2 MONTHLY REVIEW,JANUARY 1965 The Business Situation Economic activity was continuing a rise of almost four sion in the first quarlcr of 1965. Capital spending plans years' duration as 1964 drew to a close, and most fore- for 1965, on the other hand, appear to have strengthened casts pointed to fuither gains in 1965. Production, employ- since the initial surveys early last fail. ment, and personal income all recovered in November Economic developments in the months ahead will, of from the depressing effects of widespread strikes in the course, also be intluenced heavily by the Administration's automobile industry in the preceding months, and output budgetary decisions that are about to be revealed. Most in both the auto and steel industries continued to climb in business analysts seem to believe that these decisions will December. Unusually heavy Christmas shopping re- result in some net expansionary impact on the economy sulted in an appreciably greater than seasonal rise in and thus will help extend further the current over-all retail sales in December, and businessmen's outlays for advance. new plant and equipment apparently were also increasing. On the other hand, residential construction still showed RECENT INDICATORS someweakness. Price developmentscontinued to be a cause for some concern. Both consumer and industrial wholesale After a strike-induced dip in October, industrial produc- prices rose slightly in November, and some additional rise tion rose strongly in November: the Federal Reserve in the industrial component of the wholesale price index Board's seasonally adjusted index advanced by more than apparently occurred in December. Moreover, a number of 3 full percentage points to 134.9 per cent of th 1957-59 further price rises announced by the steel industry in late average (see Chart I). The bulk of this advance was at- December undoubtedly added to the recently emerging tributable to the return of most automobile workers to climate in which busincssmcn sccm to be less reluctant to their assembly lines, though final scifiemein of issues at a probc markets to dctcrmine whether price increases can be number of local Ford Motor Company plants was not made to stick. reached until late in November. In addition, most other Assessment of the economic outlook for the new year is, industries—including primary metals, furniture and lix- of course, beset with the usual collection of complicating tures, and machinery—registered moderate increases in uncertainties, not the least of which is the possibility of output in the month. In December, most of the automotive disruptions as a result of labor disputes.The strikeof East industry mustered everything at its command in an effort and GulfCoast dock workers will have serious effectsunless to work down the backlog in consumer orders and to re- it proves to be of short duration. There arc also the lingering stock dealers' showrooms. December data indicate that as- possibilities of a nationwide railroad tie-up during the semblies rose about 6 per cent above the pit-strike level winteras well as of a strike in the steel industry on or after and 12 per cent over December 1963. The stepped- May 1. Another determinant of the course of over-all up pace of activity in the automobile industry also influ- activity in the months ahead is likely to be business spend- enced steel ingot production, which continued to rise in ing. A Commerce Department survey taken in November, December. Steel ingot output for the year as a whole is which may not fully reflect the possible hedge buying of now estimated at 127 million tons, 9 per cent more than steel, indicated that manufacturers already anticipated a the previous record reachedin 1955 and 16 per cent above substantial increase in their inventory holdings in the final 1963. Strength in over-all production during the months quarter of 1964 and a somewhat more moderate cxpan- ahead is suggested by the high level of unfilled orders on Monthly Review FEDCRAL REBERVC DANK OF NEW YORK Index for the Year 1964 Guide to Page Numbers issue Month issue A'fonrlt of jssue Page.s Month of issue Pages Month of Pages of Pages 121 — 140 October . 185 —204 January 1 —20 April .... 65 — 80 July — 141 — 160 November 205—240 February 21 —44 May . 81 96 August March 45 —64 June 97 — 120 September 161 — 184 December 241 — 256 Page Page Accord Demand 57, 83. 143, 208 The "aecord"—-a landmark in the first fifty years See also Business Situation of the Federal Restive System, by Allan Sprout 227 Deposits 216 Balance of Payments Nec ecu Rank Credit, Commercial Banks, Monetarypolicy and the balance of payments: Member Banks an address by William MeChesney Martin, Jr. 2 Ste u/co Foreign Exchange Markets: Discount Rates Hayes, Alfred; International Ranking and Foreign 77, 200 Finance; Monetary Policy Federal Restrve Banks (statement) 246 Bank Credit and 214 Dollar Recent banking monetary developments Recent developments in the defense of the dollar: Federal Reserve accounts, nioftey supply. an address by Alfred Hayes 6 and bank credit 250 also Markets See otto Commercial Banks. Member Banks, See Foreign Exchange Money Market EconomicPolicy MeasuresAbroad, Recent 74, 197 Bond Market See Money Market FAge Act and AgreementCorporations in International BankIng and Finance Burgess, W. Randolph (Primary author: George H- Bossy) 88 Reflectionson the early development of openmarket policy 219 Employment IS. 56. 69, 84, lOS. 123, 144, 173, 191, 209, 243 BusinessSituation See also Business Situation Monthly article 14, 28. 56. 68, 83. 243 104. 123. 143. 172, 191,208, Exchange Foreign St'e Market Rates, also Capital Developments and Federal Reserve foreign exchange in the United Recent Treasury States. operations: two reports by CharlesA. Coombs 47, 162 Foreign exchange markets. July-December 1963 Canada and 1964 t28 The of the Canadian Commissionon January-June II, report Royal See also International Banking and Finance Banking and Finance: a review by Francis H.Sehott 151 Sn' also Foreign Exchange Markets Federal Reserse System in the Monthly arsicle. fiftieth annivemsary 19. 42. 61. 79. 93. Capital Market Dtwelopments 202. 237, 254 tinited States, Recent 178 I 19, 138. t56. 182. Treasury and Federal Reserve foreign exchange two Charles A. Coomhs 47. 162 Capital Spending 16.70,125,192 operations: repoits by See also Business Situation Techniques of member bank borrowing at the Federal Reserve 66 Central Banks,New The Federal Reserve System after fifty years: Primaryautliot : DorothyB. Christelow) 133 an address by Willians F. Treiher 98 Intnmduction by Alfred Hayes to special articles Commercial Banks by %V. Randolph Burgess and Allan Sproul 217 The banking system in 1914 42 The "accord"—a landmark in the first fifty years Early response of the coniiiiercialbanks 119 of the Federal Reserve System, by Allan Sproul 227 Reserve discount rate Recent banking and monetarydevelopments 214 Statement on Federal Bank supervision 2s4 and RegulationQ changes 246 See also Canada: Capital Market Developments in Statement on the defense of sterling 246 the united States, Recent; Currency; Federal See also Currency, Money Market Reserve System; Hayes, Alfred; Member Ranks; Securities and Securities Market Fiftieth Anniversary See Federal Reserve System Construction, Residential 16, 70, 106, 124, 174, 244 See also Business Situation Financingof Government Securities Dealers,The (Primary author: Louise Freeman Ahearn) 107 Consumer Spending 106. 124. 145. 179, 192, 210 See also Business Situation; Sales, Retail ForecastingCurrency In Circulation 36 Coombs, Charles A. (Primary author: Irving Auerbach) 'treasury and Federal Reserve foreign exchange operations: two reports 47. 162 ForeIgnExchange Markets Foreign exchange markets. July-December 1963 Currency and January-June 1964 II, 128 Forecastingcurrency in circulation 36 'Ireasury and Federal Reserve foreign exchange See also Foreign Exchange Markets; operations: two reports by Charles A. Coombs 47, 162 Hayes. Alfred: Money Supply See also International Ranking and Finance Page Page ForeignTrade Monetary Policy See Balance of Monetarypolicy and the balanceof payments: Payments; Hayes, Alfred; Jr. 2 InternationalBanking and Finance an address by William McChesneyMartin, Techniques of member bank borrowing at the Federal Reserve 66 GoM 47 79 162 economic measuresabroad 74. 197 Seealso International and Finance Recent policy Banking Monetarypolicy and a liberal international economy: anaddress by Alfred Hayes 187 GovernmentSecuritIes Market See also Canada, Dollar See Securities and Securities Market Money Market article 85. GovernmentSpending Monthly 17, 32, 59. 71, See Business Situation 116, 125, 147, 175, 193,211,245 Techniques of member bank borTowing at the Federal Reserve 66 Cross National Product The financing of Government securities dealers 107 See Business Situation Recent capital market developments in the United States 178 214 hayes, Alfred Recent banking and monetary developments Recentdevelopments in the defense of the dollar (an address) 6 Money Supply in our Moneysupply and time deposits 2)6 Liquidity expanding economy Federal Reserve accounts, money supply. (an address) - 23 and liberal international and bank credit 250 Monetary policy a See also economy (an address) 187 Currency introduction to special articles by Market W. and Allan 217 Open Operations Randolph Burgess Sproul Trea.surv and Federal Reserve foreign exchange operations: two reports by Charles A. Coombs 47. 162 Industrial Production Reflectionson the early development of Domestic 15, 56, 69. 84, 105, 123, 144, 173, 191, 209, 243 open market policy, by W. Randolph Burgess 219 Abroad 74, 197 See also Federal Reserve System. See also Business Situation International Banking and Finance Orders, New 105, 123, 144, 173, 243 Interest Rates See also Business Situation See Deposit-s.Discount Rates, Money Market Prices 84, 1(16 InternationalBanking and Finance The business situation and recent price trends 28 Foreign exchange markets, July-December 1963 See aFro Business Situation; Economic and January-June 1964 Ii, 128 Policy Measures Abroad. Recent Treasury and Federal Reserve foreign exchange 246 operations:two reports by Charles A.