Survey of Current Business May 1971 / Volume 51 Number

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Survey of Current Business May 1971 / Volume 51 Number MAY 1971 / VOLUME 51 NUMBER 5 SURVEY OF CURRENT BUSINESS MAY 1971 / VOLUME 51 NUMBER SUKVEY OF CURRENT BUSINESS CONTENTS U*S» of Maurice H. Stalls /Secretary THE BUSINESS SITUATION Harold C* Passer / Assistant Secretary for Economic Affairs Summary 1 National Income and Product Tables 11 Public and Private Debt 15 Office of Business ' George Jaszi / Director ARTICLE: Morris R. Goldman / Associate Director Personal Income in Metropolitan and Lora S. Collins / Editor Nonmetropolitan Areas 16 Leo Y* Barry, Jr. / Statistics Editor Billy Jo Hurley / Graphics TO Ago Amfrre/ Donald A. King Lora S, Collins Esther C« Kittner John A. Mordeehai E. Lando Regional Economics IMvision Staff Annual subscription prices, including weekly statistical , are $9.00 for domestic and $12.75 for foreign ,, borders to the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C 20402, or to any Commerce Department Field Office. Make checks pay- able to the Superintendent of Documents. Correspondence regarding subscriptions should lie ad- OUKBEOT BUSINESS STATISTICS dressed to the Superintendent of Documents. Correspond- ence on editorial matters should be addressed to the Office of Business Economics, U.S. Department of Commerce, General S1-S24 Washington, D.C. 20230. Microfiche edition is I available from Hational Technical Industry S24-S40 Information Service, Springfield, Va* 22151. Annual sub- scription pdecs^excluding weekly statistical sip^plement, are $9 domestic and 112 for foreign mailing. Single c0j>y Subject Index (Inside Back Cover) 10,95* Make checks payable to NTIS. ttS* BEPAETMEHT OF'COMMERCE MILD OFFICES . 9i*X« 87101 ,' . Gheyeone, Wyo, S20&1 Detroit, Mich, 48226 Mes-tiphls, Tes&si* UJ5. Coarthowse Fh. 843-2386. 2120 Capitol AY«. 445 Federal Bldg. P&. 226*6008. 147 lefltersont Av«. -, • 217 Old' U.S. Fh, 778-2220. Fb. 534-3214. ; -' ' .,...' . Fh, 226-3361, Anchorage, Alaska 99501 , -27402 Miami, Fla, ; 3SI30 • 632 Sixth Are. 272-4531 . Chicago, III. 60604 258 Federal Bldg. 300 Booth St. Fh.784«S20S, - I486 New Federal Bidg, Pb. 275-9111, 25 WestFkgler St.\Ph. a$0~S267. Atlanta, Ga« 30303 ielimo^a, Yai. 23240 ' - Ffe. 353-4400, Hartford. Cbuss* 06103 ' Milwaitkee- Wis* • ' . 75 For*ytl» St. NW, 526-6000. «Aye. , 2105 Federal Bldg, ,Ffe. 649-3611,' i, Ohio 45202 450 Main St. Fh, 244-3530, , Baltimore, Md. 21202 ' -'• '251,1 Federal Bldg. 622-4243, ,<• 305 U.S. Gwatomboiise 962^3560. Honolulu, Hawaii 96813 Miatieapolis, Minn. ' S5401 - ' a. OMo ' 44114 286 Alexander Young Bldg. ^ 306 Federal Bldg. Fh. 725-2133, Salt Lake Oty, UfaB . 84111 '" rmngam, Ala. 352C5 idAy«. Ph. 546-5977, 125 South State St. Fh»S24->SU6. 908S.20tfeSt. ..Ph. 325-3327. Ph. 522-4750, New Oficfen* La. ; 70130 ' . ; San Franei«f30, Calif. '94lt2>' - : Ilouatosi, T«i. 77002 610 South St. Eb. 527-6546. 450 Ooldeo Gate Are. Boston, Mass. 02203 ' ' 75202 1017 Old Federal Bldg. JFK Federal BMg. 1114 Commerce St. 749*3287. Ph. 226-4231. New ¥ork, N.Y. 10007 Fh. $56-5864, ' b«a, :Ph. 264-0634. San Jttttti« PiiMrto Mieo 00902 .- 14203 - ' . ' Jjeiwei', Colo, o\f^its^ Jacksonville, Mm. 100 F,Q. Bldg. Fb» 723-4640. 117 Ellkott St. Ph. 842-3208, 400W.BafSt, Fh. 791-2796. , . ' , New CustomlsouBe, 19th & Stoat , 1015 Chestnw St, Ph. 597-2850, v '29403. " 235 U.S. CoarthoiM® and P.O. 334 Meeting St. ^ ";:$hl 837-3246, Kansas City- Mo. 64106 Pfeoeai^ 4jclz. ':8S02S' ; •-.-,- Bldg. Fh, 232-4321. : : . Pk 577-4171. ' 601 East 12th St. Fh, 374*3141. 23<J! N. Firit Ay e. '. Fh. 261^3285. , Pes Moines, Iowa ; Seattle, Wash. '98104 ,» 600 Federal BWf. ngeles, Calif., 90024 ' S2SB2' ' ••-• ' V 8021 Federal Omce Bldg, t* IPh. 343-^181. Pfc, 284-4222. 11000 Wilshke Blvd. 824-7591, Fh. 644*2850. i Fh. 583-5615. the BUSINESS SITUATION extent the rate increases in capital mar- policy has been the heavy rate of short- The recent past has been marked by a kets reflected the recent unusually term capital outflows from the United rather abrupt reversal of the course of heavy volume of new corporate security States, which heightened concern over interest rates. After declining precipi- the strength of the dollar in interna- tously from the highs reached last spring issues. As part of their efforts to rebuild and summer, short-term rates turned liquidity, corporations have been bor- tional markets. As a result of the around in March and had increased rowing heavily in capital markets and precipitous decline of short-term in- one-half to three-fourths percentage using the funds to repay short-term terest rates in this country—and in the point by early May. Rates have also debt. The gross proceeds from new Eurodollar market, which is closely been increasing in long-term markets, related to domestic money market where the declines registered earlier corporate issues in the final 3 months of this year have been essentially erased. last year averaged $4 billion (a record at conditions—wide international interest Corporate profits rebounded sharply the^time), fell off to about $3 billion in rate differentials developed, which stim- in the first quarter, mainly because of January and February this year, and ulated huge liquid capital outflows. The recovery from the effects of the auto surged to an estimated $6 billion in shift away from dollar holdings into strike. The profits rebound was an other currencies led to a large accumu- important factor in the decline of the March. Federal deficit on the NIA basis. The recent reversal in interest rates lation of dollars by foreign official The Business Situation article also also reflects a somewhat less accomoda- agencies and seriously impaired the reviews recent trends in construction tive monetary policy. This has emerged pursuit of tight monetary policies in activity, auto demand, and consumer partly as a reaction to the recent rapid some foreign countries (most notably installment credit. growth of the monetary aggregates. West Germany). In terms of the U.S. The Federal Keserve has been aggres- balance of payments, that accumula- sively promoting money and credit tion has been reflected in the huge expansion since last summer, though deficits on the official reserve trans- the impact of stimulative policy was not actions basis in recent quarters. J. HE recent past has been marked by evident in the money supply and some The U.S. authorities probably ex- a rather abrupt reversal of the course of of the other major aggregates until the pected that a somewhat less accomoda- interest rates. After declining by as early months of this year. In the fourth tive monetary policy would also help much as 4 or 5 percentage points from quarter of last year, when economic to stem liquid capital outflows and the highs reached in the late spring and activity was depressed by the auto strike, mitigate pressures on the dollar in early summer last year, short-term demands for money and credit were very international markets. Moreover, interest rates turned around in March weak and the money supply (currency because unusually large differentials and had increased one-half to three- and private demand deposits) recorded persisted between short- and long-term fourths of a percentage point by early a very sluggish growth of only %% rates in the United States, there was May. Despite ongoing weakness in percent (pnnual rate). After the turn of reason to believe that some firming of business loan demand, this shift in the year, when activity accelerated, short rates could have been accom- money market rates carried through to transactions demand for money strength- plished without transmitting pressures the prime rate, which was raised from ened and money supply growth soared to long-term rates, and might even have 5% to 5% percent in the latter part of to a 9-percent rate in the 4 months been consistent with some easing in the April. This was the first prime rate ending in April. This is out of line with long-term structure—a repetition of increase in nearly 2 years and followed the 6 percent growth rate in the first what had in the past been called 10 consecutive reductions, starting in 9 months of last year, and with the "Operation Twist.7' March 1970, which had brought the target range of 5 to 6 percent that the As it turned out, however, the rise rate down from a record 8% percent. monetary authorities apparently believe in interest rates in the United States Kates have also been increasing in isx consistent with the resumption of did not succeed in relieving the pres- long-term markets, and by early May baiajiced economic growth. sures on the dollar in international the declines registered earlier this year Another important consideration in markets. In early May, a round of had been essentially erased. To some the recent formulation of monetary adjustments began which has resulted, •SURVEY OF CURRENT BUSINESS May 1971 to date, in the West German mark and continued to decline. The average lion decrease in the last quarter of 1970. the Dutch guilder being set free to workweek for all private workers in- Profits tax liability increased $4 billion, float in relation to the dollar and the creased a bit even though the manu- after tax earnings $6 billion, and re- Swiss franc and the Austrian schilling facturing workweek shrank slightly tained earnings (after dividends) $5.4 being revalued upward. after a sizable increase in March. billion. The recent modest firming in U.S. Personal income rose $4% billion in Book profits include gains or losses money and credit market conditions April to a seasonally adjusted annual due to differences between the replace- came at a time of significant uncer- rate of $841% billion. The April increase ment cost of goods taken out of inven- tainty on the part of market par- was about the same as the average for tory and the cost at which they are ticipants, many of whom apparently the preceding 2 months.
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