SCB_111965

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

SURVEY OF CURREMT BUSINESS

NOVEMBER 1965 /VOLUME 45 NUMBER 11

CONTENTSTHE BUSINESS SITUATION

Summary 1Inventory Developments 3

Price Changes in 1965 5National Income and Product Tables 6

ARTICLESRecent Financial Developments 9

Financing and Sales of Foreign Affiliates of U.S. Firms 14

Historical National Income and Product Statistics:Personal Consumption Expenditures, by Type of Product 20

CURRENT BUSINESS STATISTICS

General S1-S24

Industry S24-S40

Subject Index (Inside Back Cover)

U.S. DEPARTMENT OF COMMERCE

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U.S. Department of Commerce

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Andrew F. Brimmer / Assistant Secre-tary for Economic Affairs

Office of Business Economics

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TOBusiness Review and Features;

Leo BernsteinLawrence Bridge

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Articles:John A. GormanPaul E. SheaSamuel PizerFrederick Cutler

Smith W. Allnutt, 3dJulius N. Freidlin

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ERRATA

An error was made in lines 3 and 4 of table 1 on pages 10 and 11, for theperiod 1952 through 1960. The correct figures are as follows:

SEASONALLY ADJUSTED, AT ANNUAL RATES

Billions of dollars

Year andquarter

1952: IIIIIIIV

1953: IIIIIIIV

1954: IIIIIIIV

1955: IIIIIIIV

1956: III

Line 3:Undistributed

profits

9.88.08.19.8

11.110.410.05.5

7.58.79.410,6

13.613.613.814.6

13.413.8

Line 4 :Corporate

I.V.A.

1.31.2.7.8

-.4-1.6-2.0(*)

(*)(*)-.7-.5

-1.1 9-2.2-2.8

-2.9-3.6

Year andquarter

1956: IIIIV

1957: III

IIIIV

1958: III

IIIIV

1959: III

IIIIV

1960: III

IIIIV

Line 3:Undistributed

profits

12 . 213.313.512.3

11.79.65.96.4

8.812.212.91.5.0

11.610.712.511,3

8.77.7

Line 4:Corporate

I.V.A.

-1.2-3.0-284-1.5

-1.3-.9.-.2.3

2-.9-e8-1.3

-.5.7

-.6-.2

1,2.5


the BUSINESS SITUATION

J. HE business expansion continuedthrough October and appeared to beas robust as ever. Total wages andsalaries showed the largest monthlyadvance of the year as employment,hours of work, and rates of pay in-creased. The strong demand for laborbrought about another decline in un-employment. Despite the large cut-back in steel output, industrial produc-tion increased following a dip in Sep-tember. Retail sales rose to a new peak.

Rising outlays by business for newplant and equipment, increasing gov-ernment purchases of goods and servicesand the recent increases in SocialSecurity payments are providing themain stimulus to the advance this fall.So far at least, their effects on income,production, and sales outweigh thedampening influences of the adjustmentin steel by a good margin.

Payrolls up sharply

Reflecting gains in a broad range ofindustries, payrolls rose $3 billion atan annual rate from September toOctober. Business and property in-come also advancedby about $1billionbut transfer payments, whichjumped $10.6 billion (annual rate) inSeptember because of the lump-sumretroactive payment of the SocialSecurity increase, fell back by $9.5billion. As a result, total personalincome declined $5.7 billion; however,if the lump-sum payment is excludedfrom the September total, the Octoberchange was an increase of approximately$5 billion.

The increase in total wages andsalaries was divided about equally

among manufacturing, nonmanufactur-ing, and government. It was due inpart to a seasonally adjusted employ-ment rise of about 225,000 (accord-ing to preliminary figures) in non-agricultural establishmentsthe largestgain since early summer. In most

CHART 1

Construction ExpendituresBillion $70

60

55

50

30

15

Private Residential

10 I I I I I I I I I I I I I I I I I I I1961 1962 1963 1964 1965

Quarterly, Seasonally Adjusted, at Annual RatesData: Census

U.S. Department of Commerce, Office of Business Economics 65-11-1

manufacturing industries, employmentand weekly hours of work both rose,with increased overtime hours of someimportance. Almost half of the largeadvance in government payrolls re-flected a pay raise for Federal civilianworkers; the rest, increases associatedwith the war in Vietnam and risingState and local employment.

October marked the first month ofthe regular 7-percent (average) increasein Social Security benefits. This rise,which permanently affects the level ofincome, added $1.1 billion to theOctober income flow.

Industrial production higherIndustrial production rose about one-

half of 1 percent last month as in-creases in most durable goods indus-tries offset a sharp decrease in steel.Steel output fell about 10 percent afterseasonal adjustment for the thirdstraight month of decline. The cut-back from the July peak has nowamounted to 25 percent, slightly morethan the overall reduction that occurredin the 1963 steel inventory adjustment.Weekly figures for late October and thefirst 2 weeks in November suggest thatthe rate of decline has diminished.

With consumption strong and steelproduction falling, manufacturing con-sumers are now liquidating the largeinventories of steel they accumulatedover the year. At the end of September,these stocks totaled 17.0 million tons,some 7K million more than the carryoverof a year earlier. The reduction in Sep-tember, the first in 16 months, wasonly 200,000 tons, but it is quite likelythat a much larger reduction took placein October.


Output in the automobile industryincreased each week in October and bythe end of the month was close to peakrates of last spring. For the month asa whole, the change from Septemberwas about in line with the seasonalmovement.

Rise in retail salesWith consumer incomes rising

strongly, retail sales have been verybuoyant. The preliminary seasonallyadjusted total for October was up fromSeptember, which on a revised basiswas the highest so far this year. Sales

SURVEY OF CURRENT BUSINESS

of auto dealers were apparently some-what lower than they were the monthbefore. Some caution may be in orderregarding the automobilec figures be-cause seasonal adjustments are espe-cially hard to make in the first monthof a new model year.

Construction activityConstruction is one important part

of aggregate demand that has not con-tributed to higher real output this year.Total construction expenditures in thefirst 10 months of 1965 have been 3percent greater than in 1964, but costs

CHART 2

Gross National Product and Durable Goods OutputDurable goods output has increased at a faster ratethan real GNP since early 1961

Billion $ (ratio scale)700 // ;

600 ~^-:i\;.f^-;.

500 ^'?-"'' :;^>>

400 ~

150 -;

100 -90 rv

80 V

70 ~

60 -

^m-m

501947 1949 1951 1953

f i V t I1955 1957 1959 1961 1963 1965

Ratio of durable goods output to GNP has returned to the 1950-55 peaksRatio.26

.24 rv

.18 ~

.16 \1947 1949 1951 1953 1955 1957 1959 1961 1963 1965

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

November 1965

are up by a similar amount. In realterms, private residential and totalpublic building activity are both some-what lower than in 1964. In contrast,private nonresidential construction ishigher, reflecting the strong rise inbusiness investment programs, partic-ularly for capacity expansion. On aconstant dollar basis, industrial build-ing and shopping center constructionthis year are up about 20 percent over1964, while public utility constructionhas shown a modest advance.

It appears now that private housingactivity will just about match lastyear's record total in current dollars;housing starts are lower, however. Sofar in 1965, starts have averaged 1.46million units, as compared with 1.53million for all of 1964. On a quarterlybasis, no particular trend in activityor starts has been apparent for morethan a year; however, both are belowthe peaks reached early in 1964, whenthe long boom in apartment houseconstruction came to an end. Fromthe second to the third quarter of thisyear, residential expenditures fell about$% billion and starts declined from anannual rate of 1.5 million to 1.4 millionunits.

Like housing, public constructionexpenditures in current dollars haveshown no change from last year, andthe quarterly movement has been quitesteady since the summer of 1964.

Preliminary third quarter corporateprofits

With GNP up by $11% billion (seepages 6-8), corporate profits rose $1%billion in the third quarter to a sea-sonally adjusted annual rate of $73%billion, according to preliminary esti-mates. Book profits, which includegains due to inventory price increases,rose by $% billion before taxes and by$% billion after taxes. Almost all ofthe after-tax increase was reflected inincreased dividend payments.

By industry, quarterly changes weremixed. Profits increased substantiallyin durable goods manufacturing andmoderately in mining, finance, andutilities. However, small declines wereevident in nondurable goods manu-facturing, and profits from foreigninvestment dipped.


November 1965 SURVEY OF CURRENT BUSINESS

Inventory Developments

FROM the fourth quarter of 1964 tothe third quarter of this year, inventoryaccumulation has ranged from $6 billionto $9 billion at seasonally adjustedannual rates. (See chart 3.) Theseare higher rates than those in mostearlier quarters of the current expansionand appear particularly high whencompared with the $4 billion rates ineach of the first three quarters of 1964.Although total stocks have increasedover $7 billion in the past year, outputhas also expanded considerably, andthe ratio of overall stocks to outputdoes not appear to be high when gagedby postwar standards. (See chart 4.)

Within the past year, there havebeen some unusual shifts in the rate ofinventory accumulation, notably insteel, in automobiles, and in productsin foreign trade whose movements wereaffected by the dock strikes. The neteffect of these and other shifts has beensuch that the change in inventoryinvestment added significantly to therise in GNP in the final quarter of lastyear and the first quarter of this year,but tempered the rise in total outputin the second and the third quarters.

Third quarter inventory investment

During the third quarter of this year,inventory investment was at a season-ally adjusted annual rate of $6.1 billion,down from the $6.7 billion rate of thesecond quarter and the $8.7 billion ofthe first. The monthly book valuedata suggest that inventory investmentmoved downward throughout the thirdquarter; there appears to have beenalmost no inventory accumulation atall in September.

The decline in the third quarter wasattributable primarily to lowered in-ventory investment by most major linesof retail and wholesale trade. Farmersand manufacturers in most majorindustries invested more in inventoriesin the third quarter than in the second.

In most retail and wholesale trades,reductions in the rate of inventoryaccumulation became evident in thesecond quarter and accelerated in thethird quarter. In September, there wassome liquidation of stocks at retail andwholesale establishments dealing indurable goods; at nondurable goodsestablishments, retailers liquidated in-ventories, but wholesalers maintainedstocks at the August level.

The largest reduction in inventoriesduring September occurred among retailautomotive dealers; this was the firstdecline since the October-November1964 period when strikes at GeneralMotors and Ford plants drasticallycurtailed deliveries. With the re-sumption of a high level of auto output,automotive dealers accumulated in-ventories at a more than $2^ billionseasonally adjusted annual rate in thefirst quarter of 1965; this rate fell tosomewhat over $2 billion in the secondquarter and $% billion in the thirdquarter.

In manufacturing, inventory invest-ment was much stronger in the thirdquarter than in the earlier quarters of1965 among suppliers of machinery andequipment and of defense goods. Thefirst two market categories accountedfor about one-half the total rise ininventories during the third quarter.Thus far in 1965, these two groups haveexperienced large and accelerating quar-ter-to-quarter rises in unfilled ordersbacklogs, which were in excess of strongincreases in shipments.

Inventory investment by producerssupplying mainly consumer marketsslowed down in the third quarter,notably in automotive equipment, butalso in other consumer durable goodsand staples. Producers of consumerstaples (food, beverages, tobacco, andnewspapers) liquidated stocks for thesecond quarter in a row. Producers ofapparel, shoes, and household textiles,

on the other hand, added appreciablyto their stocks in the third quarter,following more moderate increases inthe previous two quarters.

Inventories held by suppliers ofmaterials and intermediate productsincreased substantially in the thirdquarter, with a broad rtfnge of durableand nondurable goods producers con-tributing to the rise. Steel producersincreased their mill stocks in the thirdquarter, although at the end of Septem-ber they were well below the level a yearearlier.

Steel stockpiling by steel consumersand steel warehouses, on the other hand,had been quite heavy in the year pre-ceding the settlement of the wage disputein early September. The rate of accu-mulation peaked in the first quarter ofthis year and then fell off somewhat in

CHART 3

Inventory accumulation has been highersince the third quarter of 1964

Billion $12

CHANGE IN BUSINESS INVENTORIES(GNP Basis)

2 3 4 1 2 31964 1965

Quarterly, Seasonally Adjusted, at Annual Rates

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

the second and third quarters. TheSeptember report on steel mill productsshowed a small decline in stocks heldby steel consumers.

The ratio of stocks to outputChart 4 shows the postwar ratios of

nonfarm inventories to total grossnational product, with both aggregatesmeasured on a seasonally adjusted


SURVEY OF CUEEENT BUSINESS November 1965

basis in constant (1958) dollars. Themovements in the ratios would be quitesimilar if nonagricultural business prod-uct were used in place of overall GNPor if final purchases were substitutedfor output.

The behavior of the stock-outputratios in recent years has been one of thestriking features of the current expan-sion. Although the ratios declinedafter the first quarter-1961 trough inactivityas they did after all previouspostwar troughsthey have not shownthe rise that in earlier postwar expan-sions usually occurred following thefirst year or so of recovery. They havedisplayed instead a remarkable stabil-ity, holding close to 21% percent ofGNP from the fourth quarter of 1961through the third quarter of 1965.Historically, the ratio has been below21% percent only during World War IIand in 1950 when the unusual spurt indemand following the outbreak of

hostilities in Korea sharply, but tempo-rarily, reduced inventories.

Another feature of chart 4 is theslight downward trend in the ratios ofstocks to output over the postwarperiod. The recent ratio of 21% percentmay be compared with a ratio of about23 percent in the early postwar period.This is a considerably smaller rate ofdecline than that which occurred in theprewar periodfrom about 30 percentin the early 1920's to an average of 23percent in 1939 and 1940. Thus, non-farm inventory requirements per dollarof real GNP are about 30 percent lessnow than in the early 1920'salthoughmost of this increase in "efficiency" wasachieved before World War II.

The available data indicate that overthe postwar period stocks in manufac-turing, in trade, and in other nonf armindustries have all risen less than totalGNP over the -postwar period. Thisalso has been true when stocks in these

CHART 4

Ratio of Nonf arm Stocks to Total GNP in Constant 1958 Dollars Ratios have shown slight downward drift over postwar period Ratios in current expansion, unlike those in previous advances,

have been fairly stableRatio.28

.26

.24

.20

18 , , , I M * f M f ! { j i f- j i i 1 n f t i i f 1 M f i f t I M i h i f I M t f M ! ' i M I f n h f i I f i i I i f f 1 i t i1947 49 51 53 55 57 59 61 63 65

Quarterly, Seasonally Adjusted


industries are measured against theirrespective outputs. Thus, the declinein the overall stock-output ratios can-not be attributed to a shift in theManufacturing and Trade Stock- Sales Ratios

Manufacturingand trade

ManufacturingDurable goodsNondurable

goods _ _Retail ....

Durable eoodsNondurable

goodsWholesale

Durable goodsNondurable

goods

September

1960

1.591.782.12

1.42

1.482.06

1.201.251.74

.91

1961

1.531.701.991.42

1.421.951.18

1.221.64.93

1962

1.521.732.011.43

1.391.851.17

1.181.61.89

1963

1.521.701.981.41

1.411.82

1.21

1.181.57.91

1964

1.48

1.641.921.33

1.401.821.19

1.181.54.92

1965

1.48

1.651.981.301.391.901.14

1.171.54.91

Source: U.S. Department of Commerce, Office of BusinessEconomics.

composition of output from industrieswith relatively high stock-output ra-tios to those with low ratios.The current position of inventories

From the vantage point of stock-sales ratios, which are available on adetailed basis, current levels of inven-tories in most industries appear quitelow compared with earlier postwar pe-riods of high activity. However, oneshould keep in mind that stock-salesratios, like stock-output ratios, haveshown a mild secular decline. Currentstock-sales ratios are particularly lowamong manufacturers of nondurablegoods and among retailers other thanautomotive dealers. In those indus-tries in durable goods manufacturingwhere stocks appear somewhat highhistoricallymachinery and fabricatedmetalsholdings seem to be justifiedby prospects of increasing demand, asindicated by rising ratios of unfilledorders to sales. Steel stocks in thehands of consumers are obviously highat this time, and adjustments in theoutput schedules of steel producers arenow underway. Whether adjustmentsare needed in auto stocks will be de-termined, of course, by the rate ofconsumer acceptance of the 1966 modelsduring the next few months.


November 1965 SURVEY OF CUEEENT BUSINESS

Price Changes in 1965

PRICE rises so far this year have beena bit larger than in the other years of thecurrent business expansion, which hasbeen noteworthy for its moderate priceadvances. Despite the slightly largeryear-to-year advance, there has beenlittle evidence of a sustained accelera-tion in price increases over the past fewquarters, as may be seen in chart 5.

In the first 9 months of 1965, theConsumer Price Index averaged 1.5percent above its level a year ago. Inthe previous 4 years, the CPI increasedfrom 1 to 1.3 percent a year. Itsquarterly movements have been ir-

CHART 5

Overall Prices Continue to Increasebut Rise Is Still Moderate

1958 = 100 (ratio scale)120

GNP Implicit Price Deflator(seasonally adjusted)

100

80 I I I I I I I I I M I I M I M I I I I I I I M I I M I I I I I I I I I I M I M I I M

Mild upward trend in consumer prices persists120

100Consumer Price Index

"Wholesale Price fndex

80 I M I I I I I M I I I I I I I M l l I I I M I I I I 1 I I I I I I I I I M I I I I I I I I I

Industrial prices have edged up in the past year120

100

Wholesale Price Index, Industrial Commodities

801953

i lmh i i ln i l i55 57

.huh59

I I. M I M ll I II hi 1 I Ml

61 63 65Data: QBE & BLS

regularly upward in 1965, reflectingmainly shifts in food prices.

Wholesale prices increased 1.7 per-cent from the first 9 months of 1964 tothe first 9 months of 1965. The whole-sale index, which was quite stable fromabout 1958 to the summer of 1964, hasrisen for five consecutive quarterssince then; since June, changes on amonthly basis have been very small.The increase in wholesale prices in thelatter part of 1964 centered in industrialcommodities, which have continued torise this year. However, most of thewholesale price advance in 1965 has beenattributable to sharply higher quota-tions for farm products and processedfoods in the first half of the year.

Rise in industrial prices

The 1.5-percent rise over the past yearin wholesale prices of industrial com-modities is a development of some notein view of the comparative stability inthese prices over a long period in whichdemand has expanded considerably.One aspect of the recent rise has beenthat more commodities have shownadvances than in other years in thecurrent expansion. This may be seenin the following table, which presents a4-year summary of price changes forthe 73 subcategories of industrial prod-ucts surveyed by the Bureau of LaborStatistics:

Sept. 1964-Sept.Sept. 1963-Sept.Sept. 1962-Sept.Sept. 1961-Sept.

1965196419631962

Increase

53473640

Nochange

6344

Decrease

14233329


A breakdown of industrial com-modities by stage of fabrication showsthatover both the past year and thepast 6 monthsindustrial crude mate-rials have shown the largest price in-

crease and finished goods (on the aver-age) the least:

[Percent change]

Industrial crude materials..Industrial intermediate

materialsProducer finished goodsConsumer finished goods,

durable ._Consumer finished goods,

nondurable

Sept. 64-Mar. 65

1.61 0.9

-.21.2

Mar. 65-Sept. 65

1.59

.4

-.2.7

Sept. 64-Sept. 65

3.21 91.2

-.41.9

Chart 6 illustrates price changes overthe past year for broad groups of com-modities. Prices of metals and metalproducts have risen 3.2 percent since

CHART 6

Wholesale Prices

Percent Change2 3

FARMPRODUCTS



6 SURVEY OF CURRENT BUSINESS November 1965

last September, continuing a rise thathas been in progress since early 1963.Much of the advance has been attrib-utable to higher prices for the non-ferrous metals group, which rose almost10 percent over the year, after anincrease of almost the same size theyear before. Strong worldwide de-mand, and supply shortages whichresulted from strikes, have contributedto rising domestic prices. As a group,iron and steel prices have been rela-tively stable; a decline in scrap priceshas about offset selective increases onsteel mill products. Prices of metalcontainers increased after the laborsettlement in the industry last spring.

Rising demand for machinery andequipment has been accompanied byfurther price increases for most kindsof machinery. Price increases since lastSeptember for nonelectrical machin-eryagricultural, construction, rnetal-working, and general purposehaveranged from about 1.5 percent to 4 per-cent. The price index of machineryand motive products, however, hasadvanced less than 1 percent over thisperiod because prices of electrical

machinery and motor vehicles havebeen stable.

The largest price rise over the yearhas been in hides, skins, and leather.Most of the advance in quotations forhides and skins has taken place sinceMarch and has been associated withthe decline in cattle slaughter and thesizable reduction in hog supplies atwholesale markets. In two productareas, household .durables and buildingmaterials, wholesale prices have de-clined over the past year. Prices ofmajor household appliances have beenfalling for a number of years as a resultof intense competition among producers.Price cuts on building materials (whichare scattered throughout the variouscommodity groups), such as millwork,gypsum wallboard, building paper, andfloor tile, appear to be related to theflattening out in residential construc-tion activity.

Farm and food pricesThe rise in industrial commodity

prices has been overshadowed by theunusually sharp increases that haveoccurred in wholesale prices of farm

products and processed foods sinceearly 1965. For both groups of com-modities, however, changes since mid-year have been small. Leading theadvance among farm products has beenthe increase in the livestock and poultryindex, which rose nearly one-fifth fromMarch to August but has eased some-what since; as compared with a yearago, the index has risen about 13 per-cent. Hog prices have been especiallystrong because of restricted supplies;at the end of October, prices at Chicagowholesale markets were up 50 percentfrom a year earlier.

Wholesale prices of processed foods,which have been rising since last fall,showed a sizable increase in late spring.A broad range of items has advancedmeats, sugar, animal and vegetableoils, and bakery products. A signifi-cant exception to the rising trend hasbeen canned and frozen fruits andvegetables. The large 1964 pack, whichwill supply the market until the 1965crop is processed, caused prices to droplast summer; throughout 1965, priceshave remained below year-earlier levels.

(Continued on page 24)

NATIONAL INCOME AND PRODUCT TABLESTable 1.Gross National Product in Current and Constant Dollars

Gross national pro duct __ _Personal consumption expenditures

Durable goods _Nondurable goods _ _ _ _ _Services. _

Gross private domestic investment. .

Fixed investmentNonresidentiaL.

StructuresProducers' durable equipment

Residential structuresNonfarm_ _Farm __

Change in business inventoriesNonfarm. _Farm

Net exports of goods and servicesExportsImports

Government purchases of goods and servicesFederal

National defense-Other _ _

State and localAddendum : Implicit price deflator for seasonally

adjusted GNP, 1958=100 _._

1962 1963 1964

1964

III IV

1965

I II III

Seasonally adjusted at annual rates

Billions of current dollars

560.3355.149.5

162.6143.083.0

77.051. 719.232.525. 324.8

.66.05.3.7

5.130.325.1

117.163.451.611.853.7

105.7

589.2373.853.4

168.0152. 386.981.254.319.734.626.926.3

.65.74.9.8

5.932.426.4

122.664.450.813.658.3

107.1

628.7398.958.7

177.5162. 692.9

88.160.521.139.427.527.0

.64.85.4

.68.6

37.028.5

128.465.349.915.463.1

108.9

634.8404.660.5

179.8164.392.6

88.861.621.140.527.226.6

.63.84.6-.8

8.837.328.5

128.764.949.515.463.8

109.0

641.1405.9

57.9180.9167.197.7

90.263.521.542.026. 726.2

.67.57.8-.38.9

38.429.5

128.664.348.815.564.3

109.6

656.4416.963.9

183.0170.0102. 4

93.766.021.844.227.727.1

.68.79.3-.56.2

34.828.6

130.964.948.916.066.0

109.8

665.9424.4

63.7187.6173.1

101.1

94.466.422.743.728.027.5

.66.77.1-.4

7.539.832.3

132.965.949.416.567.0

110.7

677.5432.2

65.0191.1176.1

102.095.968.323.245.127.627.1

.66.16.0.1

8.140.031.8

135.267.150.816.368.1

111.1

1962 1963 1964

1964

HI IV

1965

I II III


Billions of 1958 dollars

530.0338.649.2

158.4131.1

79.4

73.449.717.931.723.823.2

.66.05.2.7

4.530.025.5

107.560.0

47.5

550.0352.453.2

161.8137.382.3

76.651.918.033.824.724.1

.56.74.9.8

5.632.226.5

109.859.7

50.0

577.6372.158.5

169.4144.2

86.3

81.757.118.938.324. 624.0

,54.65.1-.58.5

36.527.9

110.757.8

52.8

582.6377.360.2

171.6145.586.082.258.118.839. 324.123.6

.53.84.4-.7

8.736.828.1

110.557.1

53.4

584.7376.857.9

171.8147. 1

90.283.159.619.040.623.623.0

.57.17.3-.38.3

37.329.0

109.456.1

53.3

597.5385. 963.7

173. 4148. 8

94.7

86.261.919.242.724.323.8

.58.69.1-.56.0

33.827.8

110.956.4

54.5

601.4

390.263.5

176.2150.593.086.562.020.042.024. 524.0

.56. 56.9-.4

6.738.732.0

111.556.8

54.7

609.7396.766.0

178.4152.392.987.063.420.043.423.623.1

.55.85.7.1

7.338.831.5

112.957.6

55.3


November 1965 SURVEY OF CURRENT BUSINESS

Table 2.-National Income by Type of Income[Billions of dollars]

Table 3.Personal Income and Its Dispositionf Billions of dollars]

National incomeCompensation of employees. _ _

Wages and salaries _ _PrivateMilitaryGovernment civilian

Supplements to wages and salaries.Employer contributions for

social insuranceOther labor income

Employer contributionsto private pension andwelfare funds _

OtherProprietors' income

Business and professionalIncome of unincorporated en-

terprises -Inventory valuation adjust-

mentFarm . __ .

Rental income of personsCorporate profits and inventory valua-

tion adjustmentProfits before tax

Profits tax liability. Profits after tax

Dividends _ _Undistributed profits

Inventory valuation adjustment..Net interest

1962

457.7323.6296.1240.110.845.227.513.713.9

11.42.5

50.137.1

37 1

013.016.7

55.755.424.231.215.216.0

.311.6

1963

481.1

341.0

311.2251. 610.848.8

29.815.014.8

12.12.7

50.837.8

37 8o

13.017.6

58.158.626.032.615.816.8-.4

13.6

1964

514.4365.3333. 5269. 211.752.631.815.416.5

13.52.9

51.139.1

39 1o

12.018.2

64.564.827.637.217.219.9-.315.2

1964

III IV

1965

I II III

Seasonally adjusted at annualrates

519. 5369.0336.8271.711.753.332.215.516.7

51.439.4

12.018.3

65.565.327. 837.517.420.1

.2

15.4

526.3375.4342.6276.511.954.332.7

15.717.1

51.839.6

12.2

18.5

64.965.928.137.817.720.0

-1.015.7

541. 4383.1

349.8282.911.855.033.4

16.117.3

51.939.9

12.018.5

71.7

73.129.144.017.826.2-1.4

16.1

550.3388.7355. 0287.3ai.s55.933.816.317.5

54.6

40.1

14.518.6

72.0

73.729.444.418.226.1-1.7

16.4

1 558. 4395.2360.9291. 912.356.734.216.517.7

54.640.4

14.2

18.6

173.3

74.429.644.818.626. 2

-1.1

16.7

1. Third quarter 1965 national income total and the corporate profits share are based onpreliminary estimates and are subject to revision in next month's SURVEY.

Personal income.

Wage and salary disbursements...* Commodity-producing indus-

tries _ _Manufacturing

Distributive industriesService industriesGovernment

Other labor incomeProprietors' income

Business and professional...Farm _

Rental income of personsDividendsPersonal interest income *.Transfer payments

Old-age and survivors insur-ance benefits

State unemployment insur-ance benefits __- .

Veterans' benefitsOther

Less: Personal contributions forsocial insurance

Less: Personal tax and nontax pay-ments _

Equals: Disposable personal income...Less: Personal outlays

Personal consumption ex-penditures

Interest paid by consumers.Personal transfer payments

to foreignersEquals: Personal savingAddendum: Disposable personal in-

come in constant (1958) dollars

1962

442.6296.1120.896.772.546.856. 013.950.137.113.016.715.227.7

33.3

14.3

2.94.8

11.2

10.3

57.4385.3363.7

355.18.1

.521.6

367.6

1963

464.8311.2125.7100.676.049.959.614.8

50.837.813.017.615.831.135.215.22.85.0

12.1

11.8

60.9403.8383.4

373.89.0.6

20.4

380.6

1964

495.0333.5133. 9107. 281.154.164.316.551.139.112.018.217.2

34.3

36.6

16.02.65.3

12.7

12.4

59.2435.8409.5

398.910.0

.6

26.3

406.5

1964

III IV

1965

I II III


499.1336.7135.2108.481.954.665.016.7

51.439.412.018.317.4

34.8

36.416.1

2.55.3

12. 5

12.5

58.8440.3415.3

404.610.2

.525.0

410.7

507. 1342.7137.4110.083.255.966.217.1

51.839.612.2

18.517.7

35.336.716.32.45.3

12.7

12.7

60.7446.4416.9

405.910.4

.629.5

414.5

516.6349.8141.4113.684.956.666.817.3

51.939.912.018.517.8

36.0

38.416.6?.45.5

13.9

13.1

64.8451.9428. 1

416.910.6

.623.8

418.4

524.9355.0143.3115.086.457.667.717.554.640.114.518.618.2

36.737.516.69.25.6

13.1

13.1

66.0458.9436.0

424.411.0

.623.0

422.2

535.9360.9145.7117.287.558.869.017.7

54.640.414.2

18.618.637.541.2

20.4

2.25.6

13.1

13.4

64.6471.3

444.1

432.211.3

627.2

432.4

Table 4.Gross National Product by Major Type of Product in Current and Constant Dollars

Gross national product. _ _Final salesInventory change

Goods output _ _ _Final salesInventory change

Durable goods outputFinal sales.Inventory change _ _

Nondurable goods outputFinal sales _Inventory change

ServicesConstruction '__Addendum: Auto product

1962 1963 1964

1964

III iy1965

I II III


Billions of current dollars

560.3554.3

6.0284.5278. 5

6.0109.0106.2

2.8

175.5172.2

3.2213.3

62.622.5

589.2583.5

5.7296.8291.1

5.7115.9113.1

2.8

181.0178.1

2.9

226.965.525.0

628.7623.9

4.8

316.1311.3

4.8

126. 1122.8

3.3

190.0188.4

1.5244.068.625.9

634.8631.0

3.8

319.8, 316. 0

3.8

128.1125.4

2.7

191.7190.6

1.1

246.468.626.4

641.1633.6

7.5323.3315. 8

7.5128.8124.3

4.4

194.6191.5

3.1249.768.123.4

656.4647.6

8.7

332.6323. 8

8.7138.1130.9

7.1

194.5192.9

1.6254.269.632.3

665.9659.2

6.7

337.2330.5

6.7138.5132.3

6.2198.7198. 2

.5257.870.9

31.1

677.5671.3

6.1344.3338. 2

6.1141.8136.0

5.9202. 5202.3

.2

262.0

71.130.6

1962 1963 1964

1964

III IV

1965

I II III


Billions of 1958 dollars

530.0524.0

6.0277.5271. 5

6.0107. 0104.1

2.8

170.5167. 4

3.1193.7

58.822.0

550.0544.4

5.7288.3282.6

5.7114.0111.2

2.8

174.3171. 4

2.9201.5

60.224.7

577.6573.0

4.6304.6300.0

4.6123.1120.0

3.1

181.5180.0

1.5211.561.425.5

582.6578.8

3.8

308.4304.7

3.8

125. 2122.5

2.7

183.2182.1

1.1

213.0

61.125.9

584.7577.7

7.1

310.2303. 1

7.1

125.5121.2

4.3

184.7181.9

2.8214.3

60.3

23.2

597.5589.0

8.6319.2

310. 78.6

134. 6127.6

7.0184. 6183. 0

1.6216.861.531.9

601. 4595.0

6.5

321.0314. 5

6.5134. 4128.4

6.0186.6186.1

.5218.3

62.130.8

609.7603.9

5.8327.7321.9

5.8138.6133.0

5.6189.1188.8

.3220.7

61.330.7


8 SURVEY OF CUERENT BUSINESS November 1965Table 5. Relation of Gross National Product, National Income,

and Personal Income[Billions of dollars]

Table 7. Personal Consumption Expenditures by Major Type[Billions of dollars]

Gross national productLess: Capital consumption allowances.Equals: Net national productLess: Indirect business tax and nontax

liability Business transfer paymentsStatistical discrepancy.. .

Plus: Subsidies less current surplus ofgovernment enterprises

Equals: National incomeLess: Corporate profits and inventory

valuation adjustmentContributions for social insur-

ance ._ __ .Wage accruals less disburse-

ments -.

Plus: Government transfer paymentsto persons

Interest paid by government(net) and by consumersDividendsBusiness transfer payments

Equals: Personal income

1962

560.350.0

510.4

51.52.1.5

1.4

457.7

55.7

24.0

.0

31.2

16.115.22.1

442.6

1963 ,

589.252.8

536.5

54.62.2-.7

.7

481.1

58.126.8

.0

33.0

17.515.82.2

464.8

1964

628.755.7

573.0

58.02.3-.5

1.2

514.4

64.527.8

.0

34.2

19.117.22.3

495.0

1964

III IV

1965

I II III


634.856.1

578.6

58.82.3-.7

1.3

519.5

65.5

28.0.1

34.1

19.417.42.3

499.1

641.156.9

584.3

59.32.4

-2.2

1.5526.3

64.9

28.4-.1

34.4

19.517.72.4

507.1

656. 457.7

598.6

60.72.3

-4.2

1.5541.4

71.7

29.1

.0

36.019.917.82.3

516.6

665.958.3

607.6

61.02.3

-4.6

1.5550.3

72.029.4

.0

35.120.418.22.3

524.9

677.559.1

618.4

61.62.3

1-2.8

1.2

i 558.4

173.3

29.9

.0

38.9

20.818.62.3

535.9

1 See footnote table 2.

Table 6.Government Receipts and Expenditures[Billions of dollars]

Federal Government receipts .Personal tax and nontax receipts _ _Corporate profits tax accrualsIndirect business tax and nontax

accrualsContributions for social insurance-

Federal Government expendituresPurchases of goods and services. __Transfer payments

To persons.To foreigners (net)

Grants-in-aid to State and localgovernments

Net interest paid.Subsidies less current surplus of

government enterprises...Surplus or deficit ( ) on income and

product accountState and local government receipts. ..

Personal tax and nor tax receipts. _Corporate profits tax accuralsIndirect business tax and nontax

accrualsContributions for social insurance.Federal grants-in-aid .

State and local government expendi-tures

Purchases of goods and servicesTransfer payments to personsNet interest paidLess: Current surplus of govern-

ment enterprisesSurplus or deficit ( ) on income

and product account

1962

106.448.622.714.620.5

110.363.427.725.52.2

8.07.2

4.0

-3.8

58.68.71.4

36.93.58.0

57.653.75.7.8

2.6

.9

1963

114.351.524.515.323.0

114.064.429.227.02.2

9.17.8

3.6

.3

63.19.51.5

39.23.89.1

62.2

58.36.0.8

2.8

.9

1964

114.548.626.016.123.7

118.365.329.927.82.2

10.48.4

4.3

-3.868.610.61.6

41.94.1

10.4

67.2

63.16.5.8

3.1

1.4

1964

III IV

1965

I II III


114.648.126.216.423.9

118.264.929.727.62.1

10.68.5

4.4

-3.6

69.510.71.6

42.44.1

10.6

67.9

63.86.5.8

3.1

1.5

116.849.826.516.424.2

117.964.329.827.72.1

10.88.4

4.7

-1.170.510.91.6

42.94.2

10.8

68.6

64.36.6.8

3.1

1.9

122.753.527.4

16.824.9

120.264.931.229.22.0

10.88.6

4.7

2.571.8

11.21.7

43.84.2

10.8

70.4

66.06.8.7

3.2

1.4

123.754.627.616.325.1

120.865.930.528.22.3

11.08.7

4.7

2.8

73.1

11.41.7

44.74.3

11.0

71.3

67.06.9.7

3.2

1.8

1122.153.01 27. 915.725.5

126.267.134.131.92.2

11.7

8.8

4. .5

1-4.1

i 75.311.611.7

45.94.4

11.7

72.3

68.16.9.7

3.3

12.9

Personal consumption expenditures.Durable goods - - -

Automobiles and partsFurniture and household equip-

ment _ _Other

Nondurable goods _ _ _ _Food arid beveragesClothing and shoesGasoline and oilOther

ServicesHousingHousehold operationTransportationOther

1962

355.149.522.020.56.9

162.685.729.612.934.4

143.052.022.011.058.0

1963

373.853.424.321.97.3

168.088.230.513.535.8

152.355.523.111.462.3

1964

398.958.725.824.78.2

177.592.333.314.037.8

162.659.524.411.767.0

1964

III IV

1965

I II III


404.660.527.1

25.08.4

179.893.333.814.038.7

164.360.124.811.867.6

405.957.924.824.88.3

180.994.134.014.238.6

167.161.424.811.969.1

416.963.929.725.38.8

183.094.934.314.239.7

170.062.724.912.070.4

424.463.728.925.69.1

187.697.235.014.740.7

173.164.025.312.171.6

432.265.029.826.19.2

191.199.335.714.841.2

176. 165.325.912.272.6

Table 8.Foreign Transactions in the National Income and ProductAccounts

[Billions of dollars]

Receipts from foreigners __E xports of goods and services

Payments to foreignersImports of goods and servicesTransfers to foreigners. _ _ _

PersonalGovernment _ _ - _ _ _

Net foreign investment

1962

30.3

30.330.3

25.12.7.5

2.2

2.5

1963

32.4

32.4

32.4

26.42.8.6

2.2

3.2

1964

37.0

37.0

37.028.52.7.6

2.2

5.8

1964

III IV

1965

I II III


37.3

37.337.3

28.52.7.5

2.1

6.1

38.4

38.4

38.4

29.52.7.6

2.1

6.2

34.834.8

34.8

28.62.6.6

2.03.6

39.839.8

39.832.32.9.6

2.3

4.7

40.0

40.0

40.0

31.8

2.8.6

2.2

5.3

Table 9.Sources and Uses of Gross Saving[Billions of dollars]

Gross private saving _ _ _Personal savingUndistributed corporate profitsCorporate inventory valuation

adjustment _ _ _ _ . _ _Corporate capital consumption

allowances . _ _ ' _ _ _Noncorporate capital consump-

tion allowancesWage accruals less disbursements _ _

Government surplus on income andproduct account. _ _ _ _ - _ _ _

FederalState and local

Gross investmentGross private domestic invest-

mentNet foreign investment

Statistical discrepancy

1962

87.921.616.0

.3

30.119.9

.0

-2.9-3.8

.985.583.02.5.5

1963

89.520.416.8-.4

32.020.8

.0

1.2.3.9

90.086.93.2-.7

1964

101.726.319.9

-.3

34.021.7

.0

-2.4-3.8

1.4

98.792.95.8-.5

1964

III IV

1965

I II HI


101.525.020.1

.2

34.321.8

.1

-2.1-3.6

1.598.792.66.1

-.7

105.329.520.0

-1.034.8

22.1-.1

.8-1.1

1.9103.997.76.2

-2.2

106.323.826.2

-1.4

35.422.3

.0

3.92.51-4

106.0102.4

3.6

-4.2

105.723.026.1

-1.7

35.822.5

.0

4.72.81.8

105.8101.1

4.7

-4.6

i 111.327.2

126.2-1.1

36.322.8

.0

l-1.2-4.1

2.9107.3

102.05.3

i -2.8

1 See footnote table 2. i See footnote table 2.


by JOHN A. GORMAN and PAUL E. SHEA

Recent Financial Developments

JL HE investment expansion thatstarted about 5 years ago has con-tinued in 1965. By the third quarter,gross private domestic investment was$9 billion above the 1964 rate. Mostof this advance was in nonresidentialfixed investment, which increasedthrough the first three quarters, con-tinuing the steep rise that has beenunderway for a few years. Thirdquarter inventory accumulation, thoughdown from the peak of the first quarterof 1965, was also above last year's pace.In contrast, outlays on residentialstructures were at about the same rateas they were in the middle of 1964,having fluctuated without any appar-ent trend since then. They are still,a little below the peaks reached earlylast year. Net foreign investment wassomewhat lower this year than last.The rise in private investment wasmatched by a rise in private saving from1964 to the third quarter of this year.Undistributed corporate profits rose$6 billionmostly during the firsthalfand accounted for two-thirds ofthe advance. The corporate cash flowwas augmented by a $2% billion advancein capital consumption allowances.Personal saving, which had been lowduring the first half, moved up sharplyin the third quarter, to a volume about$1 billion above the 1964 rate.

The difference between Federal re-ceipts and expenditures on income andproduct account displayed a patternjust the opposite of that shown bypersonal saving. During the first halfof 1965, the Federal Governmentshowed a surplus averaging $2} billion(annual rate); during the third quarter,it ran a deficit of $4 billion. To alarge extent, these swings in personalsaving and the budget position wereclosely related. Early in the year,

higher personal tax settlements on 1964incomes boosted the Government sur-plus and held down the rise in dispos-able income and savings; in the thirdquarter, the cessation of these settle-ments and the retroactive Social Secu-rity payment tended to raise personalsaving while increasing the Govern-ment deficit.

CHART 7

Interest RatesLong-term rates have moved up this year

Newly Issued Corporate Aa Bonds(Seasonally Adjusted)

Percent5.00

4.75

4.50

4.25

4.00 I I I I I I I I I I I I I I I I 1 I ! I I I

short-term rates peaked early in the year

4.75

U.S. Treasury Taxable Bonds

4.50

4.25

4.00

3.75

3.50

Prime Commercial Paper(4-6 months)

U.S. Treasury Bills(New Issues)

3.25 I I I I I I I I I 1 I I I I I I ! I I I I I I1964 1965

Data: Treas., FHA, Moody's & FRB


Contrast with earlier expansions

The investment expansion, togetherwith increases in consumer purchasesof autos and other durable goods, ledto a marked rise in the demand forcredit, which was largely accommodatedat stable or slightly rising interest rates.This is in marked contrast to develop-ments during previous periods of in-vestment growth, for example, those of1955-57 and 1959-60, when increasedcredit demands were accompanied bysharp increases in interest rates.

The comparative stability of interestrates during the economic advancethat started in 1961 has reflected twomajor developments that differ fromearlier experience: Corporate internalfunds have advanced almost withoutinterruption, and monetary policy hasbeen more oriented toward keepinginterest rates stable.

Corporate profits before taxes haverisen almost every quarter during thepast 5 years, whereas profits peakedrather early in previous expansions.The beneficial effects of this profitperformance on internal funds wereenhanced by the liberalization of taxdepreciation regulations, by the taxcredit on new investment, and by reduc-tions in corporate tax rates. Althoughdividends were increased substantiallyover this period, internal funds rose$24 billion from early 1961 through thesummer of this year.

Over most of the current economic ex-pansion, the rapid growth in corporateinvestment has lagged behind the risein internal funds, corporation borrowinghas been limited, and liquid assetshave been well maintained. In con-trast, earlier economic expansions werecharacterized by a rise in investment

9

791-025 O - 65 - 2


10 SURVEY OF CURRENT BUSINESS November 1965Table 1.Sources and Uses of Funds, Nonfarm Nonfinancial Corporate Business, Annually, 1946-64

(Billions of dollars)

1Ih31

234567gg

1011121314

1516171819

2021222324?fi2627?89q

Sources totalInternal sources ^

Undistributed profits *Corporate inventory valuation adjustmentCapital consumption allowances 1

External sources - - -Stocks _ - .Bonds -Mortgages _ _ _Bank loans, n e e - - _ _ _ _ _ _Other loans -Trade debtProfits tax liability -Other liabilities

Uses totalPurchases of physical assets

Nonresidential fixed investment . _ _ _Residential structuresChange in business inventories

Increase in financial assets 2Liquid assets

Demand deposits and currency _ ._ _ _Time depositsU . S G o ver nment securitiesFinance company paper _ _ _ _ _ _ _ .

Consumer creditTrade creditOther f i n a n c i a l assets . . _ _ _

Discrepancy (uses less sources)

1946

16 97 88 5

5 34.69.11.11.0.8

2.9(*)3.1

-1.92.1

21.7

17.610.9

.76.04.1

4.61.1(*)

-5.8.1.6

3.44.7

4.8

1947

27 2

12 612 8

- 5 95.7

14.61.22.8

92 3.1

3.72.31.3

30.716.714.6

g1.2

14.01.12.2(*)

-1 ?.1.6

5.96.33.5

1948

27 1

18 714 0

2 26.88.51.04.3

3.5.3.8.9.3

26.1

19.817.2

.52.1

6.31.1.2(*).7.2.5

2.12.6

-1.0

1949

18 7

19 19 51 97.8

.41.32.9

51.6

.5-2.2-2.4

.6.

14.314.014.8

.9-1.7

.43.21.1(*)2.0.2.4

-1.8-1.5-4.4

1950

41 517 914 3

5 08.6

23.61.41.61 02.8.9

7.67.5.8

43.4

22.215.81.54.8

21.24.41.5(*)2.9(*)' '8

10.25.71.9

1951

38 7

19.911 1

1 210.018.81.93.3

23 81.22.24.71.5

35 928.920.1

28.67.03.01.8(*)

q.3.5

1.81.7

-2.8

1952

31 521 29 01 0

11 2

10 42 34.7

51 7(*)2.0

-3.32 5

27 623.420.6

62.2

4.1.3.8(*)

-.7.38

3.5-.5

-4.0

1953

29 421 19 3

1 012.98.31 83.4

3 4(*).6.3

2.2

26 323.622.3

.5

.82.71.9.1

(*)1.6.22

-.71.2

-3.1

1954

29 123 39 o

314.6

5 81 63.5

71 0

92.3

-3.01 8

26 920.521.41 l

-1.96.3-.22.1

2-2.3.2

34.7

' 1.4

-2.2

1955

53 629 213 9

1 717.0

24 51.92.8

73 4(*)8.54.23 0

50 729.724.0

.74.9

21.05.21.0

14.2.1.7

10.94.0

-2.9

1956

47 2

28 913 2

2 718.4

18 32.33.6

44 8(*)5.3

-2.03.9

44 935.029.7

.44.99.9

-4.2.2

(*)-4.5

.1

.47.66.0

-2.3

1957

42 0

30 611 8

1 520.3

11.42.46.3

31 2.7.4

-2.32.4

40 7

33. 832.6

.7

.66.8

2(*)(*)-.4

.3

.23.03.7

-1.3

1958

42 1

29 58 3

321.4

12 62 15.71 2

7.2

4.4-2.3

2 1

40 926.527.51 5

2.514.42.4

-1.59

(*)n

57.53.6

-1.2

1959

55 535 012 6 522 920 62 23.01 23 1.4

4.62.23 8

52 835.129.21 74.1

17.75.6

-1.0 46.6.5.8

6.93.7

-2.8

1960

47 3

34 410 0

224.2

12 91 63.5

71 31.03.2

-2.23 9

42 536.732.51 23.0

5.8-4.1

.51 3

-5.4.6.2

6.33.5

-4.8

1961

54 535 610 2 125 418 92 54.61 7(*).3

6.71.71 4

52 134.931.12 31.5

17.23.31.61.9-.3

.1

.19.44.4

-2.4

1962

61 041 812 4329 219 2

64.62 92 4

73.8.4

3 8

56 042.034.33 04.7

14.02.4

-2.33 7.2.8.9

7.82.9

-5.0

1963

63 644 313 8 431 0

19 3_ 33.93 42 8

55.31.81 9

60 543.635.73 74.2

16.93.0

-1.93 9.4.7.7

8.05.2

-3.1

1964

68 0

49 416 7 332 9

18 61 44 03 43 41 32 4.2

2 564 549.641.33 74.6

14.9.5

-2.63 2

-1.51.41 08.94.5

-3.5

Table 1.Sources and Uses of Funds, Nonfarm Nonfinancial Corporate Business, Seasonally Adjusted Quarterly Totals at Annual Rates,1957-60


Line

No

.

i

1

2

3456799

1011121314

151617181920212223242526272829

Sources, totalInternal sources 1

Undistributed profits 1 . _ _Corporate inventory valuation adjustment __ _Capital consumption allowances 1

External sourcesStocks.BondsMortgages"Rank loans, n e COther loansTrade debtProfits tax liabilityOther liabilities

Uses, total

Purchases o f physical assetsNonresidential fixed investment.Residential structures -1Change in business inventories

Increase in financial assets 2Liquid assets

Demand deposits and currency '.Time depositsU.S. Government securitiesFinance corrpany paper _ .

Consumer credit _ _Trade creditOther f i n a n c i a l assets _ _ _

Discrepancy (uses less sources)

1957

I

50.230.414.1

-3.019.319.73.06.5

22.61.04.5-.42.5

48.535.232.1

.52.6

13.33.71.6

.(*)1.8.2.6

5.43.5

-1.6

II

44.030.811.9

1 120.013.23.75.913.5.5

1.1-3,2

1.4

42.634.032,1

.61.3

8.7-1.6-1.5

(*).3

.4i3! 66.7

-1.3

III

42.2

31.111.8

1 420.6

11.11.26.65-.5

.6

.6-1.0

3.241.534.933.5

.8

.66.6-.8

.7(*)

-1.7.2.2

2.64.5-.7

IV

31.629.99.4

721.2

1.71.96.2g-.8

.6-4.7-4.6

2.530.031.232.51.0

-2.2

-1.3-1.9-.8(*)

-2.11.0

(*).3.1

-1.7

1958

I

28.4

26.96.8

1 221.31.41.08.1g

-2.31.2

-1.4-6.7

.9

26.025.329.5

.9-5.0

.7-1.0-.22.2

-3.3.3

-.2-1.4

2.7

-2.4

II

38.227.86.0.7

21.2

10.43.64.13

-2.6.26.0

-5.03.7

36.123.827.11.0

-4.3

12.3-.31.62.2

-4.0-.1

.19.82.2

-2.1

III

49.0

30.18.6

(*)21.518.91.96.11 3-.2-.69.4.4.7

47.925.626.31.7

-2.3

22.33.13.0-.4

.7-.11.2

14.53.0

-1.1

IV

52.8

33.111.9.621.819.71.84.41 92.2.4

3.72,13.1

53.6

31.127.42.21.6

22.57.91.5-.46.8

(*)7!o6.5.8

1959

I

58.434.113.2-1.022.024.32.13.01 51.7.2

7.44.93.5

55.434.527.92.44.3

20.95.7-.5-.46.7-.1

.79.33.7

-3.0

II

66.4

36.515.0-1.322.830.03.12.91 64.6.8

5.47.14.4

63.739.628.81.89.0

24.19.4.3

-.48.6.9.8

8.44.4

-2.8

III

44.034.111.4-.323.09.91.22.61 04.1.7

-1.0-L5

2.7

43.229.829.91.5

-1.613.37.7

-2.1.49.6.5

1.0.6

3.9-.8

IV

53.335.210.7

.823.818.12.53.2.5

2.1-.36.9

-1.74.8

48.8

36.230.01.34.9

12.5-.1

-1.8-.41.4.6.6

9.22.9

-4.5

1960

I

57.836.013.1-1.324.2

21.81.52.7

g5.01.36.7

-1.95.5

54.743.732.11.6

10.111.0

-3.0.6

_ A

-5! 42.2

(*)8.34.5

-3.1

II

48.735.210.9

.124.113.52.02.9.6

1,02.12.4

-3.45,8

36.737.432.8

.83.8-.7

-4.6-.6(*)

-4.1.1.5

3.9-.2

-12.0

III

42.134.18.81.0

24.28.11.83.9.8

-1.0-.43.9

-3.22.4

43.233.932.41.0.5

9.3-3.7

.72.0

-6.7.3

(*)7.06.91.1

IV

4.732.4

7.2.9

24.28.31.04.2.5.3.9

-.4-.32.0

35.431.932.71.4

-2.33.5

-4.8-2.6

3.5-5.5-.3

.46.02.8

-5.3

Source: Board of Governors of the Federal Reserve System.*Less than $50 million.

i The figures shown here for "internal sources," "undistributed profits," and "capital con-sumption allowances" differ from those shown for "cash flow, net of dividends," "undistributedprofits" and "capital consumption allowances" in the corporate gross product table (pages 52


November 1965 SURVEY OF CUREENT BUSINESS 11Table 1.Sources and Uses of Funds, Nonfinaneial Nonfarm Corporate Business, Annually, 1952-56


1952

I

32.4

21.910.6.5

10.8

10.52.24.7.62.6.2

-.3-3.54.0

28.2

24.520.7.73.2

3.71.84.1

(*)-2.5

.2

.32.1-.5

-4.2

II

22.4

20.37.41.811.1

2.12.65.3.4

-.4-.2-2.6-5.82.8

18.7

21.321.3.7

-.7

-2.6.1

-1.5(*)

.9

.71.2

-1.1-2.9

-3.7

III

34.0

20.18.7.1

11.3

13.91.65.1.4.5.36.4

-2.92.5

29.6

22.319.5.52.4

7.3-.41.1

(*)-1.8

.3

.77.8

-1.1

-4.5

IV

37.3

22.39.11.511.7

15.02.83.6.53.9-.14.4

-1.1.9

33.7

25.720.9.74.1

8.0-.3-.7(*)

.4(*)

.85.12.3

-3.5

1953

I

35.0

22.711.4-.712.0

12.32.13.3.4.4

-.44.51.3 7

32.7

24.421.5.62.3

8.32.3

-1.6(*)4.0-.1.34.11.5

-2.3

II

35.4

21 .410.1-1.212.6

14.02.33.3.3

(*).21.23.03.7

31.5

26.522.0.63.9

5.03.13.7

(*)-.4-.3.3.9,7

-3.9

III

26.7

21.210. 8-2.713.1

5.51.22.5.1.6.8

-2.41.21.5

24.8

24.122.8.31.0

.72.4

-1.0(*)2.8.6.2

-3.91.9

-1.9

IV

20.6

19.34.9.7

13.7

1.31.64.2.3

-2.7-.5-.8-4.13.116.2

19.422.8.5

-3.9

-3.2 2-.6(*)-.1.5.2

-3.9.6

-4.3

1954

I

22.9

21.47.9.513.9

1.53.03.5.3

-1.3. .1-.4-6.42.8

19. 7

19.821.6.7

-2.5

-.1-2.8-1.0

.2-1.9-.1.31.21.0

-3.2

II

23.9

23.08.6.1

14.3

1.02.03.2.7

-2.0-.4.7

-3.0-.3

22.3

19.321.11.1

-2.9

2.9-2.93.6.2

-6.4-.3.24.11.3

-1.7

III

31.0

23.59.6-.814.8

7.5.55.61.0-.7-.21.1

-2.02.3

28.9

20.021.41.3

-2.7

8.93.63.1.2.4

.1.23.41.6

-2.1

IV

38.5

25.510.1(*)15.4

13.1.8

1.71.0.1

-.27.8-.62.5

36.6

23.121 A1.2.4

13.51.32.6.2

-1.4-.1.4

10.01.7

-1.9

1955

I

51.8

28.513.9'-1.416.1

23.22.52.21.01.2-.39.25.81.6

48.2

25.921.31.53.1

22.39.35.5-.14.2-.3.8

11.1.8

-3.6

II

48.0

29.413.3-.616.7

18.6.92.31.03.1.32.15.13.9

45.5

24.922.8.81.4

20.66.8-.7-.16.8.7.68.94.2

-2.5

III

52.7

29.014. 2-2.517.4

23.61.32.1.64.8-.79.83.12.7

50.7

31.025.0.65.4

19.7.5

-.4-.11.2-.2.6

12.65.8

-1.9

IV

62.2

29.714.3-2.417.8

32.53.24.8.14.7.5

12.92.63.7

58.6

37.027.1.29.8

21.54.1-.3-.14.6(*).7

11.15.3

-3.7

1956

I

45.7

28.813.7-3.218.3

17.02.12.1.36.4-.45.7

-3.94.6

43.9

34.427.8.26.3

9.5-5.4(*)(*)-5.7

.3

.56.77.4

-1.8

II

45.4

28.613. 3-3.118.4

16.81.03.7.74.8.35.8

-3.43.9

43.3

34.429.0.64.8

9.0-5.9-1.0(*)-5.0

.1

.17.76.9

-2.1

III

47.5

29.412.4-1.418.4

18.12.34.7.33.7.54.4

-2.24.3

42.6

35.630.7.34.6

7.0-4.9-.6(*)-4.7

.4

.87.63.4

-4.9

IV

50.3

29.013.3-3.018.7

21.33.74.0.14.2-.35.41.32.9

49.9

35.631. 3.43.9

14.3-.52.3(*)-2.6-.3.28.36.2

-.4

Line

N

o.

12345

67891011121314

15

16171819

202122232425262728

29

Table 1.Sources and Uses of Funds, Nonfinaneial Nonfarm Corporate Business, Seasonally Adjusted Quarterly Totals at Annual Rates1961-65


I

44.0

32 3

7 6.124 7

11.72.72.81.2.1

-.96.6

1.2.5

43.530.530.61.8

-1.913.04.6.5

5.3g-.4

-3.25.46. 3-.5

19

II

57.535.59.8.5

25 321.95.17.11.7

-2.31.46.81.9.3

56.433.830.32.11.3

22.67.13.51.42 2

(*)1.1

12.12.4

-1.1

Bl

III

52.136.2

10 9-.325 615.91.84.11.61.3.9

2.42.31.3

49.736.331.32.42.6

13.41.61.32.2

1.9(*)

1.26.73.9

-2.4

IV

64 338.2

12 5 326 1

26.12

4.52.1.9

-.111.23 83.5

58.838.932.22.74.1

19.8(*)

1 2-1.4_ 4

71.3

13.55 0

-5.5

I

65 841 3

12 6 128 8

24 565.02 51 1

(*)7 6.6

7.1

58.542.233.52.76.0

16.32.9

5 17.09

2.3

9.83 2

-7.3

19

II

60 241 0

12 0(*)29 019 295.63 02 61 73 0.3

2 1

56.642.534.23.25.1

14 01 2

3 13 6

26

1 58 52 8

-3.7

62

III

66 241 7

12 31

29 324 5

34 13 13 31 58 11 13 1

61 542.435.13 34.0

19 03 45

72

2 3911 53 2

-4.8

IV

51 643 212 7929 78 453 62 92 6

33 6

63 1

47 440.734.22 93.66 72 2

1 53 5(*\

2g

152 2

4 2

I

66 442 7

12 42

30 123 7(*\4 92 71 4

110 81 91 9

62 842 234 53 54.3

20 51

5 94 6g

6 310 510 3

3 6

196

II

67 843 813 9 930 823 9(*)3 43 42 6126 63 13 7

62 842 435 13 83.5

20 35 2

22 41 11 51 58 94 7

-5 0

}

III

61 445 514 1

231 315 933 63 619

73 5149

60 644 136 03 74. 4

16 42 7

1 13 24

29

6 66 2

8

IV

59 045 214 6

1 231 813 8

1 53 73 75 4

13g

1 2

56 145 737 13 94.6

10 44 2

85 2g

g5

6 03

2 9

I

61 348 716 8 432 212 62 63 62 61 533 2

61 1

59 147 339 74 03.7

11 837 2

6 42

1 02

6 74 5

2 2

19

II

67.249 316 7(*)32 617 93 33 83 94 32 7

5 7 66 1

62 648 040 03 84 1

14 73 12 11 42 42 01 75 54 3

4 6

64

III

76 050 216 8

233 2

25 81 14 23 23 11 i9 0

i4 2

74 048 641 63 4

25 45 02 i1 5

21 6

914 45 1

2 0

IV

67 5

49 416 7

1 033 7

18 11 5

4 33 77 81 13 2

91 662 254 443 83 67 07 7

6 57 5

3 43 5

1 i1 09 04 2

5.3

I

90 7

55 622 7

1 434 335 1/*)4 72 89 9

29 53 84 2

85 758 546 54 27.7

27 22 14 9

8 35 5(*)

1 714 213 3

5.1

19

II

87 2

55 522 5

1 734 731.71 85 03 5

10 22 16 3

1.34 2

81 356.546.74 25.6

24.8 1 74 3

6 94 9

64

12.413 8

-5.9

65

III IV

1

3

11111111119????????

?

through 55 of. the September 1965 Survey) for the following reasons: (1) these figures include,and the statistics in the corporate gross product table exclude, branch profits remitted fromnet of corresponding U.S. remittances to foreigners; and (2) these figures exclude, and the

corporate gross product figures include, the internal funds of corporations whose majoractivity is farming.2

Includes some categories not shown separately.


12 SURVEY OF CURRENT BUSINESS November 1965

outlays greater than the rise in internalfunds, by relatively heavy corporateborrowing, and by reductions in holdings of liquid assets.

Generally speaking, monetary policysince 1961 has been oriented towardproviding sufficient funds to financethe rise in business activity; duringearlier economic advances, there wereshifts to tight money after the initialrecovery periods. The current businessadvance has been marked by recordexpansions in bank credit, whereasduring earlier economic rises the volumeof new bank credit declined.

During the past 9 months, however,there has been some reversion to pastpatterns: The growth of corporate in-vestment outstripped the rise in internalfunds; corporate borrowing increased,and since late last year, monetarypolicy has been somewhat less easy.

Monetary policy moves away fromease

A moderate increase in pressure onbank reserve positions has been ap-parent this year. Although the volumeof bank credit supplied so far in 1965has been 22 percent above the 1964rate, new credit, though substantial,has declined from the very high firstquarter peak.

The change in monetary policy haspermitted bank reserves to expand,but not enough to match the increase intotal credit. Although Federal Re-serve purchases of U.S. Governmentsecurities through September were over$2 billion as compared with less than$1K billion in the corresponding periodof 1964, a $1K billion decline in thegold stock and a $K billion increase incurrency in circulation absorbed thefunds supplied by the open-marketpurchases. Borrowed reserves haverisen throughout the year and bySeptember had reached $627 million,the highest since the end of 1959.

As compared with last year, businessloans have expanded very sharply in1965: The $11K billion increase thisyear (seasonally adjusted annual rate)was almost twice the increase in all of1964. The rate of advance slowed afterthe adoption of voluntary guidelines onforeign lending early in the year and assteel inventory accumulation by steel

users slackened after the threat of asteel strike disappeared. Lending toconsumers in 1965 has outpaced lastyear's rate by a wide margin: $4%billion as compared with $2% billion.Purchases of State and local securitiesat $6% billion have been 80 percentabove the 1964 pace. Real estate loansincreased almost $5 billion, slightlyabove the previous year's rate.

CHART 8

Bank CreditTotal credit creation still high butoff from first quarter peak

Billion $10

CHANGE IN BANK LOANSAND INVESTMENTS

Business loans especially strong

LOANS

-2 I I I I I I I I I I I I I I I I I I ! I I I I

Investment in tax-exempt securitiesremains high

STATE AND LOCAL SECURITIES

Liquidation of U.S. Governmentsecurities slows

U.S. GOVERNMENT SECURITIES

-6 i i i I i i i I i i i I i i i I i i i I i i I1960 61 62 63 64 65

Change From Preceding Quarter

Seasonally Adjusted


ta: FRB

As banks have met the enlargeddemands of their customers for creditaccommodation, bank holdings of U.S.Government securities have been re-duced by almost $7 billion so far in1965, as compared with a decline of lessthan $1 billion in 1964. In recentmonths, the slackening in business loandemands and a decline in bank invest-ment in tax-exempt securities havebeen reflected in a modest restoration ofbank holdings of U.S. Governmentsecurities.

Corporation investment up

Corporate fixed and inventory invest-ment has risen sharply this year. Asnoted earlier, the increased investmentrequirements have outstripped the risein internal funds, and corporationshave increased their borrowing.

Fixed investment expenditures thisyear have risen more than $5 billion atannual rates above the 1964 pace andreached $53 billion at seasonally ad-justed annual rates by the thirdquarter. Manufacturers of both dura-ble and nondurable goods have beenresponsible for an unusually large partof the increase. In contrast, investmentby corporations in apartment houseshas shown little increase from the rateof the last 2 years.

Corporations have added about $6billion (at annual rate) to their inven-tories so far in 1965; this compareswith an increase of $4 % billion in 1964.The rate of accumulation was highestin the first quarter and has sincemoderated.

Direct investment abroad by U.S.corporations rose in the first half of 1965to an annual rate of over $4 billion. Itis expected that there will be a lowerrate of outflow in the second half of theyear.

Corporate before-tax profits haverisen sharply again this year. Thesecond phase of the reduction of Fed-eral taxes has also increased after-taxprofits. Since dividend payments,though high, have grown little so farthis year, retained earnings have con-tinued to expand, and so have capitalconsumption allowances. These factorscombined have increased total internalfunds by $6 billion over 1964. Becauseof the faster growth in investment,


November 1965 SURVEY OF CURRENT BUSINESS 13corporations have sharply increasedtheir borrowing. Early in the year,bank loans amounted to about $10billion at annual rates, but they havesince fallen as inventory accumulationhas declined.

Bond issues by corporations havealso been stepped up, reaching a paceof almost $5% billion (net of retire-ments) in the first 9 months of 1965, ascompared with $4 billion in 1964. Onthe other hand, stock issues, at under$1 billion, have been about half of lastyear's total. Mortgage borrowing hasbeen little changed from last year.

Liquid assets declined $2 billion inthe first half. The decline affectedmainly U.S. Government security hold-ings: Cash holdingsparticularly timedepositshave been well maintained.The decline in holdings of liquid assetshas brought corporate liquidity ratiosto their lowest level since 1945.

Consumer financeConsumers' investment patterns have

apparently changed somewhat in 1965.Though total deposit accumulation hasbeen about the same as last year, therehas been an increased emphasis on banktime deposits and less on savings andloan shares. Purchases of corporate'and tax-exempt bonds have moved up,and corporate stocks have been sold onbalance. Although the stock markethas been extremely active this year,evidence as to small investor participa-tion is conflicting: Odd lot purchaseshave risen less than total transactions;mutual fund sales, however, havemoved ahead of market transactions.

Consumer installment credit has con-tinued to rise. New installment creditincreased more than $7K billion atannual rates in the first 9 months of1965 compared to $5% billion in 1964.The rise was concentrated in auto andpersonal loans.

Mortgage financing has climbedmoderately from last year's pace. Al-though the number of homes sold wasunchanged from last year, the risingprice level of houses and selectiveincreases in loan-to-value ratios havehelped to raise new mortgage borrowing.Government borrowing

Although there have been markedshifts in the Federal budgetary position

during 1965, they have had littledirect impact on money and capitalmarkets. The swing from surplus todeficit in the Federal Budget was notfully matched in Federal borrowing.During the first half of the year, netFederal debt outstanding fell by $3%billion, and debt fell further during thethird quarter. The Federal Govern-ment built up its cash balances duringthe period of surplus and drew themdown in the third quarter.

Treasury financing operations so farthis year have been marked by areliance on Treasury bills to raise cash.However, there has been a moderatelengthening of the average maturityof the public debt because of an advancerefunding in January.

State and local governments steppedup their borrowing during the first 9months to an $11 billion annual rate,as compared with $10K billion in 1964.A substantial volume of these fundsentered into liquid assets held by Stateand local governments, pending dis-bursal of the funds on public works.

Interest rates riseThe financial developments reviewed

in this report have contributed to amoderate rise in most market interestrates this year. Short-term rates, whichrose sharply in 1964, rose further earlyin the year and have since fluctuatedaround the levels reached then. Aftera long period of comparative stability,long-term yields moved up this summer.

In part, the different timing of move-ments in interest rates reflected dif-ferent timing in demands for funds:Inventory buying and associated short-term fund demands were especiallylarge early in the year, whereas cor-porate bond issues were highest in thesummer.

However, expectations also played asubstantial role, particularly in thesummer rise in long-term rates. Afterthe enlargement of U.S. military par-ticipation in Vietnam during the sum-mer, there were widespread expecta-tions that credit demandsalreadylarge because of the business expan-sionwould rise even more. In recentweeks, the rise in market interest rateshas leveled off, as several Government

officials have indicated that prospectiveeconomic developments did not requirehigher interest rates.

Note on Revised Statistics onthe Sources and Uses ofCorporate Funds

Recent changes in definitions used inthe National Income and Product Ac-counts (prepared by the Office ofBusiness Economics) and in the Flow ofFunds Accounts (prepared by theBoard of Governors of the FederalReserve System) have brought thesetwo economic accounting systems intocloser definitional agreement than theywere in the past. A reconciliation ofthe two systems is published in theNovember 1965 issue of the FederalReserve Bulletin.

The estimates in the Flow of Fundssector "nonfarm, nonfinancial corpora-tions" are now conceptually equivalentto what OBE would publish for such asector. OBE has therefore discon-tinued its previous series on the sourcesand uses of corporate funds. For theconvenience of our readers, we presentthe Flow of Funds data for this sectorin the sources and uses of funds formaton the following two pages, annuallyfrom 1946 through 1964; and quarterly,seasonally adjusted at annual rates,from 1952 through the second quarterof 1965. In the future, these statisticswill be published in the SURVEY as wellas in the Federal Reserve Bulletin.

The Flow of Funds series has a some-what narrower industrial compositionthan OBE's former statistics on thesources and uses of corporate funds.The Flow of Funds sector "nonfarm,nonfinancial corporations7- excludesfarms, security and commodity brokersand dealers, finance companies andother credit agencies other than banks,and open-end investment companies;all of these groups were formerly in-cluded in OBE's statistics for the non-financial sector. , .

The relation of these statistics to thenational income and product data pub-lished in the August 1965 SURVEY is asfollows: The items classified under "in-ternal sources" represent the portion of

(Continued on page 24)


by SAMUEL PIZER and FREDERICK CUTLER

Financing and Sales oi Foreign Affiliates of U.S. Firms

JL HIS article presents and examinesthe latest annual tabulations of thestatistics on sources and uses of fundsof foreign affiliates of U.S. companiesin the manufacturing, mining, and

CHART 9

Sources and Uses of Funds of ForeignAffiliates of U.S. Companies1

Billion $10

SOURCES

Total

10USES

1957 59 61 63 651.Includes only foreign affiliates in the mining, petroleum, andmanufacturing industries. Total sources and uses are afterdeducting income paid out.2.Includes some amounts obtained from foreign affiliatesof the U.S. parents.3.-Funds from the U.S. do not include funds moving throughforeign financial or trading affiliates.


14

petroleum industries, and gives dataon the sales of the manufacturing andmining affiliates. These data broadenthe information on the foreign opera-tions of U.S. industry that appearedin the September SURVEY. In thatarticle, data on net capital outflows,earnings, income and royalty remit-tances, and book values were presentedon a basis that ties in closely with thebalance of payments accounts. Datagiven in this article on sources and usesof funds have a different focus; theoverall operations of the foreign affil-iates rather than their relationshipwith their U.S. parent company aretaken into account. There are alsocertain differences in the accountingprocedures and the coverages of thegroup of reporting companies. Somereconciliations of the two sets of dataare given in the statistical note onpage 24. The September article alsocontained a full discussion of the plantand equipment expenditures of theforeign affiliates; some of those dataare repeated in this article to roundout the tabulations of sources anduses of funds.

Financing Foreign Affiliates

During 1964, further large gains inthe scope of operations of foreign affili-ates of U.S. firms were accompaniedby sizable increases in the amount offinancing required. Total financing ad-vanced by $1.5 billion to $11.9 billion.Income distributions rose by $0.5 bil-lion to $3.3 billion, so that after dis-tributions of income, affiliates utilized$8.6 billion, nearly $1.0 billion morethan in 1963 (table 1).

Less than $100 million of the increasecame from U.S. sources (including bothparent companies and other creditors).The major increases were in financingfrom external sources abroad ($0.6

billion) and rising depreciation charges($0.3 billion). Retained e a r n i n g schanged very little in the aggregate.

Funds front the United StatesIn 1964, about $1.5 billion or only 17

percent of the funds used by theaffiliates in the three major industries(after income distributions) came fromthe United States, somewhat less thanthe proportion in the preceding fewyears. The proportion for manufactur-ing affiliates was even less14 percent.These figures on U.S. financing arelower than the capital outflows shown

CHART 10

Total Sales by Foreign ManufacturingAffiliates, by Major Areas

Billion $ (ratio scale)50

40

30

20

All Areas

6

Less Developed Countries'

2

Other Developed Countries*

1 ! 1 i !' : 1 1 I ,1957 58 59 60 61 62 63 64

* Includes Australia, New Zealand, Japan and Union of South AfricaU.S. Department of Commerce, Office of Business Economics 65-11-10


NoTember 1965 SURVEY OF CUEEENT BUSINESS 15

in the balance of payments accounts.The figures in this article do not include$350 million spent by parent companiesin 1964 to buy out existing companiesor minority interests, because theamount so spent is not part of the cashflow of the foreign affiliates, and theydo not count retained branch profitsas part of the U.S. capital flow, as isdone in compiling the balance of pay-ments accounts. (See table, page 24.)

U.S. financing of affiliates rose sig-nificantly in 1964 only for manufac-turing and petroleum affiliates in Europeand "other" areas, which compriseboth developed and less developed

countries in Asia and Africa. In someof these industries and areas, largerplant and equipment expenditures byaffiliates appeared to be the principalcause for the augmented outflow ofU.S. funds. However, there were otherinstanced, notably manufacturing inCanada, where rising plant and equip-ment expenditures by affiliates werefinanced without significantly largercapital outflows from the United States.The highest ratio of U.S. funds toplant and equipment expenditures inthe 1962-64 period occurred in petro-leum affiliates in the Eastern hemi-sphere.

Internal financingFunds generated by the affiliates

themselvesretained earnings plus de-preciation charged against income-account for more than half of all thefinancial resources used. In 1964,they totaled $4.4 billion. The propor-tion provided by these sources, 51 per-cent, was a little lower than in thepreceding years, even though the abso-lute amount of internal financing con-tinued to grow.

There has been a tendency over theyears for internal financing to expandroughly in line with plant and equip-ment expendituresby far the largest

Table 1.Sources and Uses of Funds of Direct Foreign Investments, by Area and Selected Industry, 1962-64(Millions of dollars)

SOURCES OF FUNDS

Area and industry

AH areas, total. . __. -Mining and smelting ~ -Petroleum -Manufacturing

Canada, total . -_ ...Mining and smeltingPetroleum -Manufacturing . ;

Latin Amerira, total 2Mining and smelting -PetroleumManufacturing - -

Europe totalMining and smelting - - - --Petroleum ___ .Manufacturing.

Other areas, totalMining and smelting ---PetroleumManufacturing _- -

Total sources

1962 *

8,806906

3,7654,1352,106

389570

1,147

1/801329854618

2,5409

7471,784

2,359179

1,594586

1963 '

10,397875

4,6424,880

2,338347743

1,248

1,909364886659

3,30012

1,0682,220

2,850152

1,945753

1964

11,8521,0444,4526,356

2,557499618

1, 440

2,241337858

1,046

3,80310

9432,850

3,251198

2,0331,020

Net income

1962

3,877494

1,8241,559

905179199527

1,016246567203

6795

74600

1,27764

984229

1963

4,262493

1,9531,816

1,055187245623

980234545201

8024

69729

1,42568

1,094263

1964

4,772679

1,9802,113

1,244318259667

1,123278559286

88138

870

1,52480

1,154290

Funds from UnitedStates

1962

1,02198

340583

201957729

-21-28

-147154

5573

255299

28428

155101

1963

1,39341

789563

192-2414868

2061434

158

5777

331239

41844

27698

1964

1,456-41735762

126143874

20-72-63155

7652

380383

54515

380150

Funds obtained abroad l

1962

1,546107506933

3201584

221

2253144

150

608*

198410

39361

180152

1963

2,152102777

1,273

33270

100162

14615

-44175

i,.m-i431681

56318

290255

1964

2,677149598

1,930

42351

119253

4903332

425

1,167*

305862

59765

142390

Depreciation anddepletion

1962

2,362207

1,0951,060

680100210370

58180

390111

6961

220475

40526

275104

1963

2,590239

1,1231,228

759114250395

577101351125

8102

237571

44422

285137

1964

2,947257

1, 1391,551

764116202446

60898

330180

9905

250735

58538

357190

USES OF FUNDS

Area and industry

All areas, totalMining and smeltingPetroleumManufacturing.....

Canada, total _. _.Mining and sneltingPetroleumManufacturing

Latin America, total 2Mining and smeltingPetroleumManufacturing _ .

Europe, total ._Mining and smeltingPetroleum -Manufacturing... .,

Other areas, totalMining and smeltingPetroleumManufacturing.. .

Total uses

1962 *

8,806906

3,7654,135

2,106389570

1,147

1,801329854618

2,5409

7471,784

2,359179

1,594586

1963 r

10,397875

4, 6424,880

2,338347743

1,248

1,909364886659

3,30012

1,0682,220

2,850152

1, 945753

1964

11,8521,0444,4526,356

2,557499618

1,440

2,241337858

1,046

3,80310

9432,850

3,251198

2, 0331,020

Property, plant, andequipment

1962

4,108438

1,6282,042

1,003245300458

72095

339286

1,5224

4941,024

86394

495274

1963

4,538398

1,8892,251

Documents

SCB_111965