AUGUST 1954 rar U. S. DEPARTMENT OF COMMERCE OFFICE OF BUSINESS ECONOMICS OF CURRENT •DEPAKTM/ECVr OF CQM'M.-EKCIK FIELD/SERVICE • - Altvu-qwwitje, N. Max.. No. 8 204 S. 10th St. 1031 S. Rn>*d«r«? AUGUST 1951 Atlanta 5,-Ga. 50 Sfcveatij £t. N18, 229 Fed-e Boutin *>, Maw. ' Miami 32, FU. U. S. Post Offic» *ai4 36 3NE. Fu-f Cowrtlionac Bldg, Mitmeapoli^ 2, Mia Buffalo 3. N. Y. 607 Marc PAGE N*w Orbans 12. La. o« 4, S. C. 385 St. Charlea A< , THE BUSINESS SITUATION .......... 1 ant Jasper N«w York 13, W. Y. National Income and Product . * . HS Wyo. 346 Broad«r 307 Federal Oflie* BM«, A Review of the Second Quarter ..... 2 ia I, Pa. 1015 Chcxttnu Chicago 1, 111, Foreign Countries Get $2.5 Billion 226 W. Jacks**) BUkC from U. S. Military Outlays .."..•..-.-.- 7 Pisoenix, Am^ Gmcirmati 2, Ohio 137 N, Sw^d 422 U. S, Post Ofl6i*9 Pitt«bur«h 22, l'^. 107 SJist * * * elajkL 11, Ohio Portland 4, Ort»#. 1100 Ch#at«r A\Y«, SPECIAL ARTICLES 520 SW. Miwis. as 2, Tex. iUno, Nar, State Income Payments in 1953 ....... 9 1 1 14 CIJ^HBUNW -5t. Farm Income Dearer 2, Colo, Richmond., V*. 142 New Custom 400£a>*i MamST-., and Gross National Product * . IS Detroit 2-6, Mi A, St. Loui» 1. M,». 2SO W, F. 1114 Market ••*(:. Salt Lake City I, Uta!r 109 W. Second 5 1. So.. MONTHLY BUSINESS STATISTICS , . S-l to SHW 'Ston, I'ex. S-a« l''r<uiei*xj 11, CflSff 430 Lanwr^t. 555 Eatery 3fi. Statistical Index , . , . , . Inside back cover ^roriiie 1, Fla. 311 W. Mowro(&Si. *«•* Qty 6, Mo. 911 Watomi St. 909 Fi Published by the U. S, Department of Commerce, SINCLAIR WEEKS, Secretary. Office of Business Economics, M. JOSEPH MEEHAW, Director. Subscription price, including weekly statistical supplement, is 13.25 a year; Foreign, $4.25. Single copy, 30 cents. Send remittances t& any Department of Commerce Field Office or to the Superintendent of Docu* for /<?>c«/ telephone liMing, con-suit section memts. United States Government Printing Office^ Washington 25, D, C, ilrwfted fa» V, S. Gw-ernmeni Special subscription arrangements^ including changes of address, should be made directly twth the Superintendent of Documents. Make cheeks payable to Treasurer of the United States. AUGUST 1954 By the Office of Business Economics Personal Income COMPREHENSIVE measures of production and sales have BILLIONS OF DOLLARS been generally stable since early spring, when the moderate 260 downswing of the fall and winter was checked. Variations Disposable in trend remain common among individual industries. personal income Liquidation of business inventories, largely in the durable 250 has been main- goods areas, continues to exert a dampening influence but DISPOSABLE INCOME the pressure from this source has not been intensified. tained in the No substantial change from the spring business pattern 240 I I I I I I I past year . was apparent in the early summer. July sales at retail stores approximated the average rate of the second quarter, 140 as payroll on a seasonally adjusted basis. Automobiles delivered to NONMANUFACTURING PAYROLLS consumers dipped from their exceptionally high June vol- declines ume but other lines showed little change in the aggregate. 130 -o—o- centering in Industrial production was also at about the average second manufacturing . quarter rate in July, after allowance for usual seasonal changes. 120 Employment in nonagricultural establishments continued to drift downward through July, according to the seasonally adjusted series of the Federal Reserve Board. Shrinkage 80 in manufacturing employment again accounted for the reduc- MANUFACTURING PAYROLLS tion. Average working hours in manufacturing, however, have been lengthening slightly in recent months after allowance 70 for usual seasonal fluctuations. Hence, there has been little change in aggregate man-hour input, and payrolls in private industry have stabilized along with production. With the 60 ly I » earlier payroll contraction approximately offset by higher property arid transfer incomes, the total personal income 60 PROPRIETORS' AND have been more flow has been approximately as large as last year. RENTAL INCOME The general tendency of business to follow seasonal than offset by patterns is clear from the analysis and detailed figures on 50 increases in the recent flow^ of national output and income which is other types of presented in the following section of this month's review. 40 income . Industrial prices steady 30 DIWDENDS AND 'NTEREST Wholesale prices of nonagricultural materials and products held firm in July as higher wage rates in some industries exerted upward pressure which was counteracted by idle 20 plant capacity and continuing keen competition. Farm TRANSFER PAYMENTS AND OTHER LABOR INCOME products, having dropped appreciably in June in response to the outlook for ample supplies, have subsequently moved within 10 a narrow range. A slight rise in consumer prices in June 40 and by the was entirely due to foods, especially seasonally strong fruits PERSONAL TAX and vegetables. ^ PAYMENTS reduction in Private residential construction activity, seasonally ad- 301 income taxes justed, has moved consistently upward in the first 7 months 1953 1954 of this year, and in July exceeded the same 1953 month by QUARTERLY TOTALS, SEASONALLY 10 percent. ADJUSTED, AT ANNUAL RATES Recent applications for Government guaranteed and OFFICE OF BUSINESS ECONOMICS. U. S. D. C. 54-29-t insured housing loans are running far ahead of last year 809117°—54- 1 SURVEY OF CURRENT BUSINESS and will tend to support high rates of homebuilding activity As compared with previous statutory provisions, financing in the near-term. The stepped-up rate of FHA activity will of existing sales housing is liberalized even more than the receive further impetus from recent housing legislation. new—though new house terms are still more advantageous. In the case of rental housing, financing of larger apartment New housing legislation units is liberalized by the removal of the $10,000 per family unit mortgage ceiling. The FHA may now insure mortgages on new houses equal Under a new provision servicemen are given special benefits to 95 percent of the first $9,000 of value and 75 percent of the under FHA insurance without losing any benefits they may additional value, subject to a mortgage maximum of $20,000 become entitled to as veterans under the GI Bill. Pro- for one- and two-family units. Previously, the general rule visions are generally more liberal than those applicable to permitted mortgage-value ratios of 95 percent up to $7,000, ordinary sales housing: 95 percent loans with a mortgage and 70 percent of the additional value from $7,000 to $ 11,000. ceiling of $17,100 are now permitted. The new law also For housing valued in excess of $11,000, the maximum mort- permits FHA-insurance in connection with "open end'' gage was 80 percent with a ceiling of $16,000. Thus, for a mortgages, through which home repair or improvement new $15,000 house the maximum loan-value ratio is currently expenditures may be added to the original mortgage arid may 87 percent as against a maximum of 80 percent under the thus be financed on easier terms than are provided in regular previous legislation—a reduction in down/payment of more home improvement loans. than $1,000. Congress has also acted, through the comprehensive tax The FHA is also given authority under the new legislation revision law, to encourage investment by business firms. to insure mortgages up to 30 years for new houses. Pre- Major provisions of general applicability directed to this viously the limit had been 25 years except for very low-priced objective are the substantial liberalization of allowable housing. At a 4% percent interest rate, interest and principal depreciation charges, the extension from 1 to 2 years of the (excluding the one-half percent mortgage insurance premium) loss carry-back provision, and the introduction of the partial on a level-payment basis would be $5.07 per $1,000 per month tax credit on dividends. Numerous other changes are for 30 years as against $5.56 for a 25-year loan. designed to encourage investment in particular situations as The mortgage-ceiling increase on one- and two-family well as to facilitate business operations. houses from $16,000 to $20,000 is the first ceiling increase foV In addition, the new tax law will broadly affect the entire such houses since the original housing legislation was passed economy by its sweeping changes bearing on many phases of in the thirties; other increases are provided for three- and personal and corporate financial management and its four-f amily homes. reduction of Federal taxes. National Income and Product... A Review of the Second Quarter AFTER three quarters of consecutive declines, business second quarter of 1954. Virtually all of the reduction in activity assumed a firmer tone in the second quarter of the inventory investment and two-thirds of the reduction in year. The gross national product was at an annual rate of Federal expenditures occurred in durable goods. Consumer $356 billion, the same as in the first quarter. This was 4 durables and investment in producers' durable equipment percent below the second quarter peak of last year, and 4 were adversely affected also, but the reductions were much percent above the comparable 1952 quarter. more moderate, both percentagewise and in absolute amounts. Private expenditures advanced in the second quarter to In contrast, other major expenditures held firm or showed counterbalance a further sizable decline in government pur- increases over the period. In the aggregate these expendi- chases. The combined advance in consumer expenditures tures offset about two-fifths of the combined decline in the and new private construction added $3K billion on an annual expenditures listed so that the reduction in total output over rate basis to the stream of final expenditures—an amount the year as a whole was moderate.