SURVEY of CURRENT BUSINESS September 1966
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SEPTEMBER 1966 / VOLUME 46 NUMBER OF CONTENTS U.S. Department of Commerce John T« Connor / Secretary THE BUSINESS SITUATION Summary 1 Office of Business Economies George Jaszi / Dime tor Capital Spending Programs in Second Half of 1966 3 Morris R. Goldman Louis J. Paradiso Associate Directors Manufacturers' Inventory and Sales Expectations 8 in Second Half 1966 Murray F. Foss / Editor Leo V* Barry, Jr. / Statistics Editor National Income and Product Tables 11 Billy Jo Hurley / Graphics ARTICLES STAFF CONTRIBUTORS TO THIS ISSUE The Balance of International Payments: 14 Business Review* Second Quarter 1966 David R. Hull, Jr. Foreign Investments, 1965-66 30 Francis L, Hirt Donald A. King Genevieve B. Wimsatt Marie P. Hertzberg Articles: Walther Lederer CURRENT BUSINESS STATISTICS Evelyn M, Parrish Samuel Pizer General S1-S24 Frederick Cutler Industry S24-S40 Subscription prices* including weekly statistical sup~ Subject Index (Inside Back Cover) plements, are $6 a year for domestic and $9*75 for foreign mailing. Single issue 45 cents* Make checks payable to the Superintendent of Docu- ments and send to U.S. Government Printing Office* Washington, D.C. 204029 or to any U.S. Department of Commerce Field Office. U.S. DEPARTMENT OF COMMERCE .FIELD OFFICES Allbnaqsiercpie, N. Mex.' 97101 Cheyenne, Wyo. 82001 Detroit, Mich. 48226 Memphis, Tfc*m. 38103 Portland, Greg. 97204 - ILS. Courthouse Ph. 247-0311. • ' 6022 U.S. Federal Bldg, 445 Federal Bldg. Ph. 226-6088. ; Ph. 634-5920. 345 Federal Oftice Bldg. 217 Old U.S. Courthouse Bldg. Anchorage, Alaska 99501 Ph. 534-3214. Ph. 226-3361. Loussac-Sogn Bldg, 272-6331. Greensboro, N.C. 27402 Chicago, IIL - 60604 412 U.S. Post Office Bldg. 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Broadway Ph. 688-2833, 1000 Liberty Ave. Ph. 644-2850, 583-5615. the BUSINESS SITUATION CHART 1 1HE PRESIDENT'S proposals on posals, the President urged the Federal Business Investment September 8 to. slow down the growth Reserve and the large commercial in business fixed investment and govern- banks to lower interest rates and to Further increase anticipated this year in ment outlays in order to reduce infla- ease the burden of tight money. plant and equipment spending tionary pressures and alleviate the Business fixed investment was one Billion $ of the focal points of the President's 70! burden on monetary policy were made PLANT AND EQUIPMENT fXPEtWURES \ in a setting of strongly rising output proposals because it had already risen 60 and demand and continued pressure to such high levels and because further on productive resources. In August, advances were scheduled for the near 50 key measures of business activity— future. According to the OBE-SEC personal income, nonfarm employment, survey, conducted in late July and and industrial production—again rose August, plant and equipment expendi- to new peaks, and retail sales exceeded tures rose $2 billion (annual rate) in the record rate of last March. It the second quarter and were expected seemed fairly certain that GNP would to rise an additional $3J£ billion by show a greater rise in the third quarter the fourth. In addition, the survey than in the second, as defense purchases indicated that as of midyear the pro- and business outlays for new plant and portion of manufacturing firms that j L S 9 ffl ® O 1965 1966 equipment continued to rise and as considered their capacity insufficient for 1962 63 64 65 66* Quarterly, Seasonally Adjusted consumer demand moved ahead at a current and prospective short-run re- at Annual Rates faster rate than in the spring. quirements was at a virtual peak. Residential construction activity is moving down The emphasis of the President's In contrast to plant and equipment, 40 proposals was on fiscal policy. Two of homebuilding activity has continued to PRIVATE RESIDENTIAL OUTLAYS the proposed measures would dampen fall sharply, chiefly as a result of the present incentives for business invest- stringent credit situation. In July, ment in plant and equipment. First, private nonfarm housing starts dropped the 7 percent investment tax credit to a seasonally adjusted annual rate of would be temporarily suspended effec- 1.04 million units, down from June tive September 1, 1966, for a period of starts of 1.25 million units and 30 per- 16 months. All orders placed for cent below the first quarter rate of about machinery and equipment during this 1.5 million units. Starts for all types Inventory investment high period, regardless of delivery date, of housing—single family homes, du- plexes, and small and large apart- 15 CHANGE IN NONFARM BUSINESS IIVENTORIES would be affected by the suspension. Second, the use of accelerated depre- ments—have been affected. Further- 10- ciation on all buildings and structures more, the recent change in housing started or transferred on or after permits, which lead starts by about September 1, 1966, would also be sus- 1 month, suggests still more deteriora- pended until January 1, 1968. The tion in starts. In July, new permits 1965 ' 1966 President also indicated that he would declined to a rate of about 900,000 1962 63 64 65 Quarterly, Seasonally Adjusted take strong measures to reduce expendi- units, the lowest rate since at least * Anticipated at Annual Rates 1959. Reflecting the declining trend ** Estimated by QBE Data: OBE.SEC tures on lower priority Federal pro- U.S. Department of Commerce, Office of Business Economics 66-9-1 grams. In addition to these fiscal pro- in starts this spring and summer, 1 SUEVEY OF CURRENT BUSINESS September 1966 residential construction outlays fell large quarterly increases in late 1965- reached in February and again in April. $% billion (seasonally adjusted annual early 1966. The job situation continues to be very rate) from July to August and were Durable goods manufacturing in- tight for skilled workers, but unem- headed for another large drop in Sep- dustries and Government accounted ployment rates for semiskilled and tember. for the bulk of the employment increase unskilled workers have edged up slightly Some potential relief may be in sight in August. Of the 150,000 new em- this summer. for homebuilders, however, as a result ployees added to manufacturing pay- of new legislation in September au- rolls, 140,000 were in durable goods Industrial production rises thorizing the Federal National Mort- manufacturing—mainly in the five Industrial production has shown an gage Association (FNMA) to borrow major metals and metal-using in- uninterrupted advance so far this year. $3.7 billion to buy existing mortgages. dustries. Government employment was In August, the Federal Keserve Board This would provide funds for lenders up by 80,000 persons from July, and index rose to 158.3 percent of the to extend new mortgage financing. the service industries added about 1957-59 average, up 0.6 percent from FNMA would also have $1 billion for 30,000 persons to their payrolls. Trans- July. Output of business and defense direct investment in mortgages. To portation employment decreased equipment led the production advance avoid adding to money market pres- slightly as the airline strike lasted last month, as it has throughout most sures, FNMA would borrow from through most of August. of 1966, while output of consumer goods Government trust accounts rather than Gains in employment have nearly remained relatively unchanged for the in the open market. paralleled the rise in the labor force fifth straight month (chart 2). Business inventory investment was this summer, and the unemployment An earlier-than-usual shutdown for unusually large in the second quarter rate has changed relatively little. In model changeovers this year held auto of 1966, but the rate of accumulation, both July and August, the rate was 3.9 and truck assemblies in August to while still substantial, slowed somewhat percent, about the same as the second 210,000 units, the lowest for the month in July.