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Prefatory Note The attached document represents the most complete and accurate version available based on original copies culled from the files of the FOMC Secretariat at the Board of Governors of the Federal Reserve System. This electronic document was created through a comprehensive digitization process which included identifying the bestpreserved paper copies, scanning those copies, 1 and then making the scanned versions text-searchable. 2 Though a stringent quality assurance process was employed, some imperfections may remain. Please note that some material may have been redacted from this document if that material was received on a confidential basis. Redacted material is indicated by occasional gaps in the text or by gray boxes around non-text content. All redacted passages are exempt from disclosure under applicable provisions of the Freedom of Information Act. 1 In some cases, original copies needed to be photocopied before being scanned into electronic format. All scanned images were deskewed (to remove the effects of printer- and scanner-introduced tilting) and lightly cleaned (to remove dark spots caused by staple holes, hole punches, and other blemishes caused after initial printing). 2 A two-step process was used. An advanced optical character recognition computer program (OCR) first created electronic text from the document image. Where the OCR results were inconclusive, staff checked and corrected the text as necessary. Please note that the numbers and text in charts and tables were not reliably recognized by the OCR process and were not checked or corrected by staff. Content last modified 6/05/2009. CONFIDENTIAL (FR) SUPPLEMENT CURRENT ECONOMIC AND FINANCIAL CONDITIONS Prepared for the Federal Open Market Committee By the Staff Board of Governors of the Federal Reserve System June 3, 1966 SUPPLEMENTAL NOTES The Domestic Economy Nonfarm business expenditures on new plant and equipment this year will total $60.8 billion, 17 per cent more than in 1965, and will continue rising throughout the year, according to the Commerce-SEC survey of business plans conducted in late April and in May. The total now planned for 1966 is nearly one per cent more than indicated by the survey last February and is a little larger than that realized in 1965. In real terms, however, the rise may be less than in 1965 because of higher prices. Actual investment has exceeded earlier plans in each quarter since the end of 1963. In the first quarter of this year actual invest- ment was $.8 billion (annual rate) higher than indicated by the February survey, and second quarter plans also have been lifted by almost that amount. The increase in planned plant and equipment spending this year of 17 per cent from last year is about the same as that indicated by the McGraw-Hill mid-May "recheck." Fixed capital spending plans of all major industry groups exceed actual spending in 1965 and several industry groups appreciably stepped-up intended spending from plans earlier this year. These step-ups more than offset cutbacks, ranging up to 6 per cent, by some important industry groups: notably, primary metals -- both iron and steel and nonferrous metals -- motor vehicles and parts, and textiles. - 2 EXPENDITURES PLANNED FOR NEW PLANT AND EQUIPMENT FOR 1966, ALL BUSINESS AND SELECTED INDUSTRIES April - May Survey Per cent change Billions of from 1965 dollars February Survey Per cent change from 1965 All business 60.8 17.0 15.9 Manufacturing Durable goods Iron and steel Nonferrous metals Nonelectrical machinery Motor vehicles and parts Other transportation equipment Nondurables Textile 27.0 13.8 2.1 .8 3.0 2.0 20.4 20.9 6.7 10.3 35.3 2.5 19.2 18.4 8.8 11.8 24.0 7.1 1.0 13.2 1.3 65.5 19.8 29.6 44.8 19.9 36.7 Nonmanufacturing Mining Railroads Other transportation Public utilities Communications and commercial and other 33.8 1.4 2.1 3.5 8.0 14.4 9.2 18.5 24.2 15.1 13.5 16.2 5.8 12.1 15.9 18.8 12.4 13.3 Plant and equipment outlays of all business will rise throughout this year. However, the increase apparently will be less in the current quarter than in the first quarter of the year. The advances now planned for each of the last two quarters are larger than indicated for the second quarter. PLANT AND EQUIPMENT EXPENDITURES (Billions of dollars; seasonally adjusted annual rates) 1965 III IV Actual I 1966 II III Planned IV All business 52.8 55.4 58.0 59.6 61.7 63.9 Manufacturing Durable goods Nondurable goods 23.0 11.8 11.3 24.2 12.5 11.7 25.6 13.2 12.5 26.6 13.6 13.1 27.6 14.0 13.5 28.3 14.4 14.0 Nonmanufacturing 29.8 31.2 32.4 33.0 34.1 35.6 Correction Page IV - 12: Second line from bottom -- "asset ratio" should read "liquid asset ratio."
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