64
MAY 1962 survey of CURRENT BUSINESS U.S. DEPARTMENT OF COMMERCE OFFICE OF BUSINESS ECONOMICS Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
MAY 1962
survey of
CURRENTBUSINESS
U.S. DEPARTMENT OF COMMERCEOFFICE OF BUSINESS ECONOMICS
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SURVEY OF CURRENT BUSINESSMAY 1962 VOL. 42, NO. 5
ContentsBUSINESS REVIEW
Summary IBusiness Advance Continues in AprilBuying Power Up, amiConsumer Purchasing Moves Ahead-Construction Advances AfterWinter Setback-Prices Generally Stable
Recent Trends in Manufacturing 3Production and Sales ImproveNew Orders DeclineAuto MarketStrongMachinery and Defense Production Rise
GNP INCREASES AT SLACKENED RATERise in Consumer Buying. 6Investment Rise Small 7Residential Construction Set Back by Weather 8
NATIONAL INCOME AND PURCHASING POWER MOVEHIGHER 8
SPECIAL TECHNICAL SUMMARIESEmployment Changes by Legal Form., 1957-60 10Advance in Salaries as Portion of Manufacturing Payrolls
Reflects Progress in Technology 11
ARTICLECapital Formation, Saving, and Credit 14
Business Capital and Profits UpPersonal Saving MaintainedConsumer Borrowing UpGovernment Deficit NarrowsBankCredit Freely AvailableInterest Kates Stable
MONTHLY BUSINESS STATISTICSGeneral S1-S24Industry. S24-S40Subject Index. Inside Back Cover
U.S. Department of CommerceLuther II. Hodges
Secretary
Office of Business EconomiesM. Joseph Meehan
Director
Louis J. ParadiseManaging Director
Murray F. FossEditor
K. Celeste StokesStatistics Editor
Billy Jo DawkinGraphics
STAFF CONTRIBUTORSTO THIS ISSUE
Business Review and Feature:
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Frederick M. Cone
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Article:
John A. Gorman
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By the Office of Business Economics
El-3O613Q61-4Q61 _ _ _ _4Q61-1Q62
($ billion)-4-154-10
. . . _ _ _ _ _ _ 4-16+6
Retail sales continue rise
With the flow of income movinghigher retail sales showed a seasonallyadjusted gain of about one percent inApril, paced by a good-sized advance indurable goods. Sales in nondurablestores were not much changed. Thesecond quarter thus begins wit.li thelatest sales total, after seasonal adjust-ment, some 2 percent above the averagefor the first quarter. For the March-April period, which includes the holidaybuying season, sales were up 8 percentcompared with the same months of 1961.
The April gains in durable goods werewidespread, extending to automobiles,furniture and appliances and lumber
and hardware stores. In nondurablessales changes were mixed. Departmentstore sales, after seasonal adjustment,were not quite so high as the monthbefore.
EXPANSION IN GNP IN FIRST QUARTERRise in Final Sales Slackened
Billion 1961 $575
550
525
500
475
GNP
J L_
J Inventory Buildup-TTi Inventory
LiquidationI I I I
Government Purchases,Consumer Expenditures on Nondurable Goods
and Services Moved Ahead175
150
125
100
Nondurable Goods\ __
Bui Residential Construction andConsumer Durable Purchases Were Of?
75
50
25
Durable Goods
Residential Constructioni i | | i i |
I960 1961 1962Quarterly
f Seasonally Adjusted, at Annual RateU.S. Department of Commerce, Office of Business Economics 6 2 - 5 - 1
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2 SURVEY OF CURRENT BUSINESS May 1002
Improvement in private construction crease of \% million over the year-ago
Residential construction activity inApril showed an improvement over therate that prevailed in the first quarter.Work put in place was at a seasonallyadjusted annual rate of $23 billion, asagainst an average of about $22% billionin the opening quarter of the year.
The pickup in expenditures reflectedthe sharp turnaround in housing startsin March. Private nonfarm starts re-bounded to a 1.4 million annual rateafter having fallen markedlyon aseasonally adjusted basisfrom Octo-ber to February. Since builders overthis period have continued to take outpermits in large volume, and there hasbeen some question as to the effect ofthe winter weather on actual housingstarts, the coming months of good build-ing weather should provide a clear-cuttest of the strength of homebuildingactivity.
This spring has also witnessed someimprovement in private constructionother than residential, which had beenshowing little change, seasonally ad-justed, over the past year and a half.Industrial construction has been mov-ing steadily upward since December,following a decline throughout 1961.Commercial construction has been verystrong while outlays by public utilities,although high, have shown little ad-vance since the summer of 1960. In-stitutional construction continues toshow the steady upward movement thathas been evident throughout the post-war period.
The most recent data on nonresiden-tial contract awards suggest a risingtrend in this type of construction overthe near term. Seasonally adjustedawards for commercial and industrialfloorspace rose to a very high level inFebruary and March-some 20 percentabove the corresponding monthly totalsin 1961.
Employment higher, unemploymentunchanged
Employment in nonfarm establish-ments registered a seasonally adjustedadvance of about % million from Marchto April, paced by a rise in manufactur-ing. The adjusted employment total ofmore than 55 million represented an in-
figure. The seasonally adjusted unem-ployment rate continued unchangedover the month at 5K percent of thecivilian labor force.
The advance in manufacturing em-ployment extended to both durable andnondurable goods industries and wasparticularly large in metal fabricatingindustries. Seasonally adjusted hoursof work in manufacturing rose again inApril to an average of 40.8, up 1 hourfrom the January low and higher thanin several years. Better-than-seasonalemployment increases also occurred inconstruction, trade, transportation, andgovernment.
Stability in Prices Continues
Prices continue to reflect easy supplyconditions with only a slight increasein the average. Despite increased de-mand, the overall price stability evidentthroughout last year has continued into1962. Costs of services and food atretail, which put a little upward pres-sure on the consumer price index in thesecond half of last year, continued torise in 1962, and accounted for all of thesmall price gain in the first quarter.
GNP FINAL PURCHASES Advance Slows as Compared With 1961
Billion 1961 $ (ratio scale)600
- 7 9 6 0 - 6 2
500
400
300
/1953-55
1948-50
1 2 3 4 1 2 3 4 1 2 3 4Quarterly, Seasonally Adjusted, at Annual Rate
U.S. Department of Commerce, Office of Business Economics 62-5-2
In March wholesale prices of industrialgoods (all commodities less farm prod-ucts and food) at an index of 100.7(1957-59=100) were slightly below ayear ago. Most commodity groupsremained either unchanged or fell alittle during the first quarter of thisyear.
Though stabilit}^ of wholesale pricesto date characterizes most commodities,declines have occurred in several mar-kets. Fuel prices in March were 2percent below their early 1962 level asa result of price reductions for gasoline.These prices are currently at the lowestpoint in over a year and a half. Amongmetal prices, iron and steel scrap hasfallen sharply as a result of he&vy millscrap inventories and the cutback insteel orders.
Average prices of radios, phonographsand TV sets were also down from theend of 1961 due to competitive pres-sures. The important machinery group,which fluctuated little last year, wasvirtually unchanged in the first quarteras a continued price rise for agriculturalmachinery was offset by lower pricesfor electrical machinery.
The principal areas of rising pricesoccurred in materials and componentsfor construction, which were up fromJanuary, and slightly above a year ago.Costs of lumber and wood products roseduring the first quarter by over 1.5percent. Textile products and apparelprices also extended the moderate ex-pansion begun last summer in responseto higher costs and demand.Stable farm prices
Agricultural prices have averagedabout the same as a }^ear ago during thefirst 4 months of 1962 and prospectsare that supplies will continue large withrelatively little overall changes inprices during the year. Food market-ings are expected to remain high. Thusthe relatively small net influence uponwholesale and retail prices which havebeen traceable to food and farm prod-ucts during the past year may besimilarly limited in the season ahead,aside from special weather influencesupon crop yields.
In recent months fresh vegetableprices have been unusually high follow-ing severe weather in the winter gardensections of Texas and Florida, whichDigitized for FRASER
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May 1962 SURVEY OF CURRENT BUSINESS
brought crop losses and delayed growthand marketings. Processed vegetablesare in large supply, however.
Fields crop prices have held a littlehigher than a year ago, reflecting acombination of higher support pricesand some specific reductions in produc-tion. Food grain prices have moved upfollowing a smaller crop and precedingan increase in support prices as a partof the 1962 food grain program; thelatter has brought a reduction in acre-age to be harvested this summer. Feedgrain prices have also been above ayear ago with the margin rather smallfor corn. Higher support price forcooperating producers and a somewhatsmaller harvest last fall have been
accompanied by considerable sale ofCCC corn stocks.
Livestock prices have been a littlelower this spring than a year ago. Animportant exception is prices of fedcattle which have stayed high as de-mand has increased and marketingshave shown little change. Poultryand egg prices have been a little lowerthan last year as marketings have con-tinued large, but the sharp break inbroiler prices which occurred in thespring and early summer of 1961 is notanticipated this year. Dairy priceshave declined and supports have beenlowered as the milk flow has risen anddemand has weakened. CCC purchaseof dairy products is at an ususually highrate this spring.
Recent Trends in Manufacturing ActivityProduction and Sales BetterNew Orders Off, Especially in Steel
INDUSTRIAL activity increased mod-erately in March and April, with gen-erally small but widespread advancesamong manufacturing industries and astrong market in autos. The recentgains in sales and output have reflectedsome improvement in final purchasessince the early part of the year, thoughthe rise has slowed as compared withlate 1961. Manufacturers have alsobeen increasing overall inventories at amoderate pace, with the buildup insteel stocks an important factor in thefirst quarter. At the moment steelinventories are being drawn down andingot production has fallen sharply inrecent weeks.
New orders placed with manufac-turers have lost some of their buoyancyrecently, following the rather steadyadvance since early 1961 which hadpushed up unfilled orders through Feb-ruary. In March, however, the ad-vance in shipments to a new highreduced backlogs about $500 million,lowering the unfilled orders increaseover the year-earlier position to $3%billion.Durable goods orders declineoutput
higher
While new orders received by non-durable goods producers have continued
to rise, the inflow of new business fordurable goods companies declined inFebruary and March. Much of thedecline in durable goods new orders inFebruary and March reflected first aneasing and then a sharp cutback insteel ordering from the abnormal pres-sures of last December and January.The parallel movements in orders forall durable goods products and in steelin recent months can be clearly ob-served in the two top panels of thechart.
This interruption in the rise of ordersabout a year after the onset of economicrecovery is not too different from theexperiences in the two previous cyclicalexpansions. In these earlier periods,however, new orders had been risingseveral months before overall activityturned upin contrast to a lead of onlyone month in 1961. In addition, changesin new orders in the latest recession andrecovery were relatively smaller thanin the earlier postwar cycles.
Relative strength has been evident inindustries producing capital goods anddefense equipment and motor vehicles.In the steel industry, output fell sharplyfrom the late winter peak with thesigning of the new labor contract, andcontinues under the influence of the
DURABLE GOODS MANUFACTURERSHigher Sales and Lower Orders Reduce Backlog
Billion $17
16
15
14
13
12
TOTAL
Steel Orders Cut Sharply as Shipments Flow atHigh Rate
IRON AND STEEL
^ Sales
" New Orders
Investment Goods Contribute to Sales RiseBut Orders Dip
CAPITAL GOODS PRODUCERS
New Orders *-^_ . .
Consumer Demand for Durables BolstersFactory Business
MOTOR VEHICLES ANDCONSUMER APPLIANCES
I960 1961 1962Monthly Data, Seasonally Adjusted
. Department of Commerce, Office of Business Economics
readjustment of the inventory positionof the user industries.
The Federal Reserve seasonally ad-justed production index in April at 117(1957=--100) was 2 points above the De-cember high, and 11 percent above thecomparable month a year ago when theturnaround in general business activitywas already underway. Both durablesand nondurables along with utilitieswere at record production rates in themost recent month; but mining pro-duction was still fractionally below itsearlier high.
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Rising trend in machineryActivity in industries producing ma-
chinery, equipment, and defensemateriel has increased in response to thepickup in private investment andGovernment defense programs, both ofwhich are expected to rise through theyear. For the group as a whole, outputis some 20 percent above the 1961 lowpoint, with the rise since January about7 percent.
Production of machinery, including
MANUFACTURING PRODUCTIONTotal at New High in Slow Rise
index, 1957 = 100UO
120
100
Total
80 I . M M l IM . . . I . . ! . . ! . . . . . ! . . . ! . ! . ! ! ! . ! .
Defense and Investment GoodsContinue Upward Autos Up Sharply
Machinery and DefenseEquipment
60
Other Durables Trace Sidewise PatternSteel Down After Inventory Buildup
140
120 -
100
80
60
Other Durables
Nondurable ManufacturesAbout Unchanged Since Fall
140
120
100
80
Nonc/urab/es, Total
1959
PreCiminan
1960 1961Seasonally Adjusted
1962
>ry Data: FRB
U.S. Department of Commerce, Office of Business Economics 6 2 - 5 - 4
SURVEY OF CURRENT BUSINESS
both electrical and nonelectrical, isat a record rate. New orders arecurrently about one-tenth above thoseof a year ago and backlogs are up aboutas much. Products showing better-than-average strength include com-mercial equipment, office and storemachines, electronics, computers, andcommunication equipment.
In the machine tool industry, bothnew orders and shipments, which wereat a slow pace in January and February,picked up in March, partly in responseto some increase in orders from abroad.This brought the total of metal cuttingand forming type tools for the quarteronly moderately below the final 3months of 1961, or about in line with theusual change for the period.
In the depressed railroad equipmentindustry, there was some improvementin freight car building in March,following the spurt in new orders placedbetween November and January.Plants shipped out almost twice asmany cars during the month as the lowaverage for the preceding 8 months.Incoming orders in February andMarch, however, were again at a slowerpace and backlogs in this industry re-main low.
Defense activity moves aheadProduction of defense goods taken as
a group-aircraft and missiles, ships,and ordnance and accessoriesinMarch was the highest in several years.Total defense output is now up roughly15 percent from the year-ago level.Employees engaged in defense opera-tions are increasing steadily and nowexceed well over 1% million workers.In aircraft and parts plants alone thetotal is over 700,000, and the increasesince last August amounts to more than40,000.
Industries most heavily engaged indefense workaircraft, electricalmachinery and instrumentstended toreport less-than-seasonal increases incontract placements from February toMarch. Given the upward trend indefense outlays and the large volumeof new orders received earlier thisyearparticularly by aircraft com-paniesthe March results may reflecta temporary lull.
Backlogs of aircraft and aerospace
May 1062
companies, which account for aboutone-third of all durable goods manu-facturers' unfilled orders, have beenreduced about $1 billion over the pastyear as deliveries have persistentlyremained above new contracts. Re-duced demand for commercial jets is amajor factor, although backlogs ofboth military aircraft and missile s}7s-tems are also lower than a year ago.
Consumer durables doing better
Spurred by good consumer demandand sales promotions this spring, pas-senger car production schedules wereraised contraseasonally in April.Assemblies increased from an averageweekly rate of 137,000 in March to147,000 in April and for the monthtotaled close to 620,000 cars; this com-pares with 600,000 in March, which hadone more working day. Truck pro-duction held about even with the Marchtotal of somewhat over 100,000. Aprilcompletions, together with the rela-tively high first quarter volume,rounded out a 4 months' total of closeto 2.4 million passenger cars. This wasover 700,000 higher than in the com-parable period a year ago which wasone of slack sales.
Production schedules for May arenow expected to exceed the April turn-out since inventories in dealers' hands,down somewhat since mid-March andunder 1 million units, continue favor-able relative to the current rate of sales.
Even though consumer buying ofappliances, television sets, and radiostapered off in the first quarter of thisyear, output and consumer buying ofthese products remained high. Therecent production rate is about evenwith the 1961 summer high point, andwell above the average for 1961 as awhole. Much of the recent strengthin this group steins from the morefavorable market reception of color TVreceivers and the large turnout of radiosfor the expanding auto industry.
Accompanying the high output wasa buildup of stocks of some productlines held by manufacturers and dis-tributors, but for the appliance groupas a whole the inventor}' position con-tinued relatively favorable, as was thecase through most of 1961. In the caseof TV and home radios, however, com-
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May 1062 SURVEY OF CURRENT BUSINESS
blued inventories in the most recentmonth were roughly 1 million units, orsome 25 percent, higher than the }rear-ago volume.
Steel adjusts to reduced purchasingSteel production is being reduced
from the high volume of 30.6 millioningot tons turned out in the first quarter.That output was more than one-tenthhigher than in the fourth quarter of1961, and the highest since the firstquarter of 1960.
All major consuming markets steppedup their purchases of finished steel inthe first quarter of this year. Receiptsfrom mills for current consumption andaddition to inventories were particu-larly sizable for the auto, machinery,commercial equipment, and appliances,
amounting to 20 percent or more abovethe fou r th quarter rale. For the autoindustry alone the rise was about one-third. Takings of finished steel bythese four groups accounted for abouthalf of tot;j>i. mill products shipped in1961. While deliveries of finish P.; I steelto consuming markets u t the momentare declining, actual consumption re-flects the rising demand for producers'and consumers' durable goods and thegrowing defense programs.
In other industries producing durablematerials, output continued to moveupward. March copper, lead, andzinc production in the aggregate waswell above the January level, whilealuminum producers stepped up theoperating rate from 81 percent to 84percent of rated capacity. Production
of construction materials, which de-clined sharply in the fall and wintermonths in line with the reduced con-struction volume, particularly in home-building, picked up in February andMarch, though the rate for the lattermonth was still 7 percent below lastsummer's high.
Non-durables production steady
Production of nondurable goods liasbeen characterized by small month-to-month changes since early last winter,but with a generally favorable trend.In March, the rate of operations wasfractionally above the high point reachedin December and 10 percent above theearly 1961 trough, a rise considerablysmaller than that shown in the com-parable 1958-59 upswing.
Rise in National Income and Product ContinuesFirst Quarter Brings Higher Consumption and Government Buying,
Lower Construction, and Inventory Rise
THE expansion in economic activitycontinued through the first quarter,though at a slower pace than in earlierquarters. Gross national product in-creased by $6 billion to a new7 high of$548 billion (seasonally adjusted annualrate). This compares with quarterlyincreases of $10 to $16 billion recordedduring the first three quarters of re-covery and expansion from the cyclicallow point of the opening 1961 quarter.
Continued growth in consumer ex-penditures for nondurable goods andservices, further expansion in purchasesat all levels of government, and a mod-erate increase in the rate of inventoryaccumulation accounted for the recentgain. There were declines in residentialconstruction and consumer purchasesof durable goods following three quar-ters of expansion in each category. Netexports were off but business outlaysfor fixed investment were little changedfrom the closing quarter of 1961.
The first quarter increase in nationalincome was somewhat less than the
rise in GNP and reflected almost en-tirely higher payrolls; corporate profitswere apparently little changed from thelevel of the fourth quarter of 1961.The first quarter rise in personal in-come ($4 billion) was about in line withthe increase in GNP and national in-come, after giving effect to the increasedrate of contribution for social insurancewhich started in January. After show-ing little net change in the November-January period, the flow of personalincome was markedly higher in Feb-ruary and March, indicating morefavorable conditions following a severewinter in major areas of the country.The improvement within the quarteris confirmed by the data on retail salesand construction activity in March.
By the first quarter of 1962, thecumulative advance in GNP from thecyclical low point of early 1961, hadamounted to $47% billion, not quite 10percent. With prices showing only aslight rising trend over the period, mostof the advance reflected increased out-
put which was up 8 percent for theperiod. This is about the same as thepercentage increases noted in the firstfour quarters of recovery and expansionin 1954-55 and 1958-59.
There were, however, rather markeddifferences in the composition of the risein GNP as among the three periods,(See chart on p. 6.) Government pur-chases have increased 10 percent sinceearly 1961, and have accounted forabout 23 percent of the rise in GNP,In contrast, these purchases increasedless than 8 percent during the first fourquarters of the 1958-59 expansion andaccounted for only 18 percent of therise in GNP for the period; Governmentactivity was declining slightly duringthe 1954-55 recovery.
These differences were attributablelargely to defense outlays which rosesharply in 1961, particularly after mid-year. In contrast, the 1954-55 re-covery coincided with the end of theperiod of retrenchment following the1951-52 Korean military defense build-Digitized for FRASER
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6 SURVEY OF CURRENT BUSINESS May 1902
up; there was a small rise in defenseexpenditures during the 1958-59 re-covery period.
Business fixed investment has playeda somewhat greater relative role in therecent gain than in the earlier periods,owing less to the vigor of the recoveryin this area, than to the fact that theupturn more or less coincided with therevival in general business activity.
BEHAVIOR OF GNP COMPONENTS in FirstYear of Cyclical Expansions
Government Purchases More Important inCurrent Recovery Than in the Prior Two
Billion 1 954 $ (ratio scale)
800 -
600
400 -
200
TOO
80
60
1957GNP
Final PeakPurchases \/ L.
I960GNPPeak
\
' Nondurable ConsumerGoods and Services
Government Purchases
1954 56 58 60 62
Fixed Investment Below Previous Highs
60
40
20
10
_ Bus/nessFixed
~J** :'**^ *'' :^^\ "^/ \
"Consumer Bus/ness Bus/ness -Durable Fi**d ^Goods
Residential Construction
, I . I . i . l . . , I . . . I , , , ! , , , 1 . , . ! . , . 1 , . , ! , . .
1954 56 58 60 62U.S. Department of Commerce, Office of Business Economics 62-5-5
Previously, capital outlays had con-tinued to decline a quarter or two aftergeneral recovery began. Moreover,business fixed investment is, in realterms, still somewhat below its 1957peak, despite the fact that real GNPis 14 percent higher over the period.First quarter outlays were, however,higher in relation to the preceding peakthan was the case in the corresponding
quarters of the two preceding cyclicalrecoveries.
The net increases in both durableconsumer goods and residential con-struction has so far fallen short of thoseachieved in the earlier periods of re-cover}7 and expansion. In both cases,a similar comparison based on the datafor the fourth quarter of 1961 wouldhave shown a more favorable picture,as may that for the current quarter ifmore recent trends are maintained.
Despite the first quarter decline notedearlier consumer buying of durablegoods, in real terms, was little belowthe 1960 peak. On the other hand,the volume of residential construction,though about matching its 1960 highpoint, was off 12 percent from its 1959peak.
Consumer expenditures for nondur-able goods and services about matchedtheir increases in the earlier periods.In percentage terms, there was littledifference as between goods and serv-ices, but since the latter have continuedto move steadily upward in all recentrecession periods, comparison with 1960and especially 1957 is considerablymore favorable for services.
Consumer Buying ContributesMajor Part of Rise
Overall, consumer buying increasedless than $4 billion (annual rate) in thefirst quarter, as compared with the $7%billion increase noted for the precedingquarter. The slowdown was entirelyin the purchase of durable goods whichhad risen sharply in late 1961. Thefirst-quarter increase in expendituresfor soft goods and services aboutmatched those of the later quarters of1961.
Stvings in durable goods purchases
Most of the $%-billion decline in dur-able goods purchases in the quarter wasattributable to automobiles and acces-sories. This reduction may have beendue in part to the severe winter experi-enced over much of the country duringJanuar}7 and February, as there was asharp spurt in sales during the earlyspring months. Thus, major signifi-cance cannot be read into the firstquarter decline. Sales during the latesttwo quarters ended in March averaged
$19 billion (annual rate), about match-ing the record level of the first half of1960 which followed the settlement ofthe steel strike and the introduction ofcompact cars of domestic manufacture.
As noted in the March SURVEY, autopurchases as a proportion of consumerexpenditures continue rather low forthe postwar period. In part, this rela-tively low volume is associated with thetrend to the less expensive compactcars. Last year, for example, the com-pacts accounted for about one third ofdomestic car sales, and were responsiblefor passenger car outlays being $1%billion less than they would have beenhad the same number of standard carsbeen sold. In the first quarter of 1962the compacts registered close to 40 per-cent of sales of cars of U.S. manu-facture.
Furniture and household equipmentsales, which in last year's closing quarterequalled the high 1959 levels associatedwith record residential constructionoutlays, were probably affected by thedecline in homebuilding activity in thefirst quarter. Sales held steady duringthe quarter, but for the quarter as awhole, a small decline ($% billion) oc-curred. With recent increases in hous-ing starts, expenditures for these typesof goods may be expected to move upagain in the second quarter.
Other expenditures rise
The $1% billion increase in consumeiexpenditures for nondurable goodsabout matched those of the precedingtwo quarters. The cumulative increaseover the past four quarters has beenabout 4 percent. Expenditures foiclothing have risen about 5K percent:increases in other major categorieshave ranged slightly downward fron4 percent.
As the growth of consumer serviceshad riot been significantly slowed by thebrief 1960-61 recession, expansion irthis area was not appreciably acceler-ated after the turn. The cumulativeincrease over the past year has beerabout 7 percent; as prices have continued to rise moderately in many service areas, the percentage increase in th(volume of services has been about 4}:percent.Digitized for FRASER
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Mav 1062 SURVEY OF CUEEENT BUSINESS
Investment Rise SmallOverall investment increased only
$l/2 billion in the quarter to reach anannual rate of $77 billion. The increaseover the past 4 quarters amounted toabout $17 billion, at an annual rate.This represents 36 percent of the risein GNP over the period, as comparedwith 42 and 47 percent, respectively,for the initial 4 quarters of the 1958-59and 1954-55 recoveries.
Rise in inventory accumulation
The first quarter increase in businessinventory investment$!} billionreflected mixed trends in the economy.There was a step-up of nearly $3 billionin durable goods factories, where steelconsumers were hedging against astrike in that industry. In addition,industries holding nondurable goodsstocks stepped up the rate of accumula-tion by about $1% billion in this period.A sharp rise in auto sales in the laterweeks of the quarter was not fully re-flected in higher production schedules;in consequence, there was a net declineof $1% billion in the rate of accumula-tion of auto stocks at retail, and otherdurable goods holdings in trade also fell.
To date the inventory buildup hascontributed some $11 billion to the $48billion expansion in GNP. The propor-tion was significantly higher in 1958-59and somewhat higher in the initial fourrecovery quarters in 1954-55. Thefirst quarter 1962 rate of accumulationwas affected by the threat to futuresteel production and was the highest inrecent years except for two quarterspreceding and one following the 1959steel strike. In general, inventories ap-pear to be under close control by buy-ers. Liquidation of abnormal steelstocks accumulated during the firstquarter are currently resulting in alowering of steel output.
Business fixed investment weak butmoving up
Business capital outlays are pro-gramed to be higher this year but here,as elsewhere, there was an adverseweather element in the first quarter.While the cumulative advance sinceearly 1961 has carried these outlaysto about the 1960 peak in dollars, in
Table 1.Gross National Product in Current and Constant Dollars (I~3, 1-5)
Gross national product
Personal consumption expend-itures _ _ _
Durable goodsNondurable goodsService^
Gross private domestic invest-ment
New construction _ _
Residential nonfarmOther
Producers' durable equipment.
Change in business inventories,
NonfarmFarm.
Net exports of goods and services.
Exports _ _Imports
Government purchases of goodsand services _ _ _ _
Federal
National defenseOtherLess* Government sales
State and local _ _. _
1959 1960 1961
1961
1 - III IV1962
I
Seasonally adjusted atannual rates
Billions of current dollars
482.8
314. 0
43.5147.3123 2
72.4
40.222 317.925.96.36.2.1
-.7
23.123.8
97.153.546.27.8
5
43.6
504.4
328.9
44.3152.4132.2
72.4
40.721.119.6
27.54.2
4.0.3
3.0
26.723.6
100.152 945.58.0
6
47.2
521.3
339. 042.3
155.5141.2
69.641.721.220.525.72.2
1.8.3
4.0
27.423.4
108.7
57.349.28.6
6
51.4
500.8
330.7
39.4153. 7137.5
59.839.619.320.4
24.2
-4.0-4.3
.3
5.327.622.3
105.054.747.28.0
5
50.3
516,1
336. 142.0
154.1139.9
68.841.3
20.620.724.7
2.82.4.4
3.926.422.5
107.356.648.88.3
5
50.6
525.8
341.042.3
156.2142.4
73.242.722.120.626.04.54.1.4
2.627.024.3
109.057.449.08.9
6
51.6
542.2
348.4
45.5158.1144.9
76.643.323.020.328.05.35.1.2
4.0
28.524.5
113.260.051.79.0.7
53.2
548.3
352.0
44.8159. 8147.3
77.041.821.420.528.56.86.6.2
3.528.224.7
115.961.552.89.4
7
54.3
i
1959 1960ii
1961
1961
I
Se
i,asona
am
III IV
1962
ly adjusted atnial rates
Billions of 1954 dollar?
428.4
289.3
41.0138.8109.5
61.134.3
19.414.821.3
5.55.6-.0
-2.1
22.224.3
80.1
43.9
36.2
440.8
298.3
41.8141.8114. 7
60.633.918.016.022.7
4.0
3.8.2
1.7
25.323.6
80.242.3
38.0
448.8
303.6
40.1143. 6119.9
57.734.4
18.116.421.2
2.1
1.7.3
2.0
25.523.5
85.544.9
40.6
433. 2
297.0
37.6141.6117.8
49.632.916.516.4
19.9-3.2
-3.5.3
3.3
25.722.4
83.343.1
40.2
445.5
301. 639.8
142. 6119.2
57.334.117.616.620.3
2.92.4
.. 4
1.9
24.522.6
84.7
44,7
40,0
451.8
305. 039.9
144. 5120. 6
60.4
35. 118.716.421.4
3.93.5
.,4
6
25. 224.5
85.745.0
40,8
464.6
310.843.1
145.9121.9
63.535.619.516.223.1
4.7
4.5.2
2.0
26.724.7
88.3
46.8
41.4
468,2
312.842.6
147. 0123.2
63.734.2
18.116.123.4
6.15.9.2
1.326.224.9
90.348.4
41,9
Table 2.Personal Income and Its Use (II-2)[Billions of dollars]
Personal income _ _
Wage and salary disbursementsCommodity-producing industries
ManufacturingDistributive industries _ _ _ _Service industriesGovernment _ . .
Other labor incomeProprietors' income _ _ - _ _
Business and professionalFarm
Rental income of persons
Dividends-
Personal interest income
Transfer payments
Old-age and survivors insurance benefitsState unemployment insurance benefits _ _Veterans' benefitsOther
Less: Personal contributions for social insurance. _
Less: Personal tax and nontax paymentsFederal . _ _State and local _
Equals: Disposable personal income
Less: Personal consumption expenditures
Equals: Personal saving _
Addendum: Disposable personal income in constant(1954) dollars
1959
383.3
258. 5107.284.768.237.745.3
10.3
46.335.011.3
11.9
13.4
23.6
27.2
10.22.54.5
10.0
7.9
46.039.66.4
337.3
314.0
23.4
310.6
1960
402.2
271.3110.487.471.840.748.4
10.9
48.236.212.0
11.7
14.1
26.2
29.1
11.12.84.6
10.6
9.3
50.443.2
7.2
351.8
328.9
22.9
319.0
1961
416.7
279.7111.287. 873.443.151.9
11.1
49.636.513.1
11.5
14.4
27.3
32.9
12.64.04.3
11.5
9.7
51.843.98.0
364.9
339.0
25.8
326.8
1961
I II III IV
1962
I
Seasonally adjusted at annual rates
404.7
270.1106.183.871.841.850.4
10.8
48.936.012.9
11.5
14.2
26.8
32.0
11.83.84.7
11.7
9.5
50.342.6
7. 7
354.3
330.7
23.7
318.4
413.2
277. 3110.787.572.842.551.3
10.8
49.236.312.9
11.5
14.2
27.0
32.9
12.54.54.8
11. 1
9.7
51.443.6
361. 8
336.1
25.8
324.8
420.3
282.7112.888.974.343.652.1
11.2
49.436.612.8
11.5
14.3
27.4
33.5
12.74.04.8
11.9
9.8
52.544.58.0
367.7
341,0
26.8
329. 0
428.6
288.71 15. 290.874.844.754. 0
11.5
50.837.213. 6
11.515,0
28.0
33.2
13.43.84.8
11., 3
1 0.0
53., 144.88 .3
375.6
348., 4
27., 1
335., 0
432.9
292.5115.791.876.045.455. 3
11.9
50.637.613.0
11.5
15.0
28.7
33.3
13.73 .44.7
1 1 . 5
10.5
54.746. 0
8 .7
378. 2
352. 0
26.2
336., 2
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
SURVEY OF CURRENT BUSINESS Mav 1902
real terms, they arc still below anyquarter of 1956 or 1957.
Capital outlays currently representa lesser proportion of GNP than in themid-1950's. In fact , if the averageratio of fixed invest in out to GNP iscomputed for 5-year periods (to mini-mize the effect of cyclical factors) therecent decline appears to bo but acontinuation of postwar adjus tments .
Period GNPFixed
Investment Percent[Billions of constant (1954) dollars]
(5-year averages)1947-51 314 33 10.51952-56 387 38 0. 81957-61 430 37 8.6
Capital investment during the decadeor so following World War II reflecteda number of special factors. In the1947-51 period, activity in certainareas was abnormally stimulated bythe absence of normal growth duringthe depression and war periods; inothers, it was curtailed by materialsshortages or by the conversion ofGovernment facilities erected duringthe war. Finally, the outbreak of theKorean war stimulated capital outlaysin certain strategic areas of the econ-omy.
During the 1952-56 period, materialswere generally abundant and invest-ment in many areas, notably durablegoods manufacturing, was still feelingthe stimulating effects of the Koreanexpansion program, and the introduc-tion of accelerated amortization. Thus,the last 4 or 5 years are the first in thepostwar period when business invest-ment has not been greatly distortedb}r the effects of severe depression andwar. The problem of raising invest-ment to more satisfactory levels inrelation to GNP must be viewed inthis light.Residential construction lower
The decline in residential construc-tion was an important factor in moder-ating the first quarter advance in GNP.In the previous quarter, activity hadcome close to matching the 1959 secondquarter peak of $23.5 billion, though inreal terms it was still 5 percent belo\vthat quarter.
The weather in man}7 areas of thecountry may have had some effect on
the rate of construction activity inlate 1961 and early 1962. The numberof new pr ivate housing uni ts author-ized by local bu i ld ing permits duringthe winter mon ths (December-Febfu-ary) reached a volume not achieved,since early 1959. On the other hand,housing s t a r t s dur ing th i s period, a tan annual rate of 1,225,000 u n i t s , wereoff sharply from the 1,400,000 unitsstarted in October. Bui lding peri n i t swere off slightly in March, but startsrose sharply to regain the October level,and in April residential constructionactivity moved above the first quarteraverage.
As noted in the article on "CapitalFormation, Savings, and Credit" inthis issue of the SURVEY, financial con-ditions in the mortgage market haveremained relatively favorable with in-
terest rates on mortgage debt con-tinuing to move do\vn slightly in theopening months of the year.
Government Purchases Rising;Net Exports Olf
Government purchases of r-;oods andservices increased another 2'14 percentin the first quarter, with higher Federaldefense expenditures and increasedState and local outlays. The recentincreases in Federal Government pur-chases reflect the full impact of themeasures taken to meet the Berlincrisis and accelerate the growth of11} ili t ary s tren g111.
Net exports were off $K billion,following a rise which had contributednearly $!} billion to the fourth quarterrise in GNP.
National Income and Purchasing PowerMove Higher
HIGHER employee compensationaccounted for most of the first quarterincrease in national income. On thebasis of preliminary evidence, corporateprofits do not appear to have changedmuch from the $52 billion (annual rate)of the first quarter, following threesuccessive quarterly rises cumulatingto $12 billion.
Within manufacturing, where halfof all corporate profits originate, earn-ings were nearly one-third above the
cyclical lows of the first quarter of1961, though about the same as inthe fourth quarter of last year. Smalldeclines in a number of manufacturingindustries were counterbalanced by asharp increase in profits of primarymetal producers.
Outside of manufacturing, still lowrail profits advanced as recovery fromthe recession was extended; earningsof the communications and public
(Continued on page 20)Fable 3.Gross National Product by Major Type of Product in Current and Constant
Dollars (1-6", 1-7)
Gross national productFinal salesIn v en t o r v c 1 1 an g e
GoodsoutputFinal salesInventory change ___
Durable goods outputFinal salesInventory ch ange
Nondurable goods outputFinal salesInventory change
Construction
1959 1960 1961
ij
1961 1962
I II III IV I 1959
Seasonally adjusted atannual rates
Billions of current dollars
482.8504.4 52,.3i
476. 5 '500. 9 519.16.3
250. 3244.0
6.3
94.991.33.6
155.4152.8
2.6176 256.2
4 . ' > i 2.2
258. 5 259. 0254. 3 256. 8
4.2
96.794. 3
2. 2
92.892.7
.1
161.8 166.1160.0|164.1
1.8| 2.0189 356.6
203 6
58.8
500.8 516. 1504. 8 51 3. 2-4.0
245. 7249. 7-4.081.687.4
-5.8164. 1162.3
1.8
197 957.2
2.8
257. 1254. 3
2.8
90.9
525. 8 542. 2 548. 3
1960 1961
1961
I II III IV
1962
I
Seasonally adjusted at|I 1
annual rates
Billions of 1954 dollars
428.4521.3 537.0 541. 6! 4^2. 9
4.5261.4256. 9
4.596.1
91.2 92.6-.3
166. 2163 0
3.2201 1
57.9
3.5165. 3
5.3271.6266. 3
5.3102.699.63.1
168.9164 3 166 7
1.0
205 159.2
2. 2
210 0
60.7
6.8J 5.5274.9268.1
6.8103.399.83.5
171.6
228.6223.1
5.582.979.83.1
145.7168 3J143 3
3.3914 3
59.1
2.4
151 748.1
440, 8 448. 8 433. 2436. 8
4.0234. 6230.6
4.0
84.782.42.3
150.0148 3
1.7
158 747,5
446. 7 436. 52.1
233. 6231.5
2.1
80.980.9
.1
152. 7150 7
2.0
166 248.9
? o
221.9225. 2-3.3
71.4
445. 5 451. 8 464. 6
442.61447.91459.92. 9
232. 5229. 7
2.979.4
76. 5 i 79.6-5.1
150.5148 7
1.8163 2
48.0
-.2
153.2150 0
3.1
164 7
48.3
3.9235. 4231.6
3.983.580.53.0
151.9151 0
.9167 1
49.2
4.7
244.6239. 8
4.7
89.486. 82.6
155.2153.1
2.1
169 8
50. 3
468.2
46? 16.1
247.1241. (
6.]90. C87.12.1
157. 1153.1
3.i
172 i
48.1
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
May 1962 SURVEY OF CURRENT BUSINESS 9Table 4.Relation of Gross National Product, National Income, Table 6.Personal Consumption Expenditures by Major Type
and Personal Income (1-18) (II6)[Billions of dollars] [Billions of dollars]
Gross national product
Less: Capital consumption al-lowances
Equals: Net national product. _
Less: Indirect business taxand nontax liability- _ _
Business transfer pay-ments
Statistical discrepancy- _
Plus: Subsidies minus currentsurplus of government enter-prises '
Equals: National income
Less: Corporate profits andinventory valuationadjustment
Contributions for socialinsurance
Excess of wage accrualsover disbursements
Plus: Government transferpayments to persons-
Net interest paid bygovernment
DividendsBusiness transfer pay-
ments _ ..
Equals: Personal income
1959
482.8
40.8
442.0
42.7
1.8-1.7
.4
399.6
46.4
17.6
.0
25.4
7.113.4
1.8
383. 3
1960
504.4
43.1
461.4
45.6
1.8-2.6
.5
417.1
45.1
20.7
.0
27.3
7.814.1
1.8
402.2
1961
521.3
45.2
476.1
47.1
1.8-1.5
1.4
430.2
46.2
21.9
.0
31.0
7.314.4
1.8
416.7
1961
I II III IV
1962
I
Seasonally adjusted at annual rates
500.8
44.2
456.6
45.7
1.8-2.6
.5
412.2
40.0
21.2
.0
30.1
7.514.2
1.8
404,7
516.1
45.0
471.1
46.4
1.8-1.8
1.4
426.0
45.5
21.7
.0
31.0
7.314.2
1.8
413.2
525.8
45.5
480.3
47.5
1.8-1.5
1.8
434.3
47.0
22.0
.0
31.6
7.214.3
1.8
420.3
542.2
46.1
496.1
48.9
1.8-.5
1.9
447.9
52.1
22.6
.0
31.4
7.215.0
1.8
428.6
548.3
46.5
501.8
49.4
1.8n.a.
1.9
n.a
n.a.
23.9
.0
31.4
7.315.0
1.8
432. 9
Table 5. Government Receipts and Expenditures (III-3, III-4)[Billions of dollars]
Federal Government receipts
Personal tax and nontax receipts . _Corporate profits tax accrualsIndirect business tax and nontax
accrualsContributions for social insurance.
Federal Government expenditures
Purchases of goods and services. ._
Transfer paymentsTo persons __ _ _Foreign (net)
Grants-in-aid to State and localgovernments.
Net interest paid
Subsidies less current surplus ofgovernment enterprises
Surplus or deficit ( ) on income and
State and local government receipts...
Personal tax and nontax receipts __Corporate profits tax accrualsIndirect business tax and nontax
accruals 1Contributions for social insurance.Federal grants-in-aid
State and local government expendi-tures __ _ _-
Purchases of goods and services. _ _Transfer payments to personsNet interest paidLess: Current surplus of govern-
ment enterprises
Surplus or deficit ( ) on Income andproduct account __ __ _ ..
1959
89.4
39.621.9
13.014.9
91.2
53.5
22.220.61.5
6.6
6.4
2.6
-1.8
46.5
6.41.2
29.62.76.6
46.9
43.64.8.7
2.2
-.4
1960
96.0
43.221.2
14.017.7
92.8
52.9
23.722.21.6
6.1
7.0
2.9
3.3
49.2
7.21.2
31.63.06.1
50.6
47.25.1.7
2.4
-1.4
1961
97.9
43.921.6
13.818.6
101.8
57.3
27.325.61.7
6.6
6.5
4.1
-3.9
52.4
8.01.2
33.33.36.6
55.0
51.45.4.8
2.6
-2.6
1961
I II III IV
1962
I
Seasonally adjusted at annualrates
92.5
42.618.6
13.318.0
98.0
54.7
26.524.81.6
7.1
6.8
3.0
-5.5
51.4
7.71.0
32.43.27.1
53.8
50.35.3.7
2.5
-2.4
96.8
43.621.2
13.618.4
101.1
56.6
27.125.71.5
6.8
6.6
4.0
-4.3
51.9
7.81.2
32.93.36.8
54.2
50.65.4.8
2.6
-2.3
99.3
44.522.1
14.018.7
102.4
57.4
27.826.11.7
6.4
6.4
4.5
3.1
52.4
8.01.2
33.53.36.4
55.3
51.65.5.8
2.7
-2.9
103.2
44.824.6
14.519.3
105.2
60.0
27.725.91.8
6.4
6.5
4.6
2.0
53.7
8.31.3
34.43.36.4
56.8
53.25.5.8
2.7
-3.1
n.a.
46.0n.a.
14.620.6
107.9
61.5
27.625.91.7
7.6
6.5
4.7
n.a.
n.a.
8.7n.a.
34.83.37.6
57.9
54.35.6.8
2.8
n.a.
Goods and services, total-
Durable goods, total
Automobiles and parts
Furniture and householdequipment
Other ._._ _
Nondurable goods, total
Food and beverages _
Clothing and shoes
Gasoline and oil. __
Other _
Services, total _
Housing. __
Household operation
Transportation
Other
1959
314. 0
43.5
18.1
18.9
6.6
147.3
78.0
27.4
11.0
30.9
123.2
39.9
18.1
10.0
55.2
1960
328.9
44.3
18.6
18.8
6.9
152.4
80.1
28.1
11.6
32.6
132.2
42.2
19.6
10.5
59.9
1961
339.0
42.3
16.8
18.6
7.0
155.5
81.8
28.4
11.8
33.6
141.2
44.5
21.0
10.8
64.8
1961
I II III IV
1962
I
Seasonally adjusted at annual rates
330.7
39.4
14.8
17.8
6.8
153.7
81.1
27.9
11.7
33.0
137.5
43.6
20.6
10.5
62.8
336.1
42.0
16.7
18.3
7.0
154.1
81.4
27.6
11.7
33.4
139.9
44.2
20.9
10.7
64.1
341.0
42.3
16. 4
18.8
7.0
156.2
81.9
28.6
11.8
33.9
142.4
44.8
21.2
10.9
65.5
348.4
45.5
19.3
19.1
7.1
158.1
82.7
29.5
11.8
34.0
144.9
45.5
21.6
11.0
66.7
352.0
44.8
18.7
18.9
7.2
159.8
84.0
29.4
12.0
34.4
147.3
46.1
21.9
11.2
68.1
Table 7.Foreign Transactions in the National Income Accounts(IV-2)
[Billions of dollars]
Receipts from abroad
Exports of goods and services
Payments to abroad
Imports of goods and servicesNet transfer payments by Government-Net foreign investment. _
1959
23.1
23.1.
23.1
23.81.5
-2.3
1960
26.7
26.7
26.7
23.61.61.5
1961
27.4
27.4
27.4
23.41.72.3
1961
I II III IV
1962
I
Seasonally adjusted at annualrates
27.6
27.6
27.6
22.31.63.7
26.4
26.4
26.4
22.51.52.4
27.0
27.0
27.0
24.31.7.9
28.5
28.5
28.5
24.51.82.2
28.2
28.2
28.2
24.71.71.7
Table 8.Sources and Uses of Gross Savings, SeasonallyAdjusted Quarterly Totals at Annual Rates, (V-2)
[Billions of dollars]
Gross private saving
Personal saving _Undistributed corporate
profits _. _ _ __ __ _Corporate inventory valu-
ation adjustment __Capital consumption al-
lowance -.Excess of wage accruals
over disbursements _
Government surplus on incomeand product transactions
FederalState and local
Gross investment
Gross private domestic in-vestment
Net foreign investment
Statistical discrepancy
1959
74.0
23.4
10.3
40.8
.0
-2.2
-1.8-.4
70.1
72.4-2.3
-1.7
1960
74.6
22.9
8.6
.0
43.1
.0
1.9
3.3-1.4
73.9
72.41.5
-2.6
1961
79.9
25.8
8.8
.1
45.2
.0
-6.5
-3.9-2.6
71.9
69.62.3
-1.5
1961
I II III IV
1962
I
Seasonally adjusted at annual rates
74.0
23.7
5.8
.4
44.2
.0
-7.9
5 5-2.4
63.5
59.83.7
2 6
79.7
25.8
8.6
.3
45.0
.0
-6.6
4 3-2.3
71.3
68.82.4
-1.8
81.6
26.8
9.5
-.2
45.5
.0
-6.0
3 1-2.9
74.1
73.2.9
1 5
84.4
27.1
11.5Q
46.1
.0
-5.1
-2.0-3.1
78.8
76.62.2
-.5
n.a,
26.2
n.a.
n.a.
46.5
.0
n.a.
n.a.n.a.
78.8
77.01.7
n.a.
n.a.Not available.63587362-
n.a.Not available.
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
10 SUEVEY OF CUKEENT BUSINESS May 1962
Employment Changes by Legal Form, 1957-60Institutions, States and Localities Pace RiseGrowth of Non-
farm Proprietorships Offsets Declines in Corporations andAgriculture
OF a population of 181 million in I960,67% million personsor 3 out of 8participated in the production of goodsand services. Of this number, 54 mil-lion were in the business sector; 9Kmillion were employed by government;and 4 million were paid employees ofhouseholds and institutions.
The largest of these, the businessgroup, may be further subdivided intothe 31 million persons working forcorporations; the 9% million proprietorsand partners together with their 11%million paid employees; and 1% millionemployees of businesses such as mutualand cooperative organizations, creditunions, and government enterprises.
The following discussion focuses onthe changes in the legal form of employ-ment that occurred between 1957 and1960 and relates them to the longerterm (1929-57) trends noted in theNovember 1959 SURVEY.*
From 1957 to 1960, there were three-fourths 2 million persons added to thenumber engaged in economic produc-tion. Although business employs thegreat share of the total, it providedonly 125,000 of the total rise. Generalgovernment and households and insti-tutions each furnished slightly over300,000 of the employment increaseover this 3-year span.
The small size of the increase in busi-ness employment reflects mainly theincomplete recovery from the 1958 de-cline and the continuing decline in thenumber of farmers. Corporate em-
1. Table 1 updates the OBE's estimates of employment bylegal form of organization which were presented for theperiod 1929-58 in the November 1959 issue of the SURVEY.The first half of this table is the employment counterpart of"National Income and Gross National Product by LegalForm of Organization,"table 1-12 in the annual incomeand product estimates. The lower portion revises the in-come counterpart that relates to nonfarm ordinary business.
2. Over this period, the number of nonagricultural civilianemployees rose 1.4 millionthe same figure reported by theBureau of Labor Statistics in their establishment-basedemployment series. After adjustment to a full-time equiv-alent basis, the increase was 1.2 million. Further adjust-ments for the 0.4 million decrease in farmers and their em-ployees, the 0.3 million decrease in military strength, andthe 0.3 million rise in nonfarm self-employed yields the netrise of three-fourths million noted above in persons engagedin production.
ployment, which because of its indus-trial composition is particularlysensitive to swings in the business cycle,declined nearly 200,000 from 1957 to1960. At the same time, the number offarm proprietors in the Nation was re-duced by twice this amount.
Substantial increases elsewheremainly in the number of nonfarm pro-prietors and their employeesmorethan offset the decline in corporateemployment and farm proprietors,thereby accounting for the net gain of125,000 jobs noted for the businesssector. This occurred because theareas showing increased employmenttrade and serviceswere those wherethe noncorporate form is significant.The increase in the number of nonfarmproprietors and their employees and thedecrease in farm operators since 1957
are essentially continuations of long-term trends.
The 350,000 increase in governmentemployment since 1957 was the neteffect of a strong rise in State and localgovernment employment (630,000), adrop in military strength, and a levelingoff in Federal civilian employment.These recent-period developments arein contrast to the rapid expansion inFederal workers and the moderate ad-vance in State and local governmentworkers from 1929 to the early 1950;s.They are, however, roughly consistentwith trends over the past decade, ifallowance is made for the direct effectsof the Korean war.
Employment in households and insti-tutions rose by 300,000 from 1957 to1960. This gain stemmed from largeremployment by nonprofit institutionsa continuation of a trend in evidencesince 1929. Employment in privatehouseholdsmainly domestic serv-antswas about the same in 1960 as in1957 and, also, as in 1948. This repre-sents a leveling off in the long-termdecline in employment in households.
Table 1.Persons Engaged in Production and National Income Originating in NonfarmOrdinary Business, by Legal Form of Organization for Selected Years, 1929, 1939, 1947,and 1956-60
1929 1939 1947 1956 1957 1958 1959 1960
(Data in thousands)
Persons engaged in production, total *Full-time equivalent employeesActive proprietors 3
Corporate businessSole proprietorships and partnerships
Full-time equivalent employeesActive proprietors __ _ _
Other private businessGovernment enterprisesGeneral government-. _ ._Households and institutions _Rest of the world
Nonfarm ordinary business, total _ _ _Corporate businessSole proprietorships and partnerships
Full- time equivalent employeesActive proprietors _ _ _ _ _ _
46, 21635, 89610 32020, 30319, 1008,780
10, 320407409
2,7753,222
0
30, 43419, 92910, 5055,7514,754
46, 60536, 33910 26618 68018, 2818,015
10, 266494503
5,6303,016
1
28, 90318 38010, 5235,5884,935
57 65247 45310 19926 50620, 91610. 71710' 199
562664
6, 0682,931
5
40, 63726 31114, 3268,6455,681
66 34556, 4009 945
31 20620, 98811, 0439 945
769847
8,9163,615
4
46, 85531 01415, 8419,3146, 527
66 57856 7349 844
31 34720, 80710, 9639 844
796864
9,0543,706
4
46, 99631 15715, 8399,2586 581
64 82455 1839 641
29, 73420, 45610, 8159 641
806886
9,0973,841
4
45, 14529 53815, 6079,0566,551
66 46356 7179 746
30 76220, 89811, 1529 746
815898
9,1683,918
4
46, 74330 57016, 1739,4196,754
67 36057 6649 696
31 16021, 01311,3179 696
843923
9,4004,017
4
47, 42130 97016, 4519,6066 845
(Millions of dollars)
National Income originating in nonfarm ordi-nary business total _
Corporate business.- __Compensation of employees
Wages and salariesSupplements to wages and salaries.
Corporate profits 3 and net interestSole proprietorships and partnerships
Compensation of employees. _Wages and salariesSupplements to wages and salaries-
Proprietors' income 3 and net interest. _
61, 08245, 06733 59733 165
43211, 47016,0157,4477,388
598,568
49, 70936, 06529 18127 6621,5196,884
13, 6446,3206,057
2637,324
143, 852104, 32080 92277 0123, 910
23, 39839, 53219 74319, 141
60219, 789
259, 036194, 826154 367143 49510, 87240, 45964, 21032 33631, 1561,180
31, 874
268, 614202, 583162 443150 30212, 14140, 14066, 03133 46632 1651,301
32, 565
261,418195, 429159 160147 08512, 07536, 26965, 98933 73432, 4141,320
32, 255
290, 830219 384173 929159 92014, 00945, 45571, 44636 76535 1581,607
34, 681
300 747226 093182 125166 63715, 48843, 96874, 65438 86136 9571,904
35, 793
1. This series falls short of total man-years of full-time employment, because of the exclusion of unpaid family workers.2. Consists of sole proprietors and partners of unincorporated enterprises, and of independent professional persons, de-
voting the major portion of their time to the business or profession.3. Includes inventory valuation adjustment.Source: U.S. Department of Commerce, Office of Business Economics.
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
May 1962 SURVEY OF CUBKENT BUSINESS 11
Advance in Salaries as Portion of Maniifacturin^ Payrolls
Reflects Progress in Technology
MANUFACTURING accounts foralmost one-third of the Nation's output;employs one-fourth of the workers; andpays one-half of all corporate incometaxes. Average earnings per full-timefactory employee in 1961 were $5,503,compared with $4,610 for all otherindustries. Output per man-hour in theindustry with its large complement ofcomplex capital resources of constantly-increasing efficiency is high and pro-ductivity has increased rapidly.
EMPLOYEE COMPENSATION INMANUFACTURING, Through First Quarter
1962Growth Has Been Large, With Cyclical
Interruptions, in Both Money and Real TermsEarnings of Wage Workers Have Risen Most,
With Fringe Benefits Supplementing BothWages and Salaries
Billion $
100 Total Compensation(Wages, Salaries& Supplements)
80 -
60
40
20 Fringe Benefits: Supplements to Wages & Salaries
. '
' WT'fM'T'T I I I I I I I I I I ! I
Relatively, the Largest Expansions HaveOccured in Salaries and in Supplementsor Fringe Benefits
Index, 1947-49 = 100500
400
300
200
100
Fringe Benefit-s:Supplements to Wages
& Salaries
Salaries
TotalCompensation
(Wages, _Salaries
i & Supplements)
1947 50 55 60 65lst quarter 1962, Seasonally Adjusted, at annual RateU.S. Department of Commerce, Office of Business Economics 62-5-6
Compensation of manufacturing em-ployees totaled $97 billion in 1961, ofwhich 11.8 million wage earners received$56% billion, and 4.1 million salariedpersonnel, $31 % billion. Supplementsto wages and salaries accounted for theremaining $9 billion. Average annualearnings of wage workers amounted to$4,778, while salaried persons, whichincludes an increasing percentage ofthose with high technical training,received $7,592 per capita. Supple-ments averaged $569 per worker. Dueto a lack of data no allocation of supple-ments is made between salaried em-ployees and wage workers.
Among individual industries, therelationships between salaries, wages,and supplements vary greatly. Asshown in table 1, the ratio of wages tototal compensation in 1960 is less than50 percent in industries such as petro-leum, chemicals, electrical machinery,and instrumentsall industries wherescientists, professionals, and skilledtechnicians are particularly important.Conversely, wages account for morethan 70 percent of total compensationin textiles, lumber, tobacco, apparel,and leather-goods manufacturingin-dustries in which the wageworker pre-dominates. Supplements, or fringebenefits, vary from 6 percent to 27percent of total compensation amongthe major manufacturing industries.
In the postwar expansion in manu-facturing, all three components of totalcompensation have increased consider-ably but at sharply differing rates.These movements are summarized inthe accompanying chart.
Salariesnow almost triple their1947 totalhave increased as a share oftotal compensation by about one-third.Although nearly every individual in-dustry shared in the rise, the largestrelative gains were in the durable goodsindustries. The persistent upwardtrend in salaries throughout the post-war period is clearly evident from thelower panel of the chart on this page.
Supplements, which currently arenearly five times the 1947 figure, havedoubled as a share of total compensa-tion. Conversely, earnings of wage-workers although increasing by three-fourths since 1947, have declined inrelative importance by one-fifth overthe postwar span.
As shown in table 3? the increasingimportance of salaries in the total wagebill has accelerated sharply in recentyears. Total wages paid in 1961 wereonly slightly (2% percent) above those
MANUFACTURING PAYROLLSSalary Portion of Total Payrolls Rises Steadily
Percent40
Salaries as a Percentof Wages and Salaries
30
20 I 1 i i i
\
i i i I i i i i i i
Largest Relative increases Occur in DurableGoods Industries
40
30
20 I t I i
Nondurable Good
I I I I
Durable Goods
I I I i I i I1947 49 51 53 55 57 59 61 63
U.S. Department of Commerce, Office of Business Economics 62-5-7
paid in 1957. Salaries, however, wereup more than one-fifth. The shift inemployment is even more marked.From 1957 to 1961 the number of wage-workers declined nearly one-tenth, whilesalaried employees increased 5 percent.
Only in average earnings per em-ployee was there near equality. Overthe past 4 years, average annual wagesrose 12 percent, while average annualsalaries moved ahead 16 percent. Overthe longer span from 1947 to 1957, theincrease in average earnings of wage-workers has substantially exceeded thatof salaried employees.
Although the importance of salariesas a percent of total payrolls has in-creased sharply during the 1957-61
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
12 SURVEY OF CURRENT BUSINESS May 1962period, these developments, it shouldbe noted, reflect mainly the impact ofthe business cycle. This is evidentfrom the 1958-61 comparisons in table3, Between these two years, bothaffected by recession and recovery,salaries increased only about twice asfast as wages, a rate generally in linewith the overall trend for the long-termperiod 1947-61. Employment movedup with salaried workers increasing 7percent against a wageworker increase
of 1 percent. The 1957-61 develop-ments are pointed out here because ofthe tendency for the shifts from wagesto salaries which develops during thedown phase of the cycle to becomea permanent part of the wage structure.
Professional jobs increaseA major factor in the relative growth
of the salaried worker group has beenthe expansion in employment of pro-fessional, technical, and kindred work-
Table 1.Wages, Salaries and Supplements as a Percent of Total Compensation in Manu-facturing, by Industry, 1948, 1957, and 1960
TotalIFood and kindred productsTobacco manufactures _ _ _ _ _ _.Textile mill products ^ ,_ . _ . _ _Apparel and other finished fabric productsLumber and wood products, except furniture^Furniture and fixturesPaper and allied productsPrinting, publishing, and allied industriesChemicals and allied productsProducts of petroleum and coal _ __Unbber productsLeather and leather products _Stone, clay, and glass productsPrimary metal industries _ _ _Fabricated metal products, including ordnance _Instruments
Miscellaneous manufacturingMachinery except electricalElectrical machineryTransportation equipment, except automobiles _ _ _ _ _ _ _ _Automobiles and automobile equipment
Wages
1948
71.564.580.584.477.582.375.474 459.961.459.871.777.2
77.378.972.062 870.568.562.169.775.0
1957
62.859.170.978.772.4
77.969.968.757.549.745.967.176.570.168.863.452 663.160.155.357.867.5
1960
59.356.770.976.771.678.169.267 557.247.243.761.671.567.263.959.347.062.656.248.751.763.4
Salaries
1948
24.1
31.113.512.018.414.121.321,236.932.625.624.619.118.817.224.232.1
25.727.731.525.921.4
1957
29.034.217.815.420.217.324.724.337.540.228.824.218.222.320.429.938.630.832.836.435.419.6
1960
31.435.515.516.119.4
16.024.324.636.941.629.328.322.024.224.232.843.030.435.741.840.622.4
Supplements
1948
4.4
4.46.03.64.1
3.63.34.43.2
6.014.63.73.73.93.93.85.13.83.86.44.43.6
1957
8.2
6.711.35.97.4
4.85.47.05.0
10.125.38.75.37.6
10.86.78.86.17.18.36.8
12.9
1960
9.37.8
13.67.29.0
5.96.57.95.9
11.227.010.16.58.6
11.97.9
10.07.08.19.57.7
14.2
erspersons paid on a salary basis.Between 1952 and 1961, the Bureau ofLabor Statistics7 occupational dataindicate that the number of such work-ers in manufacturing increased by 69percent, as compared with a 3-percentrise in total factory employment.
As shown in table 4, the four groupsof workers that constitute salariedpersonnel have expanded from one outof four of the factory labor force in1952, to the present one out of three.An offsetting decline occurred in thethree groups of wage earners.
Expansion of research activities hasbeen a major factor in the increasingneed for salaried workers. Techno-logical demands have called for anincreasing number of scientists, engi-neers, and technicians, thereby con-tributing to the rise of professionalemployment in manufacturing indus-tries. At the same time, technologicalprogress and high capital investmentper worker have made possible aconsiderably larger output without acommensurate increase in the numberof workers required to turn out theproducts. The postwar trend in sala-ried workers seems to have beenaccelerating, and it appears evidentthat this trend will continue into thefuture.
Table 2.-Compensation of Employees in Manufacturing by Industry, 1948-60[Millions of Dollars]
12345
6
789
10ii1213UIS16171819m%i22..
TotalFood and kindred products. _Tobacco manufactures. _ __ _Textile mill producesApparel and other finished
fabric productsLumber and wood products,
except furniture __Furniture and fixturesPaper and allied productsPrinting, publishing, and
allied industriesChemicals and allied prod-
ucts _ _Products of petroleum and
coal _Rubber productsLeather and leather products-Stone, clay, and glass prod-
ucts -_Primary metal industriesFabricated metal products,
including ordnanceInstruments
Miscellaneous manufactur-i n g _ _ _ _ _ _ _ _
Machinery, except electrical..Electrical machineryTransportation equipment,
except automobiles _ _Automobiles and automobile
equipment _ _
Wages
1948
34,7392,942
1733,0912,319
1,604756
1,1691, 562
1,536690605780
1,2313,4672,501
520
9453,7691,8301,234
2,015
1949
31,9392,942
1782,7332,250
1,384688
1,130
1,619
1,480
688540745
1,1502,9692,207
464
8533,0841,5621,1702,103
1950
36,7833, 190
1823,1062, 443
1,691868
1,3391,769
1,646730655821
1,3413,5722,710
550
9843,5231,9261,1532,584
1951
43,2333,399
2093,1732,421
1,939890
1,4931,885
1, 928807760825
1,5894,4673,294
733
1,0794,9352,5362,0302,841
1952
45,9523,547
2243,0572,530
1,909950
1,5222,038
2,030
829814899
1,5434,3523,723
839
1,1025,4062,9092,8872,842
1953
50, 9043,730
2343,0562,651
1, 9451,0151,6892,179
2,2238778SO923
1,6925,0514,450
935
1,2725,7663,3963,3703,570
1954
46, 4583, 714
2472,6772,549
1,800936
1,7282,238
2,198845777877
1,6464,2543, 842
870
1,2004,9442,9823,1333,001
1955
51,0113,822
2542,8692,730
2, 0071,0571,862
2,375
2,339867957948
1,8645,3154,142
907
1, 2495,2893,2463,094
3,818
1956
53, 9724,114
2652,9312,904
2,0561,1232,003
2,583
2,527913
- 958995
1,9855,6244, 236
973
1,3906,0253,5563,444
3,367
1957
55, 1874, 197
2512, 8232,919
1,8331,1352,071
2,698
2,626949
1,0131,009
2,0025,7744,4001,027
1,3826,0333,680
3, 8863,479
1958
51,0464,223
2602,6402,834
1,8031,1132,1032,789
2,596909912944
1,9794,8814,093
949
1,3745,1043,4023,437
2,701
1959
56, 2024,389
2742,9593,126
2,0691,2322,3162,940
2,767942
1,0581,020
2,2015,3054,5531,038
1, 4855,8653,9893,432
3,242
1960
57, 1684,504
2882,9223,181
1,9851,2292,3993,122
2, 885907
1,041983
2,2385,421
4,7061,049
1,5105,9474,110
3,230
3,511
Salaries
1948
11,7201,417
29439550
275213333
961
816295208193
299757840266
3441,522
929459575
1949
11,9211,472
33418509
279234334
1,038
852297209188
315774
858283
3481,495
927480
578
1950
12, 6101,464
37463509
28525534.5
1,047
905297213179
337871
907322
3821,5911,019
518664
1951
15, 0441,723
42515654
337287426
1? 148
1,121
355253187
3991,0211,114
380
4101,9211,186
810
755
1952
17, 0081,825
43513671
368301477
1,213
1,270414288194
4331,1651, 363
434
4432,1731,3951,185
840
1953
18,9771,974
45539748
326311528
1,346
1,456450315208
4691,2541,544
503
4992, 3521,6481,471
991
1954
19, 6192,097
41546737
347321556
1,452
1,563473317212
4801,2281, 585
533
5262,4241.6621, 540
979
1955
21,2412,252
42554747
392358627
1,548
1,684
509341227
5231,3461,698
577
6032,5861,8301,709
1,088
1956
23, 7342,347
44555788
416380698
1,644
1,917546362233
5961, 5771,911
692
6223,0512,142
2,1381,075
1957
25, 4572,428
63550815
408401733
1,759
2,127
597366240
6361,7102,079
754
6743,2992, 4252,384
1,009
Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
Mav 1062 SURVEY OF CURRENT BUSINESS 13
Salaries rise during cyclical down-turns
Changes in wages and salaries duringthe decline and recovery phases of thebusiness cycle bring into clearer focusthe increasing role of salaries in thetotal wage bill and the resulting in-creased stability in overall payrolls.Salary payments have increased everyyear since 1946, both in periods ofcyclical decline and recovery. Thepostwar rise in wage disbursements, in.contrast, has been interrupted in eachrecession period, as wage workers werelaid off in response to decreases in de-
mand for the products of the assemblylines.
These differences in the cyclical be-havior of wage and salary paymentsshow up clearly in the top panel of thechart on page 11. During each reces-sion period1949, 1954, and 1958thepercentage share of salaries rose steeply;in each ensuing recovery year, the sharefell as the employment of wage workersincreased and wages paid moved upsharply from the recession lows. Thismovement is obscured in the 1960-61downturn because of the comparativelymild decline in and salaries
generally, and because the impact of therecession was felt in roughly equaldegree in both 1960 and 1961.
Although the rate of increase ofsalaries and salaried employment hasbeen slowed by the postwar cyclicaldownturns, fluctuations in salaried em-ployment have been minor as comparedwith those of wage workers. The com-parative stability in the face of decliningoutput stems from several factors,including the shifting character of out-put with higher requirements for specialskills; the relative scarcity of skilled
(Continued on page 20)
Table 3.Salaries, Wages, Number of Wage and Salaried Workers, and Average AnnualEarnings in Manufacturing, Selected Years 1947-61
19471957 .. _.19581961 .. . _
1947 to 19571957 to 1961 _1958 to 19611947 to 1961
Payrolls (billions ofdollars)
Total
42 580. 676. 787.8
Wages
31.855. 251.056. 5
Salaries
10.725.525.731.2
Full-time equemployees (mil
persons)
Total
15.216.915. 515.9
Wage-workers
12.713.011.711.8
valentions of
Salariedworkers
2.53.93.84.1
Average annual earningsper full-time employee
(dollars)
Total
2,7934,7814, 9395, 503
Wages
2,4954, 2534, 3634,778
Salaries
4,3216,5396,6987,592
Percentage change
89.88.8
14.4106. 5
73.72.5
10.878.0
137.322.621.7
191.0
10.9-5.5
2.74.8
1.98. 8
1.1-7.0
56. 85.67.4
65.6
71.215.111.497.0
70.512.39.5
91.5
51.316.113.375.7
Table 4.Percent Distribution of PersonsEmployed in Manufacturing, by MajorOccupation Group, 1952, 1957, and 1961l
Total
Professional, technical, and kindredworkers
Managers, officials, and proprietors. _ _Clerical and kindred workers.Sales workers
Total salaried employees
Craftsmen, foremen, and kindredworkers
Operatives and kindred workersLaborers and service workers
Total wage earners
1952
100.0
5 45.2
11.52.4
24.5
19.845.510.275.5
1957
100.0
7 45.4
12.12.8
27.7
19.443.99.0
72.3
1961
100 6
8 86.5
12. 43.7
31.4
18.842.27.6
68. 6
Source: U.S. Department of Commerce, Office of Business Economics.
1. Includes wage and salaried workers, self-employedpersons, and a small number of unpaid family workers.
Source: U.S. Department of Labor, Bureau of LaborStatistics.
Table 2.Compensation of Employees in Manufacturing by Industry, 1948-60Continued
[ Millions of Dollars]
! Salaries Con.111958
i25, 655
! 2,4411 59
556
794
380i "$75! 752
1,763
2,190
605; 391
262
' 0291,635
2,146i "^!
1959
28,518
2, 64259594
841
400414822
1,901
1960
30,243
2, 82663|614
863
406431874
2,01111
2,369 2,538
605449300
7461, 932
2, 450877
611 6803,12C| 3.5542, 565
2, 444
1,125
3, COS
2,628
608478302
8042, 049
2, 602961
I731'
3,7773, 533|2, 534!
1,19( 1,237:
Supplements
1948
2,145
20113133
124
693370
84
151
1693137
63169
1949
2,264
21515127
132
613477
95
173
2012938
65187
132 14542 47
1950
3,142
25417175
166
834696
112
201
1875047
87420
21059
51 51 68208 202 265190
78
97
190
76
104
232
83
284
1951
4,141
30420195
187
1952
4, 431
31719186
198
9656126
1953
4,928
33122188
217
94 9060129
133 139
273
2917750
120
288
335
61146
153
321
39579 9353) 52
1954
5,012
36725188
222
1955
5, 727
40326203
253
1956
6, 379
41940208
276
9565159
164
379
4127953
|122
514 543
292 j 31080 1 91
80408327
142
370
81458'79
194
363
142590
344
1525 SO
333103 110
91488421
112 116
1957
7,209
47540213
298
11276 81 1 88175 196 210
190
397
39497
208 237
446 534
421 524108
62 64
1958
7,025
49144205
297
1959
8, 20 1
55450250
3541
11087219
248
557
537
139103255
284
624
562
1960
8, 957J
61855!272
399
159115283
323
685
559
Total compensation
1948 1949 1950
48,60446,12-452,535
4, 560215
3,663
2, 993
1,9481 , 0021,572
4, 629226
4,908'236
3,278 3,744
2,891
1, 724956
1, 541
2,607 2,752
2, 503
1,154
2, 505
1, 186
3, 118
1954
62, 418
5, 426271
3,882
3,262
2,060 2,3721,169! 1,2331, 78!)2, 928
2, 752
1,214131 129 158 170 1 814 778 91870 66
182 198 217705 790 907
384 425 1 4G8125 141 j 172
83
219! 262822
470172
94 1091 121 133 133475 538 655 712 651379 430
236 j 251444
300
430 | 566
942
89
2881,014,
555 622i202
154787
223|
168;857:
48S 551 555 704 801i
372
606
451 433 470 481 !.
G63 580 706 785:
1, 010 971 1,047
1,593 1,5304, 393
3, 473823
1,3405, 4992,919
3, 931
3,210794
1, 2524*, 781
1,7654,861
3, 827
2,045
3,167
3, 322
1952
67,391
5,689286
3,756
3, 399
2, 3711,3112,128
3,390
3,588
1,453 1,5781,090 1,1811,062
2,1086, 002
4, 700
1, 146
2, 0986, 060
1953
74,809
6, 035301
3,783
3,616
2, 3611,3872,363
3,678
4,000
1 72^l', 2881,183
2, 3036, 895
1954
71, 089
6,178313
3, 410
3, 508
2, 2421,3222,443
3, 855
4,140
1,7301,1731,142
2,2786, 062
5,396 6.338 5,760931 1,193 1,361 1,541 1,513
1955
77, 979
6,477322
3,626
3, 730
2,5111,4912,664
4, 113
4, 420
1,7701, 3951, 237
2, 5697, 366
6, 2241,609
1,433 1,569 1,621s! 1,802 1,820J 1,961
1956
84, 035
6, 880349
3,694
3,968
2, 5881,5842, 897
4,435
4, 890
1,8801,4281,292
2,7797,992
6, 5731,806
1957
87, 853
7, 100354
3, 586
4, 032
2, 3531,6243, 014
4, 694
5,287
2,0701,5101,319
2, 8558,391
6, 947
1958 1959
83, 728 92, 92 1
7, 155363
3, 404
3,925
2, 2931,5753,074
4,800
5, 343
2,051
7, 585383
1960
96,388
7, 948406
3,803 3,808
4,321
2, 6981, 7493, 393
5, 125
1
234
4,443J 5
2, 5411, 7753, 556
5,456
5,760 6,108
2, 109 2, 0741,432 1,665 L6891,272
2,8277,338
6, 7091,953 1,889i
2,133 2.189 2. 156
1,403 1,374
3,209 3,3308, 179
7, 5582,117
8, 484
7, 9302, 233
2,319 2,4105.37917,264 8,037 8, 6 ')til 7, 843 8,413 9,73110,044 8, 881 llO, 206110. 581
2,678 3,177 4,049 4,076 5,465
1.771 1,726 1,753 2,982 4,266 5,077
2, 687 2, 785 3,532 3,966 4, 045 5, 005
5, 023
4, 924
4,410
5, 500 6,185 6,656! 6,522 7,758
5,103 5,953 6,724 6,314! 6,536
5,472! 5,048i
5,1511 4,406 5,138
8, 444
6, 245
5, 533
6
8
9
10
111213
1415
1617
1819
20
21
22Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis
BY JOHN A. GORMAN
Capital Formation, Saving, and CreditFinancing of Investment Facilitated by Higher Flow of Corporate Internal Funds-
Banks Supply Greater Credit Volume-Interest Rates Vary Over Narrow Range
cAPITAL formation continued to risein the first quarter of 1962, to a season-ally adjusted annual rate of $77 billion;up $17 billion over the first quarter of1961, the low point of the 1960-61 cycle.Reflecting the cyclical recovery of prof-its, retained earnings of corporationsrose about $6 billion over the period,and capital consumption allowances ac-counted for another $2 billion rise ininternal funds. These two advanceswere equivalent to about one-half of theincreased requirements for domesticinvestment.
The increased nee