Survey of Current Business January 1949 - FRASER · 2018. 11. 6. · SURVEY OF CURRENT BUSINESS No....

JANUARY 1949

U. S. DEPARTMENT OF COMMERCE

B U R E A U OF F O R E I G N AND DOMESTIC COMMERCE

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SURVEY OF CURRENT BUSINESS

No. 1

JANUARY 1949

(ContentsPAGE

THE BUSINESS SITUATION

The Federal Budget 1International Transactions by Major Areas, Second 5

Quarter 1948 6

* * *SPECIAL ARTICLE

Postwar Patterns of Chain and Independent Store Sales. 8

* * *

NEW OR REVISED STATISTICAL SERIES

Production-Worker Employment in Manufacturing . . 14Value of Manufacturers' Sales 15Production-Worker Employment and Pay Rolls in the

Machinery Industry 16

* * *

MONTHLY BUSINESS STATISTICS . . . . S-l to S-40

Statistical Index . Inside Back Cover

Published by the Department of Commerce, C H A R L E S SAWYER,Secretary. Office of Business Economics, M. JOSEPH MEEHAN,Director. Subscription price, including weekly statistical supplement, $3 ayear; Foreign $4. Single copy, 25 cents. Send remittances to any Depart'ment of Commerce Field Office or to the Superintendent of Documents,United States Government Printing Office, Washington 25, D. C. Specialsubscription arrangements, including changes of address, should be madedirectly with the Superintendent of Documents.

Make check payable to Treasurer of the United States

DEPARTMENT OF COMMERCEFIELD SERVICE

Albuquerque. N. Mex.203 W. Gold Avcf

Atlanta 1, Ga.50 Whitehall St. SW

Baltimore 2, Md. *103 S. Gay St*

Boston 9, Mass.2 India St,

Buffalo 3, N. Y.117 Silicon St«

Butte, Mont.14 W. Granite St*

Charleston 3, S. C.18 Broad St.

Cheyenne, Wyo.304 Federal Office Bldg.

Chicago 4, III.332 S. Michigan Are*

Cincinnati 2, Ohio105 W. Fourth Sti

Cleveland 14, Ohio925 Euclid Ave<

Dallas 2, Tex.1114 Commerce St.

Denver 2, Colo.828 Seventeenth St*

Detroit 26, Mich.230 W. Fort Stj

El Paso 7, Tex.310 San Francisco Sfc

Hartford 1, Conn.135 High St.

Houston 14, Tex.602 Federal Office Bldg.

Jacksonville 1, Fla.311 W. Monroe Sfc

Kansas City 6, Mo.911 Walnut Sfc

Los Angeles 12, Calif.312 North Spring Sti

Louisville 1, Ky.631 Federal Bldg.

Memphis 3, Tenn.229 Federal Bldg.

Miami 32, Fla.36 NE. First St.

Milwaukee l,Wis.517 E. Wisconsin Are.

Minneapolis 1, Minn.2d Ave. S. at 4th St.

Mobile, Ala.109-13 St. Joseph St.

New Orleans 12, La.333 St. Charles Ave.

New York 1, N. Y.350 Fifth Ave.

Oklahoma City 2, Okla.102 NW. Third St.

Omaha 2, Nebr.1319 Farnam St.

Philadelphia 2, Pa.42 S. Fifteenth St.

Phoenix 8, Ariz.234 N. Central Are.

Pittsburgh 19, Pa.700 Grant St.

Portland 4, Oreg.520 SW. Morrison St.

Providence 3, R. I.24 Weybossett St.

Reno, Nev.118 W. Second St.

Richmond 19, Va.801 E. Broad St.

St. Louis 1, Mo.1114 Market St.

Salt Lake City 1, Utah350 S. Main St.

San Francisco 11, Calif.555 Battery St.

Savannah, Ga.125-29 Bull St,

Seattle 4, Wash.909 First Are.

For local telephone listing, consult sectiondevoted to U. S. Government


JANUARY 1949

Retail Trade SummarySales rose moderately in 1948.

oBILLIONS OF DOLLARS50 100

1948*

1947

1946

1945

DURABLEI F

NONDURABLE

Durablegoods salescontinuedsubstantiallyhigher thanin 1947...

while non-durablegoods salesleveled offearly in1948.

1947

1946

©ESTIMATE

I I I I I I I I I I 1

1946

INDEX, 1935 -39 = 100

450

400

350

300

250

200

150

100

350

300

250

2OO

150

100

© ESTIMATE

I I I I

J F M A M J J A S O N 0•« SEASONALLY ADJUSTED +>

U. S. DEPARTMCHT OF COMMERCE, Off ICE Of BUSINESS ECONOMICS.

THE

SITUATIONBy the Office of Business Economics

year 1948 closed with the volume of business sus-tained at the level reached in the late summer upswing, withmoney incomes moderately higher than in the third quarter,but with prices tending to decline. While the moderate re-duction in average prices toward the year end reflects thedownturn in agricultural prices which mirrors in part therecord crop yields, the leveling off in industrial prices isindicative of the better adjustment of demand and supplyin lines of production in which erratic factors like the weatherdo not play a major role.

Characteristic of most of the over-all measures of economicactivity was the temporary balance between opposing tend-encies during the final quarter of the year. This flatteningsucceeded the rising tendency during the third quarter, andresulted in quarterly totals at seasonally adjusted rates fornational product, national incomes and personal incomesabove the third quarter totals. The gross national productis estimated to have reached 260 billion dollars at annualrates in the final quarter, compared with the calendar year1948 total of about 253 billion dollars.

The continued forward movement of personal incomesthrough November was a significant fact in the businesspicture, against which reports of changes in employment,sales, or new business in particular lines or geographic areasshould be weighed. Aggregate employment has been main-tained at high levels, with seasonal declines in agricultureand seasonal increases in nonagricultural pursuits in Decem-ber resulting in a drop in the total number employed, ac-cording to the Bureau of Census survey. Unemploymentremained below 2 million, and the number engaged in non-agricultural pursuits at 52 million was 1 million higher thana year ago. Layoffs have been more common and thesehave been reflected in a somewhat larger rise subsequent toOctober in unemployment compensation claims than occurredin the comparable period of 1947.

The most recent rise in personal incomes reflects advancesin agricultural and property incomes and government payrolls, with private industry pay rolls showing little changeat the enlarged totals reached in the third quarter rise. TheNovember personal income figure of 217 billion dollars atannual rates, the latest figure actually available at this time,compares with the third quarter average of 214 and theNovember 1947 figure of 201 billion.

A number of significant points emerge from an examinationof the detailed fourth quarter data. The one over-all gen-eralization that can be made is that in this period the forwarddrive of the expansionary forces in the private sectors of theeconomy ceased. Discussed in a later section is the recentchange in an area where a powerful expansionary forceexisted earlier in the boom, viz, the tendency of consumers

818342°-48 1


SURVEY OF CURRENT BUSINESS January 1949

to spend increasing proportions of their income. Foreignshipments were up somewhat in the fourth quarter, in spiteof the port tie-up; and are expected to move moderatelyahead as Marshall program shipments accelerate. Privatecapital expenditures showed little change in the fourth quar-ter from the third quarter rate.

This leaves the Government sector as the area of dynamicchange at the moment. The trend of Government expendi-tures—national and state and local—was upward in the finalquarter, and the Federal Budget Message, reviewed in a

. later section, presents a program which means a continuationof this rising trend. Coupled with the expenditure recom-mendations was a request for a substantial rise in taxes tofinance these expenditures and to produce a substantialbudget surplus. Thus Government emerges as the outstand-ing basic influence in the economic picture, since encompassedin large degree in these dollar terms is the impact of the in-ternational situation and of domestic government programs.

Domestic Business Investment

Private investment expenditures continued at a high ratethrough the closing months of 1948, approximating 40 billiondollars at annual rates. This was about equal to the annualrate of purchases of goods and services by the Governmentin the final quarter. However, whereas the rate of grossprivate domestic investment rose only in limited degree fromthe first to the final quarter of 1948—estimated at little morethan a billion dollars, or about 3 percent—Governmentpurchases over this same period rose by 10 million dollars,or by one-third.

Industrial expenditures on durable goods equipment and,to a lesser extent, on plant expansion, increased in the finalquarter. Residential construction volume eased off, how-ever, reflecting the earlier decline in housing starts in thelate summer and early fall. With prices no longer rising,business requirements for inventory financing have leveledoff and are a little lower than a year earlier.

Recent Shifts in Inventories

At the same time, however, a significant shift has takenplace in the character of inventory holdings of manufacturers.Stocks of raw materials and of goods-in-process have beenrising more slowly whereas holdings of finished goods haveaccumulated at a somewhat faster rate. This same generaltrend was evident throughout the year as supplies in firstone industry and then another caught up with demand. Thustwo-thirds of the total increase in value of manufacturers'inventories during the last 12 months was in finished-goodsstocks. In November, the latest month for which completeestimates are available, the shift in inventory accumulationwas especially marked—raw materials and goo ds-in-pro cessdeclined about 100 million dollars whereas stocks of finishedgoods increased 450 million dollars.

Paralleling the accumulation of finished goods stocks atthe manufacturing level there was a greater-than-seasonaldrop in outstanding orders of department stores duringNovember. Federal Reserve data on 296 large departmentstores indicate that new orders fell very sharply from Octoberto November and were well below those placed a year ago.With prices of certain textile and clothing items droppingand demand for household goods slackening, large retailersparticularly have been holding back in their purchasing inanticipation of a more favorable price situation for thespring selling season.

Other data suggest that this hesitation in order placing bydepartment stores was not general throughout industry.New orders placed with manufacturers in a wide group ofindustries producing both industrial and consumer goodswere about the same in November as in October, on the

basis of data reported to the Office of Business Economicsand presented on page S-3.

Wholesale Prices Lower

In view of the major interest centered in price trendsthroughout the postwar period, it is noteworthy that thewiiolesale-price index at the end of 1948 averaged about thesame as a year earlier. This resulted from an advance dur-ing the first part of the year, followed by a decline in the lastquarter. Beginning in the third quarter, the influence ofbumper crops was felt in farm and food markets and someeasing of demand was evident for these and for some of theother nondurable goods. The durable-goods lines, such asmetal products and building materials, continued upwardthough even in the latter instance there was some downdriftin the closing months of 1948.

From the high point of 170 (1926= 100) reached in August,the wholesale-price index of the Bureau of Labor Statisticsreceded about 5 percent by the end of the year. Theaccompanying table shows that this resulted from the dropin the farm and food components with the average of allother commodities remaining about unchanged. The indexof all commodities other than farm and food products ceasedrising in August and since that time has been unusuallystable. Small declines in textiles and in building materialshave approximately offset the continued advance in metalsand metal products.

Table 1.—Wholesale Price Indexes (Index, 1926=100)

Item

All commodities

Farm productsFoodsAll commodities other than farm

and foodsHides and leather productsTextile productsFuel and lighting materialsMetals and metal productsBuilding materialsChemicals and allied products.Housefurnishing goodsMiscellaneous

Monthly index1948

January

165.7

199.2179.9

148.3200.3148.4130. 0154.3193.3138.8141.3123.6

August

169.5

191.0189.5

153.1188.4148.9136.6170.9203.6132.0145.4119. 7

Index forweekendedJan. 4,

1949

161.3

175.5168.1

152.60)145.1137.1175.2198.70)

8

Percentage change

Januaryto Au-

gust 1948

+2

-4+5

+3-6

0+5

+11+5-5+3-3

August1948 toJan. 4,

1949

-5

-8-11

0

-30

+3-2

1 The new index initiated on Nov. 19, 1948, lists "all other" which includes Hides andLeather Products, Chemicals and Allied Products, Housefurnishing Goods, and Miscel-laneous.

Source: Indexes from U. S. Department of Labor, Bureau of Labor Statistics.

Industrial Production

Industrial output in December was just slightly below thehigh rate of October and November. Total output, asmeasured by the Federal Reserve seasonally adjusted pro-duction index, averaged about 193 (1935-39=100) for thefourth quarter, which is a little higher than either the pre-ceding quarter or the corresponding period in 1947.

For the year, industrial production was maintained on ahigh plateau but the increase over 1947 in the physical vol-ume of goods produced was moderate. The year was markednot only by outstanding production performances in a num-ber of manufacturing lines but by downward adjustments ina growing list of industries, particularly at the year end.

On the whole, the quality of goods produced improvedduring the year, and there was a noticeable tendency in some *,lines, such as textiles, for lower priced lines to become moregenerally available. By the end of the year the consumerhad more choice available to him and—except for automo-biles—was in a position to secure prompt attention to hisneeds in the stores.


January 1949 SURVEY OF CURRENT BUSINESS

Steel Attains 94 Million Ton Rate

Output in both the durable and nondurable industriesmoved higher from the third to the fourth quarters but therewas no appreciable change from the rate attained in theearly months of the year. The rise in durable manufactureswas featured by sharply expanded operations in steel andautomobiles although small gains were also recorded in afew other important industries. In the final quarter of 1948,steel mills, operating at approximately 100 percent of therated capacity in effect on January 1, 1948, turned out 23.5million tons of ingots and castings, equivalent to an annualrate of 94 million tons, or 4 million tons more than the largestwartime total in 1944.

The larger flow of steel supplies also resulted in an increasein the number of automobiles assembled, which reached apostwar peak. In contrast, however, there was some slacken-ing in activity in plants producing other consumer durablesas output showed less than the seasonal rise in a few lines,while contraseasonal drop was experienced in others. Thenumber of radios produced—while higher than in the thirdquarter, due chiefly to seasonal factors—was considerablybelow the fourth quarter of 1947 but the number of televisionreceivers turned out nearly doubled.

Cotton Consumption Continues Downward

In nondurable manufactures, the rise in the fourth quarteras compared with the previous three months was less pro-nounced than in the heavy goods industries. For the mostpart changes in output fell within a narrow range about thehigh operating rates prevailing during the autumn months.The* principal exception was in cotton textile mill output,where a significant cut-back in operations took place duringthe fourth quarter. Mill consumption of cotton was 13percent lower in October and November than in the corre-sponding months of 1947.

Limited Change in Consumer Buying

Despite some shifting in timing of the Christmas buyingrush, the volume of retail trade in the final portion of 1948showed the usual seasonal advance. The supply of goodsfor the holiday season was more plentiful and in greatervariety than at the end of earlier postwar years, but missingwas the easy spending which had characterized retail tradea year and two years ago. Nevertheless, retail sales in thefinal quarter of the year were about 4 percent larger indollar terms than a year ago—although little changedfrom the preceding quarter on a seasonally adjusted basis.

Within a narrower focus, department-store sales in theearly part of December illustrated the greater restraint inconsumer buying which has become apparent in recentmonths. Assured of an ample supply of goods, consumersconcentrated much of their holiday buying in the late weeksof the season—as was customary in prewar years. Thelargest advances in buying volume occurred in the last twoweeks before Christmas and during the post-Christmas weekwhen widespread mark-downs were effective in stimulatingconsumer interest. The resultant pick-up of sales in thefinal weeks more than compensated for the relatively slowpace in early December and raised the month's total on aseasonally adjusted basis 7 percent above the low Novembersales, and slightly above December a year ago.

The general tendency toward smaller rises in retail salesf/s illustrated in the chart on page 1, which gives annual andmonthly comparisons of retail sales in the postwar period.At an estimated 130 billion dollars in 1948, retail sales ad-vanced about one-tenth over the preceding year, or lessabsolutely and relatively than in 1946 and 1947.

In 1946, a shortage of available consumer durable goods

curbed expenditures on these products; heavy expenditureson nondurables, and the sharp rise in prices continued toraise sales in dollar terms very rapidly. In the followingyear, a greater availability of durable goods resulted inrising expenditures on the durables which supplementedrather than supplanted continued heavy expenditures onnondurables. In 1948, however, the more moderate rise intotal retail sales reflected in large part the diminution in therate of advance of nondurable-goods purchases which inturn reflected the catching up of consumer needs and thefact that the rate of spending out of income had earlier beenunusually high.

Nondurable-goods sales in 1948 rose only 6 percent overthe previous year. In contrast, durable-goods sales ad-vanced about one-fifth in 1948 and constituted more thanhalf of the aggregate dollar increase.

Chart 2.—Sales of All Retail Stores Related to DisposablePersonal Income

140

130

50

20

NOTE: - L I N E OF REGRESSION WASFITTED TO DATA FOR 1929, 1933,AND 1935-41.

© QUARTERLY TOTALS, SEASONALLYADJUSTED, AT ANNUAL RATES.

60 80 100 120 140 160 180DISPOSABLE PERSONAL INCOME (BILLIONS OF DOLLARS)

Source of data: U. S. Department of Commerce, Office of Business Economics.

New Sales-Income Pattern Developing

The tendency for retail sales to level off is more apparentin the trend of consumer purchasing in the latter part of1948. The Office of Business Economics index of retailsales, which is seasonally adjusted, has fluctuated within arange of approximately 2 percent since June 1948. As con-sumer incomes advanced during this period because of re-duced personal income taxes, State veteran bonuses, andhigher wage and salary payments, it is apparent that signifi-cant changes have occurred in buying attitudes.

An article in the October 1948 issue 1 pointed out that theeffects of accumulated wartime savings, backlog demands,

i Retail Sales and Consumer Income, SURVEY, October 1948.


SURVEY OF CURRENT BUSINESS January 1949

and relatively smaller expenditures on services, notably rents,had maintained sales volume at a higher level in 1947 andin the first two quarters of 1948 than might have been ex-pected on the basis of prewar relationships with disposableincome. During the latter part of 1948, there was some in-dication that the effect of these factors on retail sales beganto wear off (see chart 2).

This is most marked in the fourth quarter of 1948, forwhich period preliminary estimates are available. Duringthe first three quarters of 1948 the principal advance insales was attributable to the rise in durable-goods purchases.In the fourth quarter, however, sales lagged in the durablesgroup (except automobiles), with the principal declines inhouse-furnishings and hardware and building-material stores.In contrast to the sales record for the year, it is this decliningtendency in some of the durables—reflected in the middlepanel of the chart on page 1—which represents the signifi-cant development in retail trade in the closing months of1948.

One aspect of the slackening tendency in the purchase ofsome types of durable consumer goods is seen in the markedrestraint in the growth of consumer short-term creditbetween October and November. The rise during themonth was just over 200 million dollars, in contrast to therise of some 600 million between October and November1947. It is not possible at this time to determine the extentto which the reductioa in the growth of credit may beattributed to the tightened credit controls made effective inSeptember; or to reduced credit requirements stemmingfrom an easier demand situation in the consumer durable-goods field.

Where backlog demand continues strong, as in automo-biles, the rise in automobile installment sale credit fromOctober to November was about the same as it was in thesimilar period a year earlier. Other installment sale credit,especially in department and furniture stores, showed amuch smaller rise than in the previous year. Charge-account credit, which was not directly affected by the newrestrictions, rose only one-third as much as it did betweenOctober and November 1947, but this was influenced nodoubt by the shifting pattern of sales in the holiday periodearlier discussed.

Table 2.—Retail Sales by Type of Store

Item

All retail sales . . . _ _Durable goods stores _

Automotive _ _ _ _ _ _ _ _ _Building materials and hardwareHomefurnishingsJewelery

Nondurable goods stores _ _ _ApparelFood - _ _ _ _Eating and drinkingDrug storesFilling stations _•General merchandiseOther retail

January toNovember

1947 1948

Billion dollars

105. 6927.3112.538.255.491.03

78.388.17

26.8311.413.254.70

13.7710.25

116. 7532.9716.059.995.97.95

83.798.59

28.9211.533.295.80

14.6910.98

Increase from Jan-uary-November1947 to JanuaryNovember 1948

Amount

11.075.663.521.74.48

-.085.41.43

2.08.12.04

1.10.91.73

Percent

10.520.728.121.1

.9-8.0

6.95.27.81.01.3

23 A6.67.1

Source: U.S. Department of Commerce, Office of Business Economics.

Change in Sales Pattern by Type of StoreA somewhat different perspective on retail sales results

from a comparison of sales data by type of store for the 11-month period ending in November 1948 with that for thecorresponding months in 1947. In the nondurable group,sales in drug stores and eating and drinking places during1948 barely kept ahead of 1947, as shown in table 2. Appareland food sales continued to maintain a moderate margin ofincrease, although for the food stores this was considerably

less than advances made in earlier postwar years. Sales atfilling stations rose considerably as automobile output rose.

More than half of the dollar gain and the largest percent-age increases shown in the table were made by stores classifiedin the durable-goods group. Automotive sales continued torise rapidly, along with sales of building materials and hard-ware; homefurnishings sales were about the same as in 1947,while jewelry sales declined.

Employment TrendsTotal employment declined slightly in the final month of

the year largely because of seasonal influences, as a declinein agriculture more than offset the rise in nonagriculturallines. Nonagricultural employment, which totaled 52 millionin December, rose fractionally less than the typical seasonalincrease at this time of year since usually the stepped upemployment in retail trade for the Christmas season morethan offsets the declines in construction and manufacturing.

The high level of demand resulted in the employment of59.4 million persons in civilian jobs during 1948, an averageof 1.4 million more than were employed in 1947. Therewere about 1.6 million more persons employed in nonagri-cultural industries and over a quarter million fewer personsin agriculture. The additional employment came largelyfrom new entrants—veterans and women—into the civilianlabor force, which averaged 61.4 million for the year.Unemployment Still Low

Although reports of lay-offs in soft goods and certain con-sumer-durable lines continued through December, unem-ployment rose only 100,000 over the month and was stillbelow the 2 million mark. While the softening tendencies inimportant nondurable industries like textiles have beenapparent since early fall, it is the appearance of scatteredlay-offs in certain durable industries which has attractedattention in the closing months of the year. These layoffshave taken place in industries where backlog demands, atleast until recently, have geared output and employmentto a very high rate. While these employment reductionsare indicative of an easing of demand in certain areas, a verydistorted view of employment changes results unless thelay-offs are considered in the light of the entire employmentsituation in the industry.Lay-Offs Very Scattered in Durable Lines

In order to put the lay-offs into some perspective, over-allemployment figures may be cited for three selected durable-goods industries—washing machines, grey iron castings, andstoves, oil burners, and heating equipment—where there havebeen reported lay-offs. These figures show percentagechanges in production-worker employment from November1947 to November 1948.

PercentT -, , change inIndustry: employment

Washing machines and driers +1.3Stoves, oil-burners, and heating equipment._ —8. 0Grey iron and semisteel castings__ —3.0

The pattern of employment changes within each of thethree industries has been quite diverse. At the same timethat substantial year-to-year decreases have occurred in someplants, there have been increases and relative stability inothers. This is to be expected, even in an industry such asthe washing-machine industry which for the most part pro-duces a single product. As demand has slackened in particu-lar industries, competition has increased and production and|employment gains in some firms have been made at the ex-pense of others. The net result in all three cases is a muchsmaller change in aggregate employment in the industry thanmight be suggested by the lay-off figures considered by them-selves.


January 1949 SURVEY OF CUEEENT BUSINESS

The Federal Budget

JL HE proposals in the President's Budget Message meana continuation of the upward trend of Federal expenditureswhich began almost a year ago. To meet these enlargedexpenditures and to provide a surplus for debt retirement asubstantial increase in taxes was recommended. These newproposals may properly be viewed in the perspective of themajor shift which occurred in the Government's fiscal posi-tion during the course of 1948.

The excess of the Federal cash receipts over cash paymentsto the public, running at an annual rate of 12.5 billiondollars in the first half of calendar 1948, was a substantialcounter inflationary force. The rising trend of expendituresand the reduction in personal-income-tax rates reduced thisexcess to an annual rate of 4 billion dollars in the secondhalf of the year. By the year end it was even lower. Theincreased expenditures included not only the foreign aid anddefense programs but also more public construction, in-creased pay rates and theagricultural-price-support program.

As was indicated earlier in this review, this shift in theFederal fiscal position was the major factor in the continuedupward trend in the value of the national output at a timewhen the expansionary force of the private sectors of demandwas easing.

The Budget Message estimates cash payments to thepublic in fiscal 1949 at 40.1 billion dollars, which is roughlyequivalent to the annual rate reached at the end of calendar1948, and for fiscal 1950 a total of 45.7 billion. Three itemsaccount for the bulk of the increase projected for fiscal 1950:A 2.4 billion dollar increase in national defense expenditures;refunds of National Service Life Insurance premiums esti-mated at 2.0 billion dollars, partially offset by a reduction of0.9 billion dollars in veterans' benefits; and a 1.9 billion dollarexpansion of social welfare, health and security programs.Expenditures are contemplated for shipment of militarysupplies abroad, but no figures were included in the budgetfor the reason that the program has not been formulated.

These increased expenditures are calculated to be coveredin small part by the 1.6 billion dollar increase in collectionsfrom present tax rates with a continuation of the currentlevels of profits and incomes. The Budget also includes anincrease of 2.7 billion dollars in pay-roll taxes to be derivedpartly from the proposed expansion of the scope and cover-age of social security, partly from the increases in rates forexisting programs already provided by law, and partly fromthe proposal to make the increase in Old Age and SurvivorsInsurance contributions effective July 1, 1949 instead ofJanuary 1, 1950 and to require monthfy instead of quarterlyremittances. The larger part of this increase is not scheduledto take effect until the latter half of fiscal 1950.

On the basis of these estimates, and without any otheradditional taxes, the excess of cash receipts over cash pay-ments to the public would be further reduced from 2.8billion dollars for fiscal 1949 to 1.5 billion dollars for fiscal1950. On the same basis, and on the further assumptionthat the bulk of the refunds of National Service Life Insur-ance premiums are made in the last half of calendar 1949,cash payments to the public would exceed receipts fromthe public in that period.

The 4 billion dollars of additional taxes proposed by thePresident are designed to produce a substantial cash surplusin the face of the projected increases in expenditures. Ifthe full 4 billion dollars is included in the estimates for fiscal1950, the resulting cash surplus is 5.5 billion dollars. Thisis above the current rate but well below the annual rate ayear ago. The actual surplus will, of course, depend onwhat taxes are actually enacted, the final total of appro-priations, and the size of the tax base as reflected in incometrends.

Chart 3.—Changes in the Government Surplus 1

BILLIONS OF DOLLARS+ 20

+ 15 -

+ 10 -

EXCESS OF RECEIPTSOVER EXPENDITURES

-5 -

-101946 1947 1948

QUARTERLY TOTALS, SEASONALLY ADJUSTED, AT ANNUAL RATES

U S DEPARTMENT OF COMMERCE, OFFICE OF BUSINESS ECONOMICS.

i Includes Federal, State, and local governments.Source of data: TJ. S. Department of Commerce, Office of Business Economics.

The foregoing comparisons are in terms of "cash" receiptsfrom and payments to the public rather than "budget"receipts and expenditures. The budget accounts reflectessential distinctions for appropriations and revenue pur-poses, but require recasting to provide a more useful measureof the Government's transactions with the rest of the econo-my. The estimates of the "budget" receipts and expendi-tures comparable with the cash figures above show a smalldeficit for both fiscal 1949 and fiscal 1950, before the additionof the requested 4 billion dollars of new taxes.

The accompanying chart, showing the trend of the excessof Government receipts over expenditures during the postwarperiod, highlights the sharp drop in the surplus during 1948.While the figures in the chart are those used in the nationalincome accounting—which differ from both the cash andbudget accounting figures, and include state and local gov-ernments in addition to the Federal Government—theyeffectively illustrate the important economic tendency pre-viously discussed.


SURVEY OF CUKKENT BUSINESS January 1949

International Transactions by Major Areas, Second Quarter 19481

A.REA break-down of theU. S. balance of payments dis-closes that the second-quarter decline of the export surpluson goods and services—by 320 million dollars below the firstquarter-—was more than accounted for by our transactionswith Europe, including both the ERP countries and otherEurope. In fact, the balance with the ERP countrieschanged by 386 million dollars and that with the rest ofEurope by 67 million dollars.

These changes represent a continuation of developmentswhich started in 1947 as European dollar resources, includ-ing funds available from the British loan and other U. S.Government aid programs, were greatly reduced. Aidunder the European Recovery Program (the June quarterbeing the first quarter of its operation) did not suffice tomake it possible for the ERP countries to stop or reverse thedecline in their current expenditures in the United States.The prospect of reimbursements under the program may,however, have induced these countries to make purchaseswhich they would not otherwise have made in this countrywith their own funds, thus preventing our exports fromdeclining as fast as they might have in the absence of theprogram.

Decline Ceases Outside Europe

Contrary to this European development, the decline in theexport surplus on goods and services to the other areas,whichin the first quarter was well below the high reached in 1947,seems to have been stopped temporarily at least, and, inthe case of Canada and Latin America, even reversed. Theincrease in the net balance with Latin America was due tosmaller imports, which may have been a temporary changeonly. More significant, however, may be the fact thatexports of goods and services to this area stabilized aftera decline of about 10 percent from the quarterly average during1947. Canada, to which United States exports of goods andservices had declined from 1947 to the first quarter of 1948by more than 35 percent, was again able to increase expendi-tures for current transactions in the United States. Therise was partly facilitated by larger imports by the UnitedStates.

Early Effects of ERP

The decline in the balance on goods and services withthe ERP countries from the first to second quarter corre-sponded approximately to the reduced means of financingmade available by the United States. The total of unilateraltransfers and United States capital outflow, both private andgovernment, declined from 1,262 million dollars to about803 million, about 75 million dollars more than the declinein the export surplus itself.

During the second quarter government aid and privategifts and investments were about equal to net expendituresof these countries on goods and services, indicating that the"offshore7' purchases under EGA and other aid programs wereapproximately offset by the use of these countries7 own re-serves to meet their current obligations here.

r1 The area break-down of the United States balance of payments for the second quarte

represents a continuation of estimates for 1946, 1947 and the first quarter 1948 published inthe November issue of the SURVEY. The global data for the second quarter were discussed inthe September issue and revised in December.

Net dollar transfers by ERP countries to other areas—plus transactions not accounted for—amounted to 617 mil-lion dollars. This equals approximately the liquidation oftheir own resources plus 90 million dollars obtained frominternational agencies in the second quarter. That quartertotal is slightly more than the 540 million figure for the firstquarter, which included about 240 million dollars from theinternational agencies.

The reduced Government aid, therefore, seems to have hadno effect upon dollar expenditures of ERP countries to otherareas, but led only to reduced expenditures in the UnitedStates. However, since the maintenance of the flow of dol-lars from Western Europe to other countries was possibleonly through heavier drawings upon the limited gold anddollar reserves of these countries, mainly of the UnitedKingdom, it cannot be expected to continue except throughlarger "offshore" purchases under the ERP program. Thisnew source of dollars may sustain for some time the abilityof the non-participating countries to finance the deficit intheir own transactions with the United States.

Required Balances in First Half 1948

The independent countries of Asia, Oceania, and Africa(the "all other" area) appear to have increased their dollartransfers to other areas by about 30 million dollars (from17 million in the first quarter 2 to 55 million in the secondquarter 3). These increased payments to countries in otherareas equaled the increase in funds obtained from the UnitedStates, thus leaving the net payments to the United Statesfor goods and services unchanged.

Canada's apparent dollar receipts from other areasincreased by about 45 million, approximately the sameamount by which Canada's deficit with the United Statesrose.

Latin America, which did not receive additional dollarfunds from other areas, had to meet its increased deficitwith the United States by again increasing the drawingsupon its own gold and dollar reserves. These drawings,however, remained far below the rate attained during 1947.With exports to the United States at the first quarter rateand increased offshore purchases under the ERP, Latin-American countries would be able to conduct their tradewith the United States without further depletion of reserves.

Essentially, the international flow of dollars did notchange from the first quarter, either in direction or inquantity. The only change, though a significant one, con-sists in the fact that this flow was fed from the limitedreserves of the ERP countries rather than from current aidby the United States. With increased disbursements underthe European Recovery Program this flow of dollars amongforeign countries may, temporarily at least, be continued.A more permanent solution may, however, require a reversalof the direction of the international movement of dollarfunds from Latin America, Asia, Oceania, and Africa toEurope and possibly also a decline in the size of the stream.A comparison of the data for the first and second quartersdoes not indicate any progress in this direction.

2 43 million obtained from international institutions less 26 million retained by these coun-tries.

317 million obtained from international institutions plus 38 million from their own resources


January 1949 SURVEY OF CURRENT BUSINESS

Table 3.—The United States Balance of International Payments, by Areas

[Millions of dollars]

Item

Exports of goods and services:Merchandise, adjustedTransportationTravelMiscellaneous servicesIncome on investments

Total

Imports of goods and services:Merchandise, adjustedTransportation. _TravelMiscellaneous servicesIncome on investments

Total

Net balance of goods andservices

Unilateral transfers (net):Private _'Government

Total

Long-term capital (net):U. S. Private—.U. S. GovernmentForeign capital ._

TotaL_

Gold and short-term capital:Net purchases (— ) or sales (+)

of gold. _Net movements of U. S. short-

term capital abroadNet movement of foreign short-

term capital in the UnitedStates.

Total

Transfers of funds between foreignareas (receipts from other areas— , payments to other areas +)and errors and omissions

ERP countries

Firstquarter

1948

1,42416713SO60

1,744

2818916

12342

551

+1,193

-86—617

-703

27-512-54

—593

-263

-20

+83

-200

+303

Secondquarter

1948

1,138141179333

1,422

29310632

14539

615

+807

-90—660

-750

-21-46

-101

—168

-399

+14

-31

-416

+527

ERP depend-encies

Firstquarter

1948

1889343

207

1892741

203

+4

-8

0

-1-1+2

+2

-4

-9

-11

+15

Secondquarter

1948

1938228

213

3452581

161

+52

-1+1

-23

— 1

-24

+2

+1

-20

-17

—11

Other Europe

Firstquarter

1948

1019121

114

485141

59

+55

-34-1

-35

+5-24

-19

+4

-11

-1

-8

+7

Secondquarter

1948

375141

48

496131

60

-12

-30

-30

-3-7-1

-11

+2

-8

-22

-28

+81

Canada andNewfoundland

Firstquarter

1948

43012219

57

529

340172477

395

+134

+1-1

-14-50-4

-68

—1

+5

+87

+91

-157

Secondquarter

1948

49815319

86

639

369195478

457

+182

+2-1

+1

-56-89+15

-130

+62

+3

+84

+149

-202

Latin- AmericanRepublics

Firstquarter

1948

86077202992

1,078

7153947213

825

+253

-4-2

-6

-19-16+6

-29

+5

-14

-19

-28

-190

Secondquarter

1948

838652522

125

1,075

669393920

2

769

+306

—5-2

-7

-36-5-9

-50

-81

+9

+21

-51

-198

All othercountries

Firstquarter

1948

653595

2715

759

36294

832

460

+299

-30153

-183

-1+3+1

+ 3

-93

+29

-29

-93

-26

Secondquarter

1948

685514

2052

812

34686

1553

518

+294

-34-94

-128

-48-15-4

-67

-112

+9

-34

-137

+38

Total foreigncountries

Firstquarter

1948

3,65633363

151228

4,431

1,93516199

24256

2,493

+1, 938

-161-774

-935

-57-600-49

-706

-346

-15

+112

-249

-48

Secondquarter

1948

3,38928580

150305

4,209

1,871180137338

54

2,580

+1, 629

-158-756

-914

-187-162-101

-450

-526

+28

-2

-500

+235

Internationalinstitutions

Firstquarter

1948

2

83

13

11

2

+11

-33

-33

-2

-257

-259

+281

Secondquarter

1948

12

12

5

61

12

-39

-39

+5

+5

-78

-78

+112

Total

Firstquarter

1948

3,65833363

159231

4,444

1,93516199

24357

2,495

+1, 949

-161-807

-968

-57-600-49

-706

-348

-15

-145

-508

+233

Secondquarter

1948

3,389285

80162305

4,221

1,876180137344

55

2, 592

+1, 629

-158-795

-953

-187-162-96

-445

-526

+28

-80

-578

+347

Source: U. S. Department of Commerce, Office of Business Economics.

February Annual Review NumberIn previous years there has been a large demand for separate

copies of the February Annual Review Number of the SURVEY

OF CURRENT BUSINESS from non-subscribers, and this has

resulted in early exhaustion of the available supply. Although

additional copies will be printed this year, subscribers are

advised to send such orders in promptly after receiving their

regular copies—either to the closest Field Office of the Depart-

ment of Commerce or to the Superintendent of Documents,

Government Printing Office, Washington 25, D. C. Single

copies are priced at 30 cents; quantity orders of 100 or more

copies are eligible for a 25 percent discount. Checks should be

made payable to the Treasurer of the United States.

Included in this 72-page recapitulation and analysis of sig-

nificant business and economic developments in 1948 are sections

covering National Product and Income, Prices, Manufacturing

and Mining Output, Retail Trade, Domestic Business Invest-

ment, Finance, Construction Activity, Foreign Trade, Man-

power, Agricultural Production and Income, and the Business

Population.

Last year's similar issue was entitled "Progress of the Postwar

Transition—A Review of 1947" and is currently available only as

part of another publication, Economic Guides to Postwar Mar-

kets, described on the back cover of this issue.


By Clement Winston and Reba L. Osborne

Postwar Patterns of Chain andIndependent Store Sales

"ATA on the relative performance of chain and inde-pendent retailers are of interest not only to those engaged inretail trade, but also to those concerned with comparativeeconomic tendencies. Independents and chains alike haveprospered in the sellers' market which has existed for thegreater part of the postwar period. Nevertheless, when thevarious lines of retail trade are examined, it is found that inmany of these the chains have obtained a somewhat largershare of the increase in activity, regaining some of the lossof position experienced during the war.

An earlier analysis of the relation between sales of chainsand independents described the behavior shown in the pre-war and war years.1 The present discussion deals with whathas been happening since the end of the war, but this articlepresents in addition new material on sales experience by sizeof store, in both the chain and independent segments.

Secular and Cyclical Trends in Chain Store SalesThe proportion of chain store sales to total retail activity

is currently the same as it was in 1929, when comprehensivedata on chain store operations first became available. In theintervening years, chain store sales were less sensitive thanindependents to the fluctuations of the business cycle, andwere relatively more important in depressed years such as1933 than in more prosperous ones such as 1929.

In part, this is due to the fact that chain stores account fora smaller proportion of durable-goods sales, which character-istically react more violently to changes in the level ofbusiness.

However, even within individual lines of trade, chainstores have shown greater stability. This reflects to someextent the consumer's tendency in times of reduced incomesto place more emphasis on the price competition stressed bychains, and less on the extra service and other advantagesoffered by the independent stores. Also, large scale opera-tions ordinarily experience a lower mortality during cyclicaldownswings, in view of their higher capitalization and greaterdiversification.

In the years immediately preceding the war, when theimprovement in business conditions might have pointed to aless prominent role for chain stores, these organizationssucceeded in maintaining their proportion of total retailsales, even extending their operations in such importantareas as food, apparel, and general merchandise. The warhalted this tendency, and chains lost ground in mostlines of trade—women's-wear chains providing the principalexception.

After the end of the war, sales of both chains and independ-i The Pattern of Chain Store Sales in Retail Distribution, by Clement Winston and Reba

L. Osborne, June 1947 SURVEY.NOTE.—Mr. Winston and Miss Osborne are members of the Business Structure Division,

Office of Business Economics.

ents grew rapidly in all lines of trade. Total sales of thetwo groups have increased in the same proportion since 1945.However, independents have made their greatest percentagegains in trades where chains are of minor significance—suchas motor vehicles. In lines where chains are important,their sales in the postwar period have increased more rapidlythan those of independents.

The Nature of Chain Store Operations

Chain stores operate under centralized supervision andpurchasing, and stress standardized products, large scalepurchases, rapid turn-over, elimination of certain servicessuch as charge accounts and deliveries, and smaller overheadunit costs, so as to distribute goods to consumers at lowerprices than generally prevail in independently operatedstores. Against this the independent retailer has to offerthe advantages of more personalized service, longer operatinghours, extension of credit, free deliveries, and the stocking ofspecial slower moving items which chains generally do nothandle.

Since chains buy on a large scale, they have tended to ex-pand their activities into distribution at wholesale, and eveninto manufacturing. Thus, some of the largest food chainsnot only sell at wholesale but in addition process and packagemany food products; clothing chains often own or controlclothing factories; and many of the shoe chains are retailoutlets of manufacturers. This integration of activities helpsto reduce costs.

These chain activities have helped to stimulate otherretailers to improve their own methods of distribution inorder to better their competitive position. In some cases anumber of retailers have formed contracts with a singlewholesaler, agreeing to do all their purchasing through him.Under the contracts, specified discounts are allowed whichare scaled to the quantity of goods bought in a given period.This type of connection between a group of retailers and awholesale distributor is often referred to as a voluntarychain.

Sometimes the connection between retailers involves thejoint ownership of a wholesale establishment. These retail-ers adopt a common name and common store fronts and fre-quently utilize uniform advertising and prices. A group ofretailers of this type is generally termed a cooperative.

In this analysis only groups of four or more stores cen-trally owned and managed are characterized as chains.Some of the cooperatives and voluntary chains resemblechain organizations in many particulars, but because their,stores are independently owned and operated, they arecounted as independents. A further break by type ofconnection would be desirable, but adequate data are notavailable for this purpose.


SummaryThough retail sales both for chain and independent stores

have expanded greatly in the postwar period, the increase hasbeen more marked for chains in most lines of trade. As aresult, chains have regained a good part of the ground theylost during the war. However, the proportion of chain-storesales to total activity in most lines of trade is currently stillsomewhat below 1941 and about the same as it was in 1929.

There has been a steady progress by chains since the end ofthe war in those areas of retail trade in which they are mostimportant. In the grocery field, chains have completely re-covered from the setback sustained during wartime whensupply shortages and rationing operated to restrict largescale merchandising. In most other groups, the recent gainsof the chain organizations, although insufficient to restore theirprewar position, have been substantial. The drug and res-taurant chains are in the main exceptions, and in these tradesindependents have maintained their wartime advances.

The independent stores on the whole thus have not been keep-ing up with chains in the postwar period in spite of the consider-able increase in number of independent stores that occurredin every line of trade. During this same period, on the otherhand, the number of chain stores changed very little in most

lines of trade, and actually declined in the grocery field.The advances of the chains cannot be explained completely

by their greater scale of operation. Data by size of storeindicate that individual chain stores of given size showedgreater improvement than independent outlets of comparablemagnitude, except in the drug and shoe lines. An analogouscomparison based on aggregate volume of business cannot bemade directly, for only the largest independents and the smallestchains correspond in total sales. However, even here theevidence implies that the chain-store gains were greater thanthose of independents with similar total activity.

The largest chains have reversed the wartime situation,which saw them falling behind in the competition with otherchain stores, and in the years since the end of the war haverung up more substantial sales increases than the smaller chains.This contrasts with the picture among the independent stores,where in 1947—the only year for which information is avail-able—the small independents did better than the large onesin almost every kind of business. These differential movements,however, should not be permitted to obscure the fact that allsize groups experienced substantial gains in sales in the postwarperiod.

Recent Trends in Chain Store Sales

Sales of chain stores by kind of business are shown in table1 for selected years from 1929 to the present. For com-parison sales of all retail stores are also given. Chainsaccount for about a fifth of retail activity, and in 1948 theirsales amounted to 27.8 billion dollars. Table 2 presentschanges in sales of chain and independent stores for selectedlines of trade over various periods.

In studying the role of chain stores, two procedures maybe followed. First, aggregate sales of chains may be relatedto aggregate retail sales. Alternatively, recognizing thatthere are a number of lines of trade in which chain stores areunimportant, these lines may be excluded, and attentionconfined to the position of chain stores in the remaining kindsof business.

Both of these procedures are meaningful, but they servedifferent purposes. The first measures the over-all economicsignificance of chain stores, while the second refers moredirectly to their competitive situation in retail trade, andhence is of more interest to retailers generally.

In chart 1, the ratio of chain store sales to all retail salesis shown on both bases. The lower curve pictures the ratiofor all lines of trade, the other for the 13 lines of trade in whichchains play a major part.2 The first of these measures hasexhibited great stability since 1939, varying between 20 and22 percent, except for the year 1942. However, this stabil-ity masks fluctuations in the competitive position of chainsduring and after the war which are brought out by the uppercurve of the chart.

The latter ratio reveals that the growth of chain store salesin many lines failed to keep pace in wartime with that of in-dependents. The loss of ground by chains does not show upin the over-all ratio because of the virtual disappearance in1942 of durable goods from retail stores—a development whichaffected independents much more than chains. For example,

2 For the two groups of trades, see table 2, footnote 1.

818342°—49 2

in motor vehicles and farm equipment, chain stores handleless than 3 percent of the total activity.

Chart 1.—Sales of Chain Stores as Percentage of Salesof All Retail Stores l

PER50

40

30

20

10

019

u. s.

CENT PERC

RATIO OF CHAIN TO CHAINAND INDEPENDENT SALES,SELECTED LINES OF TRADED

;-""" '-. ^~^V /•-«-•""' ^T -̂̂ -C— _

RATIO OF CHAIN TO CHAINAND INDEPENDENT SALES,ALL LINES OF TRADE

-

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 129 33 35 37 39 41 43 45 47

-* YEARS ]*

DEPARTMENT OF COMMERCE, OFFICE OF BUSINESS ECONOMICS.

-

^-"_, _

-

, 1 , i ,1946 1947 1948

HALF YEARS

ENT50

40

30

20

10

0

48-514

1 Data exclude catalog sales of mail-order houses.2 Represents lines of trade in which chain-store sales are important. (See text.)

Source of data: U. S. Department of Commerce, Office of Business Economics.

After the termination of hostilities, chains began torecover from their wartime setback. This again does notappear in the movement of the over-all ratio because of therapid rise of activity in durable goods. Although the pro-portion of chain to all retail sales in the 13 trades wherechains are important is not so high as it was in 1939-41, the

9


10 SUEVEY OF CUREENT BUSINESS January 1949

Table 1.—Retail Sales: Chain and All Retail Stores by Kinds of Business, 1939-48

[Millions of dollars]

CHAIN STORES AND MAIL-ORDER HOUSES

Kind of business

Total chain store and mail-order sales

Durable goods stores _ _Automotive group _ _ __ _ _

Motor-vehicle dealersParts and accessories _ _

Building materials and hardware groupBuilding materials _Farm implements - *Hardware _ _ _ _ _

Home furnishings group.. _Furniture and house furnishingsHousehold appliances and radio _ _

Jewelry

Non -durable-goods storesApparel group - -

Men's clothing and furnishingsWoman's apparel and accessoriesFamily wear _Shoes

Drugstores _ __ _ _ _ _ _ _ _Eating and drinking placesFood group _ _ _ - _ _ -

Grocerv and combinationOther food _ _ _ _ _ _

Fillin? stationsGeneral merchandise group

Department, dry goods, and general merchandiseMail-order2VarietvGeneral stores with food

Other retail stores

1939

9 570

1 049372136236400350

2525

2391518838

8 521991173394

79345400304

3,3402 833

507288

2,693],330

464848

51505

1940

10, 382

1 156404159245446390

2729

26015610446

9 2263,071

18743986

359425324

3,6453 113

532280

2,9241,485

48989555

557

1941

12, 434

1,4294881853035644913538

31217613665

11 0051,309

242531106430479361

4,3523,745

607306

3,5321,836

6171,016

63666

1942

14, 064

1,230306

582485765013144

26315810585

12, 8341,645

258724130533571415

5,2844,551

733250

3, 8732,007

6223,165

79796

1943

14, 441

1,234321

492725604982141

24016278

113

13, 2071,861

270939151501654481

5,1934,357

836189

3,9042,006

5741,231

93925

1944

15, 523

1,304343

502935975272743

24816583

116

14, 2192,050

3041,058

171517681509

5, 5944,710

884188

4, 2352,215

6011,317

102962

1945

16 352

1,478380

56324679602

2948

2931831.10126

14, 8742,213

3241,142

182565704531

5,7144,769

945217

4,4362,376

5981,357

1051,059

1946

21, 158

2,2466651425238707604070

553276277158

18, 9122,593

4371,233

218705830596

7,4246,2911,133

2945,8813,249

9411,567

1241 294

1947

25 334

. 2,819738241497

1, 1951, 057

5979

732326406154

22, 515?, 759

4911,270

232766834618

9,6778,4361,241

3736,7933,8411,1451 669

1381 461

19481

27 804

3 120820310510

1, 3801,220

8080

780330450140

24 6802, 960

4801,450

250780840630

10, 8109,5201,290

4507, 4304 2601,2501,780

1401 560

ALL RETAIL STORES, BOTH CHAIN AND INDEPENDENT

A 11 retail stores

Durable-goods storesAutomotive proup _

Motor-vehicle dealersParts a n d accessories _ _

Building-materials and hardware groupBuilding materialsFarm implementsHardware

Home-furnishings group _ _ _Furniture and housefurnishingsHousehold appliances and radios

Jewelry

Non-durable-goods storesApparel group -

Men's clothing and furnishingsWomen's apparel andaccesosries _ _ _Family and other apparelShoes

Drug storesEating and drinking places _. _Food group

Grocery and combinationOther food

Filling stationsGeneral-merchandise group __

Department, including mail-orderGeneral including general merchandise, with foodDry goods and other general merchandiseVariety _

Other retail storesLiquorAllother __. _ __ ...

42 042

10 3795,5495 025

5242 7351,761

345629

1,7331,200

533362

31 6633,259

8401,323

479617

1 5633,520

30 1657,7222 4432,8226,4753,975

922601977

3,859586

3,273

46, 388

12,4186,8626 286

5763,1082,000

399709

2,0223,392

630426

33 9703 441

8861,413

503639

1 6373,874

10 9068,3172 5892,9546,8474,266

910636

1,0354,311

6503,661

55,490

15, 6048,5447,794

7503,8622,435

524903

2,6111,787

824587

39, 8864,1571,0961,690

605766

1,8214,796

12, 5769,6042,9723,4547,9315, 027

991738

1,1755,151

7674,384

57, 639

10,2713,2652,596

6693,7992,326

493980

2,4541,821

633753

47, 3685,1931,2962, 175

739983

2,1856,173

15,41711, 8033,6143,0219,0155,5663,158

9433,3486,3643,0375,327

63, 721

9,7553,1422,394

7483,3912,079

410902

2,2581,785

473964

53, 9666,3233,4972,893

9071,0262,5888,034

17, 07512, 9034,1742,4539,9776,3321,3013,3191, 4257,5161,2346,282

69, 573

30,4683,3152,465

8503,7172,171

5391,0072,4541,953

503982

59,3056,8693,6183,193

9861,0722,8119, 351

18,54034,0624, 4782,604

30,8906,7641,3881,2081,5308,0401,4856,555

76, 644

3 3 , 9603,8052, 7411,0644 2732,508

5863,3772,8132,345

6681,071

64, 6847,6851,8063,5891,0931,3973,023

10, 80919,72734,8634,8643,016

13 , 6897, 4281,4173,2493,5958,7353,6887,047

100, 787

21 , 7638,8087,1451,6636 7504, !37

7873,8264,8603,1751,6851,343

79, 0268,9832,2274,0331,2623,4593, 520

12, 36225, 00539,1445,8614,065

14, 6119,6211,6763,4633,853

10,4821,9128,570

118,328

30, 39213, 77832 3001,6789 0925,6951,1802,2176,2133, 7462,4673,309

87, 9369,4132 4144, 3411 3253,5333 659

12, 48529 58423,1646,4205,193

16, 00310, 6151,8583,5381,992

31,5991,8749,725

129 700

36 30017, 50015 7001,800

10 8006,9001 5002 4006,8004.0002,8001 200

93 4009,9002 4004 6001 4001,5003 700

12,60031 80025 0006 8006,300

16,90011, 3001,9003,6002,300

12,200

1 Preliminary.2 Catalog business only is shown as mail-order sales; sales by retail stores owned by mail-order companies are included with department, dry goods, and general merchandise stores..Source: U. S. Department of Commerce, Office of Business Economics, based on data of the Bureau of the Census.

ratio has increased appreciably since 1945, reflecting greatergrowth in chain-store business than in independents.

Within the group of 13 lines in which chain-store activitybulks large, there are appreciable variations in the relativemovements of chain- and independent-store sales. In somelines chains are about back to their 1941 position, but inother cases they show no signs of recovering fully the groundlost in wartime.

Grocery and Combination Stores

The most important segment of the entire chain-storefield—and the one that generally comes to mind when chainstores are considered—is that of grocery and combinationstores (stores selling both groceries and meats). These

chains operate a great many stores distributed over theentire country, and cater to small communities as well as tothe larger cities. In 1948 sales of chain grocery and com-bination stores were 9.5 billion dollars, or well over a thirdof the sales of all chain stores.

The top curve of chart 2 shows the relative share of chainsin the total retail sales of grocery and combination stores.The increase in importance of chains in 1940 and 1941 isclearly indicated, as is the set-back experienced during thewar. From 1941 to 1945, the ratio of chain to total sales ofgrocery and combination stores fell from 39 to 32 percent, -With the end of the war, however, food chains began to doan increasing share of the total business.

The war and postwar behavior is clearly related to thefactor of price control. During the war, the importance of


January 1949 SURVEY OF CURRENT BUSINESS 11

price competition was greatly diminished, and scarce goodstended to find their way into outlets selling at higher prices.The abandonment of price controls on food was followed byan immediate and marked improvement in the position ofthe chain stores. In the last quarter of 1946 and the firstquarter of 1947, the ratio of chain store to total retail salesincreased from 33 to 36 percent. The ratio continued to rise,and by the end of 1948 was up again to the 1941 figure.

Apparel

In the apparel group, sales at men's-wear and shoe storesexhibited a pattern of behavior that was similar in many re-spects to that shown for grocery and combination stores.In the years immediately preceding the war, men's-wearchain stores had somewhat improved their position relativeto independents while sales of chain and independent shoestores had shown almost parallel movements. In the waryears, however, the ratio of chain-store sales to total in bothgroups of stores dropped sharply, reflecting in large part theeffect of material shortages and rationing restrictions whichhampered the operations of large distributors in greaterdegree.

In the past three years, chain shoe stores have shown asteady recovery in their relative position. The percentageof chain to total sales has risen from about 47 percent in1945 to about 52 percent in the last half of 1948-—thoughstill short of the 56 percent reached prior to the war. Theratio for men's-wear chains increased from 1945 to 1947, butfailed to gain in 1948.

In the women's-wear group a somewhat different relationbetween chain and independent store sales was shown.Here chain-store sales advanced more rapidly than those ofindependents in the early war years and the ratio of chainto total sales increased. Not until after 1944 was thereany evidence of a decline in the relative position of women's-we'ar chain stores. This downtrend was not of long durationand the ratio of chain to total sales began to move upwardagain in the latter part of 1947.

Table 2.—Percentage Change in Sales for Selected Kinds of Business

Kind of business

Total excluding mail orderTotal 13 selected lines of trade l

Grocery and combinationEating and drinking. _ _Drug -Department, dry goods and general

merchandise.Men's clothing and furnishingsWomen's apparel and accrssoriesShoe ---

Chain stores

1939from1929

-9+2

0+2

+28

+23-36-5-6

1945from1939

+73+76+68+75+76

+79+88

+190+63

1948from1945

+69+69

+100+19+20

+79+48+27+37

A 11 retail stores

1939from1929

-13-6+5

+66-7

-17-38-11-24

1945from1939

+83+110+93

+207+93

+96+115+171+94

1948from1945

+69+51+68+17+22

+44+-32+27+26

1 This includes, in addition to the 7 trades shown in the table, automotive parts and acces-sories, hardware, building materials, furniture and housefurnishings, family wear, and va-riety stores; and excludes 8 trades in which chains are relatively unimportant, namely, motorvehicles, farm implement, household appliance and radio, jewelry, other food, rilling stations,general stores with food, and "other" retail stores.

Source: U. S. Department of Commerce, Office of Business Economics, based on dateof the Bureau of the Census.

Supply factors again played a large part in explaining thedifference in the behavior of sales at these stores from thatin the other apparel groups. As already indicated, inde-pendent retailers made their greatest gains relative to chainsin those trade areas in which materials were far from suf-ficient to meet demands. The women's-wear segment,however, was one in which supplies were comparativelyadequate throughout the war and as a consequence inde-pendents did not show the gains relative to chains whichwere evidenced in other trades.

A considerable increase in the number of independent

women's wear stores after the war was in part responsiblefor a decline in the proportion of sales going to chains.However, in 1948 the sales gains made by chains exceededthose of independents and by the year's end, the ratio ofchain to total sales was 33 percent, about equal to the levelof the war years and higher than prewar.

Chart 2.—Sales of Chain Stores as Percentage of Sales ofAll Retail Stores, by Line of Trade

PERCENT60

40

20

0

60

40

20

GROCERY AND COMBINATION

1 ! 1 1 1 1 1 1 1 1 1 1 1 1 1 I i 1

*

WOMEN'S WEAR

MEN'S WEAR

1 1 1 1 1 1 ! ! 1 ! [ ! 1 1 ! I ! 1 1

, 1 , ,

PERCENT60

40

20

060

40

20

1929 33 35 37 39 41 43 45 47YEARS >•

1946 1947 1948HALF YEARS

U. 5. DEPARTMENT OF COMMERCE, OFFICE OF BUSINESS ECONOMICS.

1 Data exclude catalog sales of mail-order houses.Source of data: U. S. Department of Commerce, Office of Business Economics.

Drug Stores and Eating and Drinking Places

In the case of drug stores, as with most trades, the ratioof chain to total sales declined during the war years, but drugchains have not made any gains in their relative positionsince the war's end. The postwar experience in this type ofstore is to some extent the result of changes in the businesspopulation. After 1945, the number of independent drugstores increased more rapidly than the number of storesoperated by chains. As a consequence, average sales perstore show a different picture, that for chains being up morethan a fourth from 1945 to 1948, while the comparable inde-pendent figure was up only about 9 percent.

Eating and drinking places form the only group of retail-trade establishments in which the position of chain storesrelative to the total has been declining fairly steadily duringthe entire period under discussion. Only since the end of1945 has there been evidence of a leveling off in the move-ment of this ratio. From 1945 to 1948 the advances in salesmade by chains were about the same as for independents, andtherefore the relation between dollar sales of both groupshas remained constant.

The decline in the relative importance of chain stores inthe eating and drinking line is to some extent a reflection


12 SURVEY OF CURRENT BUSINESS January 1949

of the nature of the restaurant business, which is such thatlarge scale operation offers fewer advantages than in otherlines. For example, centralized buying of perishable goodsdoes not yield economies as important as in some other retailareas. Again, it is not so feasible to eliminate services inthis trade—although even here chains more frequently oper-ate self-service or counter-service establishments.

Moreover, chain organizations of this type tend not tospread over large areas of the country. The operation undera single management of a substantial number of restaurantswithin a city is common, and here some economy may beaffected by setting up central baking and cooking facilitiesto supply the local eating places. However, the same ad-vantages are not readily extended to more distant locations,and the restaurants in different cities are likely to be underautonomous operation.

On the other hand, the restaurant business is much favoredby the small investor who wishes to open a store, and the in-crease in the number of independent eating and drinkingplaces since the end of the war has been greater than in anyother line of trade, whereas the number of restaurants oper-ated by chains has increased very little. Thus, the percent-age of sales in this group accounted for by chains is nowlittle more than half what it was in 1939.

Department and General Merchandise Stores

In the years prior to the war the position of chain stores inthis sector of retail trade showed a steady rise, and by 1941the ratio of chain to total sales had risen to 36 percent.This reflected an active expansion in the size of chain estab-lishments, an increase in the lines of trade handled and asubstantial increase in the number of stores operated. Alarge part of this increase in chain-store activity stemmedfrom the increase in the number of retail stores operated bymail-order houses. In addition, a large organization, whichup to 1935 was classified as a variety store, was shifted to thedepartment-store group at that time.

It should be noted that the trade definitions are not quiteso clear cut in this category as in some of the other businessgroups. Department stores as defined by the Bureau of theCensus must have sales in excess of 100,000 dollars annually,and in general carry men's, women's, and children's apparel,furnishings and accessories, housewares, and other lines.Furniture and hardware are often but not necessarily repre-sented, although home furnishings, draperies, curtains, andlinens are almost invariably carried. Some of the largervariety stores come close to meeting these requirements, sothat shifts between these groups may occur whenever aCensus of Business is taken.

Furthermore, the line of demarcation between chains andindependents is somewhat vague. Sometimes a group oflarge department stores is clearly under central ownershipand control, and therefore is considered to be a chain. Inother cases, only financial control is centralized. Wherecentral control of merchandising and operation is absent,the stores are considered as independents. The similarityof department and variety stores is generally closer in thecase of chains than it is with independents; for example, theaverage price range of articles sold at chain departmentstores is generally lower than that common at the largeindependents.

During the war, when supplies of lower price merchandisewere short, chain department stores were not able to main-tain their relative position in the trade and the ratio of chainto total sales declined, falling to about 29 percent in 1945.Following the war's end, the easing of the supply situationenabled the chain stores to improve their position, and theratio began rising again. In addition, a number of thechains that had previously dealt only in light housewares

added new lines of the heavier consumer goods and this alsooperated to strengthen the relative position of chains. Bythe end of 1948 the proportion of chain to total departmentstore sales had returned to a point slightly higher thanthat which existed in 1941.

Number of Chain Stores Continues to Decline

In discussing the individual lines of trade, reference hasbeen made in several cases to the recent increase in thenumber of independent stores. The years 1945 to 1947 weremarked by a record growth in the retail-business population,affecting every line of trade. During this period, however,the number of chain-store units actually declined.

This decline was due almost entirely to a drop in the num-ber of stores operated by grocery chains. Continuing atrend that started in the middle thirties, chain-grocery-storeunits were reduced nearly 10 percent from the beginning of1945 to the end of 1947, and a further decline occurred in1948.3 Over the same period, the number of independentgrocery and combination stores rose by more than a fifth.

Chains in other lines of trade made only minor changes inthe number of stores operated. In fact, there Jias been littlevariation in the number of chain-store units since 1939, ex-cept for the drop in the number of chain-grocery-stores,which has eliminated one-third of the chain food store unitsin existence at that time.

Variations by Size of Establishment

With the independent-store population experiencing rapidgrowth since the end of the war, and the number of chain-store outlets holding level or declining in the various lines oftrade, the recent advance of chain stores cannot be explainedin terms of number of stores. It is natural to ask whetherdifferences in size account for the variations in sales experi-ence of the two groups. However, available data to bepresented indicate that recently the sales of chain stores havebeen increasing more rapidly than those of independentsoperating on a comparable scale, and that in consequencesize alone cannot explain the differential behavior.

In choosing a group of independent stores to compare insize with a group of chains, two possibilities present them-selves. Insofar as scale of operations may help to determinethe sales experience of a chain, it may be the aggregate sizeof the organization which is relevant, or the size of the aver-age store. If, for example, the ability to obtain goods isinvolved, the former measure of size is appropriate. If in-stead the preference of consumers for stores of one size ratherthan another is the important factor, the average size ofstore should be used. Accordingly, comparisons on bothbases have been made.

Before considering the influence of size on the relativeexperience of chains and independents, data on the effect ofthis factor will be examined for each group separately. Thecomparative performance of large and small chains will bediscussed first.

Large Chains Show Greater Gains After the War

For chain stores, data on sales by aggregate volume ofbusiness transacted are available for a number of lines oftrade from 1939 on. Figures showing the percent change insales according to the amount of business done by chain or-ganizations in selected lines of business are shown in table 3A

Because the range of sales differed markedly for the varioustrades, it was not possible to use a common interval on adollar basis for all groups. For simplicity in presentation,

3 No allowance is made for the shift of firms between the chain and independent categoriesas a result of fluctuations in the number of stores operated. See technical notes.


January 1949 SURVEY OF CURRENT BUSINESS 13

therefore, firms In each kind of business were classified intotwo groups, the first consisting of the six largest chains ineach trade, and the second, of the remaining chains.4

Table 3.—Percentage Increase in Chain Store Sales for SelectedKinds of Business—Six Largest and All Other Chains

Kind of business

Grocery and combination stores:6 largest __ _All other

Eating and drinking places:6 largestAllother .

Drug stores:6 largestAllother _. _

Department store and general merchandise stores:6 largestAll other

Variety stores:6 largest . - - -All other

Men's clothing stores:6 largestAll other - -

Women's wear stores:6 largestAll other

Shoe stores:6 largest _ - _ _ _ _All other

1945from1939

59101

5178

7670

72110

5671

9494

137202

5473

1946from1945

3034

1220

1922

3919

1525

4624

98

2823

1947from1946

3627

38

43

205

74

145

74

133

1947from1939

182242

74130

118114

186165

92121

222153

177239

122120

Source: U. S. Department of Commerce, Office of Business Economics, based on data of theBnreau of the Census.

In the period 1939-45, and especially during the war, thechain organizations found in the smaller category, generallyshowed greater advances in sales than were evidenced bythe six largest firms. The greatest divergencies occurredin the grocery and combination, and women's-wear stores.In these groups, the smaller firms showed sales advancesin the war period which were nearly double those of thelargest chain organizations.

The difference in performance of the large and smallerfirms in the war period may be partly explained in terms ofsupply. During the war, the amount of business done byany firm depended primarily on the volume of merchandisewhich could be obtained. When suppliers tried to takecare of all their customers, scarce goods might tend to *bemore evenly distributed, and sales of the larger chains wouldbe thereby affected more than those of other firms. Anotherfactor which would tend in the same direction is the greaterflexibility of the smaller enterprises.

In the postwar period, the factors that tended to restrictthe activities of the large chain organizations began to dis-appear. As the supply situation improved, a definite changein the distribution of sales between the larger and smallerorganizations occurred. After 1946 the increase in salesregistered by larger chains tended to exceed those of the re-maining chain store groups. While the gains made by thelarge chains do not compare with those made by the smallerorganizations under war conditions, the great national chainshave been moving in the direction of regaining their prewarshare of the consumer dollar spent at chain stores.

Different Pattern Among Independents

In attempting to compare chain and independent retailsales by size of firm, it should be clear that the terms "large"and "small" when applied to chains are merely relative, andthat the smaller chains usually include organizations doing,& considerable volume of business. These companies exceedin total sales all but the largest independents.

Table 4 shows how independents of different size groupsfared from 1946 to 1947—the only postwar year for which

4 Size was determined by the amount of business done in 1939. However, in every groupthe six largest firms in that year remained—in almost all cases—the six largest in all subsequentyears.

this information is avilable. In general, the relative gainsin sales tend to vary inversely with size, in contrast to thepattern found in table 3 for the chain store group. How-ever, there were a few exceptions to this behavior—notablyin the department store category, where the smaller storesshowed declines in 1947, while the large stores recorded a7 percent gain.

The more favorable showing of the smallest group ofindependent stores appears to be typical of periods of rapidbusiness expansion. It may be due in part to the consider-able influx of new stores which occurs in such periods, forthe new outlets, which have a greater short-run capacityfor growth, are found mainly among the small independents.

Table 4.-—Percentage Change, 1946 to 1947, in Sales per Store ofIndependents and Chains, by Size of Store, for Selected Kinds ofBusiness

Kind of business and size of store

Grocery and combination stores:Less than $50,000__.$50,000 to $500,000$500,000 and over

Eating and drinking places:Less than $50,000$50,000 to $500,000 _ _$500,000 and over „ _

Drug stores:Less than $50,000$50,000 to $500,000$500,000 and over.

Department and general merchandise stores: 2$100,000 to $500,000- _ _$500,000 and over

Men's clothing stores:Less than $50,000. _. _$50,000 to $500,000 _$500,000 and over. _ _ _

Women's apparel stores:Less than $50,000 ..$50,000 to $500,000 _ .$500,000 and over

Shoe stores:Less than $50,000$50,000 to $500,000$500 000 and over

Inde-pendents

+15+8

+10

+4—3—4

+11+3

0

—2+7

+19o+3

+2—2—3

+9—1_7

Chains

(i)+32+18

M+5

+14

M+3—6

+12+14

(i)+9+8

f1")+2+6

(t)U _ l10

1 Not reported.2 Department stores are defined as having sales of $100,000 or more.

Source: U. S. Department of Commerce, Office of Business Economics based on data of theBureau of the Census.

Small Chains Led Largest Independents in 1947

As has been noted, only the very smallest chains and thelargest independent stores are comparable with regard tototal volume of sales. To obtain an adequate sample ofstores in both categories, it is necessary to include a numberof the somewhat larger chains and the somewhat smallerindependents, with the result that the groups obtained differsignificantly with respect to amount of business transacted.Consequently, a conclusive statement about the comparativeexperience of chains and independents of equal size cannotbe made.

Nevertheless, some inferences can be drawn from an ex-amination of the sales increases in 1947 of the smallest groupof chains. In every line of trade but one, these increaseswere insignificantly ahead of those reported by the biggestindependents. Since the rate of increase of sales amongindependents tended to vary inversely with size, it appearsthat the advantages evidenced by the chains were not duesolely to differences in size as measured by total sales.

Turning next to the other measure of size, table 4 comparesindependents with chain stores of corresponding activity interms of average sales per store. The table gives the percentincrease in sales per store in 1947 of the chain stores, togetherwith that of independent stores whose sales in 1946 wereof comparable size. In almost all of the trades for whichdata are available it is found that chains showed greaterincreases than the corresponding independents. Only in the

(Continued on p. 16)


I lew or STATISTICAL SERIESProduction-Worker Employment in Manufacturing Industries: Revisions for Pages S—10 and S—11 1

ESTIMATED NUMBER OF PRODUCTION WORKERS (THOUSANDS)

Industrial group

All manufacturing

Durable goods industries,total

Iron and steel and theirproducts

Electrical machineryMachinery, except elec-

tricalAutomobilesTransportation equip-

ment, except auto-mobiles

Nonferrous metals andtheir products

Lumber and timber basicproducts.. _

Furniture and finishedlumber products

Stone, clay, and glassproducts __ _

Nondurable goods industries,total.

Textile-mill products andother fiber manufac-tures

Apparel and other finishedtextile products

Leather and leather prod-ucts. __ _ _ _ -

Food and kindred prod-ucts

Tobacco manufacturesPaper and allied products.Printing, publishing, and

allied industriesChemicals and allied prod-

uctsProducts of petroleum and

coalRubber products

Jan.

10, 884

5,354

1,360494

992432

538

343

485

364

346

5,530

1,123

936

342

1,07381

346

372

534

146205

Feb.

10, 185

4,545

880354

864431

486

295

494

373

368

5,640

1, 155

969

355

1,07281

353

382

537

142.209

Mar.

10, 877

5,154

1,319382

914466

478

325

509

381

380

5,723

1,176

987

363

1,06782

358

388

542

14921

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