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SURVEY OF CURRENT BUSINESS Mar 1961 The 1960-61 decline was matched in overall mildness by the advance which preceded it. Plant and equipment spending topped out last year, as earlier noted, without matching its 1957 peak volume. The shortfall was pronounced in the sensitive durable goods manufacturing industries and the railroad and mining groups, where the current cyclical cuts have been sharpest, as well as in nondurables manufacturing and public utilities. (See text table.) Net declines from peak to peak in these industries were substantially offset by the continuing uptrend in capital outlays of commercial firms and by the 1959-60 bulge in air transportation as the carriers rapidly converted their longer through routes to jet operations. Plant and Equipment Expenditures (Percent change) Peak to 3d quarter after peak Peak to peak 1960 II 1957 III 1957 III to 1961 I to 19.58 II to 1960 II contrast to that recorded for the second half of last year, when a piling up of finished goods partially offset the continuing reductions in working stocks of producers. the past year reflected in part a natural tapering in the need to add to stocks as the expansionary phase of the business cycle matured. In part it was a reaction to the unusual pattern traced by business holdings in 1959 and early 1960 because of the steel strike. With increased productive capacity, and the steel stock rebuilding proving shortlived, changes in the outlook for material supplies came to be recognized rather abruptly, and there followed a large cutback in orders and a move to draw down stocks in a number of lines. As has been the case in other postwar business swings, the reduction in inventories has been most notable in durable goods producing and handling industries, where demand for final output dropped, and the especially marked shift in the supply outlook for steel reinforced this cyclical tendency. Since 1961 opened, the sharpest cuts in inventories have centered in finished stocks, auto dealers' holdings of new cars in particular having been worked down at a time when they usually increase. This pattern is in Government and Export Demand Strong The continued expansion in government purchases and transfers at a time, when revenues have been falling has been one of the chief sustaining factors in the economy recently, making a substantial net contribution to the strength of the markets for private business output. At a $145 billion annual rate for the winter quarter, total expenditures shown by the national income accounts for Federal, State and local governments (table 5) were up $8/2 billion from the fourth quarter of 1960 and $9 billion from the spring of last year. At the same time revenues from corporate profit taxes in particular have dropped markedly. The continued postwar uptrend in State and local buying and the turnaround of Federal outlays since mid- Durable goods manufacturing, mining, and railroads. -14 -34 -13 Nondurable goods manufacturing and public utilities -1 -19 -12 Table 1.—Gross National Product in Current and Constant Dollars (1-3, 1-5) 1960 Commercial and other Airlines and other nonraiL _ -1 -4 +14 -12 -23 +19 -20 -4 Total 1958 1959 1960 I II III IV I 1958 1959 1960 The inventory movement proceeded along cyclical lines, with liquidation accelerated in the first quarter to a seasonally adjusted annual rate well above $4 billion. This compares with $3 billion in the fourth quarter, the difference comprising nearly half the decline in total GNP in this period. Accumulation had slowed progressively from early 1960 through midyear, and turned to liquidation in the second half. The swing in inventories since GNP topped out in the second quarter has meant a $10 billion annual rate decrease in demand from this source. Notwithstanding the resultant cut in earnings from production, major categories of final purchases have held up well, for the reasons earlier pointed out. The shift in inventory policy during II III IV I Billions of 1954 dollars Billions of current dollars Gross national product I Seasonally adjusted at annual rates Seasonally adjusted at annual rates Inventory selloff accelerates 1W1 1960 1961 444.2 482.1 503.2 501.3 505.0 503.5 503.5 499.8 401.0 428.0 439.2 440.5 442.2 438.0 437. 0 432.4 Personal consumption expend293.5 313.8 327. 8 323. 3 329.0 328.3 330.8 328.8 273.6 289.4 296.8 294.8 298.3 296.9 297.6 294.7 itures Durable goods Nondurable goods Services Gross private domestic investment New construction Residential non farm . . Other 37.3 43.4 43.6 44.2 44.5 42.7 43.2 39.2 35. 6 40.8 41.2 41.8 41.9 40. 2 41.2 37. o 142 0 147.6 152.4 150. 5 153. 5 152. 7 152. 9 153. 0 133. 7 139.3 141.9 141. 1 143.2 142.3 141.3 141. 1 114.2 122. 8 131.7 128. 6 130.9 132.9 134.7 136.6 104.3 109. 3 113. 7 112.0 113.3 114.4 115.2 11C,. 1 56.0 72.0 72.8 79.3 75.5 70.8 66.0 61.0 48.3 60.9 60.5 66.2 62.8 58.6 54.9 50.6 35.4 40.3 40.4 40.8 40.7 40.5 40.3 39.0 31.0 34.4 33.6 34.0 33.8 33. 6 33.5 32. 4 18.0 22.3 21.1 21.4 21.3 21.1 20. 5 19.2 16.2 19.4 18.0 18.3 18.2 18.0 17. 6 16. 5 17.4 18.0 19.3 19.3 19.4 19.5 19.8 19.9 14.9 15.0 15. 6 15.7 15.6 15. 6 15.9 10.fi Producers' durable equipment. 23.1 25.8 28.8 27.1 29.5 29.7 28.7 26.5 19.4 21.3 23.7 22.4 24.2 24.4 23.8 21.9 Change in business inventories. -2.5 5.9 3.6 11.4 5.3 .6 -3.0 -4.5 -2.2 5.2 3.2 9.8 4.8 . 6 -2.4 — 3.8 -3.6 10 5.4 5 3.2 11.0 .4 .4 5.0 .3 .3 -3.4 -4.8 -3.1 .9 .3 .4 4.9 .3 2.8 .4 9.4 .4 4.5 .3 .3 -2.8 -4.D .3 3.0 2.0 Nonfarm Farm Net exports of goods and servicesExports Imports 5 3 — 2 —2 4 1 6 —. 1 3.4 38 22.7 22.9 26.5 25.2 26.4 27.3 27.0 27.4 21.4 21.9 25 2 23.8 25.2 25.8 25. 8 21.5 23.8 23.5 23.9 24.4 23. 5 22.4 22.1 21.6 2-1.3 23.6 24.0 24.5 23. 6 22.4 2»'.. 2 1.2 -1.0 1.2 3 7 4 6 . 7 2.2 Government purchases of goods and services _ _ _ 93.5 97.1 99.7 97.5 98.6 100.7 102.1 104.7 79.3 80.2 80.3 79.6 80.3 80.3 81.1 83.3 Federal National defense Other Less: Government sales State and local 52.6 53.3 52.4 51.8 51.7 52.7 53.3 54.7 44.5 43. f 41.6 41.8 41.8 41.2 41.4 42. 0 44.8 46.0 45.1 44.9 44.7 45.1 45.7 47.2 8 3 7 8 7 9 7.5 7.6 8.2 8.2 8.1 .6 .6 .6 .6 .5 .5 .5 .6 40.8 43.9 47.3 45.7 46.9 48.0 48.8 50.0 34.8 36. f 38.7 37.8 38.6 39.1 39.7 40. 7 SURVEY OF CURRENT BUSINESS May 1961 period appears particularly unfavorable by comparison with the opening quarter a year ago, when the peak of the 195960 advance was reached. The fragmentary information provided by first-quarter financial reports of some of the largest companies has featured declines for a number of durable goods manufacturing industries and for the railroads. Income of iron and steel producers, which dropped sharply during 1960, seems to have continued downward in the opening months of 1961. Profits of auto makers and construction materials companies, which held up relatively better last year, also experienced sharp reductions in earnings after the turn of the year. The curtailment of durable goods production in the second half of 1960 has been reflected in lower railroad earnings; with this factor aggravated by unfavorable weather, several of the larger eastern lines have reported deficits for the firstquarter of 1961. In some other areas, profits have held up very well or even expanded. The service-t}7pe industries, notably communications and the public utilities, have continued their growth into this year. Some of the nondurable^ manufacturing lines have maintained the durable goods and construction. Both the falloff in corporate profits and that in compensation of employees have been concentrated in these industries. At a $293^ billion annual rate in the first quarter, employee compensation was down $2 billion from the closing quarter of last year and about $4 billion from the third quarter peak. As shown in table 2, a continued increase in government payrolls has been more than offset since last summer by a decline in private wages and salaries. The drop in the private segment from its mid1960 high to the first quarter of 1961 amounted to $5 billion—the same dollar reduction that was recorded in the combined total for durables manufacturing, mining, railroads, and contract construction. Changes in other industries were comparatively limited. Profits decline extended By the end of 1960 pre-tax profits as measured in the national income were already $7 billion under their best 1960 quarter, and they have fallen somewhat further since the turn of the year (though sufficient data will not be available for some time to compute this portion of the first-quarter national income total). Profits experience in the latest Table 3.—Gross National Product by Major Type of Product in Current and Constant Dollars (1-6, 1-7) 1 1901 1960 1960 Step-Up in Liquidation of BUSINESS INVENTORIES in 1st Quarter Billion $ 3 2 Accumulation 1 0 -1 Liquidation -2 Centered in FINISHED STOCKS • 2 AUTO DEALERS 1 0 -1 2 MANUFACTURERS & NONAUTO DISTRIBUTORS 1 0 -1 J_ While Cutback in Manufacturers' WORKING STOCKS Slowed -2 1960 1901 U. S. Department of Commerce, Office of Business Economics 1958 1959 ! 900 I II III IV I 1 958 1959 ! 900 I II III IV Billions of 1954 dollars Billions of current dollars Gross national product 444. 2 482.1 503. 2 501. 3 505.0 503. 5 503. 5 499. 8 401. 0 428. 0 439. 2 440. 5 442.2 438. 0 437. 0 432. 4 Final sales Inventory change. _ 440. 7 476. 1 499. (i 489. 9 499. 7 503. 0 500. 5 504. 4 403. 2 422. 8 430. 0 430.7 437.4 437. 4 439. 4 430. 1 -2.4 — 3.8 — 2. 5 5. 9 3.0 11.4 5. 3 -3.0 5.2 3.2 9.8 4.8 Goods ou tpu t Final sales Inventory change - - 249.9 257 8 261. 0 261. 3 255. 7 253. 1 247. 4 211. 2 228. 3 233. 8 237. 5 237.1 231. 5 229. 1 223. 6 232. 3 230. 9 231.5 227.3 231.fi 244. 0 254. 2 249. 0 250. 1 255. 1 250. 0 251.9 213. 4 223. 1 230. 0 229.1 5. 9 3. 0 11.4 5.3 . 0 -3.0 — 4. 5 -2.2 5.2 3.2 9. 8 4.8 . 6 -2.4 — 3.8 Durable good output Final sales Inventory change _ . - 80. 2 94. 1 90. 1 101. 7 98. 0 93.9 90. 8 84.0 71.5 82. 1 83. 8 88. 7 85. 3 81.4 79. 8 73. 5 S3 3 91 0 93 9 91 8 94 9 9 4 . 0 94.8 90. 2 74. 2 79. 5 81. 9 80. \ 82. 6 81.5 83. 1 78. 9 2.0 1. 9 8.3 2.7 — . 1 -3.4 -5.4 — 3. i 3. 1 2 . 2 9. 8 3. 1 -. 1 -3.9 Nondurable goods output Final sales Inventory change 148.9 1 55. 8 101.7 159,3 103.3 101. 8 102.3 103. t 139.7 146. 2 150. 0 1 18. 8 151.8 150. 1 149. 3 150. 0 148. 3 153. 0 100.3 157. 8 101. 1 101. 1 101.3 101.7 139. 2 143.0 148.7 147.3 1 49. 6 149.4 148. 3 148. 4 1.5 2.2 . (\ 2.8 1.4 1.0 1.0 . 5 2.5 1.4 1.5 2.2 1. 0 1.0 Services Construction K>4. 3 175. 9 188. 7 184. 0 187. 0 190. 8 193. 4 19f>. 0 145. 3 151. 6 157.9 155. 6 157. 4 158. 8 100.0 1GI. 4 50 8 58. 3 56.6 56. 3 56. 7 57.0 57.2 56. 5 14. 4 18.1 47. 5 47.4 47.6 47.7 i For quarterly data beginning 1947, see SURVEY OF C T R K E X T BTSIXKSS, November I960, pages 18 and 19. 5912 8 S ° — 61 2 6'-5 I Seasonal y adjusted at arm ual rates . Seasonally adjusted at annual rates 1961 Quarterly Changes in Book Value of Inventories, Seasonally Adjusted 47. 4 earnings levels they reached early last year, and the petroleum industry, in particular, reported higher profits in the March quarter due to a large heating-oil demand, an improved supplydemand-price position, and cutbacks in costs. Profits data now available for the full year 1960 show a slight reduction from 1959. Pulled down by a $41 billion fourth quarter rate, pretax earnings and TYA totaled $44^ billion as against $46K billion the year before. After-tax net income was $23 billion, $1 billion under the 1959 total. * BUSINESS STATISTICS WlontkL J_ HE STATISTICS here are a continuation of the data published in the 1959 edition of BUSINESS STATISTICS, biennial Statistical Supplement to the SURVEY OF CURRENT BUSINESS. That volume (price $2.25) contains monthly (or quarterly) data for the years 1955 through 1958 and monthly averages for all years back to 1929 insofar as available; it also provides a description of each series and references to sources of monthly figures prior to 1955. Series added or significantly revised since publication of the 1959 BUSINESS STATISTICS are indicated by an asterisk (*) and a dagger (f), respectively; certain revisions for 1958 issued too late for inclusion in the aforementioned volume appear in the monthly SURVEY beginning with the July 1959 issue. Except as otherwise stated, the terms "unadjusted" and "adjusted" refer to adjustment for seasonal variation. Statistics originating in Government agencies are not copyrighted and may be reprinted freely. Data from private sources are provided through the courtesy of the compilers, and are subject to their copyrights. 1961 1960 Unless otherwise stated, statistics through 1958 and descriptive notes are shown in the 1959 edition of BUSINESS STATISTICS March April May June July SeptemDecemAugust October November ber ber January February March April GENERAL BUSINESS INDICATORS NATIONAL INCOME AND PRODUCT f Seasonally adjusted quarterly totals at annual rates: t National income, total bil. of dol_- 414.4 419.4 419.3 416.9 do do do do ._ _ do _. do 290.2 268.7 222.1 9.9 36.7 21.5 295.0 273.1 225. 5 10.0 37.6 21.9 297.2 274.9 226.0 10.1 38.8 22.3 295 2 273 2 223.6 10 3 39.3 22 0 293 3 271.5 221.2 10.4 39.9 21.8 Proprietors' income, totalc? - -do _ _ . Business and professional^ do Farm do Rental income of persons __ __ do . . Corporate profits and inventory valuation adjustment, total _ __ bil. ofdoLCorporate profits before tax, total do Corporate profits tax liability do Corporate profits after tax_ do Inventory valuation adjustment _ _ ...do 46.0 35.4 10.6 12.5 48.1 36.0 12.1 12.5 48.3 36.1 12.2 12.5 48 8 35.9 12 8 12.5 48 35 13 12 48.0 48.8 23.8 25.0 -.8 45.3 45.7 22.3 23.4 -.4 42.2 41.5 20.3 21.3 .7 41 0 40 7 19.8 20 8 .4 Compensation of employees, total _ Wages and salaries, total _. Private Militarv Government civilian Supplements to wages and salaries Net interest 5 5 0 5 do 17.8 18.5 19 1 19 4 19 6 do 501.3 505.0 503 5 503 5 499 8 323.3 44.2 150.5 128.6 329.0 44.5 153.5 130.9 328 42 152 132 330 43 152 134 328 8 39 2 153 0 136 6 do do do ... do 79.3 40.8 27.1 11.4 75.5 40.7 29.5 5.3 70 8 40.5 29 7 .6 66 0 40.3 28 7 30 61 39 26 4 Net exports of goods and services do Exports ._ do Imports. -. -_ _ - _ - _ _ _ _ .-do _ _ _ Government purchases of goods and services, total bil. ofdoL. Federal (less Government sales) _ do National defense 9 do State and local do 1.2 25.2 23.9 2.0 26.4 24 4 3.7 27 3 23 5 4 6 27 0 92 4 5 3 27 4 22 1 97.5 51.8 44.9 45.7 98.6 51.7 44 7 46.9 100.7 52 7 45 1 48 0 102 53 45 48 Gross national product, total. _ Personal consumption expenditures, total.. _ do Durable goods do__ . Nondurable goods._._do Services __ __ _ _ . do ... Gross private domestic investment, total New construction Producers' durable equipment Change in business inventories 3 7 7 9 8 2 9 7 1 3 7 8 104 54 47 50 0 0 5 5 7 7 2 0 Personal income, total _ _ Less: Personal tax and nontax payments. Equals: Disposable personal income do do_ _ _ do 396.2 49.2 347.0 404 2 50.0 354.1 408 0 50.5 357.5 408 5 50 4 358 1 407 5 50 3 357 2 Personal saving § do ... 23.7 25.2 29.2 27 2 28 3 bil. of dol— 440.5 442.2 438.0 437.0 432.4 294.8 41.8 141.1 112.0 298.3 41.9 143.2 113.3 296 9 40.2 142.3 114 4 297 6 41 2 141 3 115 2 294 7 37 5 141 1 116 1 66.2 34.0 22.4 9.8 62.8 33.8 24.2 4.8 58.6 33.6 24.4 .6 54 33 23 2 50 32 21 3 -.1 .7 2 2 79.6 41.8 37.8 80.3 41.8 38.6 GNP in constant (1954) dollars Gross national product, total Personal consumption expenditures, total. ..do Durable goods do Nondurable goods do Services do Gross private domestic investment, total New construction . Producers' durable equipment Change in business inventories Net exports of goods and services do do do do— do Government purchases of goods and services, total bil. of dolFederal do State and local do 9 5 8 4 3 4 6 4 9 8 38 80.3 81 1 83 3 41 2 41 4 42 6 39.1 39.7 40.7 r Revised. f Revised series. Estimates of national income and product and personal income have been revised back to 1957; revisions prior to the 2d quarter 1959 (and prior to Mav 1959 for personal income) appear on pp. 8 ff. of the July 1960 SURVEY. cf Includes inventory valuation adjustment. 9 Government sales are not deducted § Personal saving is excess of disposable income over personal consumption expenditures shown as a component of gross national product above 591288°—61- S-l
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