Federal Reserve Bulletin October 1961

FEDERAL RESERVE October 1961 1 -( ^, BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis EDITORIAL COMMITTEE Charles Molony Ralph A. Young Woodlief Thomas Guy E. Noyes 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 statements and signed articles. Contents U. S. Balance of Payments in 1961 1133 Survey of Finance Companies, Mid-1961 1140 Liquidity and Public Policy 1161 Law Department 1178 National Summary of Business Conditions 1183 Financial and Business Statistics, U. S. (Contents on p. 1185) 1186 International Financial Statistics (Contents on p. 1251) 1252 Board of Governors and Staff 1268 Open Market Committee and Staff; Federal Advisory Council 1269 Federal Reserve Banks and Branches 1269 Federal Reserve Board Publications 1271 Index to Statistical Tables 1273 Map of Federal Reserve System Inside back cover Volume 47 * Number 10 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 US. Balance of Payments in 1961 THE OVER-ALL DEFICIT in the U.S. bal- surpluses under favorable conditions. Some ance of payments was much smaller in the progress toward this goal has been achieved first half of this year than the large deficits in- since 1959, but the continued deficit early curred in the three preceding years. Smaller this year, at a time when imports were de- net gold and dollar transfers to foreign pressed, is indicative of the need for further holders reflected an increased trade surplus adjustments in the balance of payments. and smaller capital outflows than late in 1960. During the latter part of 1960, concern U. S. FOREIGN TRADE nual rates Billions of doll over drains on the gold stock and over the future payments position of the United States had contributed to exceptionally large outflows of capital. The outflows diminished early this year after the U.S. Government made clear its determination to defend the international value of the dollar. Neverthe- less, outflows of short-term credits and volatile capital remained large and added to the over-all deficit in the first half of the year. A near-record trade surplus in the first half of 1961 owed much to cyclical conditions favorable to the balance of payments. Continued strong demands in industrial countries abroad helped to sustain the high 1»57 rate of U.S. exports, while decreased im- NOTE.—Three-month centered moving averages of Bureau of ports reflected a reduced level of industrial the Census seasonally adjusted monthly data, weighted one-two- one. Exports exclude shipments under military aid programs. activity in this country. Imports began to Latest figures shown, June-July-August average. rise again this summer, after expansion in U.S. economic activity resumed. In part Orderly adjustment of payments imbal- because of the increase in imports, the over- ances both here and abroad may be dis- all deficit was larger during the summer than rupted by large movements of volatile capi- it had been in the spring. tal such as those experienced over the past Reasonable equilibrium in the U.S. bal- year. A number of measures to strengthen ance of payments will be attained when defi- the world payments system against disturb- cits under cyclically unfavorable condi- ances, including capital flows, are currently tions are by and large offset by payments being explored. 1133 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 1134 FEDERAL RESERVE BULLETIN • OCTOBER 1961 TRADE SURPLUS pace of expansion has been slower. Indus- Merchandise exports exceeded imports in trial production in June was 6 per cent the first half of 1961 by $6 billion at a above a year earlier compared with a rise of seasonally adjusted annual rate. This rate more than 10 per cent in the preceding 12- was the highest in the past decade except for month period. Rapid increases in consumer the months following the Suez crisis and was incomes have continued, but in many coun- more than $1 billion higher than in 1960. tries shortages of labor have impeded growth From mid-195 9 to mid-1960 the trade in output. Rising expenditures to enlarge surplus had been enlarged by a marked ex- and modernize industrial capacity have been pansion of exports. The still higher trade a major underlying force in the European surplus in the first half of 1961, however, expansion. resulted mainly from a drop in imports. Ex- In the latter part of 1960 slower growth ports leveled off after mid-1960 at an annual of industrial output in Europe and expan- rate of close to $20 billion. sion of productive capacity in steel and other Merchandise exports. The main element metals contributed to smaller purchases for in the leveling off of total exports after mid- additions to inventories, including purchases 1960 was a cessation of increases in exports from the United States. By the spring of this to Europe. By the summer of I960, ship- year U.S. exports of metals to Europe had ments to Europe had reached an annual rate been reduced 40 per cent from year-earlier of $6 billion and were 50 per cent above levels. Also, U.S. exports to Europe in mid- the low in the spring of 1959. 1960 included heavy deliveries of com- European economic activity has con- mercial jet aircraft and by this summer a major part of these deliveries had been com- tinued to grow over the past year but the pleted. Reduced purchases by Britain ac- counted for a large part of the decline in U. S. EXPORTS both metals and aircraft; by mid-1961 total Annual rates Billion* of dollars exports to Britain were down nearly 40 per cent from a year earlier. 1 WEST AA A EUROPE / V\ Heavy demands for machinery have LATIN AMERICA ^ _ helped to sustain total exports to Europe and have contributed to further expansion of exports to Japan. Total machinery ex- \y *• ports this summer were 10 per cent above ~ All OTHER ~ both those a year earlier and the previous record rates of 1957. New export orders CANADA - for machinery advanced sharply further this spring, and existing order backlogs point to - 1 further increases in machinery exports. -. JAPAN J A recession in Canadian economic ac- 1 1 1 1 1 i i i i i 1957 1959 1961 1957 1959 1961 tivity led to declines in exports to that country beginning in the spring of 1960. Al- NOTE.—Bureau of the Census data, adjusted for seasonal variation by Federal Reserve. Exclude special category exports though recovery began in Canada early this for which details are not available by destination. Adjusted to exclude in the third quarter of 1959, and to include in the year, U.S. exports to Canada remained low fourth quarter, shipments accelerated in anticipation of the port strike in October 1959. Dots indicate July-August rates. into the summer. In June the exchange rate Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis U.S. BALANCE OF PAYMENTS IN 1961 1135 of the Canadian dollar was allowed to fall U.S. IMPORTS by about 5 per cent, tending to raise prices Annual raids Billions of dollars of U.S. goods in Canada. Declines in shipments to Venezuela and Cuba have reduced exports to Latin America over the past year. Very large exports to other nonindustrial countries late in 1960 and early this year resulted mainly from heavy shipments of grains to India and some other countries under Government aid programs. Fluctuations in cotton shipments contributed heavily to a dip in total exports this spring. After a rapid rise until early this year, cotton exports fell sharply as shipments were delayed pending an increase in the export subsidy beginning August 1. Cotton exports since August 1 have been at a much higher rate than in the spring. 19S7 1961 Merchandise imports. Imports fell sharply late last year by about 10 per cent to an NOTE.—Three-month centered moving averages of Bureau ot the Census monthly data on imports for consumption, adjusted annual rate of $13.5 billion. The reduction, for seasonal variation by Federal Reserve. Latest figures shown, accompanying declines in output in this June-July-August average. country, was much larger than in the 1958 ceeded 3 per cent to a significant extent only recession. Decreases in imports of main late 1959, when total imports were swol- terials were roughly comparable to earlier len by heavy arrivals of steel and automo- cyclical experience but, in contrast to 1958, biles. The ratio rose this summer when im- imports of manufactures also declined last ports increased sharply to about $15 billion year, as shown in the chart. at an annual rate. Declines in imports in the early part of CURRENT AND LONG-TERM 1960 were mainly in steel, after settlement CAPITAL TRANSACTIONS of the 1959 steel strike, and in automobiles.

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