182 MONTHLY REVIEW, SEPTEMBER 1965 noteworthy that the new figures show substantially the that become available only after some lapse of time. This same quarter-to-quarter movements in GNP that bad been year's revisions, however, are unusually extensive. They indicated previously. In particular, the pattern of GNP incorporate the results of using better data not only for growth during the current business expansion continues to the past few years but for earlier years as well, and they look very much as it did prior to the revisions. For the also reflect some changes in the definitions that determine earlier years of the postwar period, the net effect of the revi- which items are to be included in calculating the value of sions has been to reduce GNP slightly, while for more re- the economy's total output of goods and services. The last cent years GNP has been increased moderately. Since the time the national income accounts were given such an figure for 1964 has been scaled upward by about 1 per extensive overhaul was in 1958. The largest of the "statis- cent, from $622.6 billion to $628.7 billion, business tical" revisions— those reflectingthe use of better data— analysts will find it desirable to make a similar upward is in the estimated value received by homeowners from revision in their forecasts for 1965 as a whole. For ex- the houses in which they live. This "imputed rent", which ample, the frequently cited "standard" forecast has put is classed in GNP as consumption spending for a service, GNP this year at $660 billion, up by 6 per cent from has been increased because Government studies indicate the unrevised figure for 1964. The same percentage in- that the nation's stock of housing in the postwar years crease, applied to the revised figure for 1964, implies a has been of better quality than had previously been be- revised "standard" forecast for 1965 of roughly $667 lieved. Other "statistical" revisions resulted, among other billion. changes, in increases in outlays for residential construc- One result of the revisions which is of particular inter- tion and producers' durables. With regard to the "defini- est is that the new figures show a slightly higher rate of tional" revisions, the largest change is the removal from growth of "real" (INP during recent years. Thus, the GNP of interest payments by consumers. These payments previous estimates showed GNP, measured in dollars of were formerly counted as personal consumption of a scr- constant purchasing power, growing by an average of 4.1 vice but have now been excluded on the ground that they per cent annually in the 1960-64 period, while the re- do not reflect any production. This and other definitional vised figures put the average annual growth at 4.3 per revisions generally reduced GNP below the levels pre- cent. viously estimated. For recent years, however, the defini- The regular summer revisions of GNPfigures for the past tional revisions were more than offset by the increases few years have each reflected the use of more reliable data resulting from the use of betterdata. The Money and Bond MarketsIn August The money market was somewhat firmer during August, bill rates rose against a background of general market after having eased slightly in the latter part of July. Fed- uncertainty. eral funds traded mainly at 4¼ per cent, and the major Prices of Treasury notes and bonds declined irregularly reserve city banks were under reserve pressures as reserve in August, with prices of some issues dipping to their distribution swung in favor of the "country" banks. Treas- lowest levels in five years. Market participants warily ury bill rates moved higher in the early part of the month appraised the potential effects of recent international polit- when professional offerings outweighed a rather modest ical and economic developments, including those in Viet- investment demand. Subsequently, rates generally edged nam, as well as the possible consequences for interest lower through midmonth. In the latter part of the month, rates of the very strong summer performance of the econ- demand tapered off—as often happens in August—and omy. There was also some selling of long-term Govern- FEDERAL RESERVE BANK OF NEW YORK 183 ment bonds by institutional investors who were switching TableII into new issues as the in favor of RESERVEPOSI11ONS OF MAJOR RESERVE CV BANKS corporate yield spread AUGUST 1963 the latter remained wide. A cautious relatively atmosphere In millionsof dollars was also evident in the corporate bond market during most of the period. The volume of new issues was larger than Daily evwa;es.—weei ended I Aim;.of usual for August and their yields rose above comparable Factorsallotting fourweeks basic townspositions ended July levels, while prices of recent issues were also marked Au;. Au;. AOL Au;. Aug.25 lower. In the tax-exempt sector, where a better tone had emerged in July, bond prices edged higher in early Au- Elgbl banks InNew YankClfl and then held until late in the month when a gust steady Reserve excess or drficiency(—) II 9 13 5 10 more Less borcowinjjs Front Reserve Banks. IIS 167 4 52 85 cautious tone developed. Lens net inlerbank Federal funds purchases or sale.(—) — 70 6 239 — 45 31 Gross purchases 753 771 857 668 763 Gross sales 1431 767 618 713 732 THE MONEY MARKETAND SANK RESERVES Equals net basic rserve surplus or det*cit(—) — 26 —I64 —230 — 2 —lt Net loans to Government Over-all net reserve availability fluctuated in a narrow securities dealers 684 372 531 459 512 range in August around the average level prevailing in the 11ulity-eIlslbanks outsIde New York Cfty Reserve excess or deficiency(—l'. 29 20 IS 22 21 Less borrowinies from Reserve Banks 120 170 20') 192 17$ Less net interhank Federal fund,, purchases or salesi—) lIft' 548 441 433 485 Croci purchases , 1,250 1204 1,194 1.085 1,183 Table I Gross sales 734 657,' 754 652 699 Equals net basic eventsurplus ChANGESIN FACTORSTENDING TO INCREASEOR DECREASE or dr*Icit(—) —613 —698, —6'2 —603 — 637 Net loans to Goverametit MEMBER BANK RESERVES, AUGUST 1963 aecunties dealers 251 172 190 203 204 In millionsof dollass: (lI denotes increase. (—3 decrease inexcess reserves Note: Becauseob rounding, ligures do not necessarily add to totals. Reserves held after all adjustments applicableIrs the reportirtsj period tuna required reservesand catryuvcr reservedcliclenctes. Daily asws;es—.-weekendod Factors Not chatuges Au;. Au;. Au;. Au;. 4 11 18 25 "Martut" farIna preceding several months, but the tone of the money mar- M',mIsc lnik reoulrrd r,'senøg. — 125 + at'; ± IjeratIflu tlsnSa,I11.113 inuljtue.sl) — '47 4 —27! — till + 3Xt 21.9 ket turned somewhat firmer than in the latter part of July. Fe.Jt'ral Thence Ilsat —, 2::4 + 40 + 290 —74 'flea3iaryojwratl cut;; — 27 — Its ± s In this reflected the fact that available reserves were 47<1,1 ar,'l t.,rclnu ac,:,'l;nt — CI — 44 ill! part, I9zrrnrv ,,uto,I,, hsru7.j. — I-IS —.554 at banks outside the main money centers (I:t,nr I'e'lrral ltccc,na lodged during .4— 211!) + ± 5)111 4- 141) most of Ihe period. The effective rate on Federal funds Total ''niaj et" fans.,. — :11'll -4.r.31.Hri nio was more consistently at 41/g per cent during August than Direct Federal Relics. credIt in earlier months. leFt-hand at the chart on tra.nsaatio,, (See panel Ogst'n niarket. taitnumonra 185.) rates for new time certificates of de- IlstrlW,t tinl1tIns page Offering ii.,c"it,rncst a,'nitltlea +104 --t$6 — 44 + 172 posit issued by leading New York City banks tended to llanku,ru' au'c..uarc.'.; —1 ± I — I — Itopv,rci,a.,c nfl,'r-.scer,rg: rise slightly, as did thc range of rates at which such cer- I-9v'fII,cts'. srctultle; + 203 — IC'S — 'I3 + 64 Itans,'rs' any usa's '1!' tificates traded in the secondary market. Rates posted by Merr,h,q I,a,,k turrcau log,. + 85 — 13.; + 43tj,,,r loan....Il'n.8,,11 ., 11)11 u,I'utics.. — 210 — I t ° the major New York City banks on new call loans to Gov- Total _f_ 71 :75 — 143 -i- 23 + 194 ernnlent securities dealers were generally in a 4¼ to 4½ Extras reawvn' 'I- 415 — '2 + 77 'TT per cent range,while rates on renewal call loans were most quoted in a 41/4 to 4¾ cent Dalig anon. les,I of member bank: frequently per range. Total rr,wrvrs,, Including 1-unit cnst1. 2I.7fl 21.8111 25,312 21,7tH 21,402; Investor demand for bankers' acceptances absorbed a Knitulutul 21.3.60 21,193 21.196 21.1 IS Focus5 reuu,rcnf 378 4111 220 4113 21j limited supply during most of the month at the lower rates jl.r,nwine; 714 '116 45' r..l6 Free resert-e,ø — 1611 — 100 — 103 — IL — prevailing since late July. However, when supply expanded Nnnrenrr,,,,',l 21.223 20.945 21,021 20.972 21.0538 sharply near the end of the month, dealers raised their Note: II"eaueeor ronn'linx. Ileuree do notnses',saruy add tu totslv rates by 1/ of a percentage point, making the rate on • Tlucas agtirea are estImated. f Includescl.aiueee lii Tteaossy currency and cash. ninety-day unendorsed acceptances 4¾ per cent (bid) * Incliul,n aius5 usrnortulnaltd In Curries esinu'acl,q. I Average (or bus w4e15 u-uide'l Aus,ast 25. lOSS. and 4½ percent (offered). 184 MONTHLY REVIEW,SEPTEMBER 1965 rose The money market had a firm tone during the first tem outright holdings of Government securities by statement week of the month, which included the sub- $172 million from the final statement week in July scription period for the Treasury's August refunding.1 through the last week in August, and average System market supplied a substantial holdings of Government securities under repurchase System open operations net volume of reserves (both through outright purchases and agreements decreased by $51 million.