APRIL 1946 SURVEY OF UNITED STATES DEPARTMENT OF COMMERCE BUREAU OF FOREIGN AND DOMESTIC COMMERCE Survey of ~URRENT BUSINESS VoulHB 26, No. 4 APRIL 1946 Statutory Functions: "The Bureau of Foreign and Domestic Commerce ••• ) to foster, promote, and develop the foreign and domestic commerce of ( the United States" [Law creating the Bureau Aug. 23, 1912 [37 Stat. 408].] Contents Page THE BUSINESS SITUATION •• I Industrial Production • • • . 5 Inventories-Sales Relationships . 7 TREND OF CORPORATE PROFITS, 1929-45 . 9 STATISTICAL DATA: New or Revised Series . 20 Monthly Business Statistics • ... • • • • • • ~JL .General Index . • • • • . • • . • • • • • • • • • Inside back cover N 0 te-contents of this publication are not copyrighted and) ( may be_'l'eprinted freely. Mention of source will be appreciated Published by the Department of Commerce, HENRY A. WALLACE, Secretary.-Bureau of Foreign :and Domestic Commerce, AMOS • TAYLOR, Director. Subscription price $2 a year; Foreign $2.75. Single copies, 20 cents. Price of the 1942 Supplement, the last issue, 50 cents.-, Make remittances direct to the Superintendent of Documents, United States Government Printing Office, Washington 25, D. C. The Business Situation By Office of Business Economics ITH the resolving of the major in­ merchandisers have experienced record a major answer to the inflationary prob­ dustrial disputes in manufacturing dollar sales, and are still in the pleasant lem; and (3) a more advanced stage of Windustries, which generally established position of having to seek goods to sell, the reconversion process is now at hand the pattern of wage adjustments, the rather than customers. This has meant, and industry input-output relationships way was cleared by the end of March for of course, that pressure upon prices has will be altered from this point forward acceleration of the output of finished continued, notwithstanding that emerg­ so that a higher proportion of consum­ goods. Not all of the major disputes are ing tendencies presage a lessening of the ers' final products will be associated with out of the way and the one in the coal fundamental inflationary p r e s s u r e s. a given level of total production. industry could, if prolonged, have an im­ Thus, while the need for price controls portant effect upon production generally. Low Proportion of Consumers' Goods Notwithstanding that the working out 1 A word of explanation is perhaps nec­ of these wage and other problems consti­ Chart I.-Gross National Product essary with regard to point 3. In the tuted a brake upon reconversion in the initial phases of shifting the type or early months of 1946, there has been very BILLIONS OF DOLLARS character of the output of the economy, substantial progress in the change-over 250 the flow of final products-that is, goods to peacetime production and distribution. in the form in which they are used by Increased output was achieved in a va­ consumers-is low relative to total pro­ riety of industries, and with military duction, and low as well relative to the requirements continuing to decline, it was 200 f--- input of the factors of production and possible to divert an increasing share of hence of the earnings derived from their current output into civilian channels. use. This was true, for example, in early Two things stand out in the perform­ 1942 when output was being geared to ance of recent months: (1) The con­ war needs, and it has likewise been true tinued rise in consumer purchasing, de­ 150 - since last summer when output was being spite the further drop in income pay­ reorientated to peacetime needs. ments to individuals; and (2) the rapid The reason for this is, of course, fairly rate of expansion of private capital ex­ obvious: In the early stages of such a penditures, notwithstanding the various production shift, materials and parts bottlenecks that have had to be, or still 100 have to be assembled and facilities or­ remain to be, overcome. ganized-in other words, the pipe-lines of production and distribution have to Factors in Spending Rise be filled. The analysis of the movement With respect to the rise in consumer of manufacturers' inventories since purchasing, it should be noted that a 50 1- VE-day, presented in a subsequent sec­ variety of influences have contributed to tion, shows that much of recent produc­ this marked advance. Returning veter­ tion is still in the hands of manufac­ ans have increased the ranks of consum­ turers as materials and partly finished ers, and these individuals have been pur­ goods. The total of goods in all forms chasing at a much higher than average 0 held in manufacturers' inventories is 1944 1945 1946 higher now than at the end of the war, rate since it was necessary for them to ~ QUARTERLY TOTALS, SEASONALLY replenish their civilian supplies. Indi­ ADJUSTED, AT ANNUAL RATE _.,. notwithstanding the liquidation of their viduals generally have been relieved of 1). 0. 46-185 inventories of war goods. If these latter 1 Data for the first quarter of 1946 are could be shown separately-they are not part of their wartime tax payments, and preljminary. pay-roll bond deductions have declined, so segregated in the reports-the picture both factors tending to increase con­ Source: U. S. Department of Commerce. would be clearer. sumer spending. In addition, consumers Gradually output of finished goods is have lowered their savings of other types. is as imperative at present and for the stepped up-this is the current stage­ The net result has been that an increased coming period as it was during the war, and eventually the input-output rela­ proportion of income has been spent, this need will not continue indefinitely. tionship is in balance so that final goods resulting in a halving of individuals' net flow from production lines at a high and current savings between the second quar­ Emerging Tendencies Presage Change steady rate. It will be some time yet­ ter of 1945 and the first quarter of 1946. notwithstanding that output will accel­ The alteration in the basic situation erate-before this more advanced stage Dollar Totals Up More Than Quantities will stem from three primary conditions: is reached. Then we may expect a lower­ <1) The Government deficit is rapidly ing of the inflationary pressure. In view of the fact that the flow of diminishing, and the time of a balancing wanted goods has not yet grown at a rate of Government income and outlays has Rising Production Expected commensurate with the rate of spending, been advanced very considerably by the there has been a further tendency toward recent trends of the figures on both sides The recent trends of production are rising prices and trading up, and perhaps of the ledger; (2) the volume of produc­ analyzed in a succeeding section, which an increased willingness to take what is tion of consumers' goods is rising and makes clear that output during the re­ available. The net result has been that increased production of required goods is conversion period has been high relative 684740-46--1 1 2 SURVEY OF CUHRENT BUSINESS April 1941i Chart 2.-Gross National Product, This situation will, of course, be altered gain was notable, the urgent need for 1 only gradually by the change in the pro­ housing required still more rapid ad­ by Major Components portion of new construction, and by the vances in this field, and in February gov­ recent actions of Government agencies ernmental action involving the estab­ BILLIONS OF DOL LARS designed to shift a higher proportion of lishment of priorities for lower-cost 150 the resources available for construction housing and incentives for the production GOVERNMENT EXPENDITURES FOR to residential building. For an extended of materials was initiated. The effective­ GOODS AND SERVICES period, then, we may expect a continua­ ness of the program in stimulating in­ tion of the inflationary tendencies now creased housing construction will, in I generally apparent in the real estate large measure, depend upon legislation 100 r market, and it is highly probable that now under consideration, and priorities rent controls will have to be continued already established will alter the nature beyond the time when most, if not all, of the construction total in fayor of in­ commodity price controls may be elimi­ creased residential construction. At any nated. rate, the trend of construction should be 50 r I steadily upward. Gross National Product Decline Halted Purchases of producers' durable equip­ ment also rose at a sharply accelerated The over-all economic results of the rate in the first quarter-increasing 20 divergent movements in various seg­ percent to an annual rate of 9 billion o_ ments of the economy are summated in dollars. Accompanying this was a con­ I chart 1, which depicts the quarterly tinuation of the increase in accumulation 5or------------------------------. changes in the gross national product in PRIVATE GROSS CAPITAL of business inventories. The shift from FORMATION current prices over the past two and a inventory liquidation to accumulation quarter years. In the first quarter of began in the last half of 1945 and will this year the estimated value of cur­ probably continue through the next rently produced goods and services flow­ 0~------~~~~~~~~--~~ quarter. A more detailed discussion of ing to Government, producers, and con­ 15or------------------------------. the changed inventory position of busi­ sumers was at an annual rate only ness in the recent past is presented in a CONSUMER EXPENDITURES FOR slightly below the total for the fourth GOODS AND SERVICES later section of this review. quarter of 1945. This slackened rate of decline stands in contrast to the reduc­ tions experienced in the second half of Consumer Expenditure,.