JUNE 1960

survey of

CURRENTBUSINESS

US. DEPARTMENT OF COMMERCE

OFFICE OF BUSINESS ECONOMICS

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SURVEY OF CURRENT BUSINESS

JUNE 1960 VOL. 40, NO. 6

ContentsTHE BUSINESS SITUATION PAGE

Summary Review 1

Income a n d Purchasing Higher . . . 1

Dividend Growth . . . . . . . . . . . . . . . . . . . . . 4

Regular Reviews . . . . . . . . . . . . . . . . . . . . . . 5

Capital Investment Gives Business General Stimulus . . . . 5

Foreign Travel Increase Reflects Higher Incomes . . . . . . 8

Improvement in Balance of Payments in First-Quarter

Adverse Net Position Still Large . . 10Exports Move Higher , . . 10

Merchandise Imports Lower . . . . . . . . . . . . . . . 1 1

Net Payments for Services Up 11

ARTICLE

Investment in Fuel and Power Industries

Advancing Technology and Growth Amid Shifting Markets . . . 18

Growth o f Electric Utilities . . . . . . . . . . . . . . . . 1 9

Petroleum Industry Faces Excess Capacity . 21

Gas—Most Rapidly Growing Fuel . . . . 22

Coal Adjusts to Declining Markets 23

MONTHLY BUSINESS STATISTICS

General S1-S24

Industry , S24-S40

Subject Index Inside Back Cover

U.S. Department of Commerce

Frederick H. Mueller,

Secretary

Office of Business Economics

M. Joseph Meehan,Director

Louis J. ParadisoManaging Director

Loughlin F. McHughBusiness Review Editor

K. Celeste StokStatistics Edito

Billy Jo DawkinsGraphics

STAFF CONTRIBUTORSTO THIS ISSUE

Business Review and Features:Jacquelin Bauman

Capital Investment:Murray F. FossMarie Hertzberg

Foreign Travel:Frances P. Sasscer

Balance of Payments:Walther Lederer

Special Article:Murray F. FossWalter Leibowitz

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U.S. DEPARTMENT OF COMMERCE FIELD OFFICES

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By the Office of Business Economics

B,BUSINESS has continued to moveahead, with the flow of personal incomerising to an annual rate close to $400billion in May, compared with the first-quarter figure of $393 billion. Thiswas 5 percent above the income ofMay a year ago, representing a rise alsoin real purchasing power. All majorincome flows have either expanded orheld steady so far in 1960, with the

BUSINESS INVESTMENT

PROGRAMS

Show Rising Trend During 1960

B////O

40

30

20

M>CCMe

20

10

S

6

4

TREq

3

2

1

.8

.6

i $ (ratio scale)

Jotal Investment

^^ /

i , i 1 i . i ! i i i 1 i i i 1 . . i I . t t

XNUFACTURING Rise Sharp:

JMMERCIAL and UTILITIES

>ve Ahead

Manufacturing

*"~>>— , "*\Commercial

and Other

- ^A---"""-% «~«- /* Public //*** Utilities

i i i 1 i i i 1 i i i 1 i t i 1 i i i I t i .»

.ANSPORTATION Changes Reflect

uipment Buying

Nonrail Transportation

yA ^/^

- \ A //\ { \f' \ 1 *Railroads \ *

'- V :t i i t i t i 1 i i i 1 i i i t i t i 1 i i i

1956 1957 1958 1959 1960 1961

Quarterly Totals, Seasonally Adjusted, at Annual Rates

0 Anticipated

Data: SEC 8 QBE

U. S. Department of Commerce, Office of Business Economics 60-6-

principal advance in labor income—-up6K percent through May in comparisonwith the first 5 months of last year.

The final demand for the product ofthe econonty—paced by the rise in con-sumption and in business fixed invest-ment—has continued to forge ahead.This advance has been in part offset bythe slackening in inventory require-ments from the very high post-strikerate of the initial 1960 quarter, so thatthe expansion in total GNP has beendampened, as compared with the rapidrise of the opening quarter.

Expansion of investment

The chart at the left records thecontinuing stimulus to business duringthe spring quarter from the extensionof the rise in plant and equipmentoutlays reported in the latest OBE-SEC quarterly survey of actual andprogramed investment. This expan-sion is general, and is expected toextend throughout the year.

Industrial output has been steady;while retail sales have fluctuated theyhave displayed a rising tendency; ex-ports have advanced; and the total ofgovernment purchases of goods andservices has remained about the same.The reduction in personal income fromthe Federal Government in May reflectsthe dropping of the temporary workersengaged in taking the decennial popula-tion census. State and local govern-ments continue to increase their payrollexpenditures.

Buying by consumers upward

Consumer buying has been a majorelement of strength, and has contrib-uted the major impetus to risingbusiness. April buying was unusuallystrong, in part reflecting the removal ofretarding influences which had dam-pened March sales. The April spurtwas not sustained fully in May, but thecombined results for the 2 monthsshowed a significant growth in sales as

compared with the first quarter of theyear. This indicates a substantial in-crease in the consumer portion of theGNP.

An irregular pattern has prevailed inpurchases at department stores. Newcar purchases, though somewhat lowerin May than in April on a seasonallyadjusted basis, were for the 2-monthperiod the best since 1955, notablyabove the first quarter and one-tenthhigher than at this time last year. Theimproved spring purchases of automo-biles and the sales push of maufacturershave resulted in either maintained orincreased production schedules; dealerstocks have been kept at a high point.A wide selection of cars is now availableto the public, and promotions whichinclude price inducements, have helpedmaintain new car sales—including for-eign makes—at close to the 7 millionannual mark during the spring period.

Income flow high—employmentsteady

Backing up, as well as reflecting, thecontinuing high overall rate of businessactivity is the expanded flow of con-sumer income. Income from agricul-ture has improved with rising prices forfarm products, and nonagricultural in-come in total in May was well ahead ofa year ago.

The upward movement of personalincome is shown in the text table pre-senting the totals (in billions of dollars)on a seasonally corrected annual ratebasis. Of the $18 billion annual in-crease in May from a year ago—theearlier mentioned 5 percent rise—two-thirds came in the form of labor income,and one-third from other sources.Both these categories recorded aboutthe same relative increase.

The number of workers on nonfarmpayrolls was virtually unchanged fromApril to May, with the seasonallyadjusted total above the first-quarteraverage. Cutbacks continue in durable

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SUBVEY OF CUEEENT BUSINESS June 1960

goods manufacturing, with the numberof workers involved since the start ofthe year being 150,000, a iK-pexcentreduction. This has been in large partoffset by a net gain of 100,000 in em-ployment by the nondurable goods

PERSONAL INCOME

Has Moved to Record High This Spring

Billion Dollars

400

350

300

250

200

150

Wages and Salaries

J_L

1957 1958 1959 1960U. S. Department of Commerce, Office of Business Economics 60-6-2

manufacturing industries. In otherprivate employment, the major pickupin working forces since the start of theyear has been in the distributivebranches, with other industry groupingsreporting virtual stability in the num-bers employed.

Compared with last spring, the prin-cipal increases have been in trade,services, and State and local govern-ments. The remainder of the year-to-year gain represented small butrather widely dispersed increases. Withthe recent cutbacks in durable goodsmanufacturing, employment in thisindustry group has been running belowthe highs reached last summer.

The average workweek at factoriesrose in May to contribute to the per-sonal income rise. This indicator haddeclined for several months, as the re-duction in orders for heavy goods hadtended to be reflected more promptlyin work schedules than in the numberson the job.

Hourly earnings were unchanged inMay and the weekly wage went up

proportionally to the rise in hoursworked.

The declining tendency in the housingindustry indicated in the chart coveringunits started and Government-under-written mortgage financing, has resultedin lowered employment, though thererecently has been some seasonal springrise. FHA- and VA-supported housingdemand is still tending downward andin the past this has, generally speaking,given an indication of the new activityin the lending market. Recent ten-dencies have reflected the easing inhousing demand and some continuingdifficulties in obtaining mortgage fi-nancing on desired terms.

Prices edge upward

Price movements have continued tofluctuate over a narrow range, with theaverages recording a lack of generaldemand pressures. The recovery infarm prices and the concomitant ad-vance in food prices has been the majorinfluence in the slight recent rise inconsumer prices, though the steadyadvance in prices of services has beenthe continuing factor.

Prices of industrial products at whole-sale are virtually unchanged from lastDecember's average, and fractionallyhigher than a year ago. In the pre-ceding 12-month period—from Ma}r

1958 to May 1959—these prices hadmoved ahead 2 percent, which was more

Personal Income

[Billions of dollars seasonally adjusted at annual rates]

1959:JanuaryFebruary ...MarchAprilMayJune

JulyAugustSeptember..OctoberNovember _.December..

1960:JanuaryFebruary. __MarchAprilMay

First 5 monthscumula-tive:

1957195819591960

Totalper-sonal

income

369.0371.0375.4379 0381.3383.8

383.4380.0380.9382.6387.0392. 1

392.8393.0394.0397.8399.4

346.6352.9375.1395.4

Laborincome

258.3259.8263.8267 2269.7271. 7

271.6268.9269.4269.4271 A275.7

278. 5279.2279.8282.0282.6

245.5243.7263. 7280.4

Pro-prie-tors'

income

47.046.946.946 546.546.8

46.344.944.445.546.747.8

47.046.145.746.747.4

44. 046.146.846.6

Rentalincome

12.012.012.012 012.012.0

12.012.012.012.012.012.0

12.112.212.212.212. 2

11.311.712.012.2

Divi-dends

12.712.812.812 913.013.1

13.213.413.513.613.713.5

13.613.613.613.613.7

12.612.612.813.6

Otherincome

39.139. 640.040. 440. 140.2

40.340.841.642.143.143.0

41.641.942.743.343.5

33.138.739.942.6

than sufficient to offset the drop infarm-food prices.

What has been happening recentlyhas been that along with lower demandhave come some significant reductionsin prices of important industrial mate-

NEW AUTOMOBILE SALES

In May Continue Well Above aYear Ago

1957=100150

125

I960

100

75

50F M A M J J A S O N D

U. S. Department of Commerce, Office of Business Economics 60-6-4

rials—notably steel scrap, lumber, andhides and leather—and moderate pricetag reductions for some finished goods,such as home appliances, radios, TVsets, automobiles and tires. Offsettinghave been higher prices for other ma-terials—in eluding textiles, drugs, non-ferrous metals, and some buildingitems—-and continuing price advancesin important machinery and like com-modities of complicated manufacture.Financial markets easier

With the rise in business activityproceeding at a lesser pace recently ascompared with the upsurge early inthe year, financial requirements of bus-iness have been more readily accom-modated. The Federal Keserve, takingcognizance of easier conditions in themoney markets, moved their discountrate down one-half point in earlyJune. This was the first such reduc-tion since 1958.

The easing of the reserve position ofmember commercial banks, to whichthe central bank has contributed

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June 1960 SUEVEY OF CURRENT BUSINESS

through its security purchases, is evi-dent in the current figures publishedby the Reserve Board. At the start ofJune, borrowing by member banks fromthe Reserve Banks had been cut to$400 million gross, compared with afigure of just under $1 billion in the"tight" money period of 1959. Withthe excess of total commercial bankreserves'—-owned as well as borrowed—showing little net change since the startof the year (varying in a range of $300to $400 million), this has meant thatthe net reserve position of these banks—•excess reserves less borrowed funds—•returned to a slight positive figurerecently. The current picture is incontrast to the minus figure represent-ing net borrowings from the ReserveBanks of around $500 million in themore straightened market of 1959.

Bank borrowing tapers

Demands for bank loans by businesshave been less pressing. Metal manu-facturers expanded their bank loanssharply in the first quarter of the yearbut since then new borrowing lias beencut substantially. Commoditv dealers

INDLTot<

Aul

Index125

75

Thous.1,000

o.

Mil.20

0

U. S. Depart

JSTRIAL PRODUCTION

al Output Steady

o Production Pushed — Steel Down

Total

1957 = 100

\^r^/pit 1 1 1 1 1 1 1 1 1

/~^~>i 1 1 1 1 I 1 1 I 1 1

'"H »̂

FRBi i i i i 1 i i i i i

Auto Production

S/Unadjusted1 1 1 1 1 1 ! 1 I 1 I

n/i/rvA MA

. i i , , 1 . i , i ,

Steel ProductionTons

^^^Unadjusted

t i i i i 1 t i i i iA. 1. 8 Steel

1958 1959 1960

nent of Commerce, Office of Business Economics. 60-6-5

have reduced their borrowing this yearby somewhat more than they did atthis season a year ago. In both periodsthe underlying tendency for thesedealers was to expand their use ofborrowed funds, but this was lesspronounced in early 1960. Trade con-cerns have over the past year main-tained a fairly even pace of bankborrowing and no letup in use of suchfunds has thus far appeared.

Consumers, on the other hand, haverequired a larger amount of borrowedfunds to finance purchases of durablegoods. Funds used for auto purchasinghave been the principal feature of therise for, with new car sales at thehighest rate since 1955, net installmentborrowing is also at a high point.

Mortgage borrowing is also adding tocontractual obligations of consumers.The tapering in new residential buyingsince the middle of last year is showingup in new commitments made, andwith repayments on outstanding mort-gages higher, the net increase in mort-gage debt so far this year is not solarge as a year ago.

Cost of borrowing lowerWhat these changes in the supply

and use of funds has meant is lowerinterest rates. The accompanying chartrecords the decline in short-term in-terest costs, with the rate on 4-6 monthprime commercial paper down to 4percent in May from 5 percent at thestart of the year. Treasury short-termborrowing has been at lower rates, withthe discount on 3-month Treasury billsin the 2-percent to 3-percent range ascompared with a high of over 4%percent last December.

Long-term borrowing costs to busi-ness firms are also lower, but not to somarked a degree. With stock pricesin recent months down from their 1959highs, and with dividends maintained,yields on common stocks rose from thepostwar lows of last summer. Relativeto long-term borrowing costs, however,stock yields remain exceptionally lowin historical perspective.

This general easing of interest ratesis a not unexpected development. Therapid upsurge in business activityaround the turn of the year and throughthe winter, represented the response ofthe economy to a need to restore

balance in the face of disrupted produc-tion schedules of last fall—in particular,a response to depleted inventories ofproducers and distributors of durablegoods. Throughout that period, finaldemand of consumers arid business wasin an expanding phase, and on this thetemporary inventory restocking require-ment was superimposed. Now, newbusiness is being placed in more orderlyfashion and with due regard to the highproduction capacity of industry.

There have been only small changesrecently in the flow of business to man-ufacturers, and backlogs of long-leadtime products are being reduced. Non-durable goods orders remain high inline with the current retail sales trend.

The upward thrust of the demandof final purchasers of the Nation's out-put this year has coincided with a sharpimprovement in Federal tax receipts inline with improved business. The netresult has been that the Federal fiscalposition has tended to remove fundsfrom the market in 1960; it has thus

RESIDENTIAL CONSTRUCTION

Government-Backed MortgagesHave Recently Moved Down

Thousands

1,000

500

FHA-VA Applications(Seas. adj. annual rates)

1957 58 59 60 61With Units Started so far in 1960Off One-seventh From Last Year

Relat ives- 1958= 100150

100

50

Nonfarrn Starts(p r i va te )

1957 58 59 60 61X 2nd quarter represents Ap r i l -May average

#*• Jan.-Apri l I960, Seas. Adj . Annual Rate

Basic Data.- FHA, VA 8 Census

U. 8. Department of Commerce, Office of Business Economics 60-6-6

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SURVEY OF CURRENT BUSINESS June

served as an offsetting force to the ex-pansionary developments in the privatesphere and the private demands havenow lessened in intensity with thereturn of more stable markets andbusiness purchasing.

Adverse foreign payments

One of the unfavorable aspects of thegeneral economy—the U.S. balance ofinternational payments position- --hasimproved so far this year with, the re-duction, but not the elimination, of our

U. S. BALANCE OF PAYMENTS

Recent Improvement in Perspectiveof Continuing Advert® Balance

Billion $

40

30

20

10

U. S. Payments Abroad

U. S. Receipts from Abroad

1950 52 54 56 58 60Seasonally Adjusted Annual Rates

Note: Excludes military grant aid and contri buttonsof $1.4 bill ion to the IMF in the 2nd quarterof 1959

U. S. Department of Commerce, Office of Business Economics 60- 6- £

adverse foreign payments balance.The accompanying chart shows the ex-tent of this reduction since the spring oflast year.

The unfavorable balance was stillrunning in the first quarter of 1960close to $3 billion at an annual rate,

compared with the $3.8 billion deficitreported for the year 1959. Furtherimprovement was recorded in the tradefigures for April which showed an ex-tension of the rise in exports, the majorfactor in the recent balance of paymentsshift which is analyzed in a followingsection. The dollars gained by for-eigners have been used to increase theirearning assets in the short-term domes-tic money markets, thus supplying asource of funds to borrowers.

DIVIDEND GROWTH

Dividends on corporate stock, whichcontributed over $13 billion to con-sumer income last year, have beenrising so far in I960 with the continuinggrowth of the equity capital base asearnings are ploughed back and newissues floated. The firmness of divi-dend rates has been based upon bettercorporate earnings which in the earl}7

months of this year, showed consider-able improvement—notably in primarymetals and in automobiles—over theearlier strike-lowered quarters, and alsoalso over the initial quarter of 1959.

Indications for the first quarter ofI960, from the partially incompletedata now available, are that before-taxbook profits reached $50 billion, at anannual rate, up 4 to 5 percent fromthe fourth quarter and up around 10percent from the first quarter a yearago.

Dividends do not move in the shortrun in the unstable manner of profits.In the relatively prosperous postwaryears, heavy investment needs of cor-porations have meant a payout ratio ofroundly 50 percent, i.e., half of after-taxprofits have been paid out and halfretained for reinvestment.

Corporate Dividend Payments[Billions of dollars]

All industries, total

Manufacturing

Trade, finance, insurance and real estate

Transportation, communications and publicutilities _ _

Allother _ _ _

Total in national income accounts

1957

12.59

6.33

2.30

2.48

1.48

1958

12. 36

6.10

2.29

2.58

1.40

1959

13.36

6.58

2.52

2.80

1.47

Publicly reported

January-May

1959

4.32

2.02

.95

1.18

. 17

1960

4.63

2. 13

1.08

1.25

.17

Percentchange1959-60

51/2

14

^l/2

Publicly reported cash dividends

The table presented earlier on per-sonal income shows the slowly risingdividend trend in the past several years,when profits fluctuated widely as theydo in all cyclical business swings. Therise has continued during the currentyear, with publicly reported dividendsfor the first 5 months up 7 percent overthe corresponding period of 1959, aslightly higher increase than for divi-dends received as personal income.

In durables manufacturing, where-recent large swings in profits have

SEC

1

Ii

Pe8

6

4

2

0

6

4

2

0

*Qua°Est

U. S. Departme

IURITY MARKETS

Eased Off in First Half Year

StVIDEND YIELDS on COMMONSTOCKS Have Improved a Bit

rcenfr

\ * Earnings/Price Ratio —\w /\ Industrial Stocks*

.... /•*•*%. Vf \-...,.,- "

^ JDividend Yields

_ ! S !

INTEREST RATES off From 1959High Points — but Above April low

Bond Yie'ds — Industrials

^\^^\ « Commercial*%,/ Paper Rate(prime, 4-6 months)

i ! !

1957 1958 1959 1960

MONTHLY

rterlyimated Data: Moodys, FRB

nt of Commerce, Office of Business Economics 60-6-7

centered—reflecting the sales advanceof early 1959 and the subsequent varia-tions in output due to the strike—dividends have risen considerably since1960 opened. Communications andpublic utility industry dividends havealso increased, especially in reflection ofthe large expansion in investment.The article in this issue describes whathas happened in the utility and fuelindustries.

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June 1960 SURVEY OF CURRENT BUSINESS

Important also has been the largeexpansion in the assets and earningsof the financial companies; much ofthis is traceable to the rise in valueof corporate securities and the conse-quent availability of capital gains tohelp swell the dividends paid byin ves tin ent companies.

The increase in market value ofequity securities over the past fewyears, it may be noted, has outstrippedthe growth of dividends as equity issueswere valued on considerations otherthan current dividends.

The chart on security markets showsthat the average yield on commonstocks dropped below 3 percent; thedecline this year in stock prices, withdividends a bit higher, has raised theyield but the average otherwise islower than at any time in a quarter-century.

Pattern of cyclical rise

The broad industry pattern of recentchanges may be seen in perspectiveagainst the background provided inthe accompanying table, which presentsthe dividends as a part of the personaland national income measures through1959, and this year's rise as indicatedby the less-inclusive series of currentlyreported dividends.

In some lines, the growth trends wereobscured as shorter-term conditionsplayed a relatively important part.The limited cut in dividends whichoccurred 2 years ago, like the muchsharper recession in profits, was largelyconcentrated in the durables manu-facturing, mining and transportationindustries. The rebound in their earn-ings which featured the general businessupswing after mid-19 58 was sharplychecked in the second half of last year,and for 1959 as a whole, the effects ofthe industrial disputes which tempo-rarily lowered corporate sales anddampened the vigor of the cyclicaladvance were mirrored in the dividends,as well as in the profits, of theseindustries.

The dividend increase from 1958 wasscarcely sharper in durables manufac-turing than it was in the industrieswhich had little or no lost groundto recover. Transportation dividendsshowed a smaller percentage rise than

did the all-industry total; and for min-ing the 1957-58 drop was extended lastyear.

So far in 1960 the reported dividendpayments reflect better-than-averagegains for durables manufacturing, anupturn for mining, and gains in somebut not all of the nondurable goods in-dustries. Railroad disbursements havegenerally matched the experience ofearly 1959, with traffic and profits stillrestricted considering the current highgeneral business volume.

Dividend payout ratio

The proportions of after-tax profitsdistributed and retained vary widelyaccording to the cyclical position ofbusiness. Dividend disbursements inthe early 1950's generally accountedfor about half of after-tax profits. Inthe recession of 1953-54, the decline inpretax net income was largely offset bya much sharper drop in taxes as theexcess profits tax ended. After-taxprofits fell only 7 percent. Net dividendpayments moved up by a like fraction,however, advancing the payout ratio7 percentage points.

The 1957-58 net profits contractionwas almost twice as severe as that re-corded 4 years earlier, and despite alimited cut in dividends the proportionof earnings distributed again rose overa half-dozen points, reaching a decadehigh of 63 percent. In 1959 and early1960, as in 1955, the relationship fellback toward the 50-percent figure.

Advances in the dividend flow topersons have matched gains in totalpersonal income in the postwar period,,but both profits and dividends wereheld down by wartime controls andoverall they have not increased so muchas other incomes since the immediateprewar years. In every year for almosta decade, dividends received by personshave represented about 3}£ percent oftheir total income.

The shrinkage in the dividend shareover the longer term has been pro-nounced. From about 7 percent ofpersonal income in 1929 and 1930, thedividend component dropped to anaverage of 5 percent during most of the1932-41 period. When heavier corpor-ate tax rates were imposed with WorldWar II, and profits were restrictedthrough price controls, the dividendfraction fell still further to 3% percent:.Subsequently, in the postwar periodthe relationship established 20 years agohas been approximately maintainedsince.

The dividend part of personal incomedoes not, of course, tell the whole story.Aside from the payout ratio of earningspreviously discussed, corporate stocksrepresent the ownership of a restrictedamount of earning "property" assets.These assets have been valued at pro-gressively higher amounts, not onlybecause of the inflation and business andearning expansion but because of whatpresent buyers are willing to pay forassumed or hoped for future potentials.

Capital InvestmentGives Business General Stimulus

JtllSING investment in capital equip-ment has been a force stimulating gen-eral business, and current expectationsshow no significant change in plans fora further expansion beyond the firstquarter $35 billion annual rate. This isrevealed in the regular quarterly sur-vey of the OBE-SEC, which recordedan anticipated rise in the current quarterto $37 billion, and in the third quarterto $37/2 billion (seasonally adjustedannual rates).

While some shifts in the capital pro-grams of individual industries for theyear 1960 are evident from the current

survey, it does not reveal any note-worthy change in the total investmentfrom that reported in the regular annualsurvey in March. This year's anticipa-tion remains close to the earlier re-ported $37 billion figure, as against theactual outlay of $32^ billion in 1959,Upward revisions from earlier plans,for example, were made by railroads^several nondurable goods industries,and the commercial group; reductionswere made by some of the durable goodsmanufacturing industries, and by thepetroleum industry.

Thus, the expansion of the producingDigitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

6 SURVEY OF CURRENT BUSINESS June

plant and equipment of the country isproceeding at a steady pace, and is acontributing factor to the general busi-ness advance which has been underwaysince the rising phase of the cycle wasinitiated in the spring quarter of 1958.

Support for the current investmentexpansion stems from the continuedrise in business sales, which so far in1960, with few exceptions, are reason-ably in line with the expectations whichbusiness reported in March. Profits are

PLANT AND EQUIPMENT

INVESTMENT

Is a Major Force in Business Expansion

Billion Dollars

TOTAL

25

Anticipated

1957 1958 1959 1960

AH Industries Except Public UtilitiesAre Above the 1958 Recession Low3rd Qtr. % Change - 1958-60

100

75

50

25

0

-25

Railroads

Nonrai!Transportation

Manufacturing

TOTAL- Mining

Commercial &Other

Public Utilities

Commercial and Nonrai! TransportationAre Higher Than at Previous CyclicalPeak—Others Lower

3rd Qtr. % Change - 1957-6050 r

25

0

-25

-50Data: SEC 8 OBE

-U. S, Department of Commerce, Office of Business "Economics 60-6-9

NonrailTransportation

Commercial &Other

- TOTAL- Manufacturing- Public Utilities- Mining"' Railroads

generally favorable, having continued toadvance in the first quarter of the year.The emphasis of investment programsis less now, than earlier in the postwarperiod, on increasing capacity and moreon the replacement and modernizationof existing facilities with a view towardsimproving production and lowering, ordampening the rise in, the costs ofproduction.

Manufacturing leads advance

Manufacturing investment as a wholecontinues in the forefront of the 1980expansion, with every major industrycontributing to a rise in the aggregateof almost one-fourth over 1959. Durablegoods producers are scheduling anincrease of 29 percent and nondurablegoods companies of 18 percent.

Durable goods companies are antici-pating a seasonally adjusted annualrate of investment of about $7K billionin the third quarter of 1960. Ifrealized, this would represent the sev-enth successive quarterly rise—about50 percent more than the cyclical lowof the final quarter of 1958. Thethird-quarter 1960 figure, however, isstill almost 10 percent lower than the1957 peak.

Steel companies anticipate outlays of$700 million more than in 1959, withprograms unchanged from those re-ported earlier. The anticipated third-quarter figure is within 5 percent of thepeak in the corresponding quarter of1957. By way of contrast, nonferrousmetals producers are still holding newinvestment at a point only slightlyabove the recession lows.

Auto producers anticipate a steadilyrising trend this year, though full-yearprograms are not now so large as thoseprojected in March. Other transpor-tation equipment manufacturers havealso reduced earlier announced pro-grams, and these are relatively low.

Each of the major machinery groupsexpects a large increase over 1959; theelectrical machinery companies plan aninvestment rise of one-fourth from ayear ago—a new high. Outlays by theother major machinery group are ex-pected to be one-fifth greater than inthe third quarter of 1959, but still belowthe 1957 high.

Nondurable^ rise steady

Investment in nondurable goods in-dustries continues to recover, withprogress as compared with the lastcyclical low dampened by the compara-tive position of the petroleum industry.Petroleum firms have made a sizablecutback from plans reported in our

MANUFACTURERS' INVESTMENT

One-Fourth More Then m 1959, WithIndustry increases Varying Widely

% Change, S953-6025 50 75

ALLMANUFACTURING

By Industry

Iron & Steel

TexHbs

Rubber

Motor Vehicles

Chemicals

Machinery

Stone, Clay,& Glass

Paper

Food & Beverages ^ j

Nonferrous Metals

Other Transpor-tation equip.

Petroleum

Durable Goods ^^

Nondurable Goods | •. ^ 1

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

Data: SEC & OBE

60-6 -10

March report, and now expect to spend$2.6 billion in I960, a 6-percent riseover 1959.l A more detailed analysisof this industry's capital investment,together with that of electric and gasutilities, appears in the special articlein this issue.

Upward revisions over earlier plans—arid a rising trend through the thirdquarter of 1960—appear in the foodand beverage, textile, paper, and rubberindustries. The chemicals industry isalso scheduling a large rise, though thethird-quarter anticipation is still belowthe $1.8 billion annual investment ratereached in the last half of 1957.

1. This figure as well as the other estimates in this surveyrefer to domestic investment only. A special census offoreign investment by American companies is now underwayand will be presented in the SURVEY in a later issue.

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June liXiO SURVEY OF CURRENT BUSINESS

Non-manufacturing at peak

Investment in nomnanufacturing in-dustries has undergone little changeover the past year, with divergentmovements among individual indus-tries. The expenditures scheduled forthe second and third quarters—annual rates of more than $22 billion—•represent a new high for this majorsource of investment requirements.

Railroad plans have been revisedupward, and a 15-percent gain is nowantici pa ted over 1959. First-quarter1960 expenditures represented a partialrecovery from the fourth quarter of1959, when both traffic and earningsdropped; further gains are anticipatedfor the spring and summer quarters.It may be noted that orders for newfreight cars this spring have fallenfrom the volume of last winter, althoughunfilled orders are still well above thoseof 1959. This order flow probably re-flects uncertaintv over traffic demand

later this year, and the fact that rail-road income so far in 1960 has beenrunning below year-ago figures.

Capital outlays by the airlines, afterdeclining in the first 3 months, areexpected to reach a peak in the springquarter of 1960. The}7 are scheduledto fall off in the second half of the year,even though this period will see con-tinuing large deliveries of jet aircraft.For most airlines, the reported capitalexpenditures refer to progress pay-ments, rather than to actual deliveries;hence, plane deliveries are not a directcurrent measure of quarterly investment.

Small pickup for utilities

Both of the major utility groupshave scaled down slightly the programsreported 3 months ago, with projectedgains over 1959 of 3 and 4 percent forelectric and gas, respectively. Actualexpenditures of electric util i t ies, season-

ally adjusted, have changed relativelylittle since the first quarter of 1959.The reported programs indicate a smallincrease in the second half of this year,at rates about 10 percent below thehigh of the 1957 final quarter.

Gas company investment, seasonallyadjusted, declined fairly sharply fromthe first to the second half of 1959,picked up again early this year, and isexpected to rise slightly in the periodahead.

Communications companies are carry-ing out their large expansion programs,with investment of more than $3 billionin 1960—a 15-percent rise over 1959.The stead}7 upward trend is expectedto continue throughout the year. In-vestment scheduled for the latter partof 1960 represents a new peak.

Investment by retail firms also showsa rising trend through the summer of1960, at rates which represent newlimiis.

Table 1.—Expenditures on New Plant and Equipment

by U.S. Business l

[Billions of dollars] Seasonally A d j u s t e d at Annual Rates

Manufacturing

Durable goods industriesPrimary iron and steelPrimary n on ferrous metalsElectrical machinery and equip-

mentMachinery except electrical

Motor vehicles and equipment___Transportation equipment, ex-

cluding" motor vehiclesStone, ciay, and glass products. __Other durable roods ^

Nondurable jjoods industriesFood and beveragesTextile mill productsPaocr and allied productsChemicals and allied products

Petroleum and coal products

Olhor ndnrable orrds 4

"Mining

Railroads

Transportation, other than rail . _

Public utilities . .. __ -

Communications

Commercial and other '3

Total

1958

11.43

5.471. 19. 44

. 40

.92

. 56

.37

.401. 13

5. 96.74. 29. 58

1.32

2.43.13.47

.94

. 75

1,50

6.09

2.62

7 20

30. 53

1959

12.07

5.77' 1.04

.31

. 52

.91

.64

.39

.531.44

6.29. 83.41.63

1.23

2.49. 19.51

,99

.92

2.02

5.67

2.67

8.21

32.54

1960 2

14. 90

7.471.71.35

. 651.17

.85

.42

. 651.67

7. 43. 94. 58

ll 59

2.64.26.67

1.07

1.06

2,14

5.85

\ 11.82

36.85

1959 1960

Jan.-Mar.

2,46

1.14.21.07

.09

. 18

.12

.08

. 11

. 28

1.31. 19.08. 12. 26

.52

.04

. 11

,21

.16

.41

1.20

f .59

[ 1.88

6.91

Apr.-June

3.02

1.45. 27.09

. 1222

. 15

. 10

. 14

.36

1.57

!io. 15.30

.62

.05

. 13

.24

.26

.53

1.47

. 67

2.12

8.32

Julv-Sept,

3.02

1.4422

'. 07

. 1323

. 18

. 10

. 13

.37

1.58.20. 10.17.31

.' 05

. 12

.26

.28

.54

1.48

.66

2.08

8.32

Oct.-Dec.

3. 57

1.74.34.09

. 17

.28

. 19

. 11

. 1543

1. 83

! 13. 19. 3(5

.73

. 06

. 15

.27

.22

.55

1.51

.75

2.12

8.99

Jan.-Mar.

3.09

1.55.33.07

.12

.25

. 17

.10

. 14

.36

1.54.21. 12. 16.33

. 53

. 05

. 15

22

.25

.47

1.18

| 2.68

7.89

Apr.-June 2

3. 79

1.85.42.08

.16

.28

.20

.10

. 17

. 43

1.9426

!l6. 19.41

. 69!07. 17

29

.29

.61

1.46

3.06

9.50

July-Sept. 2

3. 73

1.86.43.09

.16

.28

. 24

.11

:lt1.87

! 14.20.39

. 68

.07

. 16

.27

.28

.56

1.55

3.00

9.39

1959 1960

Jan.-Mar.

11.20

5.251.00.30

.45

.80

.55

.40

Apr.-June

11.80

5.751. 05.35

.50

.90

.60

.40

Julv-Sept.

12.25

5.85.90.30

. 55::

.40

Oct.-Dec.

12.85

6. 151. 15.30

55:95

.40

Jan.-Mar.

14. 10

7.151.00.30

.601. 15

.80

.45

5. 95

!30

1 15

2. 55

(i. 05.85.35.60

1. 15

2.40

6.40. 85.45. 65

1. 30

2. 45

6.70. 85. 50. 70

1.30

2. 55

6. 95.90.50.70

1. 15

2. 55

.95

.65

1.70

5.80

10.35

30.60

.95

1.00

2.10

5.80

10.85

32.50

1.00

1.30

2.15

5.60

11,05

33.35

1.05

.85

2.15

5.50

11.20

33.60

1.00

1.00

2.00

5.75

11.35

35. 15

Apr.-June 2

14.8

7.31.6.3

.61.1

.8

.4

7.51.0.6. 7

1. 6

2 7

1.1

1.1

2.4

5.8

11.9

37.0

July-Sept. 2

15.1

7.G1. S.4

12

.9

.4

7.61.0. 0. s

l'. 6

2.7

1.1

1.2

2.3

5.9

12.0

37.5

1. Data exclude expenditures of agricultural business and outlays charged to current account.2. Estimates for the year 1960 are based on actual capital expenditures for the January-March quarter and anticipated capital expenditures for the remaining quarters of the year. These

data were reported by business in late April and May 1960. The anticipated data have been adjusted when necessary for systematic tendencies.3. Includes fabricated metal products, lumber products, furniture and fixtures, instruments, ordnance, and miscellaneous manufactures.4. Includes apparel and related products, tobacco, leather and leather products, and printing and publishing.5. Includes trade, service, finance, and construction. Figures for 1960 and seasonally adjusted data also include communications.NOTE: Details may not add to totals due to rounding. Data for earlier years were published in the June 1956 and March 1958 SURVEY OF C U R R E N T BUSINESS.Sources: U.S. Department of Commerce, Office of Business Economics, and Securities and Exchange Commission.

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8 SURVEY OF CURRENT BUSINESS June 1960

Foreign Travel IncreaseReflects Higher Incomes and Broadening Markets

FOREIGN travel by U.S. residentscontinues to increase, with $2,380 mil-lion expended in 1959- 11 percent morethan in 1958. This rate was slightlyhigher than the average annual increasesince 1950. A further rise is indicatedin 1960, which is expected to carry thetotal well beyond the $2^ billion mark.

Of this 1959 total, SI,600 million wasspent in foreign countries, and the re-mainder of close to $800 million waspaid for transportation.

Foreign countries received hal f of thefare total, bringing foreign countriesreceipts to about $2 billion. The 1958figure was just short of $1.8 billion.

Expenditures in foreign countriesrose 10 percent. Fares paid to foreignships and airlines increased nearly 20percent, as foreign lines continued to ob-tain a rising share of the passengers.These airlines received over $200 millionin 1959—eight times as much as theyreceived in 1950. The rise reflected thegrowth in air travel and the increasingproportion of U.S. travelers using for-eign-flag planes, as these have affordedincreasing competition to U.S. airlines.

Fares paid to foreign ships have risen

Table 1.—Expenditures for ForeignTravel

by U.S. Residents

[Millions of dollars]

Year

1929

1937

1947

19501951195219531954

19551956195719581959

Total

688

470

716

1,0221,0281,1881, 3061,401

1,6121, 8141 9552,1392 380

Expendi- j Fares naid to —tures inforeign

countries Forecarr

483 i

348 i

573

754!757 i840 !929 ;

1.009 i

1,1531,275 :1,372 ;1. 4601 6H)

NOTE.— ExcludPiJ travel by niihtjrj peiso

ign U, S. car-ers ners

164 41

95 27

55 ' 88

145 , 123132 ! 139172 j 176179 ! 198183 i 209

|201 j 258238 301261 322320 I 3593^2 388

iiifl and otJio*Government employees stationed abroad, then dependentsand U.S. citizens residing abioad; include^ -Jiorv expendi-tures of cruise travelers; pas^en^i fare5? evbby emigrant aliens.

id* s firos pud

Source: U.S. Department of Comin *Economics.

since 1950 from $120 million to $180million, despite a decline in the numbersof sea travelers. The rise is due to anincrease in cruise travel---mostly onforeign ships. Fares from travel oncruises have risen from $15 million in1950 to $83 million in 1959. Also,average fares of t r an sa t l an t i c* sea pas-sengers- 75 percent of all sea travel-ers---have risen with the expansion ofdirect service to the Mediterranean at ahigher average fare t h a n tha t on theshorter North A t l a n t i c 4 routes.

Further advance in 1960

The growth in travel abroad—reflect-ing in large part the rise in incomes inthe United States---has been made pos-sible by the increase in transportationand foreign hotel facilities.

In I960, the travel flow is again beingstimulated by the advance in personalincome—up more than 5 percent forthe first 5 months of the year—and alsoby the increase in airline capacity withthe rapid expansion in the use of jet-planes. Most major international air-lines now have these new planes inservice.

The I960 trend in overseas foreigntravel is suggested by the accompany-ing chart on passports issued. ThroughMay of this year, the increase of one-fifth over the corresponding period ayear ago indicates a considerable risein traffic and travel expenditures.

Direction of travel

More than half of the $150 millionincrease in expenditures in foreigncountries in 1959 accrued to the nearbycountries—Canada, Mexico, and theCaribbean area. Europe and the Medi-terranean area received about one-thirdof the 1959 increase.

Some $600 million was spent inEurope and the Mediterranean area, 8percent more than in 1958. The num-ber of travelers in 1959 increased by 11percent over 1958, with a per capitaexpenditure decline of 3 percent whichreflected an increased proportion oftransatlantic air travelers. Due to

U. S. PAYMENTS FOR TRAVEL

Are Twice Receipts — HaveIncreased More Than Receipts

Billion Dollars

2.0

1.5

1 ,0

.5

0

.5

0

1.0

.5

0

.5

0

.5

0

1.0

.5

01

TOTAL EXPENDITURES

By U. S. Trove/ers Abroad &

^/ ,/^.** By foreign Visitors

in U. S.

1 ! 1 1 1 1 1 1 1 1 1 1 1

Fare Payments Are Three Times

Receipts — Have increased Faster

^Expenditures Rose Primarily in —

EUROPE & MEDITERRANEAN

Payments ^^^^

^^^^ Receipts

-i-r-i--i-r7T"T i i i t .

MEXICO

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

WESTERN HEMISPHERE(Excluding Canada & Mexico)

1 1 1 ! 1 i ! ! 1 1 ! ! t

Receipts From Canada ExceedPayments by Growing Amount

CANADA

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

950 52 54 56 58 60 62

U. S. Department of Commerce, Office of Business Economics 60-6-13

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June 1960 SURVEY OF CURRENT BUSINESS 9

Table 2.—Expenditures for ForeignTravel

by U.S. Residents, by Area[Millions of dollars]

Total

Transportation

Foreign-flag carrier'sU S -flag carriers

Expenditures abroad

Canada _ -.- - _ -Persons staying under

48 hours _ _ _Mexico

Persons visiting Mexi-can border only

Oversea areas

Europe and Mediter-ranean

United KingdomWest Indies and Cen-

tral A m ericaSouth \mericaOther oversea areas

1955

1 612

459

201258

1,153

306

71255

159

592

43073

1072233

1956

1 814

539

238301

1,275

316

74279

181

680

47382

1342944

1957

1 955

583

261322

1,372

340

80305

203

727

48382

1533754

1958

2 139

679

320359

1,460

323

75319

210

818

56090

1563765

1959

2 380

770

382388

1,610

365

n.a.350

233

895

604102

1744176

n.a. = Not available.

NOTE.—For coverage, see table 1.Source: U.S. Department of Commerce, Office of Business

Economics.

their shorter stay abroad, the averageexpenditures of this air lifted group areabout 20 percent below those of seatravelers.

The average European trip in 1959cost just over $1,500, including thetransatlantic fares of $650. Travelersby sea averaged close to $1,700 per trip,and travelers by air over $1,400.

Canada again received the largest

Table 3.—U.S. Travelers to OverseaCountries,

by Means of Transportation[Thousands of dollars]

Total

SeaAir

Europe and Medi-terranean

Sea _Air

West Indies and Cen-tral America

Sea-.,.Air

South America

SeaAir

Other

SeaAir

i5

1,075

.'518757

482

2142(i8

522

87485

34

628

37

1126

1956

1, 239

327912

521

226295

631

87544

42

537

45

936

1957

1, 369

3031,OG6

556

205351

704

79625

51

744

58

1246

1958

1, 398

2921, 106

637

218419

645

55590

52

646

64

1351

1959

1,516

2791, 237

705

204501

677

55622

59

52

75

1362

NOTE.—For coverage, see table 1; also excludes cruisetravelers.

Source: U.S. Department of Commerce, Office of BusinessEconomics; based on data of U.S. Department of Justice,Immigration and Naturalization Service.

550995°—60 2

share of travel expenditures of any sin-gle foreign country—over $360 million.The increase of one-eighth was the larg-est year-to-year increase since the war,which stimulated nearby travel andhampered the movement elsewhere.Although travel payments to Canadahave risen steadily in total since then.Canada's share has declined as moreusual country patterns were reestab-listed.

Some $350 million was spent in Mex-ico, with one-third going to the interior,and two-thirds to border places bythose making frequent but brief cross-ings. Most of the 10-percent increaseover 1958 in payments applied to theseborder expenditures.

The West Indies and Central Americaaccounted for about $175 million, the11-percent increase coming from cruisetravel. A 5-percent rise in the numbersof travelers was accompanied by an in-crease in per capita spending. A dropoccurred to Cuba with the politicalchanges, as travelers shifted to otherdestinations.

The gain in travel payments to SouthAmerica was about average, with aslightly higher increase in the numbersof travelers and a lower average ex-penditure.

The greatest relative rise—17 per-cent—occurred in payments to otherareas, principally the Far East.

Foreign travel here up

Foreign visitors in the United Statesspent about $900 million in 1959, anincrease of 9 percent, and paid an addi-tional $90 million to U.S. ships andplanes for transportation—about thesame amount as in 1958. A drop inthe proportion of foreign travelers usingU.S. ships and planes offset the increasein the number of foreign visitors.

As in the case of our travel payments,the big share of the $77 million increasein receipts—$53 million—came fromCanadians and Mexicans. Expendi-tures in the United States by visitorsfrom Europe and other oversea countriesrose by about $24 million.

Expenditures in the United Statesby Canadians accounted for half of ourreceipts from all foreign travelers.Canadians spent 9 percent more herethan in 1958, and a total amount whichexceeded our payments to Canada by a

considerable margin. There has beena U.S. credit balance in the travelaccount with Canada since 1952, fol-lowing the gradual easing of exchangerestrictions by Canada in the late1940's.

The second largest share-—18 per-cent—of foreign travel receipts comesfrom Mexican visitors, and all but $22million of the $160 million represented

RECORD FOR OVERSEAS TRAVEL

INDICATED FOR 1960

Passports Issued Up One-Fifth in First Half

1955 1956 1957 1958 1959 1960 1961

Data: J. S Dept. of State

U. S. Department o! Commerce, Office of Business Economics 60-6 -14

border outlays. The Mexicans spendtwice as much along the U.S. borderas do the Canadians. The comparativesupply of goods and their relative at-tractiveness induce more frequent bor-der crossings by Mexicans for routinepurchases. The other American repub-lics and nearby Caribbean dependen-cies account for 15 percent of the to ta l .

Expenditures by visitors from Europeand the Mediterranean—up 14 percentover 1958—were little more than one-tenth of our total receipts. The num-ber of European visitors rose by a fifth,but the average expenditure dropped.This was due to an increase in theproportion of visitors in direct transitthrough the United States, who spendlittle here. Relaxation of currencyrestrictions in some European countriesand rising incomes in that area con-tributed to the larger number ofvisitors.

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10 SURVEY OF CURRENT BUSINESS June

Improvement in Balance of International Payments in First QuarterAdverse Net Position Still Large

OUTSTANDING in our first-quarterforeign transactions was the large im-provement in our trade balance, result-ing mainly from an increase in mer-chandise exports and in a lesser degreefrom a decline in merchandise imports.This was partially offset by a rise innet payments on other transactions.The first-quarter deficit in our inter-national transactions, at a seasonallyadjusted annual rate, was close to $3billion, compared with $3.8 billion inthe year 1959 and $3.5 billion in 1958.

EXPORTS MOVE HIGHER

The increase in exports in the firstquarter of 1960 came in part fromanticipated special developments affect-ing a few important commodities.Cotton exports spurted rapidly to arate, however, which is not expected tocontinue. They declined in Februaryand March, after having reached a peakin January. Cotton consumptionabroad is very high, but stocks whichhad been reduced last 3rear are beingbuilt up again. In addition, cottonproduction in competing countrieswhich had fallen off a year earlier isrecovering, so that both from the de-mand and from the supply side themarket situation for cotton will notcontinue so favorable as it has been inpast months.

Exports of commercial airplanes roseduring the quarter and in Marchapproached the rate expected for theremainder of 1960 on the basis ofdelivery schedules on the backlog oforders. For the first quarter as awhole, however, exports were still belowthat rate, and deliveries during thefollowing quarters may be expected tobe higher.

Shipments of steel-mill products alsoincreased sharply as supplies for exportbecame available. During the firstquart er such exports approximatelyequaled those a year earlier but con-tinued to rise, and the combination ofa high demand abroad, and the recentslackening of domestic demand may

contribute to a continuation of thattrend. The rise in exports of metalproducts, such as automobiles and cer-tain types of machinery, may also bedue, in part, to shipments which hadbeen postponed by shortages of steelin the previous quarter.

Basic movement is upivard

These special factors were not theonly ones, however, affecting the recentrise in exports. To evaluate the cur-rent trends, the first quarter of 1960 iscompared in the accompanying chartwith the corresponding quarter of 1959,

FOREIGN TRADE RISING

EXPORTS Except for Fuels Have AlmostRecovered to the Previous Peak in 1957

Agriculturalproducts

Coal &petroleum

Other crude &semimfrs.

Otherfinishedmfrs.

IMPORTS Especially in Finished GoodsMoved Higher

Otherfinishedmfrs.

1956 57 58 59 60

First Quarter of Each Year

Data; Census Bureau

U. S. Department of Commerce, Office of Business Economics 60-6- II

when exports were at the lowest pointin the recent cycle, and earlier years.

The 1960 increase in total exportsfrom the first quarter of last year wasabout $770 million, or $3 billion at anannual rate. One-third of the rise wasdue to higher exports of cotton, andother agricultural products raised theproportion to 45 percent. Sales forforeign currencies by the Governmentwere about $40 million higher than inthe first quarter of 1959, and were aminor factor in this increase.

Approximately a quarter of the ex-port rise consisted of crude and man-ufactured nonagricultural materials,and the other quarter was in manu-factured products.

Merchandise exports, except for coaland petroleum, in the first quarter of1960 were nearly as high as in the firstquarter of 1957, which was the mostrecent export peak. This applies alsoto each of the other broad categoriesshown in the chart, though within thesecategories some shifts have taken place.In the materials group, chemical prod-ucts including synthetic rubber andfibers, and aluminum have gained, whilesteel, scrap, and copper have lost.Among the finished manufactures, ma-chinery exports were as high as in 1957,and lower exports of automobiles wereoffset by higher exports of aircraft.

Exports of automobiles and partshave shown some recovery in the firstquarter of this year, and were higherthan in the corresponding period of thetwo previous years, About two-thirdsof the increase over 1959 went toEurope.

The recent rise in aggregate exportshas been mainly to Europe and Japan.These countries accounted for nearlythree-fourths of the increase, and Can-ada, Australia, and New Zealand foranother 10 percent. Exports to LatinAmerica were lower than in the firstquarter of 1959, and more than one-fifth less than in the first quarter of1957.

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June 1960 SURVEY OF CURRENT BUSINESS 11

and Japan were in part in cotton andairplanes. Another element was therise in business activity in thesecountries, and some of the increase mayhave come from the liberalizations oftrade which had been accelerated duringthe last year. Although the effects ofthe liberalization of exchange restric-tions on our exports of capital goods andindustrial materials are difficult toseparate from those of the general risein foreign business activity and demand,a review of the exports of consumergoods indicates significant gains.

Exports of such commodities to coun-tries which had relaxed or entirely re-moved restrictions on their importswere about $60 million higher—over 80percent—-than in the first quarter of lastyear. For some items, particularlyfoodstuffs and textiles, the percentageincrease was considerably higher. Theincrease was largest to the UnitedKingdom and Germany, and less tocountries which liberalized imports to alesser extent.

Exports during the first quarter, withthe major exception of coal and petro-leum, have almost returned to the pre-vious peak; the}^ are not yet sufficiently

high to meet the balance of paymentsproblem.

MERCHANDISE IMPORTSLOWER

Imports during the first quarter wereat a seasonally adjusted annual rate ofjust over $15 billion, $700 million underthe second-quarter 1959 peak. Thedrop in the first quarter from the year-end quarter was mainly in January; inDecember, as well as in February andMarch, imports were above the first-quarter rate.

The January developments may havebeen affected by the speedup of importsto arrive here in December in anticipa-tion of a resumption of the dockworkerstrike scheduled for January, just as theearlier anticipations of the strike hadshifted imports from October to Sep-tember.

Steel imports were higher than duringthe fourth quarter of last year, but didnot continue to rise after January.Copper imports which were high duringthe second half of last year becausedomestic supplies were limited bystrikes, fell off somewhat. Other major

industrial materials did not show sig-nificant changes in imports, thus reflect-ing the relative stability in domesticindustrial production.

Imports of manufactured goods—asthe chart shows—were chiefly respon-sible for the rise of overall imports overrecent years. The trends for some ofthe major manufactures appear to bediverging to an increasing extent. Im-ports of radios, for instance, which hadrisen from $12 to $30 million betweenthe last quarters of 1958 and 1959declined more than seasonally in thefirst quarter of 1960.

Imports of automobiles and partsrose from the last quarter of 1959 tothe first quarter of this year, but con-siderably less than a year earlier.Imports of many other manufacturescontinued upwards, particularly tex-tiles, industrial machinery, and officeequipment.

NET PAYMENTS FORSERVICES UP

The favorable developments in tradewere in part offset by changes in serv-ices transactions; payments on a sea-

Table 1.—U.S. Balance of Payments Seasonally Adjusted[Millions of dollars]

U.S. payments (debits)

ImportsMerchandise __ -Services

Remit tan cos arid pensionsGovernment grants and related capital

outflowsU.S. private and other Government

capital outflows

U.S. receipts (credits)

Exports - - _ - _MerchandiseServices

Repayments on U.S. Governmentloans

Foreign long-term investments in theUnited States.. . .

Balance on recorded transactions [netpayments ( — )]

Unrecorded transactions (errors andomissions) net receipts

Increase in foreign gold and liquid dollarassets through transactions with theUnited States

Addendum: Military transfers undergrant-aid (unadjusted)

I

6,202

4 9273 2151 712

156

605

514

5, 777

5, 5393,9841 555

119

119

— 425

18

407

657

19

II

6,354

4 9193 1851 734

168

628

639

6, 160

5,8884 2971 591

119

153

— 194

51

143

1,089

56

III

6,884

5 0243 ?421 782

164

676

1 020

6,368

6,1054,4511 654

120

143

—516

194

322

431

IV

6,885

4 9593 1621 797

177

667

1 082

6,409

6,1734 6471 526

121

115

—476

380

96

402

I

7,024

5 1713' 2621 909

184

730

939

7,199

6,8795 0871 792

154

166

175

336

-511

605

19

II

7,456

5 2523 3701 882

174

721

1,309

7,205

6,8314,9731 858

247

127

-251

237

14

813

57

III

6, 695

5 2583 3491 909

164

611

662

6,890

6,7074, 8261 881

165

18

195

257

-452

461

IV

6,858

5 2423 3101 932

180

498

938

6,459

6, 3164 5041 812

93

50

—399

-82

481

556

I

6,737

5 0973 0981 999

179

598

863

5,944

5,7844 0761 708

147

13

— 793

184

609

621

19

II

6,962

5 2433 1922 051

179

624

916

5,973

5,8414 0681 773

-15

—989

62

927

681

58

m

6,900

5 ^02i 3 189

2 013

182

609

907

5,951

5,8734 0991 774

104

-26

—949

47

902

455

IV

7,118

5 4783 4392 039

182

596

862

6, 025

5,8274,0201,807

146

52

— 1,093

54

1,039

524

I

7,020

5 6213 5922 0^9

186

616

597

5,983

5,6143,8281 786

297

72

— 1,037

144

893

505

19

II

7,587

6 0163 9802 036

189

611

2 771

6,026

5,6893 9401 749

147

190

-1,561

351

1,210

626

59

III

7, 472

5 9833 9012 082

211

629

649

6, 458

6, 1534, 3301 823

147

158

-1,014

-63

1,077

397

IV

7, 555

5 9403 8422 098

193

621

801

6,558

6,0084, 1271 881

422

128

-997

351

646

460

1960

IP

7,496

5 9453 7972 148

194

634

723

6,798

6,4384, 5561 882

170

190

-698

-8

706

425

" Preliminary.1. Excludes Census trade adjustment of $33 million.2. Excludes $1,375 million for U.S. subscription to International Monetary Fund.

Source: U.S. Department of Commerce, Office of Business Economics.Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

12 SURVEY OF (TRRKXT BUSINESS June 19

June IIM'JO SURVEY OF CURRENT BUSINESS 13

Table 2.—U.S. Balance of Payments by Area

First Quarter 1960 "[Millions of dollars]

Line

1

2

3

456

89

101112

13

141516

171819

2021

2223

2425

26

272829

30

31

3233343536

37

383940

41

42

43

44

45

46

47

48

I

II

m

Type of transaction

Exports of goods and services

Military transfers under grants, net

Other goods and services

Merchandise, adjusted, excluding militaryTransportationTravelMiscellaneous services:

PrivateGovernment, excluding militarv

Military transactionsIncome on investments:

Direct investmentsOther private. - _ _ - -Government

Imports of goods and services

Merchandise, adjusted, excluding militaryTransportation ... -TravelMiscellaneous services:

PrivateGovernment, excluding military

Militarv expendituresIncome on investments:

PrivateGovernment

Balance on goods and servicesExcluding military transfers

Unilateral transfers, net [to foreign countries (— )]Excluding military transfers

Private remittancesGovernment:

Militarv supplies and servicesOther grantsPensions and other transfers

U.S. capital, net [outflow (—)]

Private, net

Direct investments, net.- _ . - .New issuesRedemptions _. . _ _Other long-term, netShort-term not

Government, net _ _ _.. - - . ..

Long-term eanital, outflowRepaymentsForeign currency holdings and short-term

claims, net [increase (— )]

Foreign capital, [net outflow (— )]

Direct and long-term portfolio investments otherthan U.S. Government securities

Transactions in U.S. Government long-termsecurities

Short-term liabilities to foreign banks and officialinstitutions

Other short-term liabilities

Monetary gold [U.S. sales C4-) purchases ( — )]

Foreign capital and gold, total __ _. .

Errors and omissions and transfers of funds betweenforeign areas [receipts by foreign areas (— )], net

Memorandum items:Increase in total reported foreign gold reserves

and liquid dollar holdings 1Through estimated transactions with the

United States 2

Through other transactions 3

All areas

6 738

425

6 311

4, 596499206

2963687

50711658

5 753

3.819436283

14069

757

148101

983558

—999—5V 4

— 141

— 425—380

— 53

-78!)

— 507

— 248— 274

3613

—94

-222

—220150

-152

717

190

124

41199

50

797

8

746

599147

WesternEurope

2 257

220

2 037

1, 52017922

1341254

782216

2, 139

1,17920263

9220

429

9757

us-102

-3G3— 143

-67

—220— 55— 21

29

1

-79

171353

25

—3049

6

235

157

11

-98165

40

275

-59

263

59204

EasternEurope

32

32

291

(r}

I

(*)

1

21

19(*}

]

C2")1

(*)

u11

-5—5

— 5

— 11

-13

-13

_,1

-12

1

1

1

G

1

7-6

Canada

I 1 232

1 232

\ 93330

101

34(•0

10

7351

919

7082733

71

100

349

313313

-9-9

— 1

— 8

-199

— 199

-113j -|"

(*)5

26

198

11

32

253— 98

198

-303

177

-116293

LatinAmericanRepublics

I 265

10

1 255

8446869

5974

1621923

1,186

93660

117

35198

74

7969

-48—38

— 10

— 10— 24

—4

-113

— 117

-8— 53

19

4

— 5061

-7

-11

12

1

8—32

1

-10

92

-86

70-156

All othercountries

1 894

195

1 699

1,27010214

571719

1871518

1,371

9695869

625

220

1014

523328

-547—352

— 58

—273—21

— 405

— 167

—40— 13

6

—96

-238

— 13839

-139

130

8

30

105— 13

1

131

298

152

421—269

Interna-tional

institu-tions and

unallo-cated

56

56

29

11

_

9

117

889

3

(*)17

— 61— 61

-27—27

O7

00

88

—8—91

11

194

2

50

142(z)

8

202

-26

239

16673

Total

n.s s

n.s.s.

1 149

804

15

9577

126118

1,058

6497663

7311

128

508

n.s.s.91

n.s.s.— 106

—30

n.s.s

4

-169

—is

— 45

20— 916

-151

—739

-87

328

14

56

2553

2

330

-146

285

170115

Sterling area

UnitedKingdomand otherEurope

n s s.

n.s.s.

492

308477

7132

460

(*)

585

2956214

712

86

487

n.s.s.-93

n.s.s.-17

— 14

n.s.s.(z)

-3

19

20

-14

162

16

i

—11

-1

329

14

45

2673

2

331

-240

265

77188

Othercountries

n.s.s.

n.s.s.

657

496298

2445

8038

473

3541449

29

42

21

n.s.s.181

ll.S.S^

-8S

-1G

n.s.s.—72-1

— 188

—38

-31

4-11

-150

—728

-86

-I

(z)

1112

0)

1

94

20

93-73

* Less than $500,000. n.s.s. = Not shown separately. * Preliminary.1. Reported gold reserves of foreign central banks and governments, excluding U.S.S.R. and other Eastern European countries, plus foreign liquid dollar holdings (lines 43, 44, and 45).2. For "All areas" equals balance (with reverse sign) on line 23 (less net sales of gold by domestic sources to (+) or purchases from (—) the monetary gold stock of the United States),

plus lines 25, 30, 42, and 48. Domestic sales to (-}-) or purchases from (—) the monetary gold stock were in millions of dollars: 1960 I, —3. Line I minus line II. Amounts for "All areas" represent gold obtaim

NOTE.—Data for 1956 through 1959 may be found on pages 14-17.

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

ned by foreign countries outside the United States.

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

14 SURVEY OF CURRENT BUSINESS June 1000

Table 3.—U.S. Balance of[Millions of dollars]

Line

1

2

3

4

56

789

101112

13

14

1516

171839

2021

2223

24

25

26

27282930

31

3233343536

37

383940

41

42

43

44

4546

47

48

I

II

III

Type of transaction

Exports of goods and services. ...

Military transfers under grants, net

Other goods and services. _

Merchandise, adjusted, excludingmilitary.

Transportation... ._ ... .TravelMiscellaneous services:

PrivateGovernment, excluding military

Militarv transactionsIncome on investments:

Direct investmentsOther private _ . _ _ _ - -Government

Imports of goods and services

Merchandise, adjusted, excluding mili-tary.

TransportationTravel ._ ._ .Miscellaneous services:

Private -.- - .._Government, excluding military

Militarv expenditures _ _ ... _Income on investments:

PrivateGovernment

Balance on goods and servicesExcluding military transfers

Unilateral transfers, net [to foreign coun-tries (-)].

Excludin^ military transfers

Private remittancesGovernment:

Militarv supplies and servicesOther grants . _ _Pensions and other transfers

U.S. capital, net [outflow (— )]

Private net

Direc^ investments notNew issuesRedemptionsOther long-term netShort-term net

Government, net

Long-term capital, outflow 3RepaymentsForeign currency holdings and short-

term claims, net [increase (— )]Foreign capital, net [outflow ( — )]

Direct and long-term portfolio invest-ments other than U.S. Governmentsecurities.

Transactions in U.S. Government long-term securities.

Short-term liabilities to foreign banksand official institutions.

Other short-term liabilitiesMonetary gold [U.S. sales (+)> purchases

Foreign capital and gold, total 3

Errors and omissions and transfers offunds between foreign areas [receiptsby foreign areas ( — )], net

Memorandum items:Increase in total reported foreign gold

reserves and liquid dollar holdings 4Through estimated transactions with

the United States 5Through other transactions 6

1956

Year

26, 284

2,579

23, 705

17, 379

1, 642705

1, 087123158

2 120297194

19, 829

12,804

1,4081, 275

543264

2, 955

1957

Year

29, 168

2,435

26, 733

19, 390

1 999785

1, 168138372

2, 313363205

20, 923

13, 291

1, 5691, 372

563310

3. 165

426! 452154| 201

6,455 8,2153,876j 5,810

-4,977 -4,753

-2,388! -2,318

-530 -543

_2 579 — 2 435-1,733

-135—3,619

-2,990

-1,859-453

174-324— 528

-629

— 545479

-563

1,804

530

-135

1,095

314-306

1,498

643

1, 460

993

467

-1, 616-159

-4,133

-3,175

-2,058-597

179-441-258

-958

— 993659

-624

691

361

-52

-16

398-798

-107

748

263

-442

705

1958

Year

25, 606

2,281

23, 325

16, 263

1, 672825

1, 205142296

2,198417307

21, 053

12, 951

1,6361, 460

613305

3, 412

537139

4, 5532,272

-4,619

-2, 338

-540

-2, 281-1,616

-182-3,815

-2,844

-1,094-955

85-574-303

971

— 1, 176544

-339

1,226

24

31

827

3442,275

3,501

380

4,378

3,496

882

All areas

1959

Year

25, 452

1,988

23,461

16, 225

1, 649902

1, 199144297

2, 235467346

23, 560

15,315

1, 7841. 610

609322

3, 090

549281

1,892-96

-4, 390

-2, 402

-563

1 988— 1, 623

— 216-4,034

2 301

1 310— 624

94-372

89

1 733

2 3931.013-353

4, 674

548

669

3, 209

2481, 075

5,749

783

6,028

5, 167

861

1956

I

6, 037

657

5,380

3, 960

36,5139

2513036

4817048

4,870

3, 255

312201

124

781

10634

1.167510

-1,231

-574

-127

-657-420

97-554

-417

— 288-103

85115

4

-137

11386

-110

617

119

— 250

692

56-12

605

13

674

493

181

II

7,098

1,089

6,009

4, 420

412

274s512

50

4,997

3,173

334

12159

799

10034

2,1011,012

-1,721

-635

-126

— 1. 089-472

—37-899

690

353— 10'

14— 89

157

209

III

6,184

431

5, 753

4,112

423227

2733029

115, 113

3. 156

383500

14290

694

10939

1,071640

-975

-541

-132

-431— 380

-987

-806

-524-104

21-104

181

99-121

544

153

60

278

53-103

441

81

461

296

165

•po- 185

811

143

108

505

55-164

647

214

581

513

68

IV

6, 965

402

6,563

4,887

442162

2893235

5968139

4, 849

3, 220

336240

1 .5658

681

11147

2, 1161,714

-1,047

-645

-145

-402— 461-39

-1,179

-1,077

-694-141

5416

-280

-102

197

-168

115

-53

-380

150

— 195

305

-256

-309

53

1957

I

7,348

605

6,743

5, 108

501162

2763345

4917948

5, 092

3, 297

356213

12466

880

10947

2, 2561, 651

-1,181

-576

-144

-605-392-40

-1,070

813

II

7, 823

813

7,010

5, 158

540202

2953440

5949651

5, 318

3, 344

423352

12964

850

104

2, 5051,692

-1,475

-662

-135

-813-488-39

-1,563

1 OK I

40? ooo— 218

9422

•239

257

— 198128

-33

166

127

-447

121-348

-381

376

-252

-541

289

-18176

948

-18

-199

232— 295

641

127

10

243

261-325

316

217

395

196

199

"• 1 "6,787

461

6,326

4,462

487248

2763470

595

pr

5, 361

3. 265

424543

150100715

11351

1,426965

-960

-499

-126

-461-335-38

-544

-410

-339-88

50-102

69

-134

-171170

-133

-242

18

-244

— 109

93-27

-269

347

-205

-279

74

7,210

556

6,654

4,662

471173

32137

217

6339941

5,152

3. 385

366264

16080

720

12651

2,0581, 502

-1,137

-581

-138

— 556-401

— 42-956

588

-324-110

113-70

-368

— 55812961

325

50

O.'O

297

-77-98

227

-192

325

182

143

1958

I

6, 232

621

5,611

4, 058

384164

2883476

4629352

1, 941

3, 139

355234

14364

832

13242

1,291670

-1,184

-563

-133

-621-385-45

-887

-642

-155-338

21126

-44

245

— 254130

-121

210

13

127

76

-6370

580

200

730

574

156

II III

6, 646 6, 062

681! 455

5, 965 5, 607

4, 193 3, 816

441 434210 | 269

299' 30936 i 3687 i 40

535! 545103 i 102

61 i 56

5, 278 5, 388

3. 166 3. 121

448 431382 565

149| 16071 i 105

912! 839

12~i 13223- 32

1,368! 674687! 219

-1,279! -999

-598 -544

-131 -124

-6S1! -455-424; -370-43, -50

-1,251 -784

-1,025 -451

-411; -156-350; -99

19! 10-115! -91

168 115

-226: -333

112 109-186: -106

11 451

-15 -26

-121 8

53-1 353

94 1161, 075 483

1, 086 934

761 175

1, 322 1, 151

1, 107 966

215 185

IV |

6,666!

524!

6, 142!

4, 196!

413 :

182;

309 '3693

656119138

5,446

3. 522

402279

16165

829

14642

1,220696

-1,157

-633

-152

— 524-437-44

-893

726

-372- 168

35-242

21

-167

-43419374

554

52

17

345

140347

901

-71

1. 175

849

3261

* Less than $500,000.NOTE.—Quarterly details by areas for 1956 through 1958 may be obtained upon request to the Balance of Payments Division, Office of Business Economics. Data for 1958 and 1959 re-

vised. Comparable data for 19.55 and previous years may be found in "Balance of Payments—Statistical Supplement."For footnotes, see p. 16.

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

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

June !!) SURVEY OF CURRENT BUSINESS 15

Payments by Area[Millions of dollars]

1959

I

5, 92G

505

5,421

3, 802

386187

3003074

46810800

5,431

3, 597

409258

14369775

128

495-10

-1,132

-627

-141

— 505-437—49-470

-391

-267-192

21-120167

— 79

-289268-58

852

72

116

440

22495

947

160

1,075

872

203

II

6, 423

626

5,797

4, 000

425222

3003685

48812100

5, 967

3,884

472412

14571790

13459

456-170

-1,204

-578

-138

— 02(-393-47

-2,40S

-745

-449-J29

36-141— 62

— 1,663

-1,652116

-1272,050

19C

1, 702

101741

2, 791

365

2, 880

2, 593

287

III

6, 275

397

5,878

4, 035

429295

3013563

53611371

6, 200

3, 848

480617

163112773

13374

75-322

-931

-534

-131

-397-333— 70-620

— 392

-229

~-iH40

-228

-205147

-170

1,277

158

323

748

48167

1,444

32

1,395

1,278

117

IV

6,828

460

6, 368

4,328

409198

2983775

743125155

5,962

3, 986

423323

158

752

15496

866406

-1,123

-663

-153

-460— 460-50—536

-773

-365-128

25— 71-234

237

-247482

495

128

173

319

-12572

567

226

678

424

254

Western Europe

1956

Year

9, 039

1,866

7,173

5, 378

70466

4693548

28068125

6,573

2, 949

679461

320

1,702

28999

2,466600

-2,669

-803

—259

— 1,866—491-53-827

-777

—486

10-124-177

-50

-91288

-247

1, 053

357

-118

643

171-80

973

57

1.037

673

364

1957

Year

9, 728

1,542

8, 186

5, 965

82686

52140237

31176124

6,955

3, 094

722474

337

1,809

311121

2, 7731,231

-2, 192

-650

—276

1 542-317— 57-768

-396

—254—2520

-58-79

-372

-368218

706

310

37

137

222-68

638

-451

844

-123

967

1958

Year

8, 123

1,300

6,823

4, 668

68588

54545170

32594203

7, 334

3, 299

771538

37581

1,858

33478

789-511

-1,950

-650

-258

1 300-317

-452

-411

— 173

1959

Year

8,299

1,236

7,063

4, 718

73698

551

183

415101214

8,640

4, 518

892578

36981

1,674

359109

-341-1,577

-1,901

-665

-277

1 236-310-7856

-488

-476-121i -78

16— 71-02

-41

-236239-44

600

— 6

— 68

590

842, 326

2, 926

-1,313

3, 725

1,619

2,106

8— 78136

544

-1607051

1, 937

472

365

761

339829

2,766

-580

2,367

1,714

653

I

1,842

300

1,542

1, 038

16920

1421246

602431

1,901

1, 000

188

9221426

8631

-59-359

-491

-191

-68

—300-106-1718

-140

-172-15

2— 78123

158

-351952

363

54

74

-11

24638

401

131