wages in industrial countries.

Prices continued

to climb in most European countries during the first half of 1965,
with consumer prices advancing more strongly than wholesale prices.
Increases in wholesale prices were larger in the first half of 1965
than last year for the Netherlands, Germany, the United Kingdom and
Canada, but have continued to be small in France and Italy.

Consumer

prices advanced more strongly in 1965 than last year in France, the
Netherlands, Canada and Japan; and they continued to rise rapidly in
the United Kingdom.

Only Italy showed a definite moderation in the

upward momentum of consumer prices.

PRICE TRENDS IN SELECTED INDUSTRIAL COUNTRIES
(Per cent change in period)

Country

Consumer Prices
Dec. 63 July 64 Dec. 64
June 64 Dec. 64 June 65

Wholesale Prices
Dec. 63 July 64 Dec. 64
June 64 Dec. 64 June 65

E.E.C.
France
Gerra-y
Italy
Netherlands

+0.9
+1.1
+2.9
+4.6

+1.3
+1.4
+2.9
+1.8

+3.0
+1.3
+1.5
a/+5.3

-1.0
+0.3
+0.1
+3.8

+1.8
+1.7
+1.7
+1.0

-1.1
+1.2
+0.4
a/+4.6

United Kingdom

+3.1

+1.7

+3.2

+2.8

+1.7

+2.5

Canada

+0.8

+1.1

+1.6

+0.3

+2.4

Japan

+3.3

+1.5

+6.1

a/

December 1964-May 1965.

--1.2

+0.7

--

IV -

5

By contrast, wage increases slowed down in all the major
European countries shown in the table--except in Britain--after
exceptionally large increases last year.
WAGE TRENDS IN SELECTED INDUSTRIAL COUNTRIES
(Per cent change in period)

Country

Dec. 63
June 64

Dec. 64
June 65

July 64
Dec. 64

E.E.C.
France a/
Germanyb/
Italy c/
Netherlands d/

+ 3.8
h/ + 3.5
+ 9.1
+15.1

+2.9
+6.1
+5.5
+3.5

+ 2.2

+1.7

United Kingdom e/

Canada f/
a/
b/
c/
6/
e/
f/
g/
h/
J/

--

+3.0

g/
h/
i/

+1.3
+2.7
+3.8
+4.1
+2.0

g/

+1.4

Hourly wage rates, all occupations.
Hourly earnings in industry.
Hourly wage rates, including family allowances, in industry.
Hourly wage rates in industry.
Weekly wage rates.
Average hourly earnings in manufacturing.
January-March.
January-April.
January-May.

Italy.

The stabilization program has definitely slowed upward

price movements in Italy in 1965.

Through mid-year the rise in wholesale

prices was quite small and advances of both consumer prices and wages
have slowed down perceptibly.
In 1964, prices and wages had continued to rise even though the
pace of demand slacked off and industrial production, employment and
hours worked registered sharp cuts.

The rise in wholesale prices,

IV - 6

however, was greatly sloued, but consumer prices advanced by 5.8 per
cent, almost as much as in 1963.

Price inflation in 1964 was patently

the result of the further round of extraordinary wage increases in the
year.
Contract wages in industry rose far less in the early months
of this year than they did last year.
were signed in the first half of 1965.

Reportedly, no new wage contracts
As a result, the increases in

wages in 1965 would therefore have originated in old contract settlements.
France.

Over the first half of 1965, France continued to

enjoy a high degree of stability in wholesale prices.

But consumer

prices have continued to move up, and at a somewhat faster rate than
last year.
In 1964, the French euthorities were highly successful in
slowing down the increase in

holesale prices by means of monetary and

fiscal restraints and the imposition of a general freeze on factory
prices (instituted in September 196?).

A decline of 0.6 per cent in food

prices helped to hold down the rise in the aggregate wholesale price
index; prices of industrial raw materials and semi manufactures increased
by 2.5 per cent, but this was less than in 1963.
In the first half of 1965, the general level of wholesale prices
declined by 1.1 per cent, a bit more than a year earlier, primarily
because of seasonal declines in food prices.

But consumer prices rose

by 3 per cent, compared to just under 1 per cent in the first six months

IV - 7

of 1964.

Special factors contributed to this acceleration.

A dispute

between the doctors and the Social Security system led to higher medical
costs and produced a rise of 1.6 per cent in the consumer price index
in the month of June.

However, it seems that the dispute will be

resolved and that doctors' fees will fall back to about their previous
levels.
The increases in hourly wage rates have been slowing down in
France:

the rise in the first six months of 1965 was less than half

the growth in the same period a year earlier.
Germany.

Prices in Germany have continued to advance strongly

under the influence of vigorous demand pressures.

At the wholesale level,

the recent upward movement reflects to a considerable extent increases
in prices for basic and producers' goods, although prices for capital
goods and consumer goods (excluding food, beverages and tobacco) have
also risen.

In this period, consumer prices have also increased, mostly

due to higher food prices; but even if seasonally sensitive products
(potatoes, vegetables, fruits, eggs, fresh fish) are excluded from the
index, consumer prices have risen considerably more rapidly in the first
half of this year than in January-June of 1964.
Hourly earnings increased by 2.7 per cent in the first four
months of 1965 es compared with 3.5 per cent in the comparable period
last year.

However, recent increases in hourly earnings have been

somewhat more rapid than during the last half of 1964.

IV - 8

The Netherlands.

In recent Ltonths, prices have again begun to

exhibit a strong upward trend.

Recent prices increases have mainly been

attributable to the effects of bad weather on the potato and vegetable
crops; but increases in charges for Government services also raised
some prices.
Although labor market tensions appear unrelieved, wage settlements have remained within the 5 per cent guidelines agreed upon in
December 1964.

However, the recent approval of the controversial wage

contract for the Philips Company by the Board of Government Mediators
suggests a major change in Dutch wage setting procedures.

The contract

is to run for three years, rather than the customary one year, and the
introduction of an escalator clause, which permits a maximum of 2 per
cent per annum compensation for increases in living costs, will make it
more difficult to contain inflationary tendencies.

The Philips agreement

may well furnish the basic pattern for future contracts; end the
important metal industry recently reached an egreement which contains
all the rajor provisions of the Philips arrangement contract.

Government

approval of this contract is still pending, however.
United Kingdom.

Prices and wage increases in the United

Kingdom were quite vigorous in 1964, and there is only the slightest
hint of any moderating tendency in the first six months of 1965, mostly
because of the pressure of continued demand growth.

Part of the rise in

the cost of living index was due to higher taxes on drink and tobacco that
were imposed in the budget for 1965-66 presented in April 1965.

IV - 9
Price advances in Britain in 1964 and early 1965 were larger
than they had been in the E.E.C. countries (except for the Netherlands)
and there has been no tendency for the rate of advance to slacken in
Britain as it has in mos; major European countries during 1965.
The continued price and wage pressure has reflected labor
shortages, which have bean persistent since mid-1964 and have intensified
in recent months.
an incomes policy.

The authorities have had little success in pursuing
In fact, wage settlements in the most recent period

have on the average exceeded the recommended guidelines.

In addition,

some manufacturers tended to raise prices in anticipation of the activation of the new Price ard Incomes Review Board.
Canada.
more rapidly.

Canatian prices have recently begun to move upward

The tota

wholesale price index, virtually unchanged

throughout 1964, advanced by 2.4 per cent in the first six months of
this year.

The recent increase was concentrated in the April-June quarter,

when the upward pace of price increases accelerated for non-ferrous
metals, iron products, and animal products.
The upward movement in consumer prices has also accelerated
in the first six months of this year.

Almost one-half of the increase

occurred in June, and should be attributed to a seasonal rise of food
prices.

Even so, the rate of rise was substantially higher in the first

half of 1965 than in the first half of 1964.

IV - 10

Continued vigorous economic expansion and tightening labor
market conditions in Canada have been reflected in an increase of 1.4
per cent in average hourly earnings in manufacturing in the first six
months, compared with no change in the comparable period in 1964.
Japan.

'holesale prices have continued to move within an

extremely narrow range.

During the initial stage of the upsurge of

Japanese economic activity in 1963 and 1964 wholesale prices advanced
by 2 per cent but since then prices have on the whole shown little
change.

The wholesale price index in July vas the same as two years

earlier, and lower than it was in 1957.

Export prices have declined

by a little more than 1 per cent over the past year ai

have continued

at levels well below those of the mid-1950's.
Consumer prices, on the other hand, have ri en steadily and
markedly.

In July, the Tokyo consumer price index was 7 per cent higher

then a year earlier, reflecting in part sharp advances in food prices.

-- C-1

8/24/65

U.S. AND INTERNATIONAL ECONOMIC DEVELOPMENTS
SEASONALLY ADJUSTED

BALANCE OF PAYMENTS

U S BALANCE OF PAYMENTS-COI

U.S.

BANK CREDIT OUTFLOWS

MILLIONS OF DOLLARS
NOT SEASONALLY ADJUSTED

-EUROPE

"

A APPENDIX A:

REVISION OF GROSS NATIONAL PRODUCT AND NATIONAL INCOME ESTIMATES*

A comprehensive revision of the U.S. national income and product
accounts has been completed by the Department of Commerce, and the first
report on it was released last week. Further descriptive and analytical
material will be found in the August Survey of Current Business and a
complete report is tentatively scheduled for next spring.
The revision extends back to 1929 for annual data and back to
1946 for quarterly figures (1947 for constant dollar). However, most
of the changes were in the postwar period, especially in recent years.
Revised data for some of the principal aggregates are shown in Table A--T-1
and A--T-2 from 1960 to date.
An appraisal of the full significance of the revision for economic
analysis will require considerable further study, including a more detailed
analysis of the separate effects of the statistical and the conceptual revisions. The description which follows hits first the principal changes
in magnitude, emphasizing those revisions which are probably of greatest
significance in a reappraisal of recent economic trends.
Highlights.
The revised estimates depict a pattern of overall economic
activity--both in terms of long-term growth and in cerms of cyclical
patterns--quite similar to that pictured by the now superseded figures.
However, a number of the components were revised strikingly, in some cases
by statistical revisions, in others by changes in concept.
Total GNP was lowered 1 per cent in the early postwar period and
raised about that much in recent years. Output in 1964, in current prices,
is now estimated at $628.7 billion, $6.1 billion more than before, and
in the second quarter of 1965 at a seasonally adjusted annual rate of
$665.9 billion, $7.9 billion more than before. Aggregate measures of income, both national and personal, were also raised in recent years.
Differences for selected components for selected periods are shown below.
The personal saving rate has been reduced markedly for recent
years; in 1964, for example, it was lowered from 7.5 per cent to 6.0 per
cent.
Corporate profits before tax have been raised considerably, in
1964 by $7.2 billion to $64.8 billion. Two thirds of this increase resulted from statistical revisions, one third from conceptual revisions.
The Federal deficit, national income basis, is shown to be
appreciably lower in recent years, in some periods shifting to a surplus.
What had been indicated by the former estimates as a position of balance
followed by a deficit in the first and second quarters of this year are
now shown as a substantial surplus in each quarter.
* Prepared by J. Cortland G. Peret, Economist, Division of Research and
Statistics.

A-

2

EFFECT OF REVISIONS
(Billions of Dollars)

1948

1953

1957

1958

1960

1964

GROSS NATIONAL PRODUCT

-1.9

-. 8

-1.6

2.8

1.2

6.1

PCE-Durable goods
PCE-Services
Business fixed investment
Producers' durable equipment
Change in business inventories
Residential structures

.0
-2.2
-1.4
-. 9
-4.3

.4
-1.9
-2.0
-. 8
-4.2

.4
-2.0
-1.2
-. 1
-.3
3.1

.6
-2.3
1.1
1.9
.5
2.7

.4
-2.9
1.2
2.7
.1
1.8

1.7
-2.4
2.5
4.3
1.1
1.5

.7
.2

-. 8
.2

-.8
.1

.4
.1

.0
-.5

NATIONAL INCOME
Wages and salaries
Other labor income

--

--

4.2
1.9

.4

.6

.9

2.4

.7
2.2
2.4
-2.4

2.1
2.3
2.6
-5.4

2.9
4.0
4.5
-7.8

3.2
4.0
4.4
-8.0

3.7
5.5
5.8
-9.8

5.8
7.1
8.0
-11.6

PERSONAL INCOME
Interest paid by consumers

-. 2
1.5

-. 1
3.8

-. 3
5.8

.9
5.9

-. 3
7.3

3.6
10.0

PERSONAL SAVING

2.4

-1.5

-2.9

-2.4

-4.6

Rental income of persons
Corporate profits before tax
Undistributed profits
Net interest

-6.2

Growth.
The rate of growth of real GNP was noc significantly changed.
The average annual race of growth from 1948 to 1964 was raised to 3.7 per
cent from 3.6 per cent when measured exponentially with terminal years
(compound rate of interest formula). When measured exponentially by least
squares fitting of straight line trend to logarithms of all years for the
period, the growth rate is still 3.4 per cent. Longer term growth rates
for aggregative measures of income were also little changed.
The revision did raise the growth rate from 1960 to 1964, to
4.5 per cent from 4.2 per cent (trend line method). From 1953 to 1964,
however, the rate is about the same as before. For components, trends
were altered substantially in some cases.
Cycles
The cyclical patterns shown for the broadest aspects by the new
estimates generally are little different. The peak to trough declines in
the 1953-54 and 1957-58 recessions, however, are now somewhat milder.

A-

3

The peak of the 1958-60 business expansion now comes in the
first quarter of 1960 instead of in the second and. thus, the length of
that expansion is shortened slightly.
Revised and former figures for three cyclically important components--investment in business fixed capital, business inventory change,
and residential construction--are shown in constant (1958) dollars since
1953 in Chart A --C-1.
The new figures indicate that business fixed investment, in
both real and current dollar terms, declined much less in the 1958 recession, and in recent years has shown greater expansion. The estimate for
1964, in terms of current dollars, is revised up by $2.5 billion; part
of a $4.3 billion upward adjustment for equipment was offset by an opposite
movement in nonresidential construction. The share of business fixed
investment in GNP during the second quarter of this year is now shown to
be 10 per cent, as compared with 9 per cent at the beginning of the recovery
in early 1961, 9-1/2 per cent in the first half of 1960 and 10-1/2 per cent
in 1956 and 1957.
The rate of business inventory accumulation is shown to be larger-or liquidation smaller--throughout the period from early 1961 to date and,
beginning in 1963, revisions have amounted to $1 billion or more most of
the time. As a consequence for the whole period from the beginning of
1961 to date inventories are shown to be up $4-1/2 billion or one-fourth
more than before.
For residential construction--referred to in the new tables as
"structures"-- the principal change was a reduction in growth (early
levels were raised more than recent levels) but this altered the shape
of shorter-term fluctuations (including trend elements), reducing upswings
as compared with downswings.
Personal saving
Since the early 1950's personal saving is shown to be a considerably smaller share of disposable personal income than before. In
1964, while disposable income is raised some $3 billion, personal saving
is cut $6.2 billion to $26.3 billion. The downward revision in personal
saving stems largely from an upward revision in imputed rent of homeowners.
(Personal consumption expenditures have been defined to exclude interest
paid by consumers and personal transfers to foreigners. But in calculating
personal saving account is taken of these items, as well as of consumption
expenditures.)
The saving rate is now at a lower level for recent years, but
the quarter-to-quarter movements indicated by the new figures are similar
to those of the old.

A-4
PERSONAL SAVING
Amount
(Billions of Dollars}
Revised
Difference
from former

Ratio to
Disposable Income
(per cent)
Revised

Former

1948
1953
1957
1958
1960
1964

13.4
18.3
20.8
22.3
17.0
26.3

.2
-3.3
-1.8
-2.4
-4.7
-6.2

7.1
7.2
6.7
7.0
4.9
6.0

5.8
7.8
7.6
7.8
6.2
7.5

1964 - I
II
III
IV

23.3
27.3
25.0
29.5

-6.2
-6.7
-6.0
-6.0

5.5
6.3
5.7
6.6

7.0
7.9
7.1
8.0

1965 - I
II

23.8
23.0

-6.4
-9.3

5.3
5.0

6.7
7.1

Statistical revisions
As noted above the revision incorporated both statistical changes
and definitional changes. The more important statistical changes affected
personal consumption expenditures for services, investment in structures,
and investment in producers' durable equipment.
A large increase in the rental value attributed to owneroccupied dwellings tended to raise the services component of consumption
outlays but not enough to offset the effects of conceptual revisions.
The estimates of investment in nonresidential structures were
reduced--$1.4 billion in 1964--with public utility construction most
affected, reflecting improvements in the use of basic source data from
regulatory agencies.
Estimates of investment in nonfarm residential structures were
revised upward substantially, particularly in the decade after World
War II, on the basis of data provided by 1956 National Housing Inventory
and the 1960 Census. The maximum revision was about $4 billion in 1950.
Producers' durable equipment estimates were revised upward,
by $5.7 billion in 1964. This revision resulted from use of data from
the 1958 Census of Manufacturers and similar data from the Annual Survey
of Manufactures through 1962, and beginning in the third quarter of 1964,
inclusion of upward revisions in plant and equipment survey data not
A large part of the Census-based revision was in
introduced earlier.
1958 in the form of a smaller reduction in outlays during the 1957-58
recession.

A-

5

On the income side, large revisions have raised corporate
profits, and undistributed profits, primarily because of an increased
allowance for profits not reported to the IRS on income tax returns.
Other small changes also tended, on net, to increase corporate profits.
Conceptional revisions
The major definitional change is in the treatment of interest
paid by consumers to persons, an item that in 1964 amounted to $10 billion. This is no longer regarded as reflecting production, hence is
excluded from GPP and personal consumption expenditures and from national
inccme and net interest. This interest item is treated as an outlay,
however, in obtaining personal saving and thus personal saving is unaffected.
Otter conceptual changes involved transfer payments to foreigners
by persons, purchases of small tools, transactions in second-hand fixed
assets among the major sectors of the economy, and commissions arising in
the sale and purchase of new and existing assets. The effects of these
changes are generally small. A final conceptual change to be noted here
is the exclusion of NASA purchases of goods and services from the defense
category and inclusion uith the "Other" Federal purchases.

A --

T -

GROSS NATIONAL PRODUCT
(Billions of Dollars; Quarterly Totals Are Seasonally Adjusted Annual Rates)
1960
GROSS NATIONAL PRODUCT
Personal consumption expenditures
Durable goods
Nondurable goods
Services

1962

1963

1964

I

1961

503.8

520.1

560.3

589.2

628.7

503.0

325.2
45.3
151.3
128.7

335.2
44.2
155.9
135.1

355.1
49.5
162.6
143.0

373.8
53.4
168.0
152.3

398.9
58.7
177.5
162.6

321.1
45.9
149.4
125.7

1961
III

IV

III

IV

I

II

504.7

504.2

503.3

503.6

514.9

524.2

537.7

326.3
46.1
152.0
128.1

325.9
45.3
151.3
129.3

327.7
43.8
152.5
131.4

328.4
41.9
154.1
132.4

332.3
43.4
154.7
134.2

336.7
44.8
156.1
135.8

343.1
46.6
158.7
137.8

II

1960

76.0
72.1
49.0
17.9
31.2
23.1
3.9
3.8
.2

73.5
70.4
48.4
17.8
30.6
22.0
3.1
2.7
.4

67.6
70.0
48.4
18.6
29.8
21.6
-2.4
-2.8
.4

64.3
67.7
46.0
18.4
27.6
21.7
-3.5
-3.7
.3

70.2
68.1
46.0
18.3
27.7
22.1
2.1
1.8
.3

74.2
70.4
47.5
18.4
29.0
22.9
3.8
3.4
.4

77.9
72.5
48.6
18.4
30.3
23.8
5.5
5.3
.2

2.4
26.1
23.7

3.5"
27.4
23.8

4.3
27.5
23.3

6.1
28.0
21.9

6.6
28.5
22.0

5.7
27.8
22.1

4.9
28.6
23.6

5.4
29.4
24.0

97.0
52.7
45.0
7. 7
44.3

98.8
53.0
44.4
8.6
45.9

100.4
53.9
44.6
9.3
46.6

101.9
54.6
45.8
8.8
47.3

104.3
55.4
46.9
8.4
49.0

106.7
57.3
47.7
9.6
49.4

108.4
57.8
47.7
10.0
50.6

111.3
59.2
48.9
10.3
52.1

490.2

489.8

487.4

483.8

482.7

492.9

501.6

511.9

Gross private domestic investment
Fixed investment
Nonresidential
Structures
Producers' durable equipment
Residential structures
Change in business inventories
Nonfarm
Farm

74.8
71.3
48.4
18.1
30.3
22.8
3.6
3.3
.2

71.7
69.7
47.0
18.4
28.6
22.6
2.0
1.7
.3

83.0
77.0
51.7
19.2
34.5
25.3
6.0
5.3
.7

86.9
81.2
54.3
19.7
34.6
26.9
5.7
4.9
.8

92.9
88.1
60.5
21.1
39.4
27.5
4.8
5.4
-. 6

82.5
72.6
47.8
18.2
29.6
24.7
9.9
10.0

Net exports of goods and services
Exports
Imports

4.1
27.2
23.2

5.6
28.6
22.9

5.1
30.3
25.1

5.9
32.4
26.4

8.6
37.0
28.5

Government purchases of goods and
services
Federal
National defense
Other
State and local

99.6
107.6 117.1
57.4
63.4
53.5
47.8
51.6
44.9
9.6 11.8
8.6
50.2
53.7
46.1

122.6
64.4
50.8
13.6
58.3

128.4
65.3
49.9
15.4
63.1

497.3

550.0

577.6

-

.1

GROSS NATIONAL PRODUCT IN CONSTANT

(1958) DOLLARS

487.8

530.0

A -- T - 1 (cont.)
GROSS NATIONAL PRODUCT
(Billions of Dollars; Quarterly Totals are Seasonally Adjusted Annual Rates)
1962
GROSS NATIONAL PRODUCT

Personal consumption expenditures
Durable goods
Nondurable goods
Services
Gross private domestic investment

1963

I

II

III

IV

I

II

III

547.8

557.2

564.4

572.0

577.0

583.1

593.1

348.3
48.5
160.2
139.6

351.7
48.5
161.6
141.6

357.2
50.1
163.2
144.0

363.0
51.1
165.3
146.7

368.0
52.2
166.6
149.2

371.1
52.6
167.4
151.1

376.6
54.1
169.2
153.3

IV

1964
III

1965
IV

I

II

I

II

603.6

614.0

624.2

634.8

641.1

656.4

665.9

379.5
54.9
168.9
155.7

389.1
57.4
173.7
158.0

396.0
59.1
175.7
161.2

404.6
60.5
179.8
164.3

405.9
57.9
180.9
167.1

416.9
63.9
183.0
170.0

424.4
63.7
187.6
173.1

80.6
73.9
49.5
18.5
31.0
24.4
6.7
6.3
.4

82.8
76. 7
51.3
19.2
32.1
25.4
6.1
5.6
.5

84.3
79.2
53.1
19.7
33.5
26.0
5.2
4.3
.8

84.7
78.3
52.7
19.5
33.2
25.6
6.4
5.3
1.1

82.6
78.1
52.1
19.0
33.1
26.0
4.5
3.8
.7

84.8
80.1
53.4
19.2
34.2
26.7
4.7
4.2
.6

87.9
82.1
55.1
20.0
35.1
26.9
5.8
5.2
.7

92.4
84.3
56.5
20.5
36.0
27.9
8.1
6.9
1.2

89.7
86.5
58.1
20.7
37.5
28.4
3.3
3.6
-. 4

90.9
86.8
58.9
21.1
37.9
27.9
4.1
5.1
-1.0

92.6
88.8
61.6
21.1
40.5
27.2
3.8
4.6
-. 8

97.7
90.2
63.5
21.5
42.0
26.7
7.5
7.8
-. 3

102.4
93.7
66.0
21.8
44.2
27.7
8.7
9.3
-. 5

101.1
94.4
66.4
22.7
43.7
28.0
6.7
7.1
-. 4

Net exports of goods and services
Exports
Imports

4.5
29.1
24.6

5.7
30.9

5.4
30.6
25.2

4.9
30.5
25.5

4.5
30.0
25.6

6.2
32.4
26.2

5.7
32.6
26.9

7.3
34.4
27.1

8.8
36.3
27.5

7.7
36.0
28.2

8.8
37.3
28.5

8.9
38.4

6.2
34.8
28.6

7.5
39.8
32.3

Government purchases of goods and
services
Federal
National defense
Other
State and local

114.4
61.9
51.1
10.8
52.5

117.0

117.4
63.3
51.3
12.0
54.1

119.3
64.4
50.9
13.5
55.0

121.9
65.4
51.5
13.9
56.5

120.9
63.6
50.5
13.1
57.4

123.0
64.2
51.0
13.2
58.8

124.3
64.4
50.3
14.1
59.9

126.3
65.0
49.8
15.2
61.3

129.7

64.0
53.0
10.9
53.1

519.7

527.9

533.6

538.5

541.2

544.9

553.7

560.0

567.1

Fixed investment
Nonresidential

Structures
Producers' durable equipment
Residential structures
Change in business inventories
Nonfarm
Farm

25.2

29.5

51.7
15.3
62.7

128.7
64.9
49.5
15.4
63.8

128.6
64.3
48.8
15.5
64.3

130.9
64.9
48.9
16.0
66.0

132.9
65.9
49.4
16.5
67.0

575.9

582.6

584.7

597.5

601.4

67.0

GROSS NATIONAL PRODUCT IN CONSTANT

(1958) DOLLARS

A --

T-

2

NATIONAL INCOME, PERSONAL INCOME, and PERSONAL SAVING
(Billions of Dollars; Quarterly Totals are Seasonally Adjusted Annual Rates)
1960

411.7

412.2

422.6

430.7

443.4

295.9
272.4
23.5

294.2
270.5
23.7

294.8
270.9
23.9

299.5
275.2
24.3

304.7
279.9
24.8

311.5
286.3
25.2

46.6
34.5
12.1

46.3
33.9
12.4

46.5
33.8
12.7

47.4
34.6
12.8

48.1
35.4
12.7

48.6
35.9
12.7

49.6
36.4
13.2

15.8

15.8

15.9

15.9

15.9

15.9

16.0

16.1

53.3
53.9
25.0
28.9
6

51.6
51.8
24.0
27.8
-. 2

48.6
47.5
22.0
25.5
1.2

46.1
45.7
21.2
24.5
.5

45.0
45.0
20.7
24.4
-.1

49.3
48.8
22.4
26.4
.5

51.1
51.4
23.6
27.8
-. 3

55.4
55.7
25.6
30.1
-.3

15.2

7.9

8.0

8.5

9.0

9.2

9.7

10.2

10.8

464.8
60.9
403.8
383.4
20.5

495.0
59.2
435.8
409.5
26.3

396.6
50.0
346. 6
328.5

403.3
51.2
352.1
333.8
18.3

406.6

51.8
354.8
336.4
18.4

412.5
52.0
360.6
340.4
20.2

419.4
52.5
366.9
344.8

18.1

401.3
50.8
350.4
334.0
16.5

428.0
53.3
374.7
351.3
23.3

5.1

6.0

5.2

4.7

5.2

5.2

5.6

6.0

1962

1963

1964

414.5

427.3

457.7

481.1

294.2
270.8
23.4

302.6
278.1
24.6

323.6
296.1
27.5

Proprietors' income
Business and professional
Farm

46.2
34.2
12.0

48.4
35.6
12.8

Rental income of persons

15.8

Corporate profits and inventory
valuation adjustment
Profits before tax
Profits tax liability
Profits after tax
Inventory valuation adjustment

Compensation of employees
Wages and salaries
Supplements to wages and salaries

Net interest
PERSONAL INCOME
Less: Personal tax and nontax payments
Equals: Disposable personal income
Less: Personal outlays J/
Equals: Personal saving
Ratio of saving to disposable personal
income

IV

II

514.4

414.2

417.1

415.2

341.0
311.2
29.8

365.3
333.5
31.8

291.8
268.8
23.0

295.0
271.6
23.3

50.1
37.1
13.0

50.8
37.8
13.0

51.1
39.1
12.0

45.4
34.7
10.7

16.0

16.7

17.6

18.2

49.9
49.7
23.0
26.7
.2

50.3
50.3
23.1
27.2
-. 1

55.7
55.4
24.2
31.2
.3

58.1
58.6
26.0
32.6
-.4

64.5
64.8

8.4

10.0

11.6

13.6

442.6
57.4
385.3
363.7
21.6

5.6

416.8
52.4

4.9

5.8

364.4

343.2
21.2

1/ Personal outlays consist of personal consumption expenditures,
foreigners.

III

I

401.0
50.9
350.0
333.0
17.0

IV

II

1961

NATIONAL INCOME

1961
III

I

1960

27.6

37.2
-. 3

-.

interest paid by consumers,

403.3
51.6
351.7
335.7
16.0

4.5

22.1

and personal transfer payments to

6.2

A --

T - 2 (cont.)

NATIONAL INCOME, PERSONAL INCOME, and PERSONAL SAVING
(Billions of Dollars; Quarterly Totals are Seasonally Adjusted Annual Rate)

1962

1963

II

III

448.8

456.0

460.4

465.6

470.4

476.7

484.6

317.1
290.3
26.8

322.9
295.6
27.4

325.7
297.9
27.8

328.8
300.6
28.2

333.6
304.5
29.0

338.0
308.4
29.6

Proprietors' income
Business and professional
Farm

50.3
36.7
13.5

50.4
37.1
13.3

49.9
37.2
12.7

49.8
37.3
12.6

50.7
37.5
13.2

Rental income of persons

16.3

16.5

16.8

17.2

Corporate profits and inventory
valuation adjustment
Profits before tax
Profits tax liability
Profits after tax
Inventory valuation adjustment

54.3
54.4
23.7
30.7
-.1

54.9
54.8
23.9
30.9
.0

56.1
56.0
24.4
31.5
.1

Net interest

10.8

11.3

11.8

NATIONAL INCOME

Compensation of employees
Wages and salaries
Supplements to wages and salaries

PERSONAL INCOME
433.9
Less: Personal tax and nontax payments 55.0
Equals: Disposable personal income
378.9
Less: Personal outlays 2/
356.6
Equals: Personal saving
22.3
Ratio of saving to disposable personal
income

5.9

IV

I

II

1965

1964

I

III

IV

III

I

II

492.6

501.6

510.5

519.5

526.3

541.4/550.4

343.0
312.9
30.1

349.5
318.8
30.7

355.1
324.2
30.8

361.9
330.4
31.5

369.0
336.8
32.2

375.4
342.6
32.7

383.1
349.8
33.4

388.7
355.0
33.8

50.5
37.6
12.9

50.9
37.9
13.0

51.9
38.0
13.0

50.4
38.5
11.9

51.0
39.0
12.0

51.4
39.4
12.0

51.8
39.6
12.2

51.9
39.9
12.0

54.6
40.1
14.5

17.1

17.4

17.7

18.0

17.9

18.1

18.3

18.5

18.5

18.6

57.4
56.5
24.7
31.8
.9

56.3
56.1
24.9
31.2
.2

57.6
58.5
26.0
32. 6
-. 9

59.1
58.9
26.1
32.8
.2

59.6
60.8
27.0
33.8
-1.2

63.6
64.0
27.3
36.7
-. 4

64.5
64.5
27.5
37.0
.0

65.5
65.3
27.8
37.5
.2

64.9
28.1
37.8
-1.0

71.7 1/72.1
73.8
73.1
29.1
29.4
44.0
44.4
-1.7
-1.4

12.4

12.7

13.2

13.9

14.5

14.5

15.0

15.4

15.7

16.1

483.0
60.4
422.6
399.3
23.3

490.6
56.9
433.6
406.3
27.3

499.1
58.8
440.3
415.3
25.0

507.1
60.7
446.4
416.9
29.5

6.3

5.7

6.6

440.8
56.8
384.0
360.2
23.9

445.0
58.1
386.9
365.9
20. 9

450.3
59.5
390.8
371.9
18.9

456.1
60.4
395.7
377.1
18.5

460.1
60.6
399.4
380.5
18.9

467.1
61.0
406.1
386.3
19.8

475.6
61.6
414.0
389.5
24.4

6.2

5.4

4.8

4.7

4.7

4.9

5.9

5.5

IV

I

65.9

516.6
64.8
451.9
428.1
23.8
5.3

1/ Second-quarter 1965 national income total and the corporate profits share are based on preliminary estimates and are subject to
revision in September.
2/ Personal outlays consist of personal consumption expenditures, interest paid by consumers, and personal transfer payments to
foreigners.

II

16.4

524.9
66.0
458.9
436.0
23.0
5.0

8/24/65

A-C-1

PRIVATE DOMESTIC INVESTMENT
SEASONALLY ADJUSTED ANNUAL RATES
BILLIONS OF 1958 DOLLARS
I

I

I

I

I

I

65

BUSINESS FIXED INVESTMENT

55

r

45
35

35

11-

I

35

RESIDENTIAL CONSTRUCTION

or

^

25

15

CHANGE IN BUSINESS INVENTORIES
10

+

-o_ 10

\_.~___

1953

1955

1957

__

___

1959

-

1110 I_

I

1961

1963

1965