Federal Reserve Bulletin November 1959
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FEDERAL RESERVE BULLETIN November BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM ASHING'tON Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis EDITORIAL COMMITTEE Winfield W. Riefler Woodlief Thomas Charles Molony Ralph A. Young Susan S. Burr The Federal Reserve BULLETIN is issued monthly under the direction of the staff editorial committee. This committee is responsible for opinions expressed, except in official state- ments and signed articles. Contents I Economic Activity in Late 1959 1347 | Law Department 1353 Current Events and Announcements 1356 j National Summary of Business Conditions 1357 |i Financial and Business Statistics, U. S. (Contents on p. 1359) 1361 | International Financial Statistics (Contents on p. 1425) 1426 ; Board of Governors and Staff 1443 j Open Market Committee and Staff; Federal Advisory Council 1444 i; Federal Reserve Banks and Branches 1444 l j Federal Reserve Board Publications 1446 j Index to Statistical Tables 1448 Map of Federal Reserve System Inside back cover Volume 4£ • Number n Subscription Price of Bulletin A copy of the Federal Reserve Bulletin is sent to each member bank without charge; member banks desiring additional copies may secure them at a special $2.00 annual rate. The regular subscription price in the United States and its possessions, Bolivia, Canada, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, Guatemala, Haiti, Republic of Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, El Salvador, Uruguay, and Venezuela is $6.00 per annum or 60 cents per copy; elsewhere, $7.00 per annum or 70 cents per copy. Group subscriptions in the United States for 10 or more copies to one address, 50 cents per copy per month, or $5.00 for 12 months. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis ECONOMIC ACTIVITY is recovering from GROSS NATIONAL PRODUCT the contraction caused by the steel strike. Billions of dollars, annual rotes Operations were resumed at major steel soo plants on November 7 following the longest CUI«EN1 DOLLARS steel work stoppage on record. Steel pro- TOTAL duction is increasing rapidly but it will take some time to rebuild depleted in- ^T 1954 DOLLARS ventories. Through September, activity was main- CONSUMER __—" tained in most metal-fabricating lines, — mainly by drawing on large steel stocks accumulated earlier, and employment and 1 III' 1 200 income curtailments were confined for the ISO most part to the industries involved in the strike. GOVERNMENT 100 Beginning in October, secondary effects - 50 spread more widely and by early November • ». the total number out of work because of 1 1 1 1 1 1 the direct and indirect effects of the steel 1953 1955 1959 strike approached one million. The auto- NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Investment includes gross mobile industry has been seriously affected private domestic investment and net exports of goods and by steel shortages. By mid-October, the services. seasonally adjusted unemployment rate, Fixed investment outlays by business con- which excludes most persons on strike, had tinued to rise, although steel shortages risen to 6 per cent of the labor force. It affected some producers' equipment and had been slightly under 5 per cent before construction projects. Residential construc- the strike. tion activity, which had been at a record Gross national product declined $6 bil- level in the spring, declined moderately in lion, or 1.2 per cent, in the third quarter the third quarter. Mortgage lending, how- to a seasonally adjusted annual rate of ever, continued in large volume and pres- $478.6 billion, reflecting mainly the shift sures on mortgage markets increased. from building up to drawing down of steel Total consumer expenditures rose fur- stocks. Total business inventories declined ther in the third quarter, but at a reduced at an annual rate of $1 billion during the rate. State and local government outlays quarter, in contrast with an increase at a also increased, while Federal Government rate exceeding $10 billion in the second purchases of goods and services changed quarter. little. Exports continued the recovery that 1347 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 1348 FEDERAL RESERVE BULLETIN • NOVEMBER 1959 began in the second quarter; the recent in- of the postwar period, and the rate of ac- crease has reflected for the most part mount- cumulation in second quarter 1959 was ing economic expansion abroad. Imports unprecedented except for the early Korean increased much less than in preceding War period. The shift accounted for $18 quarters. billion, or one-third of the total rise in gross Before the strike, economic activity had national product. In the third quarter, been expanding rapidly. From the reces- nonfarm business inventories declined mod- sion low in early 1958, gross national erately. Steel strike influences contributed product had risen 12 per cent before allow- to the rapid inventory increase in the second ance for price increases, and 10 per cent quarter, and have dominated recent after such allowance. The gain in economic changes. activity on either basis was about as large The recession decline in fixed business and as widespread as in the corresponding investment in 1957-58 was the largest since phase of the 1954-55 cyclical recovery. World War II, and recovery during 1958-59 Wholesale prices have risen less while —while generally strong—has not quite consumer prices have risen more in this matched that at the corresponding cyclical cyclical recovery period than at the corres- ponding stage of the business upturn begin- periods in 1955 and 1950. Equipment out- ning in 1954. Consumer prices have moved lays have risen nearly as rapidly as earlier, up to new highs. Retail food prices gen- but construction has lagged, as may be seen erally have tended downward this year, but in the upper chart on the opposite page. prices of other commodities have edged These developments have reflected in part persistently upward. Prices of services have larger margins of capacity relative to out- resumed a rapid rate of increase, following put in a number of lines than in 1955 or some slackening in 1958. 1950. Corporate profits rose from recession BUSINESS INVESTMENT lows to record rates by the second quarter The rate of liquidation of nonfarm business of 1959. Higher profits reflected increased inventories in early 1958 was the highest sales and lower labor costs per unit of out- SELECTED BUSINESS INDEXES 1947-49=100. monthly 140 NON AGRICULTURAL 140 PRICES EMPLOYMENT NONMANUFACTURING INDUSTRIAL w l> o 11- i u 1 c f 120 /'" - 120 CONSUMER 100 100 ..111 III. 19S3 1955 1957 1959 1953 1955 1957 1959 1953 1955 1957 1959 NOTE.—Seasonally adjusted series, except for prices. are wholesale prices of all commodities other than farm Bureau of Labor Statistics data for employment and prices, products and foods. Latest figures shown are for October, and Federal Reserve data for production. Industrial prices for which consumer prices were estimated by Federal Reserve. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis ECONOMIC ACTIVITY IN LATE 1959 1349 by manufacturers of durable goods. In- BUSINESS INVESTMENT Billions ol dollon. onnuol rol ventories of durable goods held by whole- sale and retail distributors as well as by PRODUCERS 30 manufacturers increased rapidly, with auto- (QUIPMiNl motive dealers accounting for a large part of the rise. Stocks of new domestic autos 20 reached a new high of nearly one million cars in July. NONRESIDENTIAL CONSTRUCTION With the onset of the steel strike in mid- I I 10 July, durable goods inventories began to decline, both at manufacturers and distribu- INVENTORY CHANCE 10 tors, as shown in the chart below. From the end of July to the end of September, liquidation of inventories held by manu- iL ill facturers of durable goods was at an annual rate of $7 billion. The bulk of this decline reflected the run-off of steel stocks, 10 and this run-off continued in October 19S5 19S7 and November. In line with this develop- ment, part of the decline was also accounted NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Construction includes all private nonresidential construction. put. Profits fell considerably in the third BUSINESS SALES AND INVENTORIES 1957= 100 quarter, mainly in steel and related indus- 12O tries. DURAILI GOODS Inventories. Despite rapid recovery in production after April 1958, nonfarm busi- too ness inventories continued to decline until the closing months of the year. Durable goods inventories began to rise in late 1958 and increased sharply up to the beginning of the steel strike. Moderate accumulation of inventories of nondurable goods began NONDURAILE GOODS in the spring of 1959. Inventory requirements accompanying IOO expanding sales by manufacturers of dur- able goods were reinforced in the first half INVENTORIES of 1959 by large accumulation of steel •O and some other materials in anticipation of strikes or higher prices. During 195S 1957 this period inventories of purchased ma- NOTE.—Based on Department of Commerce monthly figures terials accounted for four-fifths of the total on value of sales and book value of inventories for manufac- turers and distributors, adjusted for seasonal variation. Latest increase in book value of inventories held figures shown are for September. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 1350 FEDERAL RESERVE BULLETIN • NOVEMBER 1959 for by steel warehouses and by automotive PERSONAL INCOME dealers. Growth in personal income and in total con- Fixed investment. Business fixed capital sumption expenditures has been sustained outlays turned up in late 1958, and this throughout the period since World War II. year the Commerce-SEC quarterly surveys Declines in recession have been small, and have indicated a progressive strengthening prompt cyclical recovery has shaded quickly of business fixed investment intentions.