Full text of New England Economic Review : May 1963

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REVIEW OF THE FIRST QUARTER:

In Search of a Trend
How good wa busine performance in the fir t quarter of 1963, and what was
it trend? Analy ts for the most part would readily concur that aggregate business
performance was in very good volume although many would contend that it could
han· I, en even better. But they were still perplexed in their search for a clear-cut
trend running through the maze of rising and declining statistics to serve as a guide
for future expectations.
Many over-all measurements of performance, uch a gros national product, indu trial production, employment, incomes, and retail sales, indicated an economy
operating at or close to record levels. Even at these high levels, however, there were
still considerable unutilized resources in the form of a continuing high rate of unemployment and excess productive capacity in some industries.
Until late in the quarter. week-to-week or month-to-month changes in these and
( Continued on page 2)

- A / _ ~ Easter Sales Gain Modest, page 4.
Skiing Growth Continues, page 5.
People in ew England, page 6.
Outlays Up Slightly, page 9.

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other statistical indicators presented a mixture of
gains and losse , seemingly without consistent pattern. It was a continuation of the patternless movements which over the last half of 1962 led to use
of the terms "sluggishne " and " tagnation." In
such a confusing picture, determination of an underlying trend was difficult and forecasts increasingly
uncertain. Toward the end of the quarter, a greater
proportion of favorable statistics pointed to a more
decisive upturn.
These ame attributes show up in business
developments in Iew England during the first quarter. Over-all performance was good. Yet statistics of
individual economic factor and reports from individual industries ranged from good through indiffrrent to bad, and search for a guiding trrnd was
difficult.
From first quarter <>mployment data for ew
England. one can make either gratifying or discouraging findings. The 3.710.200 workers reported on
nonfarm payrolls in mid-March represented a decline of somewhat less than seasonally expected
magnitude from December. and a 0.1 percent net
gain from a year ago. Yet this is v~y small compared to the 1.8 percent national gain over thf' same
period, and to 12-months' gains of 2.0 percent or
morf' for ew England employment at time during
1962.
Employment trends. aside from temporary seasonal movements, continue to reflect a shift of relative strength between industry groupings. Data for
March as comparf'd to a year earlier show a 1.3
pncent net gain in nonmanufacturing. a 1.0 percent net loss in durable goods manufacturing. and
a 2.3 percent net lo"s in nondurahlf' goods manufacturing. In the latter category. employment in the
tf'xtile and leather product industries over the ] 2month period sufTered a contraction of 4.3 percent or
9,600 workers.
The estimated unemployment rate in New England declined slightly from 5.6 percent in Decemher
lo 5.5 percent in March. seasonally adjusted. However. the number drawing unemployment compensation during the quarter averaged about 10 percent
morr than a year ago. Moreover. during the quarter
estimated unemployment ratf's rosf' above 9 percent
in the Brockton and Fa11 River areas, and the U. S.
Burf'au of Employment Security in March classified
9 of the 17 major labor market area in Iew England as having ubstantial labor surplus.

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Average factory workweeks, of course, varied
by industry and state. Sea onally adjusted averages for Iew England were estimated at 40.6 hours
in January and February, but down to 40.1 in March.
Man-hours worked by factory employers are
influenced by changes in both manufacturing employment and average factory workweeks. and
constitute one factor in estimates of manufacturing
production. The sea, onally adjusted index of production ,rnrker man-hours in
ew England declined 0.8 percent from December through March.
Industrial consumption of <>lectric power is
another indirect indicator of manufacturing production. On a seasonally adjusted index basis, this
continued its genera lly upward trend. and in March
was :~ .8 percent hi gher than a year ago.
An expanding trend in the flow of new orders
was noted by 31 percent of reporting members of
the . ew England Purchasing Agents Association
in March. somewhat better than the 27 percent so
reporting in December. The index of orders for
the Associated Industries of Massachusetts, compared to values of a year earlier, was down 3.5
percent for December. up 0.1 percent for January
and up :-to percent for February.
Capital Pxpenditure plans of New England
manufacturers, as disclosed in this Bank's annual
survey. indicate that total 1963 spending for new
plant and equipment will exceed that for 1962 by
ahout 4 percent.
New England construction contract awards for
the first quarter as reported by F. W . Dodge Corporation were 36 percent less in total value than the
abnormally large total for a year earlier. A single
N eu• England BUSINESS REVIEW

large highway comract in the 1962 period accounted
for most of the over-all decline, and led to a 67 percent relative decline in the nonbuilding component.
TonrC'sidential building contracts for the quarter
also totaled 11 percent less than a year earlier. Residential contracts showed a relative gain of 2 percent.
Meanwhile_ active construction in the region
continued in visibly impressive volume, mortgage
funds were generally in ample supply at moderate
interest rates, and most builders and lenders noted
little evidence as yet of overbuilding in New England such as is causing concern elsewhere.
Con.m m<>r sp<>ndin{{ has been one of the more
consistently bright spots in the New England economy. Department store sales during the quarter
averaged 4 percent higher than a year ago, with
relative declines appearing in only three weeks. By
departments, sales of apparel were particularly
strong. while those of accessories and house furnishings were relatively weaker. Basement sales were
well maintained. Revolving credit sales gained relative to other types of sales. Compared to a year ago.
February 28 inventories were up 3 percent and outstanding merchandise orders up 9 percent, the latter
perhaps buoyed by optimism in sales expectations
and by the earlier 1963 Easter date. Despite increases in charge and instalment accounts receivab~e,
satisfactory collection ratios were maintained.
Automobile dealers' sales were sustained in unusually good volume, with January and February
registrations of new cars in the six states up 12
percent from a year ago. Keen competition, however, was limiting dealer profits and inducing some
further liberalization of instalment credit terms.

balance at weekly reporting member banks in the
Fir t FC'deral Reserve District were in late March 17
percent greater than a year earlier. Free reserves at
member banks averaged somewhat over $300 million
on a nationwide basis during the quarter.
Outstanding business loans at District member
banks experienced a sharper than seasonal decline
in January from their late 1962 surge, but recovered
strongly in February and March. Ample funds were
available from various types of lenders for the further expansion of real estate credit. This Bank's
index of consumer instalment credit outstanding in
New England was 8.5 percent higher at the end of
March than a year earlier.
Typical interest rates, little changed during the
quarter. show a 3 percent discount rate at this
Bank, yields of about 2.9 percent on new 3-month
Treasury bills, a 4.5 percent rate for prime business
loans at commercial banks, and a range from 5¼
to 6 percent for conventional residential mortgages.
Farm receipts in New England remained about
the same as last year, while expenses were higher.
Dairymen especially were experiencing the pinch
of higher grain prices and the effect of a short hay
crop which requ.ired many to purchase hay. Maine
potato producers suffered severely from continuing
depressed potato prices little better than those of a
year ago. Southern New England producers, closer
to markets, suffered somewhat less severely.
The production of transportat10n <>qzdpm<>11t
has recently been one of New England's stronger
manufacturing industries, with a growth of 4,300
employees in the 12 months through March.
Work on helicopters, aircraft engines and parts,

Winter vacation business benefited from unusually
heavy snow accumulations on northern Tew England ski slopes, so that resort operators were able
to report 8 percent more guest night patronage for
the season than during the previous season. Prospects for the summer season at private camps for
boys and girls seemed auspicious as advance registrations received through February totaled 3 percent
ahead of last year's pace.
The banhing and cn,dit environment for business was not greatly altered from late 1962. In
general, funds continued to be freely available at
moderate interest rates. Inflow of new saving expanded balances at mutual savings banks and savings and loan associations in the region at an annual
rate of nearly 10 percent. Time and savings deposit

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Easter Sales
Gain Modest
New Englanders spent more money in the region's department stores during the past Easter
shopping season than in any previous one. The
gain was modest, amounting to only 1 percent, but
sufficed to establish this year's season as the recordholder. Nonetheless, some grumbling was heard on
the part of the region's merchants and analysts of
consumer behavior. Larger gains had been expected
because the year's sales to the beginning of the
Easter season exceeded 1962 levels by 5 percent.
Sales ,started slowly the fourth week before
Easter, trailing 1962 volume by 5 percent. During
the next two weeks, the sales pace accelerated
rapidly with gains of 5 and 6 percent, so that the
gain for the season exceeded 2 percent when the
week before Easter began. The weather ·up to this
point had favored shopping and encouraged the
idea of a warm Easter. Slightly cooler temperatures
set in during the final week, however, and the likelihood of warm weather for the traditional fashion
parades dimmed. Sales slowed and fell 2 percent
short of the record Easter week volume achieved in
1962, cutting the gain for the season to 1 percent.
Sales in Quincy, Lowell, and Downtown- Boston
failed to match the records set in 1962. Sales gains
in other parts of the suburban Boston area, including Cambridge, more than offset these losses and
resulted in a 1 percent gain for the whole metropolitan area. For other stores in the region, combined sales were 2 percent larger than a year ago.
Gains were recorded in sales of infants', children's, and girls' clothing, while sales of boys'
clothing lagged. Men's clothing sales achieved
modest gains but sales of women's and misses' apparel and accessories failed to challenge last year's
record volumes. Basement store sales were only
slightly better than those in the upstairs stores. Sales
of home furnishings, usually slow during the Easter
season, were up 5 percent from a year ago.
The record achieved continues the evidence of
stable consumer spending but the modest size of the
gain disappointed those looking for an indication
of an outburst of consumer enthusiasm for spending to accompany the arrival of spring. Post-Easter
sales have continued this trend of slight gains over
year-ago levels.

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and submarines has provided most of the new
strength. Automobile assembly operations were still
very busy. Activity at the region's major shipyard
was limited because of insufficient orders.
The nonelectrical machinery industry also
has added to the strength of the region's economy.
March employment was 800 over a year ago, although recent gains have been below seasonal expectations. Average weekly hours have recently
been rather stable around 41.7 hours, seasonally
adjusted. Business conditions vary among sectors of
the industry. Orders for machine tools have picked
up rapidly, but not to 1961 levels, and some further
contraction in orders from abroad is likely.
From New England's electrical machinery
industry, reports and statistics were less bullish
despite recent advances in the output and uses of
electronic products. Employment in March dropped
to 7,200 or 4.4 percent below a year ago, although
there was a partially compensating rise in average
weekly hours worked. Many firms reported declining orders. Current overcapacity in the industry has
led to keep competition, some price shading, and
reduced profits.
Employment in the region's primary metals
industry was still running about 5 percent below a
year ago in February. It should be recognized,
however, that operations at that time had been
stepped up in anticipation of a 1962 steel strike.
Operations have resumed at the pipe foundry closed
last fall by strike. Textile machinery foundries have
been quite active. Business at brass mills has held
up better than anticipated by industry spokesmen.
At New England plants manufacturing lumber
and wood products, early 1963 work forces had
experienced less than the usual seasonal contraction
and averaged slightly above a year ago. As some
producers of eastern white pine were snowed in,
dry stocks were in short supply and commanded
higher prices.
New England furniture producers in the first
quarter seemed more successful in maintaining last
year's high volume of business than those elsewhere.
March employment was close to that of a year ago,
as some of the region's producers benefited from
increasing orders for early American solid furniture.
Although March textile mill employment in
New England still recorded a 12-months' net loss
of 4,700, a more than seasonal improvement in employment and average weekly hours appeared in
New England BUSINESS REVIEW

progress. Inventory pos1t10ns were generally considered sou:-,d. and many mills reported a pickup in
orders. In the cotton mill sector daily average
spindle hours and cotton consumption were increasing. In pite of the currently better outlook, operators must still reduce costs to compete with the
lower prices of imported fabrics.
Business for New England apparel manufacturers tarted slowly in 1963. but improved distinctly by late March. Increased retail interest in
fall and winter samples, coupled with their relatively low inventories, offer prospects for a busy
fall season for producers.
New England shoe manufacturers noted a deterioration in business commencing last November.
Employment in March, despite seasonal strength,
was 4,900 less than a year ago, while first quarter
output is estimated to be down by 6 percent. Competition from low-priced imported shoes has become
a critical threat to domestic producers who at the
same time are losing some export markets. Shoe
prices have remained rather stable as hide prices
have declined and labor costs have risen.
First quarter business was disappointing for
jew<>lry manufacturers. particularly for makers of
less expensive costume items. Employment in the
first two months of the year slipped 7 percent below
a year ago. Profit in this as well as the silverware
industry have been adversely aff ecte·d by the rising
price of silver.
Paper mills in the region were generalJy busy
in early 1963, with operations averaging about 90
percent of capacity. although newsprint producers
felt the effect of the strike in ew York. Employment was off slightly from a year ago. and some
price reductions developed.
At chPmical plants in New England, employment and average workweeks, seasonally adjusted,
declined somewhat in the quarter. Prices remained
generally stable, and a rising inflow of orders gave
hope to the industry.
At the region's food processing plants, total
work staffs and average workweeks registered increases in the quartet over a year ago. Higher
prices of refined sugar meant higher costs for producers of candy, ice cream, and soft drinks.
Tew England's rubber products industry experienced a slowdown from its rapid growth rate of
1962, with orders declining and with March employment slipping below that of a year ago.

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Skiing Growth
Continues
The rapidly growing ski industry reached new
highs this past winter. Measured by the number of
guests at New England's vacation lodging places,
the 1962-63 season of December through March was
8 percent greater than the previous record set a
year ago. The index of lodging occupancy rose to
244 (the 1949-50 ski season occupancy
100).
Lodging business ran consistently better than
year-ago totals in each of the four months, with
gains of 7 to 9 percent. Gains might well have been
even larger had weekend weather in December and
January been more favorable to travel hy car. Instances were few during the season when skiing
conditions could not be classed as "good to excellent." Many area records for skiing were set.
In addition to good snow cover in most ski areas,
improved and expanded ski facilities, new areas,
improved access, good highway clearing work, more
plans to stimulate midweek business, and snowmaking equipment all helped to make the season a
record surcess. All these factors served to increase
the interest and enthusiasm of the growing number
of people seeking recreation out-of-doors in the
wintertime. Our data do not tell the full story inasmuch as they only cover people staying overnight
in the ski country. Many more drive up for a day's
skiing and then return home. Also a growing number own vacation cottages in ski areas. and numerous ski clubs own or rent lodgings for the season.
Ski lodgings in all areas reported gains over
last year. Only in western fassachusetts did the
gains not shatter previous records. There the volume
of business was only 1 percent lower than the 195960 season total. Hotels and inns recorded a gain of
8 percent while the tourist group catered to 9
percent more guests than a year ago.
The industry continues to grow rapidly and
is also gaining stability through the addition of
snow-making equipment, smoothing of slopes, and
stimulation of midweek business. Package plans,
reduced midweek rates, activities in addition to skiing, and expanded apres-ski entertainment are all
measures taken in this direction. With the success
of the past season and the continued growth of
interest in skiing, plans are already being made to
expand facilities for next year's season.

People in New England
New England's population growth rate was
higher in the past decade than any period since the
1910's, and recent projections indicate that the rate
will continue to increase in the 1960's. This advance
in the region's growth reflects the high postwar birth
rate characteristic of the Nation as a whole. It
also reflects a resurgence in the region's economy.
New employment opportunities have induced people to stay in the region.
The population growth in the region still remains
below the national average. Compared to the 13
percent increase in
ew England from 1950 to
1960, the Nation's growth was 18 percent. But this
disparity is no new development - New England
has always had a slower rate of population growth
than the Nation. The causes are several. The early
preponderance of urban population in the region
accounted in part for its lower than national birthrate. Also contributing to this were the young
people who left the region in pursuit of broader
economic opportunities. In addition, the region's
higher than average death rate slowed population
growth.
The Historical Record

From 1790 to the Civil War the population of
the Nation increased by about one-third every dee-

Percent
Increase

ade. New England's growth rate in this same
period averaged about 18 percent per decade, and
it fluctuated more than that of the Nation. Early in
the 1800's Jefferson's Embargo on imported manufactures helped to establish manufacturing in New
England and the tariff of 1816 protected this infant
industry. Later the opening of the Middle West by
canals and railroads brought a decline in New
England agriculture.
After the Civil War New England had a period
of rising growth based largely on its expanding
production of textiles, shoes, and industrial machinery. A large number of foreign immigrants
found jobs in these industries. The biggest surge
in immigration occurred in the 1890-1910 period
when New England gained over a million foreignborn persons. The decade of the 90's is also the only
period in the last hundred rars with a net influx
of native-born people as seen in the table on the next
page.
Although Federal legislation curtailed immigration after World War I, foreign-born people continued to come to New England. In addition to job
opportunities, they were attracted because of the
presence of others who shared their social customs,
religion, and language. One intere ting result is that
except for ew York, no part of the country has a

RATES OF POPULATION GROWTH BY DECADE
1790 -1970

UNITED
ST ATES

••••
•• ••

o
I
I
I
I
78~570__,__~,a~7~o-.J.__1_aL9_o__L__1~91_0_...L__1_9L3_o_L_
17~9~0____.-~,a~1~0:--_._~,~a~3~0-L..-~1
__1J9_5_0-1
_ _J1970
10-Year Period Ending In:
1970 - Projected by the Bureau of the Census and the Federal Reserve Bank of Boston.
SOURCES: U . S . Bureau of the Census, Historical Statistics of the United States, Colonial Times
and Statistical Abstract of the United States, 1962.

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to 1957

New England BUSINESS REVIEW

NET INTERCENSAL MIGRATION - NEW ENGLAND
proportionately larger foreign population. Of all the
1870-1940
!thousands)
regions of the country.
New England is the best
1870-80 1880-90 1890-00 1900-10 1910-20 1920-30 1930-40
TOTAL NET MIGRATION
141
example of a melting pot
403
494
496
298
28
43
Native-White
-67
-33
-80
-53
-190
-23
+22
of nationalities. The forForeign-born White
-26
204
429
458
569
339
211
eign-born are relatively
Negro
5
15
12
7
7
5
8
more numerous in the region's southern states and Note: Because of rounding, details may not odd to total.
Source: Lee, E. S. et al., Population Redistribution and Economic Growth: United States, 1870-1950, Vol. I.
are largely from European
countries. In Maine, New
Hampshire, and Vermont, Canadians predominate
land has a higher proportion of foreign-born than
in this group.
the rest of the country, and foreign-born persons
typically do not live quite as long as native-born.
During th<' 1920's growth was also slow because
the South cut into the textile market. The low
On Balance, Few Leave the Region
point was reached in the 1930-40 decade, when New
While foreign immigrants have come to New
England's growth was only 45 percent of the
England
and generally remained here, native-born
ation's.
white persons have been leaving New England. The
Since then the differential has narrowed. In the
most mobile part of this group are people in their
decade just pa t the region's growth was 69 percent
twenties and thirties. Most of them have a high
of the national rate. Recent Census Bureau proschool
education, speak good English, have learned
jections suggrst. as shown in the table on page 8.
basic skills, and are readily accepted in all parts of
that the region's growth for the 1960-70 period will
the country. They have the choice of taking higher
he 80 percent of the Nation's.
paying jobs in other sections of the country. In
Sources of Population Growth
recent full employment decades ( the twenties, the
forties, and the fifties) , 5 to 10 thousand nativeThe rate of increase in the population depends
born
whites aged 20 to 40 moved out each year. But
on the f'xcess of births over deaths plus the extent
compared to the average 2 million or more New
of in- or outmigration.
Englanders in this group the total outmigration was
New England's birth rate i~ slightly below the
small.
national averagP. In 1960. the number of births for
During these decades, Connecticut was the reeach 1,000 in the population was 22.5 in New Enggion's only state to which native-born white persons
land as compared with 23.7 in the Nation. This lower
were consistently attracted. On the other hand, every
birth rate is Pxplained in part by thf' relatively
ew England state attracted young foreign-born
smal1er proportion of rural population in the region.
adults.
For the region as a whole, the foreign-born
Rural familirs have more children than urban famimoving in about counterbalanced the native-born
lies and the region's proportion of rural population
moving out.
is about one-fifth less than the Nation's. Another
Much of New England's total increase in populareason for the smaller number of births is the age
tion has taken place in Connecticut and particudistribution of the population. Because younger
larly in Fairfield County. This county, however,
people have migrated from the region, the percannot really be considered part of the New Engcentage of women of childbearing age is slightly
land "economic region." It is in the active growth
lower than the national average.
New England's higher than national average
fringe of metropolitan New York. Its population
increased 30 percent from 1950 to 1960, and in
death rate also curtails population increase. The
last available figures (1959) for the number of
deaths for each 1,000 people show that they were
Time Deposits in New England, the 1962 Annual
10.7 in Tew England and 9.4 in the United States.
Report of the Boston Federal Reserve Bank, is available on request from the Bank's Public Information
One reason is that the region has proportionately
Department.
more older people than the ation. Also ew EngDigitizedMay
for FRASER
1963
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Reprints of "Federal Open Market Operations in
1962," a report by Robert W. Stone, Manager, System Open Market Account and Vice President of
the New York Federal Reserve Bank, are available
on request from this Bank's research department.

1960 it accounted for 12½ percent of the region's
increase in population. If this county were excluded, New England would have had a net outmigration of about 55,000 in the 1950's and a much
smaller inmigration in the l 940's. Without this
area almost no net movement of population in or
out of New England has taken place since 1920.
Population Movements Within the Region

Compared with the sluggish migration between
ew England and other regions, the movement of
people within the region was brisk.
These movements have been from the northern to
the southern states, from small towns to larger
towns and cities, and from central cities in metropolitan areas to the suburbs. From 1950 to 1960
the population of the three southern states increased
by 14 percent while that of the three northern states
increased only 8 percent. Connecticut had the largest rate of increase - 26 percent- and Vermont
had the lowest - 3.8 percent. In the three northern
states, urban places with a population from 2,500 to
5,000 declined in population from 1950 to 1960.
Differing wage rates and job opportunities in
various parts of the region in part explain these
changing population patterns. In Tew England as
in the United States more high wage opportunities
exist in larger urban centers than in small towns.
Furthermore, wages tend to be higher in Connecticut than in the other states of the region. and higher
in Massachusetts than in the three northern states.
Unemployed persons in northern ew England
usually have difficulty in finding acceptable jobs
nearby. Cities such as Burlington, Vermont and
Portland, Maine offer some opportunity. But many
young people faced with limited opportunities at
home have migrated to southern New England.
In the region's metropolitan areas the population of core cities declined by 3.7 percent from
1950 to 1960 while areas outside the core cities
increased by 28 percent.

published a senes of economic projections which
ew
showed an expected population growth in
England of 10.2 percent from 1960 to 1970 (table
below). These projection s were substantially the
same as those issued by the Census Bureau at that
time.
Recently the Census Bureau has produced with
the benefit of 1960 Census Data a series of revised
state population projections. These vary depending
on what assumptions are made about the number of
chi ldren who will be born, and the number of people who will move from state to state. A middle
projection assumes that the birth and migration
rates will remain about the same as during the last
decade. It suggests a 15 percent gain for New England from 1960 to 1970.
The recent Census projection was based on the
number of children under five years of age per
tOOO women of childbearing age during the 195557 period. while the Bank's 1959 study used these
figures for 1950-55. This change accounts for much
of the difference in the two projections for the
region as a whole.
The Bank's study based its net migration estimates on the 1940-55 period while the Census used
the migration figures for 1950-60. This difference
accounts in part for the higher forecasts for
Connecticut and New Hampshire. The more recent
data also suggest that outmigration from the other
Iew England states in the region will be larger
than expected in 1959.
Both projections assumed that people would live
somewhat longer during the next ten years.
Altogether the new Census projections using
1960 data indicate a further incrrase in the region's
total population in the next decade. The shift within
the region - particularly to Connecticut - will
probably be greater than previously forecast by
this Bank.

1970 POPULATION PROJECTIONS

NEW ENGLAND
Maine

New Hampshire
Vermont
Massachusetts
Rhode Island
Connecticut

The Future

In 1959 the Federal Reserve Bank of Boston

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...

OLD 1

NEW 2

ToooT

Tooc»

11 ,380
1,018
655
404
5,595
943
2,766

12,129
1,046
698
406
5,799
944
3,235

Federal Reserve Bank of Boston, Research Report 1970 Projection No. 5.

2 Unoffic ial

Census Bureau projections Series II 2, May 1961. Assumptions
far births, mortality and migration ore closest ta those of the Bank .

N ew England BUSINESS REVIEW

Outlays Up Slightly
New England manufacturers plan to up capital
outlays 4 percent above last year's level to $656
million this year. If realized, this year's percentage
gain will match that recorded last year.
Present plans are strongly influenced by the
relatively small gain, 4 percent, expected in sales
this year, and by the excess capacity which still
prevails in the region. New England manufacturers
are operating at 78 percent of capacity, up only l
percentage point from the ratf' a year ago. This is
considerably short of their preferred operating
rate of 91 percent of capacity.
Durable goods producers, after raisin?: their outlays by a fifth last year. foresee increasing spending
by only 2 percent in 1963. ondurable goods manufacturers. on the other hand, plan a 7 percent increase this year. after rutting outlays back by more
than a tenth last year.
Tentative plans for 1964 call for outlays
15 percent below the amount planned for this year,
but estimates tend to hC' low when made so far in
advance. Moreover, four industries, including the
expanding instruments and plastic products industries, already anticipate spending morf' next year
than they are scheduling for 1963.
These forecasts are based on reports to the Federal Resen-e Bank of Boston in February and
March of this year from 909 firms which account
for :10 percent of manufacturing employment in the
region.
With capacity considerably in excess of current
needs, the emphasis continues to be on installation
of modern machines to cut costs. Purchases by New
England manufacturers of new machinery and
equipment will increase by a tenth this year, while
outlays for new buildings will fall by 15 percent.
Moreover, an increasing proportion of outlays
are going for replacement of existing plant and
equipment, rather than expansion of facilities. In
1957, the first year of the Bank's all New England
capital spending survey, outlays were evenly divided
between expansion and replacement. Since then outlays have been increasingly allocated to replacement
rather than expansion. Plans for this year indicate
that this trend will continue. Only one-third of total
outlays will go to expanding facilities, while twothirds will be dfrected to replacing existing plant

May 1963
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

and equipment.
Nationally, according to a joint Securities and
Exchange Commission-Department of Commerce
survey conducted in February, manufacturers plan
to increase capital spending 7 percent this year.
The national survey indicates the same trend as
found in the regional survey; the gain expected this
year will equal that registered last year.
The Nation's durable goods producers expect
to increase their outlays this year 11 percent over
1962, compared to only 2 percent for the region's
durable goods group. However, if expected 1963
spending is compared with 1961 levels, the relative
growth in the ation is comparable with that of
the region, both areas showing an increase of nearly
a fourth over the two-year period.
Tondurable goods manufacturers in the Nation
plan to raise capital outlays by 3 percent in 1963,
the same rate of growth as achieved the year before.
It is in this sector where the national and regional
growth trends diverge.
New England's soft goods producers raised
their capital outlays by a tenth between 1960 and
1961, while nationally outlays rose by less than 2
percent. A substantial pickup in business in the
region's soft goods sector had occurred over this
period. Capacity utilization rose from 74 percent at
the end of 1960 to 82 percent at the close of 1961.
However, this spring's survey shows that utilization of capacity remained unchanged between 1961
and 1962. Consequently, the region's nondurable
goods sector reduced capital outlays last year by
more than a tenth to a level slightly below that of
1960. This cutback was foreshadowed in last year's
spring survey, as the nondurable goods sector forf'cast a 1 percent decline from the 1961 level. The
greater cut than anticipated stemmed primarily
from a downward revision of almost a third in the
spending of the chemical and rubber industries.
Current Business Trends

That manufacturers are planning to increase
outlays by the same proportion this year as last is
not too surprising in view of current business
trends. The Federal Reserve Board's index of
manufacturing production nationally indicates that
output in February was up only 2.8 percent above
9

the same month a year ago. Since lase July the index
has remained virtually stable, fluctuating between
119.7 and 120.4 percent of the 1957-59 average.
after adjustment for seasonal influences.
Increases in new orders and sales have also been
relatively sma1l over the past year. Manufacturer's
new orders rose 5 percent and sales 4· percent between February of 1962 and 1963.
Inventory buildup, however, is still not a depressing factor on business expansion. Manufacturers are continuing to maintain their inventories at
a low level in relation to sales. The current inventory to sales ratio of I. 71 months of sales is equal
to that which prevailed in February a year ago.
and is considerably below the high of 1.87 months
of sales reached in January of 1961.
The national survey indicates that manufacturers
anticipate that their sales this year will duplicate
last year's performance of increasing 4 percent.
New England manufacturers expect this same rate
of sales increase. Anticipations differ between the
region and the ation, however, when comparisons
are made by industrial sector. Iationally both the
durable and nondurable goods sectors expect to
equal the average gain for a1l manufacturing. In
New England, on the other hand, durable goods
producers anticipate only a 1 percent gain in sales,
while nondurable goods manufacturers look for a
6 percent increase. Producers of textiles, rubber,
and chemical products in New England all expect
a gain in sales above the relative increase expected
in these industries nationally.
Only 7 percent of the respondents in New England's nondurable goods sector expect sales to fall
below 1962 levels, while 12 percent of the participants in the durable goods group believe sales will
fall.
Durable goods producers in ew England are
operating, on the average, 15 percent below their
preferred rate of capacity utilization. Important
capital using industries such as primary metals and
electrical machinery are operating at an even greater
distance from their preferred rates.
Industry Trend~

The largest dollar increase in investment within
the region's durable goods sector this year will
occur in the transportation equipment industry. Its
outlays will advance by $10 million or 24 percent.
This is the same rate of increase as expected nation
IO
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

CAPITAL SPENDING PLANS OF
NEW ENGLAND MANUFACTURERS
Total Expenditures
1962
Actual

1963
Planned

($ Millions)

1$ Millions)

Percent
Change
From 1962

--629.6

656 .4

DURABLE GOODS
Primary Metals
Fabricated Metals
Machinery
Electrical Machinery
Transportation Equipment
In stru men ts
All Other Durables

360.9

368.2

42.6
73.4
67.2
67.-4
41.5
19 . 1
49.7

35.2
74.5
69.8
70.2
51.3
23.1
44.1

+ 2
-17
+2
+4
+ 4

NONDURABLE GOODS
Food
Textiles
Paper
Chemicals
Rubber and Plastics
Shoes
All Other Nondurables

268.7
37.3
39.6
63.4
24.2
38.5
15.9
49.8

288.2
46.3
38.4
73.4
28.8
38.5
15.4
47.4

ALL MANUFACTURING

+24

+21
-11

+7
+24
-

+16
+19
-3
-5

ally in the nonautomotive sector of this industry
where the region's activity is concentrated. More
than four-fifths of the added spending in the region
will go to replacement of existing facilities as the
industry seeks to keep pace with changing technology. Indicating an advance in business, employment has increased 5 percent since last July in the
region's transportation equipment industry.
Both New England's electrical and nonelectrical
machinery industries plan to increase outlays by 4
percent this year. This is in contrast to an expected
4 percent decline in outlays nationally for these
industries. The region's nonelectrical machinery
industry has been showing a relatively stronger
performance than the national industry since the
1960-61 business downturn.* Capacity utilization
increased from 75 percent in 1961 to 80 percent
last year. Recent reports on incoming orders to
regional machinery producers indicate that capacity
utilization should increase even further this year.
New plant outlays will account for all of the
increase in spending this year in the electrical
machinery industry. On the average, respondents
in this industry expect sales to increase by only 2
percent this year. However, it is the pessimism
of the communication equipment sector which depresses the average. All other sectors of the industry
anticipate a 6 percent gain in sales this year.
The largest cutback in spending within the durable goods sector is anticipated in the primary metals
*See "Nonelectrical Machinery-A Leader," New England
Business Review, February, 1963.

New England BUSINESS REVIEW

industry. Outlays are expected to fall 17 percent
from the 1962 level, as both plant and equipment
purchases will be cut back substantiaJly. Capacity
utilization fell from 73 percent in 1961 to 70 percent last year in the regional industry. Sales this
year are expected to remain unchanged from 1962
levels. Consequently, primary metal producers are
cutting their capital outlays for expansion purposes
by two-fifths this year. Outlays for replacement, on
the other hand, are expected to rise by a tenth as this
industry strives to become more competitive and
enlarge its markets.
Within the nondurable goods sector, the region's
paper producers plan a $10 million, or 16 percent,
increase in capital expenditures this year. Both
plant and equipment purchases are scheduled to expand by this proportion. A 4 percent gain in sales
this year is anticipated by the region's producers.
Capacity utilization increased slightly last year to 86
percent, well above the average for all manufacturing and within 11 percent of the paper industry's
preferred operating rate.
The chemical industry is another of the region's
soft goods industries planning a substantial increase
in outlays this year. It expects to advance spending
19 percent over 1962 levels, but this will still be 25
percent short of the 1961 level. Nationally this
industry foresees a rise of 8 percent in outlays this
year. Both nationally and regionally this industry
expects a relatively greater rise in sales than for any
other manufacturing industry. Regional producers
expect a rise in shipments of more than a tenth this
year.
Capital outlays of New England textile manufacturers peaked in 1961 at $41 million. Last year
they reduced outlays 3 percent, and they anticipate a like reduction this year, primarily in smaller
outlays for new plant. Nationally this industry plans
to raise outlays by 18 percent this year. Sales are
expected to advance 5 percent by regional producers, while nationally the expectation is for only
a 2 percent rise. If regional textile manufacturers
experience the sales gain they anticipate, their current plans may be revised upward.
Expenditures Per Employee

Since 1958 capital expenditure per manufacturing employee has been increasing in the region, but
current levels are still below the 1957 peak in most
industries. In that year New England manufacturers

May
1963
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

added $524 of capital equipment per employee. The
1958 recession caused them to reduce this to $336
per worker, after adjusting for price changes. Last
year the ratio was up to $417, and if present plans
are realized it should rise another $21 this year.
The region has historically used less capital per
worker than has the Nation. Its manufacturing activities are concentrated in products such as shoes,
textiles, and machinery which call for a lower ratio
of machines to people than for the Nation's manufacturing a~ a whole. In 1957 the region's capital
expenditure per employee was 56 percent of the
national average. This proportion fell to 4 7 percent
in 1960. In the past two years it rose to one-half of
the national amount. A comparison of national and
regional spending plans for 1963 indicates that
New England expenditures per employee will remain
near this proportion.
Some industries in the region have been adding
as much or more capital equipment per employee in
recent years as their national counterparts. Among
them are the electrical machinery, food, and rubber
and plastics industries. This latter industry, for instance, plans to add $546 of capital equipment per
employee in the region, compared to $537 per
employee in the Nation, this year.
Next Year's Plans

Tentative estimates for 1964 capital outlays
were made by more than nine-tenths of the firms
participating in this year's survey. Being primarily
the larger firms, this group accounts for a fourth
of manufacturing employment in New England.
These firms now foresee spending 15 percent
less in 1964 than this year. The durable goods group
have plans to spend 20 percent less next year. However, the instrument industry expects to raise spending 50 percent over 1963, and the lumber and wood
products industry looks for a 2 percent rise.
New England's nondurable goods producers now
expect to spend in 1964 about nine-tenths the
amount they are planning for this year. The rubber
and plastics and the miscellaneous group each plan
to raise outlays next year by about two-fifths ov~r
1963 levels.
If present sales expectations are substantially
exceeded this year, thus reducing excess capacity
appreciably, plans for both 1963 and 1964 may
be raised from present expectations in most industries in New England.
11

Consumer prices rose further in early
1963, but fewer man-hours led to stable
earnings.

District 1 checking accounts declined
somewhat in 1963.
$ Bill ions
5 .2

MASSACHUSETTS
(1950-52
100)

NEW ENGLAND
(1950-52
100)

MANUFACTURING INDEXES

(seasonally odiusted)

Mor. '63

Feb. '63

Mor . "62

120
105
-42
114
111

119
104
-44
114
111

122
113
43
115
111

All Manufacturing
Primary Metals
Textiles
Shoes and Leather
Poper

UNITED STATES
(1957-59
100)

Mor. '63
128
110
63
120
128

Feb . '63

Mor . "62

Mor. "63

Feb. '63

126
111
63
122
126

125
116
66
121
125

121
110
n .o.
n.o.
n.o.

120
105
113
n.o.
n.o.

NEW ENGLAND
Percent Change from:
BANKING AND CREDIT

Commercial and Industrial Loons ($ millions)
(Weekly Report ing Member Banks)
Deposits ($ millions)
(Weekly Reporting Member Banks)
Check Payments ($ millions)
(Selected Cities)
Consumer Installment Credit Outstandi ng
(index , seas. adj . 1957
100)

Mo r. ' 62
117
117
117
104
121

UNITED STATES
Percent Change from:

Mor. "63

Feb. '63

Mor . "62

Mor. '63

1,591

34,971

-4,961

-1

11,438

+11

132.2

Feb. '63

Mor . "62

130,088

173,455

+10

145 .2

+12

-1

119

+-4

n.o.

TRADE

Department Store Sales
(index, seas. ad j. 1957-59
Department Store Stocks
(index, seas. adj. 1957-59

= 100)
= 100)

121

119

n.o.

3,710
184

0
-4

0
+12

55,035
2,366

+1
-9

+
+

2
4

n.o .

EMPLOYMENT, PRICES, MAN-HOURS & EARNINGS

Nonagricultural Employment (thousands)
Insured Unemployment (thousands)
(excl. R. R. and temporary programs)
Consumer Prices
(index, 1957-59
100)
Production-Worker Mon-Hours
(index , 1957-59
100)
Weekly Earnings in Manufacturing ($)

OTHER INDICATORS

Construction Controcf Awards ($ thous .)
(3-mos. moving overages Jon., Feb., Mor.)
Total
Residential
Public Works
Electrical Energy Production
(index, seas. adj. 1957-59
100)
Business Failures (number)
New Business In corporations (number}

12
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

108.0
(Moss.)
95.9

106 .2

-3

98 .0

97 .84

116,846
43 ,511
29,755
133

+ 2
+3
0
0

-35
+ 2
-66
+6

3,093,391
1,368,809
544,110
138

47
917

-10
+24

-38
-4

1,296
16, 12-4

89.89
(Mass.)

n.o.

= not

0
+

+5
--4
-9
l

-1
+4
- 10
+ 5

- 13
- 6

1
+15

available

New England BUSINESS REVIEW