Gov. Doc. G 43.8: 48/2 the BUSINESS SITUATION THE new year started with a sharp a large advance in disposable income. which brought the total for the quarter pickup in consumer spending, which had Seasonally adjusted retail sales in Jan­ to a new peak, slightly above the previ­ shown only a modest improvement from uary are estimated to have increased ous high reached in the third quarter of the third to the fourth quarter despite significantly above the December rate, 1966 (chart 1). Unfilled orders for du­ according to preliminary reports. Not rables at the end of December were $2X only were automobile sales stronger but billion above their level at the end of CHART 1 sales in nondurable goods stores were September (seasonally adjusted) and New Orders for Durable Goods also considerably higher. more than $3 billion above their level Personal income advanced in January at the end of 1966. Billion$ but much less than it had in the last 2 The improvement in new orders from 28 months of 1967, and nonfarm establish­ the third to the fourth quarter was pro­ 26 ment employment showed little change nounced in the case of durable goods 24 from December, primarily because bad materials. The rise in primary metals 22 weather held down construction activ­ reflected mainly the pickup in steel de­ ity. Industrial output fell back a little mand (discussed below). Orders for con­ 20 after very sharp gains in November struction materials showed their first 18 and December, when the auto industry quarterly increase in over a year as con­ was recovering from the strike. struction activity continued to advance. 5 The reduction in auto output in Jan­ New orders for defense products, uary, which was due mainly to sporadic 4 which had declined in the third quarter, walkouts, and recently announced cut­ moved up in the fourth almost back to 3 backs in first quarter production sched­ the second quarter peak. Aircraft orders, 2 ules suggest that the recovery in autos a large and volatile component of this will not add as much to the rise in series, were especially heavy in Decem­ GNP in the first quarter as had been ber as they had been in June and again thought. However, when allowance is in October. 5 made for the special factors affecting Demand for producers' durable equip­ 4 January developments, it would appear ment is rising but still lacks vigor. that a sizable increase in aggregate 3 Orders for machinery and equipment economic activity is in progress even 2 improved in both November and De­ though its dimension cannot be cember, but the total for the quarter quantified. was below the third quarter total and the very high rates of mid-1966. 5 Spurt in durable goods orders Orders for consumer durables rose to 4 Doubts about the strength of demand a record rate in December. Orders for 3 in manufacturing should be lessened by these goods were sluggish in the first half of 1967 because stocks held by 2 recent changes in new orders. Orders showed a very sharp rise in December distributors and dealers were heavy; 1964 1965 1966 1967 in both durable and nondurable goods with inventory positions improved by Seasonally Adjusted Quarterly Average industries; in durables, every major in­ midyear and consumer demand advanc­ U.S. Department of Commerce, Office of Business Economics 68-1-1 dustry reported a substantial gain, ing slowly but steadily, new business 1 2 SURVEY OF CURRENT BUSINESS February 1968 received by manufacturers has gained nearly $2 billion last month, after a $3 ment, the service industries, and retail considerably in the past two quarters. billion increase in December; the ad­ trade. vance slowed because of a reduction in The Nation's unemployment rate fell Personal income up construction payrolls and a slower rate to a 14-year low of 3% percent of the After unusually large advances of of gain in manufacturing. Payroll civilian labor force in January, after $6% billion in November and $7 billion incomes in the distributive and serv­ seasonal adjustment. Although the re­ in December, personal income rose only ice industries continued their steady duction from December may have been $2 billion in January to a seasonally advance. influenced by random developments, adjusted annual rate of $651% billion. Nonpayroll incomes generally showed there can be little doubt that there has Special, nonrecurring factors were small gains, although dividend pay­ been a very distinct improvement in partly responsible for the wide variation ments rebounded considerably from the unemployment situation since early in the size of the monthly increases. December, when they were depressed last fall, when the overall rate was The recovery from the strike bolstered because of a reduction in yearend extras. above 4 percent. Decreases in rates have private payrolls in November, and in Personal contributions for social insur­ occurred for virtually all occupational December, Government payrolls were ance, which are deducted to arrive at and industrial categories. personal income, increased $1}~ billion in January because the taxable wage Auto sales improve CHART 2 base for workers covered by Social After a somewhat disappointing De­ New Domestically Produced Cars Security was raised from $6,600 per cember, dealers' sales of new domes­ year to $7,800. tically produced automobiles rose to a Million Units seasonally adjusted annual rate of more Employment little changed than 8 million units in January (chart 10 Most of last month's advance in pri­ 2). Sales were at a 7.8 million rate in vate payrolls was attributable to higher December and had fallen below 7 average hourly earnings since hours of million in November. Sales in January 9 work declined and employment changed may have received a fillip from special little from December, after seasonal promotions. Dealers started off the adjustment. Employment was depressed new year with larger and more balanced stocks than in many months. In­ 8 by a very large cutback in the contract construction industry. Unusually cold ventories at the beginning of 1968, at weather during the first 3 weeks of 1}~ million units (seasonally adjusted), January slowed building projects; as a were higher than at any other time 7 result, the number of employees on since the end of June 1967. Stocks rose construction payrolls, which normally above the 1.3 million mark by the end declines by about 200,000 persons from of January and represented 1.9 months 6 December to January, fell by 325,000 of sales at the January sales rate. this year. This was somewhat below the ratio An advance of nearly 45,000 persons that prevailed in 1966 and well below 5 in January brought seasonally adjusted the ratios of early 1967, when sales 1963 64 65 66 67 68 were depressed. Monthly, Seasonally Adjusted employment in manufacturing close to at Annual Rates the peak reached a year earlier. Much Rise in payments deficit U.S. Department of Commerce, Office of Business Economics 68·2·2 of the latest monthly rise was concen­ trated in the machinery and equipment The U.S. balance of payments posi­ industries; a 25,000 increase at non­ tion deteriorated sharply from the third temporarily swollen by the lump-sum electrical machinery plants reflected to the fourth quarter of 1967. Measured payment of the retroactive portion of mainly the settlement in early January on the liquidity basis, the fourth quarter the pay raises for military personnel and of a 39-day strike against a major balance was adverse by $1.8 billion, Federal civil service employees. producer of agricultural implements. seasonally adjusted, as compared with a Total wage and salary disbursements Industries other than construction third quarter deficit of $650 million. declined about $% billion from Decem­ and manufacturing generally reported Measured on the official reserve trans­ ber to January mainly because Govern­ higher levels of employment in January actions basis, the fourth quarter balance ment payrolls returned to a more than in December. The largest in­ was adverse by $1.2 billion, as com- normal level. Private payrolls were up creases were in State and local govern- (Continued on p. 10) l!'ebruary 1968 SURVEY OF CURRENT BUSINESS 3 NATIONAL INCOME AND PRODUCT TABLES 1966 1967 1966 1967 1966 1967 III I IV I I II I III I IV 1966 1967 III I IV I I II I III I IV Seasonally adjusted at annual rates Seasonally adjusted at annual rates Billions of current dollars Billions of 1958 dollars Table 1.-Gross National Product in Current and Constant Dollars (1.1, 1.2) Gross national product._----------------------------------- 743.3 785.0 748.8 762.1 766.3 775.1 791.2 807.3 652.6 669.3 654.8 661.1 660.7 664.7 672.0 679.6 Personal consumption expenditures............................... 465.9 491.7 470.1 473.8 480.2 489.7 495.3 501.8 418.0 430.1 420.4 420.4 424.2 430.6 431.5 434.0 Durable goods·------------------------------------------------- 70.3 72.1 70.9 70.6 69.4 72.5 72.7 73.8 71.3 72.1 71.9 71.1 69.7 72.9 72.7 73.0 Nondurable goods·--------------------------------------------- 207.5 217.5 209.5 210.3 214.2 217.2 218.5 220.3 187.7 193.0 188.8 188.4 191.8 193. 6 192.8 193.6 Services •• ------------------------------------------------------ 188.1 202.1 189.8 192.9 196.6 200. o 204.1 207.7 159.1 165.0 159.8 160.9 162.6 164.1 166.0 167.4 Grossprivatedomesticinvestment•............................... 118.0 112.1 116.4 122.2 110.4 105.1 112.2 120.8 105.6 96.9 103.6 108.4 96.9 91.3 96.4 103.0 Fixed investment..·-------------------------------------------- 104.