AUGUST 1964 survey of CURRENT BUSINESS U.S. DEPARTMENT OF COMMERCE OFFICE OF BUSINESS ECONOMICS SURVEY OF CURRENT BUSINESS AUGUST 1964 VOL. 44, NO. U.S. Department of Commerce Luther II. Hodges Secretary Richard H. Holton Assistant Secretary for Economic Affairs Office of Business Economies George Jaszi Contents Director THE BUSINESS SITUATION PAGE Louis J. Paradiso Summary ,. 1 Associate Director Murray F. Foss Gross National Product Continues Sharp Increase in Second Editor Quarter 3 K. Celeste Stokes Billy Jo ETur Statistics Editor Graphics Pattern of Second Quarter Advance 3 STAFF CONTRIBUTORS TO THIS ISSUE The Tax Cut 5 Business Review and Features: David R. Hull, Jr. ARTICLES Robert B. Bretzfelcler Foreign Investments in 1963-64 8 Articles: Samuel Pizer Portfolio and Short-Term Investments 8 Frederick Cutler Julius N. Freidlin Direct Investments Abroad 9 Zalie V. 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MU Phone 241-7900. 2133. 2-3300. By the Office of Business Economics wciuon *•• jULY was another month of rising strike was not settled until the end of far from the 734 million average rate business activity, after allowance for the third week in July the month's for the first 5 months of 1964. seasonal influences. Important meas- performance looked comparatively good, Although retail stocks are high, the ures such as personal income, industrial gaged by unit sales o! new domestic cars. favorable selling pace in the most production, retail sales and n on farm The seasonally adjusted annual rate of recent weeks suggests that the cleanup employment were higher than in June. sales was in excess of 7% million ve- of 1964 models is proceeding in an The July increases put all of these hicles, well above the June rate and not orderly fashion. indicators above their respective second quarter averages, starting the 14th Personal income and employment quarter of expansion in the present EXPANSION HAS ACCELERATED advance cyclical advance. SINCE MID-1963 , . Personal income rose about $1^ The latest developments follow a Billion $ billion at a seasonally adjusted annual second quarter increase in GNP of $10 650 rate to reach a total of $491 billion in billion, the fourth large quarterly rise July. Somewhat more than $1 billion in a row. Heightened demand in most of the rise reflected increased wage final markets contributed to the ad- and salary payments, about evenly vance, but the expansion in consumer divided among the major industry expeiiditures was predominant. A more groupings. detailed review accompanying the reg- The rise in payrolls during the month ular second quarter income and product was primarily the result of increased statistics is presented in later pages of employment. The IK >i if arm establish- this issue. As Gams in FINAL PURCHASES ment total was up about 140,000, after Have Been Strong <. * < seasonal adjustment; except for govern- Retail sales higher 650 ment employment, which dipped Increased consumer buying, under 600 slightly, increases were quite general the influence of rising disposable in- by industry division. The July rise come, was the major stimulus to the 550 was the eighth successive monthly increased economic activity in the first advance in employment, which lias half of this year. This summer retail 500 risen by more than 1/2 million over sales are continuing to show strength. the past year. The preliminary report on retail trade 450 i i i I i i i for July put sales at a new peak, about 1 And INVENTORY ACCUMULATION Unemployment lower percent (seasonally adjusted) above the Has Continue*! Moderate The sustained rise in the demand for revised June rate and above the 50 Current $ previous high readied,in May. labor has brought about a distinct im- Sales were up in both durable goods 0 provement in the overall unemploy- and nondurable goods stores from ment situation this spring and summer. -50 June to July. For durables the July The number of jobless fell more than rate was about 1 percent above the PRICES Have Advanced Slowly usual from June to July, to a seasonally second quarter average, and for non- Index, 1963 ~ 100 adjusted total of 3.6 million, and the 125 durables, about 2 percent. Implicit GNP Deflator unemployment rate declined to 4.9 per- The durable goods rise over the 100; cent. In the past 3 months the rate month was rather sharp, and reflected has moved irregularly lower, averaging some recovery in automotive sales, 75 5.1 percent, the lowest 3-month average which had fallen the month before 1961 1962 1963 1964 in 5 years. The incidence of unemploy- because of the trucking strike that Seasonally Adjusted, at Annual Rate ment still varies widely but the recent held back deliveries from East Coast improvement has been rather general, O.S. Department of Commerce, Gfftce of Business Economics 64-3-1 plants to retail dealers. Since the + as may be seen in the following table. 1 SURVEY OF CURRENT BUSINESS August 11W4 Unemployment Rate, Seasonally Adjusted tive to sales. In the second half of dustries rose 10 percent as compared ! Men !\Vomenj I 1963 backlogs declined slightly, both with the prior 3-month period, with 1 20 ; 20 ! Mar- j Teen- 3 months ending Total! years; years i ried ! agers in level and relative to sales. steel mill orders up about 15 percent and and ; men j : over over ! | The fluctuating volume of defense and other primary metals 5 percent orders frequently introduces an element higher. The increasing inflow of new July 19H3 o 7 4 4 o 4 3 2 16 5 of irregularity into the new orders business to iron and steel producers October 1953 5 5 4.2 5.6 3.0 15.2 series. Part of this year's overall in- has been reflected in rising steel mill Januarv 1964 5. 7 4.4 5 5 3.3 15.5 crease is due to an upsurge in defense output this year. This strengthening April 1964 5 4 3 9 5 5 2 9 14 8 orders during the first quarter from the of demand has lengthened delivery July 1964 .__ _ 5.1 3.8 5.0 2.7 14.7 very low fourth quarter 1963 level. times for many mill products, and lias However, the exclusion of defense from led a majority of producers to antici- Balance of payments deficit rises the total, as may be seen in the accom- pate an improvement in the rate of Preliminary estimates of the second panying chart, would still leave the August shipments over the July level. quarter balance of payments indicate a order rate during the second quarter at deterioration as compared with the first- a record level for the current expansion.