NOVEMBER 1962 survey of CURRENT BUSINESS U.S. DEPARTMENT OF COMMERCE OFFICE OF BUSINESS ECONOMICS SURVEY OF CURRENT BUSINESS NOVEMBER 1962 VOL. 42, NO. II U.S. Department of Commerc Luther H. Hodges Secretary Office of Business Economics M. Joseph Meehan Director THE BUSINESS SITUATION PAGE Louis J. Paradiso Summary * . 1 Managing Director Automobile Purchases at Record Pace—Personal Income Up—Indus- trial Production Steady Murray F. Foss Financial Conditions Ease 2 Editor Expansion in Government Programs in Fiscal 1963 4 K. Celeste Stokes Billy Jo Dawl Statistics Editor Graphics GROSS NATIONAL PRODUCT AND INCOME IN STAFF CONTRIBUTORS QUARTER 6 TO THIS ISSUE Expansion in Final Purchases ,«,«,.» 7 Business Review and Feature: Inventory Buying Slackens *... *. 7 John A. Gorman ARTICLES Helen B. Junz EXPANSION OF FIXED CAPITAL IN THE UNITED STATES National Income and Product: Rapid Postwar Growth—-Rise Slackens. 9 Frederick M. Cone Postwar Investment Greatly Increases Stock of Fixed Capital—Rate Articles: of Increase in Equipment Stocks Tapers Off, While Stocks of Structures George Jaszi Continue to Grow Robert C. Wasson Lawrence Grose CORPORATE PROFITS AND NATIONAL OUTPUT E. Lynn Williamson Profits Share Declines in Postwar Period 19 Robert E. Graham, Jr. Trend Over Postwar Period Reviewed—Effect on Corporate Profits and Jaeqtielin Bauman National Income of Changes in Treasury Regulations—"Quarterly Annette R. Presley Measure of Corporate Gross Profit NEW OR REVISED STATISTICAL Subscription prices, including week Industrial Production Index on New Base. * ,.....*..... S3 statistical supplements, are $4 a year f Building Cost Index (AGC) on New Base. S9 domestic and $7.50 for foreign mailing. Sing Commercial Bank Credit (Seasonally Adjusted), New S17 issue 30 cents. Make checks payable to the Superintende CURRENT BUSINESS STATISTICS of Documents and send to U.S. Governmei General S1-S24 Printing Office, Washington 25, D.C., or Industry S24-S40 any U.S. Department of Commerce Fie Subject Index Inside Back Cover Office. U.S. DEPARTMENT OF COMMERCE FIELD OFFICES Albuquerque, N. Mex., U.S. Courthouse. Denver 2, Colo., 142 New Custom House. KEystone New Orleans 12, La., 333 St. Charles Ave. Phone 529-2411. Phone 247-0311. 4-4151. New York 1, N.Y., Empire State Bldg. LOngacre 3-3377. Atlanta 3, Ga., Home Savings Bldg., 75 Forsyth St., Detroit 26, Mich., 438 Federal Bldg. WOodward 3-9330. Philadelphia 7, Pa., Jefferson Bldg,, 1015 Chestnut St. NW. JAckson 2-4121. Greensboro, N.C., 407 U.S. Post Office Bldg. WAlnut 3-2400. Boston 10, Mass., Room 230, 80 Federal St. CApitol B Road way 3-8234. Phoenix 25, Ark,, 230 N. First Ave. Phone 261-3285. 3-2312, Pittsburgh 22, Pa ,355 Fifth Ave. GRant 1-0800. 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Fourth St. DUnbar 1-2200. YUkon 6-3111. Memphis 3, Tenn., 212 Falls Bldg, JAckson 6-3426. Cleveland 1, Ohio, Federal Reserve Bank Bldg.s E. 6th Savannah, Ga., 235 U.S. Courthouse and P.O. Bldg. St. and Superior Ave. CHerry 1-7900. Miami 32, Fla., 14 NE. First Avenue. FRanklin 7-2581. A Dam s 2-4755. Dai las 1, Tex., Room 3-104 Merchandise Mart. River- Minneapolis 1, Minn., Room 304, Federal Bldg. Seattle 4, Wash,, 809 Federal Office Bldg., 909 First Ave. side 8-5611. Phone 339-0112 Mutual 2-3300, iia lion OOME improvement occurred in busi- government an important influence in which had been responsible for a fair- ness activity in October due largely to the October rise in employment and sized drop in payments in the previous the buoyancy of automobile sales. This income. Nonf arm employment reached month. led to a stepping up of production a new high, but except for State and Manufacturing payrolls were about schedules and to renewed ordering of local advances, changes from September unchanged in October for the second steel by motor vehicle companies last were relatively small. successive month, with seasonally ad- month and early November. Else- The Cuban crisis, starting late in justed factory employment showing where the trends were mixed, with October, and having widespread reper- little change over the month. Else- cussions, did not record major effects where in the private sector small ad- FEDERAL GOVERNMENT PURCHASES OF upon the current broad economic meas- vances were registered in noncommodity GOODS AND SERVICES ures. There was no evidence of any producing industries. • As of Recent Budget Review, Expected to significant changes in business policy or October also witnessed an increase of Total $64 1/2 Billion in Fiscal 1963 buying either by businessmen or con- $0.7 billion in transfer payments at an • National Security Accounts for $3 1 /2 Billion sumers. The immediate reaction oc- annual rate, and further small rises in of $4 1/2 Billion Increase • Space Programs Rising Sharply curred in sensitive commodity markets interest and dividends. A large part where there was a flurry of price in- of the increase in transfers stemmed Billion $ (ratio scale) from a special payment to disabled 100 creases, but this was short-lived; spot prices on November 9 were only 1 per- war veterans. The first year cost of 80 Total Purchases cent higher than they were just before this new program is estimated at $0.1 60 the crisis week. billion but one-fourth of the total, A drop in the stock market late in representing payments retroactive to 40 October followed upon the announce- last July 1, was paid out last month. Military Functions ment of military measures directed (incl. Military Assistance Program) Auto sales spurt toward eliminating the threat from 20 Cuba, but this gave way to a sharp rise Over the past year automobile pur- as evidence of progress eased inter- chasing by consumers and business have Government Purchases, Other T/jan For National Defense national tensions; the rising tendency alternately stimulated and depressed economic activity. Just a year ago a o _ continued into mid-November. Gov- 10 V ernment defense ordering was high in strong demand for autos was a major 8 October, but it is not possible at this factor in the sharp increase in GNP. 6 time to identify any specific amount Auto sales were not sustained in the which might have been attributable to first quarter of this year, however, but Atomic Energy the Cuban developments. picked up again this spring only to fall back this summer. Personal income up So far in the fourth quarter purchases Personal income increased $2 billion of new cars have been running at the in October to an annual rate of $445% highest rate on record. The 730,000 units delivered by dealers in October ran billion. The October advance was 30,000 ahead of the best month in the about twice the average monthly in- peak sales year of 1955. Possibly the crease that had taken place from May unusually high rate was affected by the through August. concentration of introduction dates at Wage and salary disbursements were the beginning of October, although a up by about $% billion over the Septem- vigorous sales pace was maintained in ber rate, mainly because of an increase the latter part of last month. In part, I I 1 in government payrolls—chiefly at the October may have reflected some make- 1960 1961 1962 1963 State and local level. The October up for the slower sales rate in August Quarterly/ Seasonally Adjusted, at Annual Rates O Fiscal 1963 estimate from Review of the 1963 Budget figures also reflected the cessation of the and September, when supplies were U.S. Department of Commerce, Office of Business Economics 62-11-1 demobilization of military reserve units, short. 661964°—62 1 1 SUKVEY OF CURRENT BUSINESS November 1962 Even if some allowance is made for dustries to get rid of the heavy steel The relative ease may be traced to this factor, there can be little doubt stocks accumulated in the early part of the pace of business investment ex- that sales are moving extremely well this year. Aside from steel, production pansion, which has been moderate, and and have caused producers to step up changes in other broad industry groups to the action of the monetary au- production schedules. After turning were largely offsetting last month, and thorities in facilitating the growth of out 720,000 cars in October, the largest the pattern of virtually no change in bank credit. volume since November 1955, manu- industrial output continued for the Corporations highly liquid facturers have scheduled for November third successive month. Although corporate purchases of a daily production rate fully as high Fourth quarter business plant and equipment moved up early as the month before.