SCB_091965

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

SEPTEMBER 1965 / VOLUME 45 NUMBER

CONTENTS

THE BUSINESS SITUATION

Summary 1

Plant and Equipment ProgramsSecond Half of 1965 3Manufacturers Expect Higher Sales and Inventories

in the Second Half of 1965 7National Income and Product Tables 9

ARTICLESThe Balance of International Payments

Second Quarter of 1965 11Foreign Investments, 1964-65 22

The Transactions Table of the 1958 Input-Output Studyand Bevised Direct and Total Requirements Data 33

Historical National Income and Product Tables 50

CURRENT BUSINESS STATISTICS

General S1-S24

Industry S24-S40

Subject Index (Inside Back Cover)

U.S. - : ' " '

John T. Connor / Secretary

Andrew F. Brimmer / Assistant Secre**tary/or Economic Affairs

'

George Jaszi / DirectorMorris R Goldman Louis J. Paradiso

Associate DirectorsMurray F* Foss / EditorLeo V. Barry, Jr. / Statistics EditorBilly Jo Hurley / Graphics

TO ,

Business Review and Features:Francis L. HirtDavid R. Hull, Jr*Genevieve B. WimsattMarie P* Hertzberg

Articles:Walter LedererEvelyn M, ParrisliSamuel PiuerFred Cutler

Julius N. FreidlinZalie V. WarnerPeter H. Zassen&aws

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OF

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? 3520$2030 Tliird Ave. N, Pis. 325-313,1.

Boston, Mass.*80 Federal St. CA 3-2312.

Buffalo* N.Y.,117 EUicott St. Ph. 842-32D8.

Ci3arlst, S.C., ' . '334 Meeting St. - '

, . Ph. 747-4171. ,Chaiicotcm, W. Ta9

500 Qtiamer St. Ph. 343-6196.

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Ph. 634-5920.

1486 New Federal Bidg.' Ph; 828-4400. ,Cincinnati, Ohio,

550 Main St.' Ph. 684-2944.. Cleveland, Ohio, 44101

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ss Iowa,1216 Paramount Bidg. 'Ph, 284-4222.

'Detroit, Mieh., 48226.445 Federal Bldg. Ph. 226-4088.

GreenslHWO, N.C., 27402412 U.SC Post Office Bldg.Ph. 275-9111,

Hartford, Conn., 0610318 Asylum St. Ph. 244-3530.

Henoliifc, Hawaii,202 International Savings Bldg,Ph. 588-977.

Houston, Tex., 77TO2 515 Rusk Ave. Ph. 228-0611.Jacksonville, F!a,,

208 Laura St. Ph. 354-7111.Kansas City, Mo., 64106

911 Walnut St. BA 1-7000. .' Los Aegeles, Calif.,

1031 S. Broadway Ph. 688-2833.

Mempfcis, Tenn.345 Federal Office Bldg.Ph. 534-3214." ' .

' Miami^ Flas '51 SW. First Ave. Ph. 350-5267, .Milwaukee, Wis.* '

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Federal Bldg. Ph. 334-2133,,New Oxieana, La9 70130610 South St.' , Ph. 527-6546, Nw okt N.Y,,'10001

Empire'State BWg. LO 3-3377. 'Ffailadelphia, Pa.,-19107

1015 Chestnut St. Ph.- 597-2850.Phoenix, Aric.,'85025 , '

230 N, Fkst Are. Ph. 261-3285.' Pittetargfe, Fa.^

1000liberty Ave. Ph. 644-2^50.

PocOand, Oreg., , '217 Old U.S. Cowrthottse -

Ph. 226-3361. , ;Reno, Nevi. 89502 ' -

300'Booth St. Ph, 784-5203. ,RichmonoVVflu,

210S Federal Bldg; Ph.649-3611.-'St.'Louis,-Mo., 63103,

-'2511 Federal Bldg. "MA 2-4243.Sai% take City* Utah, 84111

' 125 South State St. Ph.524r5116.Sam -Fifaneifleo, -' -

' 450 QoUen Gate Arei, Ph. 556-5864,Santa'vce. Fiierte Mtc, '

605 Condado ATC. -Hi. 723-4640.Sa-vannait* Giau, 314D2

" -235 U.Si 'Cowthowse' and P.O.B0g. 232-4321. ' ' .

Seattle,: Wash*, .9810* 809 Federal Office Bi

BUSINESS SITUATIONOUSINESS activity continued briskin August as employment and personalincome rose to new highs, industrialproduction increased a little, and retailsales held close to the July peak. Onthe basis of the third quarter record todate, total income and output for thesummer quarter should show anotherstrong advance, and fourth quarterprospects also appear favorable. Thesettlement of the steel negotiations inearly September has dispelled the un-certainty that business might be ad-versely affected by a strike. Withorders from steel users declining, thetemporary reduction in steel outputnow underway will be a moderatelydampening influence on the rise inoverall activity.

Rising plant and equipment expendi-tures have been stimulating total pro-duction so far this year and willcontinue to do so in the months ahead.According to the latest survey of plantand equipment expenditures, discussedin detail below, businessmen expect theircapital outlays to reach $53 billion inthe fourth quarter, a rise of more than$2}f billion from the second quarterrate. Activity is also being bolsteredby rising government orders and ex-penditures, especially for defense, whichare likely to grow larger in the nearfuture. Consumer demand continuesto advance with the rise in income,which is scheduled to receive a sharpboost in September from the lump-sumpayments of the retroactive increase insocial security benefits. The wage in-crease in the steel industry and a risein military pay will also add to the flowof income in September.

The wholesale price index has movedup slightly this summer, mainly as aresult of increases in processed foods.Prices of farm products, which rose

sharply earlier this year, have eased,and prices of industrial commoditieshave changed little in the past 2 monthsdespite the sustained rise in industrialactivity.

Personal income upPersonal income rose about $1 billion

in August to a seasonally adjusted

I CHART 1

Investment in New Plant and EquipmentWidespread increases expected throughout 1965Billion $70

60

50

40

30

20

1 TransportationI Public UtilitiesI Communications & Commercial

Manufacturing & Mining

1961 1962 1963

*Last two quarters are anticipated.

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

1964 1965*Quarterly

Seasonally Adjusted,at Annual Rates

annual rate of $531.6 billion. As inJuly, the increase was tempered by aa substantial drop in farm proprietors'income.

Wage and salary payments rose $1%billion over the month; about one-halfof the increase was in manufacturingpayrolls, and the remainder was dividedalmost equally among trade, services,and government. The payroll increasereflected in part higher employment:The preliminary employment total fornonfarm establishments was up 125,000after seasonal adjustment. Seasonallyadjusted rates of pay were also higherwhile average weekly hours of workwere little changed over the month.

Nonwage incomes, other than farmproprietors', were up a little from July;personal interest income and transferpayments showed further slight gains.For the second straight month, farmincome declined as prices received byfarmers continued to recede from thepeaks of late spring.

While total personal income appearsto have been advancing more slowly thissummer than in the first half of theyear, the picture is different if farm in-come is excluded. Nonagricultural in-come so far in the third quarter hasrisen about as much as it did on theaverage in the first half, as may be seenin the figures below. Data for themonth of August have been used torepresent the third quarter.

[Billion dollar increase in]

Data: OBE-SEC65-9-1

n-64 ni-64111-64 IV-64

IV-64 1-65

1-65 11-65 _ _ -

n-65 m-65

Total per-sonal income *

8.5

8.09.58.3

6.7

Nonagricul-tural personal

income 1

8.7

7.99.7

5.67.6

i Seasonally adjusted at annual rates.


SURVEY OF CURRENT BUSINESS

Teenage unemployment lowerTotal unemployment fell in August.

However, the labor force was also lower,and the overall rate of unemploymentremained at the July figure of 4% per-cent; in the first half of 1965, the rateaveraged 4.8 percent. Teenage employ-ment continued to improve last month,and the teenage unemployment ratedeclined for the fourth month in a row.Adjustment in steel underway

With the threat of a strike removedby the signing of a new labor contracton September 6, steel production is nowbeing reduced from the high rates thathave prevailed since late 1964, whenconsumers began to stockpile metal as ahedge against a work stoppage. Out-put declined in August, even before theagreement was reached, and continuedto move downward in early September.How long this adjustment in productionwill last and how far it will go dependon the rate of steel consumption and onthe desire of steel users to draw downtheir currently high inventories to amore normal position.

Steel consumption has been buoyantunder the influence of rising activity inmetal fabricating industries and non-residential construction. In the secondquarter of this year, for example, steelusage by manufacturing consumersaveraged a record 5.9 million tons amonth and was some 13 percent abovethe second quarter of 1964. Near-termprospects for steel consumption appearquite favorable in view of the expectedincreases in plant and equipment ex-penditures, the scheduled high rateof automobile production, and risingdefense outlays.

At present, steel stocks are high,both on an absolute basis and in relationto steel consumption. (See chart 2.)At the end of August, manufacturingconsumers held the equivalent of morethan 60 (working) days of steel suppliesin terms of the May-July average rateof consumption. A year earlier, beforethe inventory buildup started, manu-

Steel Stocks and ConsumptionStocks at record levels just beforesteel settlement

Million Tons40

Total?;

I CHART 2

36 i.;~*;;;

32 ;:

24 *

20Steel Brbd|ieers

Manufacturing Softsuffiers8 ;

0 irl 'U I I 1 1 I I U I H 1 1 LI 111,111 111 M i l I I l l ; ll,i;U M 11 KK:

Underlying trend of consumption still risingCONSUMPTIONI BY MANUFACTURERS

; :V (^ rnonth moving average) 2 , \ - > ;>

6 !>'''".: -;* V - " -V" ''", 'C . ' ' ' V - v - - ;" ' '

Relative to consumption, stocksexceed 1962 and 1963 peaks

Number of working days' supply80

; j MANUFACTURING CONSUMERS ; ; .-';; (3-mpnth moving average)2 .

60 ! - - ', ' < ' " ' : ' ' , ' ? , ' ' ' ':V

40;

20 I1961 1962 1963 1964 1965

1 Includes warehouses, excludes nonmanufacturing industries.

2 Centered on last month.

NOTE.Data are not adjusted for seasonal variation.Basic data: Census

U.S. Department of Commerce, Office of Business Economics 65-9-2

September 1965

facturing consumers held inventoriesequivalent to a supply of approximately40 days.

In the last two steel inventorycyclesin 1962 and 1963steel millscut their production back rather sharplyover a relatively short period of time.In 1962, over a 4-month period, steelproduction (seasonally adjusted) de-clined about 25 percent from peak totrough; in 1963, over a comparabletime span, the cutback was somewhatless. At the present time, a fairlysharp reduction over a period of a fewmonths appears to be a reasonableprospect.Auto output reflects changeover

In the auto industry, assembly lineoperations in August reflected the sum-mer slowdown for model changeoversand held car and truck completions to430,000 units; this was less than halfthe July assemblies but well abovethose of August 1964, when the transi-tion period began 2 weeks earlier thanthis year. With all assembly linesreaching full production of the 1966models by the end of September, theindustry plans to build about 500,000passenger cars this month and, accord-ing to present schedules as reported bytrade sources, 2.6 million in the fourthquarter. The October-December turn-out would be about equal to the recordvolume of the second quarter of 1965and 30 percent above last year's finalquarter, when work stoppages curtailedassemblies.

From now until the end of the year,a good part of auto output will moveinto dealer inventories, but it is notlikely that on a seasonally adjustedbasis total auto stocks will rise muchsince they have been maintained at ahigh level during most of the past modelyear. At the end of August, dealerstocks of new cars were almost 1.9 timesmonthly sales on a seasonally adjustedbasis-the highest ratio so far in 1965and moderately above August 1964.


September 1965 SURVEY OF CURRENT BUSINESS

Plant and Equipment ProgramsSecond Half of 1965

more than a year, so that the carryoveror backlog of uncompleted investmentprojects has been rising substantially.For manufacturers, the carryover-ex-penditure ratio in mid-1965 (measuredby the ratio of June carryover tosecond quarter seasonally adjusted ex-penditures) was the equivalent of 2.8

INVESTMENT by nonfarm businessfirms in new plant and equipment isscheduled to rise further during the re-mainder of 1965, according to reportsfiled during late July and August in theregular quarterly survey of plant andequipment programs. Capital expend-itures were at a record $50% billionseasonally adjusted annual rate in thesecond quarter, and are now expected,on the basis of businessmen's reports, torise to $51 billion in the third quarterand to $53 billion in the final quarter.

If these anticipations are realized,expenditures for new plant and equip-ment for the year as a whole would total$50.9 billion$6 billion more than theamount spent in 1964. The expectedincrease of almost 13% percent would bejust short of the 14% percent advancelast year and would represent more

Table 1.Percent Change in Plant andEquipment Expenditures; 1963-65

All industries i _ _Manufacturing _

Durable goods *Prim ary metalsMachineryTransportation

equipmentStone, clay, and

glassNondurable goods 1

Food and beverage- _TextilePaper___ChemicalPetroleum

MiningRailroadTransportation, other

than railPublic utilitiesCommunications. _ _Commercial and other. . _

Actual,1963-64

14.518.420.031.119.225.010.716.99.5

17.230.022.415.014.027.5

24.010.113.48.0

Actual 1964 to antici-pated 1965 as reported

in

Febru-ary

11.715.913.617.118.78.0

18.218.210.935.813.324.312.610.515.1

8.15.5

[ 9.6

May

12.317.215.514.018.621.319.418.94.4

31.022.223.817.610.815.7

11.27.3

8.2

August

13.417.816.315.620.9

. 25.412.919.310.033.821.225.413.89.8

15.1

17.37.6

9.9

than 4 successive years of substantialexpansion in capital outlays.1

The current survey reflects anotherupward revision in this year's capitalbudgets: Investment for 1965 is ex-pected to be 1 percent more thananticipated in May and 1% percentmore than reported in February. Du-rable goods manufacturers and com-munications, commercial, and nonrailtransportation companies accounted forthe enlargement of programs sinceMay.

Actual outlays during the secondquarter exceeded expectations by $%billion, and anticipations for the secondhalf of 1965 also have been raised alittle. These upward adjustments inprogramsa pattern evident since late1963reflect a gradual uptrend incosts which has raised final billingsover original estimates and a step-upin the volume of investment in re-sponse to the rise in sales and pro-duction.

The current survey reports werefiled shortly after the escalation ofmilitary operations in Vietnam. Theydo not fully reflect the direct or in-direct effects of the rise in the pro-curement of military supplies andequipment on capital goods demand.

Although the survey covers onlyanticipations through the fourth quarterof 1965, the current size of investmentbacklogs suggests that the high rate ofcapital goods outlays will carry intonext year. As chart 3 shows, starts ofnew plant and equipment projects bymanufacturers and public utility com-panies have exceeded expenditures for

1 Includes industries not shown separately.

Sources: U.S. Department of Commerce, Office of Busi-ness Economics, and Securities and Exchange Commission.

1 The reported figures for anticipations are adjusted for

systematic biases when necessary. (See footnote 2, table 5.)Before the application of adjustment factors, anticipatedexpenditures for the year 1965 were $51.5 billion for all in-dustries, $22.4 billion for manufacturing, and $29.1 billionfor nonmanufacturing. The net effect of the adjustments,which are applied separately to each industry, was to lowerthe manufacturing total $500 million and reduce the non-manufacturing total about $50 million.

ICHART 3

Plant and Equipment Expenditures,Carryover and Starts of ProjectsStarts of new projects continue to exceedexpenditures so that the carryover has beenrising steadily for more than a year

Billion $

15

10 ,. v,"

Sj^ ^4;lH^^\::^&f^'$^

BVI^

NOTE.Starts and Expenditures, quarterly totals.All data unadjusted for seasonal variation.

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

Data: OBE-SEC


SURVEY OF CURRENT BUSINESS September 1965

quarters, up from 1.9 quarters at theend of 1962.Increases are widespread

Manufacturers expect an increase ofmore than one-sixth in outlays for newplant and equipment this year; pro-ducers of nondurable goods anticipatea slightly larger rise than durable goodsfirms. Among the nonmanufacturinggroups, transportation companies areprojecting the largest advances in in-vestment15 percent above 1964 forthe railroads and 17 percent for othertransportation firms. The commercialand communications group and themining companies are both planning a10-percent rise in expenditures over lastyear; public utilities project an 8-per-cent increase, with both electric and gascompanies showing about the samerelative advance. (See table 1.)

Not all industries show a steady up-ward pattern of quarterly expendituresfor 1965. Fourth quarter plans, how-ever, appear exceptionally stronggenerally at record ratesfor mostindustries.Outlays up three-fifths from trough

The quarterly increases projected forthe rest of this year would mark 18*quarters of almost uninterrupted expan-sion in capital expenditures since theirmost recent low in the second quarter of1961. Over this period, total outlayswill have increased nearly 60 percent, or2.6 percent per quarter. Quarterly ratesof increase for individual industries areshown in the table below.

Quarterly Rate of Increase in Plant andEquipment Expenditures From RecessionLow in 1961 to Anticipated 4th Quarter1965

All industriesManufacturing _ _ _

Durable goods - _ _Nondurable goods

MiningEailroadTransportation, other than railPublic utilities _ _ _ _Communications, commercial, and other ... _

Percentper

quarter

2.63.03.62.5

1.84.93.0

1.12.5

The length of the current expansionin capital investment has already ex-ceeded by a considerable margin the 10

quarters of increase in 1955-57. Theaverage quarterly rate of increase wasgreater3.9 percentin the earlierperiod, but mainly because capitalgoods prices rose more rapidly. In realterms, the quarterly rates of advance inboth expansions have been about 2.5percent.

Manufacturers anticipate highoutlays

Both durable and nondurable goodsproducers are looking forward to recordexpenditures of $11K billion, at aseasonally adjusted annual rate, in thefourth quarter of 1965. Soft goodsmanufacturing firms are projectingsteady increases in the third and fourthquarters; durable goods companies nowexpect little change in expenditures inthe third quarter, but a substantial risein the fourth.

All major industries in the heavygoods group except motor vehiclesanticipate outlays in the second half of1965 to be above those of the first half.Motor vehicle producers expect thatexpenditures, after declining in thesecond and third quarters, will returnto the high rate of the first 3 months ofthis year.

Nondurable goods producers hadpreviously anticipated little change incapital spending in the fourth quarterbut now project a moderate rise. Mostmajor industries in the group haveraised their investments sights for late1965. However, expenditures by boththe chemical industry and the food andbeverage industry will probably be alittle lower in the second half than inthe first.

Manufacturers9 carryover continuesto rise

New investment projects beingundertaken by manufacturers continueto exceed progress on projects alreadyunderway. Thus, carryover or expendi-tures yet to be made on projects alreadycommitted has been rising: From theend of March to the end of June, itincreased $1.1 billion. This broughtthe carryover at the end of June to$15.8 billion, $4% billion above thefigure a year ago; all major industriescontributed to the rise. Heavy goodsproducers accounted for $2% billion of

the increase over the year, with thenondurables up $1% billion. Duringthe second quarter, durable goodsproducers increased their carryover ofinvestment projects to $8.7 billion, a$% billion rise, which centered in theiron and steel and the motor vehicleindustries.

The value of new projects startedduring a quarter may be estimated byadding the change in the value ofcarryover to expenditures made duringthe quarter. During the second quar-ter, starts of new projects totaled$6^ billion, just under the record totalin the first quarter of this year but one-fifth higher than a year earlier. Starts

I CHART 4

Investment in New Plant and Equipment 1965 programs have been generally

revised upward since May Expenditures now expected to be

131/2 percent above 1964

Percent Increase10 20

; NondurableGoods

TransportationExcLRafl

Durable , ;.'Goods ,/ -,Nlfg; ,

Railroads,

ALLINDUSTRIES

^Communications& Commercial

Mining

PublicUtilities



September 1965 SUEVEY OF CUEEENT BUSINESSby durable goods companies edged offfrom the first quarter rate, while thosefor nondurables rose slightly.2

Manufacturers9 evaluation ofcapacity

Since early 1964, each manufacturingcompany cooperating in the quarterlyplant and equipment surveys has beenasked: "Taking into account your com-pany's current and prospective sales,how would you characterize your plantand equipment facilitiesmore plantand equipment needed; about adequate;or existing plant and equipment exceedsneeds?"3 The most recent shifts inthe three categories of answers point tosome increase in pressures on capacity,a development that is consistent withthe expansion in current investmentprograms.

According to the current survey,companies owning 47 percent of totalfixed assets in manufacturing reportedthat their facilities on June 30, 1965,were inadequate for near-term needs.At the end of March, the correspondingfigure was 42 percent, and at the end ofJune 1964, 38 percent. The increase of9 percentage points from June to Junemay be compared with a 6-point spreadfrom March to March.

The proportion of assets held byfirms reporting facilities in excess ofprospective needs was only 6 percenton June 30. This proportion hasremained relatively unchanged sinceearly 1964. Facilities regarded as "ade-quate" represented 47 percent of manu-facturing assets in mid-1965downfrom 56 percent a year ago.

Over the year ending in June, allmajor manufacturing industries re-ported a rise in the proportion of assetsconsidered "inadequate," and the in-creases were greater than those evidentin the March-to-March comparisons.

Declines in the proportion of assetsconsidered in excess of needs weregeneral among the durable goods in-dustries from June 1964 to June 1965.However, the proportion increased for

many of the nondurable goodsproducers.Commercial outlays revised upward

Expenditures for new plant andequipment by the commercial and com-munications group in the second quarterof this year were higher than anticipated3 months earlier. This group has alsosubstantially increased its anticipationsfor the third and fourth quarters.

Companies in retail and wholesaletrade, services, and communicationshave strengthened their investmentplans considerably. All are projectinghigher expenditures in the second thanin the first half of 1965.Other nonmanufacturing programs

Transportation companies7 expendi-tures for new plant and equipment are

expected to rise a little more this yearthan the average for business firms ingeneral. For the railroads, the ex-pansion in this year's outlays, althoughlarge, is a little more than half the sharprates of gain since 1962. The extensiveequipment acquisition programs em-barked upon by railroads 3 years ago totake advantage of the improvement infreight-carrying technology and tobetter their competitive positions vis-a-vis airlines and trucking companiesare now maturing.

During the second half of 1965, capi-tal outlays by railroads will be at aslightly lower rate than they were dur-ing the first 6 months. This slowdownreflects primarily a reduction in expend-itures for equipment, which constitute

Table 2.Carryover of Plant and Equipment Projects, Manufacturing and Public Utilities1(Billions of dollars)

Manufacturing.Durable goods 2

Primary metals _.Electrical MachineryMachinery excluding

electricalTransportation equip-

ment-Stone, clay, and glass

Nondurable goods 2

Food and beverageTextile. _ _PaperChemicalPetroleum. _ _ _ _

Public Utilities

1962'

Dec.

7.21

3.991.66.3325

.87

.313.23

.34

.17

.361.031.025.07

March

8.614.841.97.37

561.10.32

3.78.42.16.52

1.011.326.13

19

June

9.00

5.152.08.3648

1.40.30

3.85.41.15.56

1.011.406.40

63

Sept.

9.185 252.27.33

401.37.32

3.94

.36

.1461

1.111.41

5.58

Dec.

9.085.052.23.32

31

1.36.29

4.03

.41

.20

.591.031.505.46

March

10.385.612.30.33

531.48.33

4.78.42.26.61

1.261.906.62

19

June

11.265.952.56.3748

1.63.38

5.31

.40

.28

.781.392.106.53

64

Sept.

11.886.212.59.41

41

1.86.39

5.68.40.28.77

1.612.236.09

Dec.

12.636.622.74.41

43

2.02.40

6.01.54.29.77

1.592.435.65

19

March

14.73

7.983.05.51.85

2.31.52

6.75.60.37.88

1.742.627.64

65

June

15.828.723.34.43

77

2.85.53

7.10

.63

.46

.961.862.72

7.67

1. Carryover refers to expenditures yet to be incurred on plant and equipment projects already underway.2. Includes industries not shown separately.Sources: U.S. Department of Commerce, Office of Business Economics, and Securities and Exchange Commission.

Table 3.Starts of New Plant and Equipment Projects, Manufacturing and PublicUtilities1

(Billions of dollars)

2 Based on unadjusted data; starts are not now available

for a period long enough to permit the elimination of seasonalvariations.

3 For a discussion of the nature and limitations of the

inquiry, as well as methodological procedures, see the April1965 SURVEY.

Manfacturing _ _Durable goods 2

Primary metals_ _Electrical machineryMachinery excluding electricalTransportation equipmentStone, clay, and glass

Nondurable go ods 2__ _ __ _ _Food and beverageTextile ..PaperChemicalPetroleum

Public Utilities

Annual

1963

17.568.912.22.68

1.312.09.59

8.641.04.68.95

1.611.26

6.04

1964

22.17

10.992.68.76

1.762.66.79

11.171.19.84

1.112.524.296.41

1963

I

4.682.47.63.20.59.55.14

2.20.30.14.30.34.89

2.10

II

4.302.27.51.17.22.70.14

2.03.25.17.21.39.78

1.67

III

4.13

2.06.64.14.21.39.17

2.07.20.14.24.49.77

.78

IV

4.42

2.12.46.18.30.45.14

2.30.29.23.20.38.96

1.48

1964

I

5.102.48.50.16.55.49.19

2.61.26.20.19.59

1.10

2.34

II

5.412.65.77.20.36.63.22

2.76.24.19.40.60

1.03

1.48

III

5.292.63.58.20.34.77.18

2.68.27.19.23.72.97

1.27

IV

6.373.24.84.20.52.78.20

3.13.42.26.29.61

1.18

1.32

1965

I

6.643.62.80.25.83.81.28

3.02.32.28.34.71.98

3.30

II

6.563.51.89.12.43

1.21.21

3.06.35.32.34.76

1.03

1.75

1. Starts are estimated by adding changes in carryover to expenditures during the given psriod.2. Includes industries not shown separately.Sources: U.S. Department of Commerce, Office of Business Economics, and Securities and Exchange Commission.


6 SUEVEY OF CTJBKENT BUSINESS September 1965more than 80 percent of total outlaysby railroads; spending on roadbed isexpected to rise throughout 1965.

Airlines and trucking firms accountfor most of the substantial upward

revision in programs, for this year re-ported by the nonrail transportationgroup. Both groups are now antici-pating a strong upward trend in outlaysthroughout 1965.

Expenditures by public utilities havebeen expanding only moderately inrecent years and are just approachingthe record outlay of 1957. This year,electrical utilities are making large ex-

Table 4.Manufacturers' Evaluation of Their Capacity[Percent distribution of gross capital assets]1

AH manufacturing __ _

Durable goods 2Primary metals _Metal fabricators 3

Nondurable goods 2Food and beverageChemical _ _ _Petroleum

Mar. 31, 1964

Moreplantand

equip-ment

needed

3636453135296923

Aboutade-

quate

5853336362643077

Exist-ing

plantand

equip-ment

exceedsneeds

611226371

(4)

June 30, 1964

Moreplantand

equip-ment

needed

38

36453040327723

Aboutade-

quate

5655396457582277

Exist-ing

plantand

equip-ment

exceedsneeds

69

1663

101

(4)

Sept. 30, 1964

Moreplantand

equip-ment

needed

3936433241347724

Aboutade-

quate

5656426456562276

Exist-ing

plantand

equip-ment

exceedsneeds

58

154

3101

(4)

Dec. 31, 1964

Moreplantand

equip-ment

needed

43414441

46397928

Aboutade-

quate

5151425451502072

Exist-ing

plantand

equip-ment

exceedsneeds

68

1453

111

(4)

Mar. 31, 1965

Moreplantand

equip-ment

needed

42

42483943377924

Aboutade-

quate

5250385654542076

Exist-ing

plantand

equip-ment

exceedsneeds

68

145391

(4)

June 30, 1965

Moreplantand

equip-ment

needed

4749535145408324

Aboutade-

quate

47

44324650501670

Exist-ing

plantand

equip-ment

exceedsneeds

67

1535

1016

1. According to respondent companies' characterizations of their plant and equipment facilities, taking into account their current and prospective sales for the next 12 months.2. Includes industries not shown separately.3. Includes machinery, transportation equipment, and fabricated metals industries.4. Less than 0.5 percent.Sources: U.S. Department of Commerce, Office of Business Economics, and Securities and Exchange Commission.

Table 5.Expenditures for New Plant and Equipment by U.S. Business,1 1963-65[Billions of dollars]

All industriesManufacturing industries

Durable goods industriesPrimary iron and steelPrimary nonferrous metalElectrical machinery and equip-

mentMachinery, except electricalMotor vehicles and partsTransportation equipment, ex-

cluding motor vehiclesStone, clay and glassOther durable goods 3

Nondurable goods industriesFood and beverageTextile .PaperChemical _ _PetroleumRubber. _._iOther nondurable goods 4

Mining _ _

RailroadTransportation, other than rail__ _

Public utilitiesCommunication

Commercial and other s

Annual

1963

39.2215.697.851.24.41

.691.241.06.53.61

2.057.84.97.64.72

1.612.92.24.73

1.041.101.92

5.653.79

10.03

1964

44.9018.589.431.69.48.66

1.641.51.48.68

2.289.161.06.76.94

1.973.36.27.80

1.191.41

2.386.22

4.30

10.83

19652

50.9221.88

10.961.88.63.80

1.991.98.52.76

2.3910.92.1.171.011.132.473.83.35.97

1.31

1.622.79

6.69

[l6.63

Quarterly, unadjusted

1963

I

8.253.271.62.23.09.15.27.19.12.13.44

1.65.22.15.14.36

59.05.15.24

.21

.391.04

.852.26

II

9.743.921.96.30.10.18.30.28.13.16.51

1.95.26.18.18.4070

.06

.19

.26

.28

.541.40

.952.41

III

10.14

3.951.96.33.12

.16

.28

.29

.13

.15

.511.99.25.15.19.39

76.07.18

.27

.29

.451.60

.932.64

IV

11.094.562.31.39.11

.20

.39

.30

.16

.17

.602.25.24.17.21.4787

.07

.22

.28

.33

.541.61

1.062.72

1964

I

9.403.791.93.34.09.1433

.25

.11

.14

.511.87.24.14.18.3770

.06

.18

.26

.32

.511.18

.972.37

II

11.11

4.532.30.40.11.16.40.37.12.17.58

2.23.27.18.22.4784

.06

.20

.29

.36

.631.581.10

2.61

III

11.544.672.37.42.13.16.40.43.11.17.56

2.30.27.20.24.5084

.07

.19

.30

.37

.591.71

1.062.84

IV

12.84

5.592.83.54.15.20.51.47.14.19.62

2.76.28.25.30.6399

.08

.23

.33

.35

.641.761.17

3.01

1965

I

10.794.542.25.36.14

.15

.41

.43

.10

.16

.512.28.25.20.22.55

79.07.19.29.39

.581.32

1.08

2.59

II

12.815.472.76.44.15.20.51.53.13.20.60

2.70.32.22.26.6492

.09

.24

.33

.44

.77

1.71

1.24

2.85

III 2

13.02

5.482.71.48.16.20.48.48.13.19.59

2.77.30.27.31.5898

.09

.24

.33

.40

.701.82

4.30

IV 2

14.30

6.403.24.60.18.24.60.55.16.21.70

3.17.,29.32.33.70

1 14.10.30

.35

.39

.73

1.84

4.58

Quarterly, seasonally adjusted at annual rates

1963

I

36.9514.857.351.05.40.75

1.20.90.50

7.50.95.65.65

1.602 80

1.05.90

1.705.203.559.65

II

38.0515.307.651.15.40.75

1.151.05.55

7.65.95.65.70

1.552.80

1.001.00

2.055.453.659.65

III

40.0015.958.001.30.45.65

1.201.10.50

8.001.00.60.75

1.603.00

1.051.20

1.855.903.85

10.20

IV

41.2016 458.301.40.40.65

1.401.10.55

8.15.95.65.80

1.653.05

1.051.352.10

5.804.05

10.45

1964

I

42.5517.40

8.851.60.40.70

1.451.25.50

8.551.05.60.80

1.653.30

1.151.40

2.30

5.954.05

10.25

II

43.5017.80

9.001.60.45.65

1.551.35.45

8.801.00.65.90

1.803.35

1.151.252.256.304.30

10.45

III

45.6518.859.601.65.50.65

1.751.65.45

9.201.10.80.95

2.053.30

1.20

1.502.40

6.304.40

11.00

IV

47.7520.1510.151.90.55.70

1.801.80.50

10.001.10

95L052.253.50

1.30

1.552.606.354.40

11.40

1965

I

49.0020.7510.401.70.60.70

1.802.10.45

10.401.10.85

1.052.503.70

1.251.752.556.804.55

11.30

II

50.3521.5510.801.80.60.80

2.001.95.55

10.701.20.85

1.052.503.75

1.30

1.552.70

6.854.80

11.60

III 2

51.1522.0010.901.90.60.85

2.051.80.55

11.051.201.101.202.403.80

1.30

1.552.906.55

16. 90

IV 2

52.9523.00

11.602.10.65.80

2.102.10.55

11.401.151.151.152.504.00

1.351.653.006.65

17.25

1. Data exclude expenditures of agricultural business and outlays charged to currentaccounts.

2. Estimates are based on anticipated capital expenditures reported by business in August1965. The estimates for the 3rd quarter and 4th quarter of 1965 have been adjusted whennecessary for systematic tendencies in anticipatory data. The adjustment for each industryand time period is based on the median ratio of actual to anticipated expenditures for thepast 5 years. However, no adjustment is made unless the anticipations have shown a biasin the same direction in at least 4 of the last 5 years and in at least two-thirds of all years since1954.

3. Includes fabricated metal, lumber, furniture, instrument, ordnance, and miscellaneousindustries.

4. Includes apparel, tobacco, leather, and printing-publishing.5. Includes trade, service, finance, and construction.NOTE : Details may not add to totals due to rounding. rData for earlier years were published

in the June 1956, March 1958,1960,1961,1962,1963, and 1964 issues of the SURVEY OF CURRENTBUSINESS.

Sources: U.S. Department of Commerce, Office of Business Economics, and Securitiesand Exchange Commission.


September 1965 SURVEY OF CUEKENT BUSINESS

penditures for long-distance power-transmission facilities that will help toequalize load factors. For 1965, pro-grams are being held close to thoseannounced at the beginning of the year.

At the end of June, expenditures yetto be made on uncompleted projects

by the public utilities amounted to $7.7billion, $1.1 billion higher than a yearearlier. Starts of new projects duringthe second quarter totaled $1.7 billion,well below first quarter starts butslightly more than the rate in the secondquarter of 1964.

Manufacturers Expeet Higher Sales and Inventoriesin the Second Half of 1965

MANUFACTURERS anticipate a fur-ther improvement in business for therest of this year and continued accu-mulation of inventories. Factory salesare expected to advance 2 percent inthe third quarter and 1 % percent in thefourth, according to the regularquarterly survey conducted in lateJuly and August by the U.S. Depart-ment of Commerce. Manufacturersexpect their inventory book values toincrease $800 million in the thirdquarter and an additional $500 millionin the fourth. If these expectationsare realized, stocks would remain at1.6 months of sales, a ratio that has

persisted with comparatively little vari-ation for 2 years.

Most manufacturers continue to viewtheir inventory position as satisfactory.On June 30, manufacturers holding 80percent of total factory stocks regardedtheir inventories as "about right" rela-tive to sales and unfilled orders, whilethose holding 16 percent of stocksviewed them as "high"the same ratioas in March and about the averagesince 1960. The "low" category was anegligible 4 percent.Sales advance to continue

Manufacturers7 sales were at a record$120 billion in the second quarter of

Table 1. Manufacturers' Inventories and Sales: Actual and Anticipated[Billions of dollars]

Inventories, end of quarterUnadjusted

All manufacturing _ _DurablesNondurables

Seasonally adjustedAll manufacturing _ ___

DurablesNondurables

Sales, total for quarterUnadjusted

All manufacturingDurablesNondurables- __

Seasonally adjustedAll manufacturing

DurablesNondurables

I

58.434 923.5

58.134.623.5

101 051.949.1

101.952.649 3

19

II

59.035 523.5

58.735 223.6

107 057 050.0

104 454.250 1

63

III

58.835 423.5

59.135 523.6

102 552 250.4

105 054.850 2

IV

59.735 624.2

60.136.024.1

106 855 851.0

106.255.350.9

I

60,736 424.3

60.336.124.2

108 056 351.7

109 157.152 1

19

II

60.736 823.9

60.436.523.9

114 260 653.6

111.157.553 6

64

III

60.736 923.8

61.037.024.0

109 655.454.3

112.458.354.1

IV

62.638 024.6

62.938.424.5

113 758.655.2

113.658.555.2

I

64.139 324.8

63.739 024.7

117 061.555.5

117.962.155.8

19

II

65.040 324.7

64.640 024 7

123 365 457.9

119 862. 157 7

65

IIIi

65.140 424 7

65.540,624.9

119 460.359.1

122.463.558 9

IV i

65 640 325 3

66.040 825.2

124 564 360.2

124.163.960 2

1965, after allowance for seasonal vari-ation. Expectations are for sales to in-crease to $122K billion in the thirdquarter of this year and then to $124billion in the fourth quarter. Thus,sales in the second half would be 4percent above those of the first half;the expected rate for the fourth quarterwould be nearly one-tenth above thecorresponding 1964 period in bothdurable and nondurable goods. Theseexpectations are in line with the recentrecord rates of new orders and therising trend in unfilled orders.

Durable goods producers are pro-jecting a 2-percent sales rise in thethird quarter and an advance of lessthan 1 percent in the fourth. Therewas little change in sales from the firstto the second quarter, after a 6 percentrise in the first quarter, which reflectedthe recovery of the automobile industryfrom the late 1964 strikes.

The slowing in the projected rate ofadvance in the fourth quarter of 1965is due primarily to the anticipations of

Table 2.Manufacturers' Evaluation of theCondition of Their Inventories l

[Percent distribution]

3ord

I960Mar. 31June 30Sept. 30Dec. 31

Mar. 31June 30 _.Sept. 30

IV * Dec. 311962

Mar. 31June 30Sept 30

65 6 Dec. 31 _40.325. 3 1963

Mar. 31June 30

66 0 Sept. 3040 8 Dec. 31___25.2

1964

Mar. 31June 30__Sept 30

124 5 Dec. 3164.360. 2 1965

Mar 31June 30 _ __

124. 1

Total

826292424

18141010

14141514

15151713

16131413

1616

H& C

^

72697575

81858888

84848384

82838185

82848284

8180

I

2211

1122

2222

3222

2343

34

Durables

-as

33343027

20151110

19171817

17181914

17161515

2020

tj.H>& c

8metal producers for shipments to slipsomewhat from their current recordrates. These expectations were re-ported prior to the step-up in theplacement of military orders to supportthe Vietnam operations.

Nondurable goods manufacturers asa group anticipate a continuation of theuptrend in sales which has prevailedthis year. Successive 2-percent gainsare projected for the third and fourth

SURVEY OF CURRENT BUSINESS

quarters. All the major nondurablegoods industries are expecting sales torise through the remainder of the year.

Further inventory rise expected

By yearend, the book value of manu-facturers' inventories is expected toreach a new high of $66 billion, season-ally adjusted, $3.1 billion higher than ayear earlier. Additions to inventoriesare projected at $1% billion for the

Manufacturers' Inventory and Sales Expectations, Second Half 1965and Position of Inventories, June 30,1965Inventory and sales rise to continue with slowingof inventory accumulation in fourth quarter

i CHART 5

Billion $2.0

1.5

1.0

DURABLE GOODS MANUFACTURERS Billion $ Billion $65 2.0

1.5

NONDURABLE GOODS MANUFACTURERSBillion $

65

60

55

45

40 -.5

50

Inventory Change -(left scale)

40

-i.o I I I t I II960 61 62 63 64 65*

Seasonally Adjusted

Percent of Inventories100

-1.0 I I I I I I1960 6.1 62 63 64 65*

Seasonally Adjusted

INVENTORY POSITION(End of Quarter)

About Right

80

60

40

20

1960 61 62 63 64 65

* 3d and 4th quarters are anticipated.U.S. Department of Commerce, Office of Business Economics

Percent of Inventories100

About Right

80

60

40

20

1960 61 62 63 64 65

September 1965

second half of this yeara moremoderate advance than in either of thetwo preceding half years. During thethird quarter, accumulation is expectedto be $800 million, about the same as itwas in the second quarter. A rate ofonly $500 million is projected for thefourth quarter.

Durable goods producers expect toadd $600 million to their stocks in thethird quarter of 1965 and $200 millionin the last quarter. The projected in-crease for the last two quarters com-bined would be about half as large asthe accumulation during the first 6months of 1965 and considerably belowthe inventory rise during the secondhalf of 1964.

Steel stockpiling has, of course, beena major factor in inventory additionssince the fourth quarter of 1964. Somefurther steel stockpiling is expected inthe third quarter. Fourth quarter an-ticipations point to the smallest increasein durable goods stocks in almost 2years and probably reflect some ex-pected liquidation of steel. The inven-tory policies of steel consumers, re-ported in this Survey in late July andAugust, are very likely being reviewednow that a labor settlement has beenreached in the steel industry.

Durable goods producers as a groupestimate that the book value of theirinventories will total almost $41 billionat yearend. This would be equivalentto 1.9 months of expected shipments,a ratio that has prevailed without muchchange since late 1962. In individualindustries, some changes in stock-salesratios have been evident. For example,in recent quarters, a small decline inthe ratio for primary metals producershas offset a rise in the ratio for metalfabricators.

The outlook of nondurable goodsproducers is somewhat different fromthat of the durable goods group. Softgoods manufacturers are expecting in-creases of $200 million and $300 millionfor the remaining quarters of the year.Stocks held by these producers wererelatively stable in the first half of 1965.

Nondurable goods producers expectthe book value of their inventories toreach $25 billion by the end of theyeara record high. In recent years,the expansion in sales of these industries


September 1965 SURVEY OF CURRENT BUSINESS 9

has more than kept pace with inventoryincreases so that the stock-sales ratiohas gradually declined, reaching 1.3in mid-1965. The realization of currentsales and inventory expectations wouldmaintain this ratio.Current inventory condition

At midyear, durable goods manu-facturers found their inventory posi-tions, viewed in terms of their sales andunfilled orders, about the same as inMarch but somewhat different froma year ago. As of June 30, 20 percentof heavy goods inventories were classi-

fied as "high," 77 percent as "aboutright," and 3 percent as "low." InJune 1964, the "high" proportion was16 percent.

The metal-using industriesfabri-cated metals, machinery, and trans-portation equipmentreported a minordecline in the proportion of their in-ventories considered "high" from theend of March to the end of June, butthere has been a rise in this propor-tionfrom 18 to 23 percentover theyear. Metal producers have reportedonly small changes over the quarter

and over the year in the proportion ofstocks viewed as "high," but the direc-tion of change has been upward.

Nondurable goods producers havecharacteristically reported a smallerproportion of inventories as "high"than have durable goods manufacturers.For the soft goods group, 10 percent ofinventories were considered "high," 85percent "about right," and 5 percent"low," as of June 30. These figureswere not markedly different fromMarch 1965 or June 1964.

NATIONAL INCOME AND PRODUCTTABLES

Revised historical data for tables .2, 3, and 5 appearon pages 50-55. Revised historical data for the othertables shown here were published in last month'sSURVEY.

Table 1.National Income by Type of Income[Billions of dollars]

National incomeCompensation of employees

Wages and salariesPrivateMilitaryGovernment civilian

Supplements to wages andsalaries

Employer contributionsfor social insurance.- _

O ther labor incomeEmployer contributions

to private pension andwelfare funds ^

OtherProprietors' income

Business and professionalIncome of unincorporated

enterprises ..Inventory valuation ad-justment __ _

Farm _

Rental Income of persons......Corporate profits and inven-

tory valuation adjustmentProfits before tax

Profits tax liabilityProfits after tax

Dividends ,.__Undistributed profits

Inventory valuation adjust-ment

Net Interest .

1963

481.1341.0

311.2251.610.848.8

29.8

15.014.8

12.12.7

50.837.8

37.8.0

13.0

17.6

58.158.626.032.615.816.8

-.4

13.6

1964

514.4365.3333.5269.211.752.6

31.8

15.416.5

13.52.9

51.139.1

39.1.0

12.0

18.2

64.564.827.637.217.219.9

-.315.2

1964

I II III IV

1965

I II

Seasonally adjusted at annual rates

501.6355.1324.2261.611.651.0

30.8

15.115.8

50.438.5

11.917.9

63.664.027.336.716.720.0

-.4

14.5

510.5361.9330.4266.911.651.9

31.5

15.216.3

51.039.0

12.0

18.1

64.564.527.537.017.119.9

.015.0

519.5369.0336.8271.711.753.3

32.2

15.516.7

51.439.4

12.0

18.3

65.565.327.837.517.420.1

.2

15.4

526.3375.4342.6276.511.954.3

32.7

15.717.1

51.839.6

12.2

18.5

64.965.928.137.817.720.0

-1.0

15.7

541.4383.1349.8282.911.855.0

33.4

16.117.3

51.939.9

12.0

18.5

71.7

73.129.144.017.826.2

-1.4

16.1

550.3388.7355.0287.311.855.9

33.8

16.317.5

54.640.1

14.518.6

72.073.729.444.418.226.1

-1.7

16.4

Table 2. Corporate Gross Product 1

[Billions of dollars]

Corporate gross product.Capital consumption allow-

ancesIndirect business taxes plus

transfer payments less sub-sidies

Income originating in corpo-rate businessCompensation of employees-

Wages and salariesSupplements

Net interest. _Corporate profits and inven-

tory valuation adjustment.Profits befor tax

Profits tax liability.Profits after tax. _

DividendsUndistributed profits-

Inventory valuation ad-justmentGross product originat-

ing in financial insti-tutions

Gross product originat-ing in nonfinancialcorporations

Capital consumption allow-Indirect business taxes plus

transfer payments less sub-sidies

Income originating in nonfi-nancial corporationsCompensation of employees _

Wages and salariesSupplements

Net interest- --Corporate profits and inven-

tory valuation adjustment.Profits before tax

Profits tax liabilityProfits aftftr tax

Dividends ...Undistributed profits-

Inventory valuation ad-justmentAddenda:Cash flow, gross of dividends:

All corporationsNonfinancial corporations. _.

Cash flow, net of dividends:All corporationsNonfinancial corporations. _ _

1963

334.2

32.0

32.8269.4216. 3194.921.4

-2.555.656.026.030.014.815.2-.4

14.3

319.8

31.2

31.4

257.3204.4184.519.94.8

48.148.522.625.913.812.2

-.4

62.057.147.243.3

1964

358. 6

34.0

34.8289.8231.2208.522.7

-2.861.461.727.634.116.018.1-.3

15.3

343.3

33.1

33.3276.8218.4197.321.15.0

53.453.723.630.014.715.3-.3

68.063.252.148.5

1964

I II III IV

1965

I II


349.3

33.2

33.8282.3224.6202.622.0

-2.760.460.827.333. 515.418.1-.4

14.5

334.8

32.4

32.3270.0212.2191.820.54.8

53.053.323.629.814.315.5-.4

66.762.2

51.347.9

355.8

33.6

34.5287.7229.1206.622.5

-2.861.461.427.533.815.818.0

.0

15.0

340.9

32.8

33.0275.0216.5195.520.95.0

53.553.523.629.914.615.3

.0

67.562.751.648.1

362.5

34.3

35.3293.0233.6210.623.0

-2.962.362.127.834.316.118.2

.2

15.7

346.8

33.4

33.7279.6220.6199.221.45.1

53.953.723.630.114.815.3

.2

68.663.552. 548.7

367.0

34.8

35.6296.6237.7214.223.5

-3.061.962.928.134.816.518.3

-1.0

15.9

351.0

33.9

34.0283.1224.4202.621.85.3

53.554.423.930.615.215.4

-1.0

69.664. 553.149.3

380.5

35.4

36.4308.6243.5219.623.9

-3.068.169.529.140.416.424.0

-1.4

15.9

364.6

34.6

34.8295.2230.0207.822.25.3

59.861.225.735.515.020.5

-1.4

75.970.159.555.1

384.4

35.8

36.5312.2247.0222.824.2-3.168.270.029.440.616.723.9

-1.7

16.5

367.9

34.9

34.9298.1233.3210. 822.55.4

59.461.125.735.415.320.1

-1.7

76.470.3

59.755.0

1 Excludes gross product originating in the rest of the world.

17 84-836 0^652


10 SUKVEY OF CUREENT BUSINESS September 1965Table 3.National Income by Industry Division


All industries, totalAgriculture, forestry, and

fisheriesMining and construction, _ _ _Manufacturing

Nondurable goods. . _ _Durable goods

Transportation _Communication.. _. _Electric, gas, and sanitary

services _ _Wholesale and retail tradeFinance, insurance, and real

estate ._ _ _ _ _ServicesGovernment and government

enterprisesRest of the world

1963

481.1

18.630.1

143. 857.786.119.99.8

10.273.353.254.164.83.3

1964

514.4

17.632.4

154.761.992.821.010.610.878.157.058.070.04.1

1964

I II III IV

1965

I II


501.6

17.431.5

150.760.090.820.710.310.576.455.156.568.24.2

510.5

17.732.1

153.661.592.120.810.7

10.877.7

56.457.569.24.1

519.5

17.632.4

156.562.194.421.310.7

11.078.957.958.470.84.1

526.3

17.733.5

158.163.394.821.410.811.179.558.859.571.93.9

541.4

17.434.0

167.265.7

101.521.911.011.282.059.260.272.74.6

550.3

20.234.3

168.165.8

102.222.511.011.582.7

60.361.173.74.8

Table 6.Relation of Gross National Product, National Income,and Personal Income


Table 4.Sources and Uses of Gross Saving[Billions of dollars]

Gross private saving. _Persona] savingUndistributed corporate

profits. . .- .- -. ._ .Corporate inventory valua-

tion adjustment.. ..Corporate capital consump-

tion allowances -.Noncorporate capital con-

sumption allowancesWage accruals less disburse-

ments

Government surplus on in-come and product account .

FederalState and local. _ __

Gross investmentGross private domestic in-

vestmentNet foreign investment

Statistical discrepancy

1963

89.520.4

16.8-.4

32.0

20.8.0

1.2

.3

.9

90.0

86.93.2-.7

1964

101.7

26.319.9-.3

34.021.7

.0

-2.4

-3.81.4

98.7

92.95.8-.5

1964

I II III IV

1965

I II


97.523.3

20.0-.4

33.221.4

.0

-1.6-2.6

1.0

95.9

89.76.1.0

102.427.3

19.9.0

33.621.6

.0

-6.4-7.6

1.2

95.7

90.94.8-.3

101.525.020.1

.2

34.3

21.8.1

-2.1

-3.61.5

98.7

92.66.1-.7

105.329.520.0

-1.0

34.822.1-.1

.8

-1.11.9

103.9

97.76.2

-2.2

106.3

23.826.2

-1.4

35.4

22.3

.0

3.92.51.4

106.0

102.43.6

-4.2

105.723.0

26.1-1.7

35.822.5

.0

4.7

2.81.8

105.8

101.14.7

-4.6

Table 5.Corporate Profits (Before Tax) and Inventory ValuationAdjustment, by Broad Industry Groups

[Billions of dollars!

All industries, totalFinancial institutions

MutualStock

Nonfinancial corpojations-Manufacturing

Nondurable goodsDurable goods _ _

Transportation, communi-cation, and public utilities-

All other industries

1963

58.17.51 65.9

50.628.713.215.49.2

12.7

1964

64.58.01 76.3

56.532.114.917.2

10.014.3

1964

I II III IV

1965

I II


63.6

7.5

56.231.914.417.59.9

14.5

64.57.8

56.732.115.017.1

10.114.5

65.58.4

57.032.515.017.510.214.4

64.9

8.5

56.432.315.317.1

10.114.0

71.7

8.3

63.437.316.620.810.515.5

72.08.9

63.236.716.620.1

10.516.0

Gross national product. .Less: Capital consumption al-

lowancesEquals: Net national product. .Less: Indirect business tax

and nontax liability. . .Business transfer pay-

mentsStatistical discrepancy-

Plus: Subsidies less currentsurplus of governmententerprises

Equals : National incomeLess: Corporate profits and

inventory valuationadjustment

Contributions for socialinsurance

Wage accruals less dis-bursements

Plus: Government transferpayments to persons.. .

Interest paid by gov-ernment (net) and byconsumers.

DividendsBusiness transfer pay-

ments..Equals: Personal Income

1963

589.2

52.8536. 5

54.62.2-.7

.7481.1

58.126.8

.0

33.0

17.515.82.2

464.8

1964

628.7

55.7573.0

58.02.3-.5

1.2514.4

64.527.8

.0

34.2

19.117.2

2.3495.0

1964

I II III IV

1965

I II

Seasonally adjusted at annual rates614.0

54.6559.4

56.42.3.0

.9501.6

63.6

27.3.0

34.6

18.716.72.3

483.0

624.2

55.2569.0

57.62.3-.3

1.2510.5

64.527.6

.0

33.9

18.817.1

2.3490.6

634.8

56.1578.6

58.82.3-.7

1.3519.5

65.528.0

.1

34.1

19.417.4

2.3499.1

641.1

56.9584. 3

59.32.4

-2.2

1.5526.3

64.928.4-.1

34.4

19.517.7

2.4507.1

656.4

57.7598.6

60.7

2.3-4.2

1.5541.4

71.7

29.1.0

36.0

19.917.82.3

516.6

665.9

58.3607.6

61.02.3

-4.6

1.5550.3

72.029.4

.0

35.1

20.418.2

2.3524.9

Table 7.Government Receipts and Expenditures[Billions of dollars]

Federal Government receipts _.Personal tax and nontax

receiptsCorporate profits tax

accruals . _ _ _Indirect business tax and

nontax accrualsContributions for social

insuranceFederal Government expendi-

turesPurchases of goods and

services _ _Transfer payments

To persons _ _ _ __ _To foreigners (net)

Grants-in-aid to State and]local governments. .

Net interest paid _ _Subsidies less current sur-

plus of governmententerprises __ _

Surplus or deficit ( ) onincome and productaccount

State and local governmentreceipts __ _ _ _ __ _ _ _ _

Personal tax and nontaxreceipts

Corporate profits taxaccruals. _ __

Indirect business tax andnontax accruals

Contributions for socialinsurance

Federal grants-in-aidState and local government

expenditures ._ . _. .Purchases of goods and

servicesTransfer payments to

personsNet interest paidLess: Current surplus of

government enterprises..Surplus or deficit ( ) on

income and productaccount _

1963

114.3

51.524.515.323.0

114.0

64.429.227.02.2

9.17.8

3.6

.3

63.1

9.51.5

39.23.89.1

62.2

58.36.0.8

2.8

.9

1964

114.5

48.626.016.123.7

118.3

65.329.927.82.2

10.48.4

4.3

-3.8

68.6

10.61.6

41.94.1

10.4

67.2

63.1

6.5.8

3.1

1.4

1964

I II III IV

1965

I II

Seasonally adjusted at annual rates114.8

50.225.715.623.3

117.5

65.030.328.22.1

9.98.3

3.9

-2.6

66.4

10.1

1.640.8

4.09.9

65.4

61.36.4.8

3.0

1.0

112.0

46.525.916.023.5

119.6

67.029.827.52.3

10.38.2

4.2

-7.6

68.0

10.51.6

41.64.0

10.3

66.8

62.76.4.8

3.0

1.2

114.6

48.1

26.216.423.9

118.2

64.929.727.62.1

10.68.5

4.4

-3.6

69.5

10.7

1.642.4

4.110.6

67.9

63.86.5.8

3.1

1.5

116.8

49.826.516.424.2

117.9

64.329.827.72.1

10.88.4

4.7

-1.1

70.5

10.9

1.642.94.2

10.8

68.6

64.36.6.8

3.1

1.9

122.7

53.527.4

16.824.9

120.2

64.931.229.22.0

10.88.6.

4.7

2.5

71.8

11.2

1.7

43.8

4.210.8

70.4

66.06.8.7

3.2

1.4

123.7

54.627.616.3

25.1

120.8

65.930.528.22.3

11.08.7

4.7

2.8

73.1

11.4

1.7

44.7

4.311.0

71.3

67.06.9.7

3.2

1.8


by WALTHER LEDERER and EVELYN M. PARRISH

The Balance of International Payments-Second Quarter 1965

1 RANSACTIONS with foreign coun-tries during the second quarter resultedin a substantial improvement in theU.S. balance of payments. Because ofthe unusual variety of both favorableand unfavorable developments, here aswell as abroad, it is especially difficultto separate relatively short-term (i.e.,mainly quarter-to-quarter) oscillationsfrom longer run trends. The net resultof these developments, however, ap-pears to have been a somewhat largerimprovement than is likely to be main-tained during the remainder of thisyear. Although the balance, adjustedfor very short-run influences, may nothave been as favorable as the secondquarter figures would suggest, there canbe little doubt that it reflected a con-siderable improvement from last year.

Because some of the short-run devel-opments had a favorable effect on thesecond quarter balance at the expenseof the first, the combined balance forthe first half of the year gives a betterindication of the current position andtrends than are provided by the resultsfor the second quarter alone, or by thechanges from the first.

Among the major changes froni thefirst to the second quarter was the in-crease (seasonally adjusted) in the tradesurplus from about $0.9 billion to $1.3billion. This resulted from a rise of$1.2 billion in exports and of $0.8billion in imports.

Last winter's dock strike affectedexports more than imports. The in-crease in net exports that resulted fromthe catchup in the second quarter afterthe first quarter delay in shipments maybe estimated at about $650 million.Some of this shift was in shipmentsfinanced by government grants andcredits.

This improvement of the trade bal-ance was partly offset, however, by theadverse effects of a slowdown in thepace of business expansion in some ofthe major industrialized foreign coun-tries, by the continued rise in businessactivity here, and by the extraor-dinary demand for steel and steel-making materials in anticipation of astrike in the steel industry.

Another major change occurred incapital movements. The net outflowof U.S. private capital declined afterseasonal adjustment by about $1.3billionfrom more than $1.5 billion inthe first quarter to less than $300million in the second. This change wasin part offset by a shift of nearly $500million in the movement of foreign

capital other than liquid funds, froman inflow of $270 million in the firstquarter to an outflow of $220 million inthe second. The net change of about$800 million in these capital flows was amajor factor improving the balance ofpayments during the second quarter.

The decline in the outflow of U.S.capital from the first quarter was largelyin transactions reported by banks,which changed by over $800 millionfrom a net increase (in foreign assets)of $435 million in the first quarter to anet decrease of $370 million in thesecond. Direct investments were about$280 million less than the exceptionallyhigh first quarter amount, and reduc-tions of other long- and short-terminvestments abroad by enterprises other

Trends in Merchandise TradeBillion $30

CHART 6

Billion $v 7.5

Exports

20 . 5.0

: , , Adjusted for/ '' Shipping Strikes

Imports , J{:i

10 ,NET EXPORTS; 2.5

1955 57 59 61


63 65 1963 I 1964 I 1965Quarterly, Seasonally Adjusted

11


12 SURVEY OF CURRENT BUSINESS September 1965

than banks were $100 million greaterthan the already large amount re-patriated during the first quarter. Netpurchases of foreign securities wereabout $90 million lower.

As indicated above, the net flow offoreign capital shifted from net inflowsduring the first quarter to net outflowsduring the second. The first quarterinflow reflected a temporary reinvest-ment of funds obtained here by inter-national organizations through the issueof new securities. The second quarteroutflow was due mainly to liquidationsof U.S. corporate securities by theUnited Kingdom.

The various programs initiated by thePresident in his message of February10 were a major factor contributing tothe decline of capital outflows. Otherdevelopments, however, may have hada similar effect. The faster rise indomestic demand for bank credit thanin bank reserves may have contributedto the decline in foreign lending bybanks. On the basis of past experience,some slowdown was not surprisingafter the rapid expansion of last yearand the first months of this year.

Not all of the developments that ledto the sharp decline in capital outflowsduring the second quarter can be ex-pected to be as effective in subsequentperiods. Banks may not continue toreduce their foreign assets at the secondquarter rate. This applies even moreto repatriations of the much smallervolume of funds, mostly short-term,invested abroad by nonbank corpora-tions; these are funds in excess ofrequirements for ordinary internationalbusiness operations. On the otherhand, direct investments, which con-tinued at a relatively high rate duringthe second quarter, may not yet havefully reflected changes in corporatepolicies initiated in response to thePresident's program and the guidelinessuggested by the Secretary ofCommerce.

Changes in U.S. official reserveassets and in liquid liabilities

The counterpart to the rise in thetrade surplus, the decline in U.S. capitaloutflows, and the smaller variations inother transactions was the change in

Table 1.Analysis of U.S. Balance of Payments, Seasonally Adjusted, Excluding MilitaryGrant Aid

[Millions of dollars]

Corresponding line in table 3 in ( )

Transactions other than changes in official monetaryassets and in liquid liabilities (including nonmar-ketable, medium-term, convertible Governmentsecurities)

I. U.S. PAYMENTS (DEBITS) RECORDED1. Imports of goods and services (13)2. Merchandise, adjusted, excluding military(14). _ __3. Transportation (15)4. Travel (16) _ ... _

Miscellaneous services:5. Private (17)6. Government, excluding military (18)7. Military expenditures (19)

Income on investments:8. Private (20)9. Government (21) _

10. Private remittances (26)11. Government pensions and other transfers (29). -12. Government grants and capital outflows (28+39

+42)13. ( Transactions involving no direct dollar outflowsfrom the United States)14 . (Dollar payments to foreign countries and inter-

national institutions) * _ _ _ _ _ .15. U.S. private capital (31)16. Direct investments (32)17. New foreign securities sold in the United

States (33)18. Redemptions (34) _ _ _19. Other transactions in foreign securities (35) __20. Other long-term, net: (36)

20a. Reported by banks20b. Reported by nonfmancial concerns. __

21. Short-term, net: (37)21a. Reported by banks21b. Reported by nonfmancial concerns and

brokersII U.S RECEIPTS (CREDITS) RECORDED

1. Exports of goods and services excluding trans-fers under military grants (3)

2. Merchandise, adjusted, excluding military(4)3. (Financed by Government grants and capital)(table 4, line A-l 4) __ _ . __4 Transportation (5)5 Travel (6)

Miscellaneous services:6 Private (7) . _ _ .7 Government, excluding military (8)8 Military sales (9) 2

Income on investments:9. Direct in vestments (10) _ _ _ _

10 Other private (11)11 Government (12)12. Repayments on U.S. Government loans,

scheduled (40) _ _ _ - _ _13. Repayments and selloffs, nonscheduled (41)14. Inflow of foreign capital other than liquid

funds (43) _ _ _15. Direct investments in the United States (44).16. Other long-term investments (45) __17. U.S. private short-term commercial and

brokerage liabilities (46)18. U.S. Government liabilities associated with

specific transactions (47)18a Military exports (table 4 line B-2)18b. Government grants and capital outflows(table 4. line B-3) .18c Miscellaneous (table 4 line B-9)19. Foreign holdings of nonmarketable, medium-

term nonconvertible securities (48)

Calendar year

1963

36,28026, 43616, 9922,3162,090

391447

2,929

871400575262

4,5513,717

8344,4561,9761,250-195

49591754

-163785781

434,011

32,35322, 0692,7932,115

934

1,687235659

3,1341,022

498

644326688-5331

-24429334941

-43

1964

40,01828, 45718, 6192,4642,216

396534

2,824

952452560279

4,2603,658

702

6,4622,3761,063-193-1931,298

942356

2,1111,523

58838,381

37, 01725, 2882,8122,3171,095

1,837261762

3,7411,262

454

57512266711511547822249

207-36

1964

I

9,3806,8784,410

613535

98149732

23011114267

966831135

1,327464124

-54-9429827226

589383206

9,411

9,0846,149

671571268

44660

194968298130

16152

11417

-114

159163-8

4-55

II

9,6917,0614,599

616554

99128720

23511013766

1,083897186

1,344540183

-38-401519358

54852325

9,261

8,9916,067

683558264

45165

191955308132

1603377296519

-28-62

35-1-8

III IV

9,9977,1364, 709

613550

98128691

23810913572

1,085902183

1,569551157

-38-35528264264406162244

9,695

9,3356,382

748600270

45766

168946314132

16030

170-27-45

64180

-284

204-2

10,9507,3824,901

622577

101129681

249122146

74

1,126928198

2,222821599-63-24321313

8568455113

10,014

9,6076,690

716588293

48370

20987234260

947

306-2410628

16714918(x)29

1965

I'

9,8827,1524,663

621593

104134662

25312215173

973791182

1,5331,159

299-55-34478484-6

-314-49

-2659,191

8,6705,586

574531282

47768

1741,061

352139

16410

34789

1920

746941

UP

9,7588,0785,469

668622

97136693

279114157131

1, 128960178264882217-51-45

-236-176-60

-503-193-310

10, 173

10,0846,762

715601291

47173

2311,148

361146

1846

-101-58

-21350

122126

-106

-2

NOTE.See footnotes at end of Table 1A, page 13.

U.S. official reserve assets and in liquidliabilities.

Official reserve assets continued todecline during the second quarter, butthey fell only $68 million, much less

than the $842 million drop in the firstquarter. The second quarter declinein these assets was considerably morethan offset by the $270 million declinein liquid liabilities. This was in sharp


September 1965 SURVEY OF CURRENT BUSINESS 13Table 1A.Analysis of U.S. Balance of Payments, Excluding Military Grant Aid: Selected

Balances (Net Credits + , Debits )[Millions of dollars]

Derivation from Sections I and II, table 1 in ( )

A. Regular types of transactions: (seasonally adjusted) :1. Merchandise trade, excluding military (II 2

less I 2)2. Military sales and expenditures (II 8 less I 7)__3. Incomes on investments (II 9+10+11 less

1 8+9)4. Other services (11 4+5+6+7 less 1 3+4+5+6)..5 Goods and services (II 1 less 11)6. Excluding exports of goods and services financed

by Government grants and capital outflows) . .7. Remittances and pensions (1 10+11) _ _8. Government grants and capital outflows, less

changes in associated liabilities, less sched-uled loan repayments (II 12+18b less 1 12) _.

Domestic and foreign private capital:9. Direct and long-term portfolio (II 15+16 less

1 16+17+18+19+20)10. Short-term (II 17 less I 21) _ _ _ _11. Miscellaneous Government nonliquid liabili-

ties (II 18c)12. Errors and unrecorded transactions (Table 3,

line 53)13. Balance on regular types of transactions _14. Less* Net seasonal adjustments15. Balance on regular types of transactions before

seasonal adjustment _ _ _ _ __B. Special Government transactions:

1. Nonscheduled receipts on Government loans...2. Liabilities associated with military exports 2. _ _3. Net sales of nonmarketable, medium-term, non-

convertible securities _4. Dollar securities 36. Foreign currency securities6. Net sales of nonmarketable, medium-term, con-

vertible securities _ _7. Dollar securities _ _ _ _ - _ _ _8. Foreign currency securities

C.I. Balance A+B excluding net receipts from sales ofnonmarketable, medium-term, convertible Gov-ernment securities (including seasonal adjust-ment of items in A)

la. Excluding seasonal adjustment (equals line 52,table 3)

2. Balance A+B including net receipts from salesof nonmarketable, medium-term, convertibleGovernment securities (including seasonaladjustment of items in A)

2a. Excluding seasonal adjustment (equals line52a table 3)

D. Increase in short-term official and banking liabili-ties and in foreign holdings of marketable U.S.Government bonds and notes (decrease ) (ex-cluding seasonal adjustment)

1. Foreign holders other than official (excludingseasonal adjustment) (Table 6, lines II-3,4 5)

la. Including seasonal adjustment2. Foreign official holders (Table 6, lines II-l, 2)__

E. Decrease in U.S. monetary reserve assets (increase )

1 IJVtF gold tranche position *2. Convertible currencies3. Gold 4

Calendar year

1963

5,077-2,270

3,383-273

5,9172,497-837

-3,813

-3,345-809

1

-401-3,287

-3,287

326334

-4331

-74

703150553

-2,670-2, 670

-1,967-1,967

1,589

619619970

37830

-113461

1964

6,669-2,062

4,053-100

8,5605,170

-839

-3,636

-4,241-1, 996

207

-1, 161-3, 106

-3, 106

122222

-36-16-20

375

37~5

-2,798-2, 798

-2,423-2, 423

2,252

1,5541,554

698

171266

-220125

1964

I

1,739-538

1,055-50

2,2061,394

-209

-813

-732-585

4

-288-417-481

64

52163

-55-5

-50

-257

224

-257

224

-173

22771

-400

-51131

-22846

II

1,468-529

1,050-59

1,930

1,085

-203

-888

-702-529

-1

-152-545

50

-595

33-62

-8-8

(X)

122

122

-582

-632

-460

-510

207

11423193

303118258

-73

III 1 IV

1,673-523

1,0454

2,199

1, 325

-207

-921

-1, 235-342

204

-291-593

428

-1,021

30-28

-2-2

(X)

203

203

-593

-1, 021

-390

-818

748

562639186

70135

-45-20

1,789-472

9035

2,2251,366

-220

-1, 014

-1, 572-540

(X)-430

-1,5513

-1,554

7149

29-130

50

50

-1,366-1, 369

-1,316-1,319

1,470

651613819

-151118

-205172

1965

I*

923-488

1,177-94

1,518

766

-224

-805

-1, 566306

1

-10-780-521

-259

1069

5151

-701

-180

-650

-129

-713

19967

-912

84268

-58832

UP

1,293-462

1,262-87

2,0061, 076

-288

-954

-1,038553

6

-16611947

72

6126

-2-*

249

202

249

202

-270

-156-32

-114

68-466-56590

T Revised. * Preliminary. X Less than $500,000.1. Under agreement between the Agency for International Development and recipient countries, some of these funds are

to be used for procurement in the United States.2. See footnote 1 of table 4.3. Includes Export-Import Bank Portfolio Fund Certificates of Participation.4. Reflects $259 million payment of gold portion of increased U.S. subscription to IMF in the second quarter of 1965.

contrast to the first quarter, when thedecline in reserve assets was $180million larger than the $662 milliondrop in liquid liabilities. The netposition in outstanding official reserveassets and liquid liabilities, beforeadjustment for seasonal variations,thus shifted from a deterioration of $180million in the first quarter to an im-

provement of about $200 million in thesecond.

After adjusting the various transac-tions for seasonal influences, the shiftin the net position was considerablymore favorable, from a deteriorationof about $700 million in the first quarterto an improvement of $250 million inthe second. Thus, during the first

half of the year, the net position inoutstanding official reserve assets andliquid liabilities declined $450 million,or $900 million at an annual rate. Someasured, it was a much better per-formance than the decline of $2.8 billionin 1964 and of $2.7 billion in 1963(table 1, line Cl).

Omitting special Government trans-actions, particularly changes in Gov-ernment liabilities on military contracts,other or "regular" types of transactions,after adjustment for seasonal varia-tions, resulted in net receipts of about$120 million in the second quarter, ascompared with net payments of $780million in the first quarter. In thefirst half of 1965, the net payments of$660 million, or an annual rate of $1.3billion, compare with net payments of$3.1 billion in 1964 and $3.3 billion in1963 (table 1, line A13).

At the end of June 1965, liquidliabilities were $28.0 billion, and U.S.official reserve assets $15.8 billion.With liquid liabilities nearly twice aslarge as official reserve assets, evenequal declines in reserve assets andliabilities cannot be sustained over thelong run. It is important, therefore, toconsider not only changes in their netposition, but also changes in the relationof the official reserve assets to liquidliabilities.

In the second quarter, the decline inliquid liabilities was about four timesthe amount of the decline in reserveassets. This improved their relation-ship, although in view of the size of thechanges compared with the positionfigures, the improvement was rathersmall. This improvement contrastswith the changes in the first quarter,when the decline in reserve assets wasboth absolutely and relatively greaterthan that in liabilities.

In 1964, when official reserve assetsdeclined by the relatively small amountof $171 million, while liquid liabilitiesincreased by $2,627 million, the ratioof the former to the latter changed from63.9 percent at the beginning of theyear to 57.5 percent at the end, anaverage half-yearly decline of 3.2 per-cent. During the first half of 1965, theratio declined only 1.3 percent.


14 SURVEY OF CURRENT BUSINESS September 1965

The net position in official reserveassets and in liquid liabilities to foreignofficial organizations only, showedsomewhat different chang.es.

Before adjustments for seasonal vari-ation, this position improved by $19million during the first quarter, andby $46 million in the second (table 1,lines Cla plus Dl). After adjustmentfor seasonal variationsincluding theseasonal shifts of dollar balances be-tween foreign official and private organi-zationsthe net position deterioratedin the first quarter by $634 million, andimproved in the second quarter by $217million. For the first half of 1965, thiscomes to a deterioration of $417 mil-lion, or $834 million at an annual rate.The corresponding change in 1964 was

a deterioration of $1,244 million (ex-cluding $204 million in special noncon-vertible long-term Government secu-rities issued to the Government ofCanada in connection with transactionsunder the Columbia River treaty).

To sum upin the first half of 1965,the change in the net position asmeasured by official reserve assets andliquid liabilities to foreign officialorganizations was only slightly lessadverse than the change in the netposition that includes all liquid lia-bilities. However, the improvementfrom 1964 was only $400 million at anannual rate for the former, as comparedwith $1.9 billion for the latter.

The differences between these bal-

Table 2.U.S. Balance of Payments by Major Components,1 Seasonally Adjusted[Millions of dollars]

Goods and Services, Government Assistance andLong- Term Capital Accounts 2

A 1. Nonmilitary merchandise exports2. Less: Those financed by Government grants

and capital3. Merchandise exports, other than those financed

by Government grants and capital _ ._ _ _4. Nonmilitary merchandise imports. _ _ _5. Balance on trade excluding exports financed

by Government grants and capital _6. Nonmilitary service exports-7. Less: Those financed by Government grants

and capital __ _8. Service exports other than those financed by

Government grants and capital9. Nonmilitary service imports _ _

10. Balance on services other than those renderedunder Government grants and capital--

11. BalanceB. Other major transactions:

1 Military expenditures2. Military cash receipts33. Government grants and capital dollar pay-

ments to foreign countries and internationalinstitutions

4. Repayments on U.S. Government loans ex-cluding fundings by new loans and repay-ments on military credits

5. U.S. direct and long-term portfolio investmentsabroad

6. Foreign direct and long-term portfolio invest-ments in the United States

7. Remittances and pensions8. Net sales of nonmarketable medium-term, non-

convertible securities 49. Miscellaneous Go vernment nonliquid liabilities _10. Balance

C. Balance on Goods and Services, GovernmentAssistance and Long-Term Capital Accounts _

D. Recorded U.S. private short-term capital out-flow less foreign short-term credits to theUnited States (excluding foreign liquid dollarholdings) 1__ __ _ _

E. Unrecorded transactionsF. Net sales of nonmarketable, medium-term, con-

vertible Government securitiesG. Balance C+D+EH. Balance C+D+E+F

Calendar year

1963

22, 069

2,793

19, 276-16,992

2,2849, 625

6069,019

-6, 5152,5044,788

-2, 929980

-834

792

-3, 671

326-837

-431

-6,215

-1,427

-842-401

703-2,670-1,967

1964

25, 288

2,812

22, 476-18,619

3,85710, 967

585

10, 382-7, 014

3,3687,225

-2, 824993

-702

576

-4, 351

110-839

-36207

-6,866

359

-1,996-1,161

375-2,798-2,423

1964

I

6,149

671

5,478-4, 410

1,0682,741

144

2,597-1, 736

8611,929

-732362

-135

184

-738

6-209

-554

-1,313

616

-585-288

-257-257

II

6,067

683

5,384-4, 599

7852,733

155

2,578-1, 742

8361,621

-720122

-186

176

-796

94-203

-8 1

-1,522

99

-529-152

122-582-460

III

6,382

742

5,640-4, 709

9312,785

143

2,642-1,736

9061,837

-691151

-183

166

-1,163

-72-207

22W

-1,797

40

-342-291

203-593-390

IV

6,690

716

5,974-4, 901

1,0732,708

143

2,565-1, 800

7651,838

-681358

-198

50

1,654

82-220

29(*)

-2,234

-396

-540-430

50-1,366-1,316

1965

!

5,586

574

5,012-4, 663

3492,910

188

2,722-1,827

8951,244

-662243

-182

149

-1,847

281224

2 241

-9S7

S06-10

51-701-650

UP

6,762

715

6,047-5,469

5783,091

198

2,893-1,916

9771,555

-693340

-178

160

-767

-271-288

6-1,693

-138

553-166

249249

TRevised. *> Preliminary. * Less than $500,000.1. Excludes military transfers under grants.2. Short-term capital movements between parent companies and their foreign affiliates are reported as part of direct

investment.3. See footnote 1 to table 4.4. Includes portfolio fund certificates sold abroad by Export-Import Bank.NOTE.For reconciliation of data on Government transactions shown in this table with those shown in tables 1 and 3,

see table 4.

ances reflect, of course, the changes inU.S. liquid liabilities to foreign privateaccounts and to international organiza-tions other than the International Mon-etary Fund:. During the first half of1965 these liabilitiesafter accountingfor seasonal changesincreased by $35million (or $70 million at an annualrate), a very sharp change from theincrease of $1,550 million in 1964.

U.S. Merchandise Trade

Since last fa

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SCB_091965