SCB_031953

U. S. DEPARTMENT OF COMMERCE

OFFICE OF BUSINESS ECONOMICS

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

SURVEY OF CUMBENT BUSINESS

/$*~>rzs\/v^lfiuifx^X

Vol. 33 M . 3g >& No. 31 ' I hrl 1 /$^& I IVt 1

' ,' M A R C H 1953^

MARCH 1953

By the Office of Business Economics

Metal Consuming IndustriesNew orders have been about equal to salesin recent months

BILLIONS OF DOLLARS12

NEW ORDERS

+SALES

I960 1951 1952 1953

Ratio of unfilled orders to monthly sales stillfar above pre-Korean rate

ELECTRICALMACHINERY ANDEQUIPMENT

TRANSPORTATIONEQUIPMENT

MACHINERY,EXCLUDINGELECTRICAL

FABRICATED METALPRODUCTS

NOTE: DATA ARE SEASONALLY ADJUSTED

U. S. DEPARTMENT OF COMMERCE. OFFICE OF BUSINESS ECONOMICS 53-34yr~r*T^F~7/I. H..VV V ' ^ - '

H,LIGH level stability has characterized the nationaleconomy ^ during the opening quarter of the year. Thenational income and product have remained steady at ratessomewhat above the fourth quarter 1952 when much of theoutput lost during the steel shutdown was being made up.

Personal consumption, fixed business investment andGovernment purchases of goods and services appear cur-rently to be absorbing a larger share of the national productwith the result that the flow of additional goods into inven-tory has been greatly reduced. The rebuilding of metalproducts stocks was a major influence in the inventoryincrease of late 1952.

The progressive removal or relaxing of price and materialscontrols has been accompanied by few disturbances in com-modity markets. This signifies that there are not manyinstances where supplies are substantially below demand.The most pronounced price movements have occurred inmarkets for farm products where surpluses, partly seasonalin character, caused price weakness and required supportingmeasures by the Government.

Material controls were relaxed in February when theNational Production Authority authorized producers ofcontrolled materials to accept "unrated" orders for any freecapacity they might have. The effects of this "open-ending" of CMP will depend upon the available productivecapacities relative to demand for the various types of steel,aluminum, copper, and brass products. In the months aheadthere should be additional quantities of these materials avail-able for distribution.

Civilian materials controls to lapseThe Controlled Materials Plan is to remain in effect until

June 30. At that time all materials controls over civilianproduction and construction will be terminated. At thesame time, CMP is scheduled to be replaced by a new systemof controls known as the Defense Materials System whoseregulations will assure producers allotments of materialsrequired for defense production and construction.

Since the lifting of price controls on a broad assortment ofproducer and consumer goods, most market prices are nowfree. By mid-March only 5 percent, as measured by baseperiod market value, of the 2,000 or so commodities includedin the Bureau of Labor Statistics wholesale price index werestill under control by the Office of Price Stabilization. Steelmill products, machine tools and certain other fabricatedsteel products, sulfur and sulfur chemicals are the mostimportant of these. With regard to consumer goods, allprice controls have been removed.

Prices of most commodities after being freed from controlhave shown little change up to mid-March. Some increased.Copper rose most as domestic quotations moved closer to


SURVEY OF CURRENT BUSINESS March

the world price. Other prices, such as lead and zinc, de-clined as decontrol occurred at a time when supplies wereincreasing.

Farm price adjustmentsPrices received by farmers continued to decline during

January and early February and also dropped further belowparity, but firmed somewhat in late February and earlyMarch. As of mid-February, farm product prices were off9 percent from February 1952 and stood 6 percent belowparity. This price decline means lower raw materials costsfor processors of farm products, especially food, and cottontextiles. In some casesnotably meatslower consumerprices resulted. It can also mean, however, loss of incomefor farmers if the larger quantities marketed are more thanoffset by their lower prices and by relatively higher costs offarm production.

Weakness of farm product prices in late 1952 and the earlyweeks of this year is chiefly ascribable to the larger quantitiesmarketed and in some cases also, to the shrinkage of foreigndemand. These price declines reflected the adjustment ofthe supplies resulting from the record-breaking large farmoutput of 1952 to current demands for farm materials.

During the course of the farm price decline, many majorcommodities fell to (or slightly below) support prices andthis brought an increase in price support operations. Largequantities of basic commodities such as cotton, corn, andwheat have been placed under loan while others, such asbutter and cheese, have been purchased outright. As sup-port operations have continued and some easing has takenplace in the movement to market, farm product prices firmedappreciably between mid-February and early March.

Personal income still risingThe flow of personal income in the first quarter is well

above that of the fourth quarter of 1952. The January total,at a seasonally adjusted annual rate of $280.5 billion, wasonly fractionally above December but was up $3.5 billion orone percent from the fourth quarter average.

Major factors underlying the continuation of the incomerise were moderately higher employment, on a seasonallyadjusted basis, and the further rise of average hourly earn-ings of employees. In addition there wrere small increases innonfarm proprietors' income, as well as in rents and intransfer payments.

The increase in employment was particularly marked fromJanuary to February when a half million more persons wereengaged in nonagricultural pursuits. Total nonagriculturalemployment of 55.6 million exceeded February 1952 by 1.9million, while unemployment was 0.3 million lower.

Retail distribution largeSales of retail stores, on a seasonally adjusted basis, have

continued high in the early months of the year. AlthoughJanuary sales were one percent below the December high,they were above any other preceding month, and preliminarydata indicate the maintenance of the January sales rateduring February.

A part of the sales dip from December to January was dueto lower prices, especially for food and apparel. Since salesin January 1953 were nearly 10 percent above those ofJanuary 1952 while retail prices averaged 1 percent lower,it is clear that retail distribution has commenced this year insubstantially heavier volume than a year ago.

January sales of durable goods stores, seasonally adjust etwere 3 percent above December and the highest since ttadvance buying wave which culminated at the beginning c1951. All major groups participated and showed gains froiDecember; hardware stores, motor vehicle dealers, anhousehold appliances including radio stores registered the mosdecisive gains from the fourth quarter.

and . ,Sains by major store groups are we!Sabove et year ago < with prices -generallysteady or lower , .

INDEX, DEC, 1051^100140

ALL RETAIL STORES

^PRICES

I I I I I I I I ! I ! I I I I I I I I I I I I I I I I I i

120

100

80

140

120

IOQ

80 1 I I I... I... | | I. 1 I I l l | | I I I I I I | I I I I . 1 I | I

DURABLE-GOODS STORES

FOOD GROUP120

100

80 | 1 I ! I I I I | | II I I I t > I ' ' I I . . I . . I ' ' ' ' ' '120

100

APPAREL GROUP

8 0 I I I I I I J I I I I I I t | I I i I t | I I I I \ \ I I Ii&&t 'io*io " ' ittd t^**?Qi i9%/4& - - ' iyt+f&

U. $. &PAnTMt

March 1053 SURVEY OF CURRENT BUSINESS

showing relative to December and general merchandisestores the poorest.

Durables aided by creditSales of durables were aided in January by the continued

expansion of instalment credit above the year-end total.This expansion, although small, was unusual and contra-seasonal. It was accounted for by a substantial rise ininstalment credit extended by automotive dealers and a risein cash instalment loans, chiefly by commercial banks. Re-tail purchasers have thus started the year by adding to theirstocks of durable goods but have incurred larger instalmentdebt in so doing.

Production moves higherCommodity production in the first three months of this

year is continuing moderately upward, paced by the steel,construction, and automobile industries. The activity ofthese three basic industries is suggestive of the high rate atwhich the Nation's business economy has worked in thisopening quarter of 1953. It is to be noted, however, that thenondurable goods industries have not thus far been so activeas those making durable goods.

From the beginning of the year the steel industry hasoperated virtually at its January 1, 1953 capacity of 117.5million tons under the pressure of requirements for defense,for construction and producers7 durable equipment, and forconsumer durable goods. Since a further addition to capacityof about 5 million tons is programed during 1953, the industryappears capable of supplying a very large tonnage of steelfor civilian use after meeting in full all defense requirements.

-Even without the expected 1953 addition to capacity, con-tinuation during the remainder of the year of the averageoperating rate that has prevailed from New Year's daythrough the second week of March would yield 116 milliontons or 19 million more than in 1950.

The construction industry, a major consumer of steel, isalso commencing the year at a high rate. Expenditures fornew construction put in place during January and Februarytotaled $4.5 billion or 6 percent above the same 1952 period.The decline from last year's fourth quarter rate was consid-erably less than is usual for the winter season and indicatesthat the industry is getting an unusually good start to whatpromises to be a year of exceptional if not record-breakingachievement.

Auto production highest in tivo yearsMotor vehicle production has moved with great irregular-

ity since the invasion of South Korea. For the most partthe availability of steel has controlled production movementsin this period, although at its start production was greatlystimulated by the abnormal demand arising from buyerfear of future shortages.

The expansion in motor vehicle production, which beganfollowing settlement of the work stoppage in the steel millslast summer has continued into the current quarter. Com-pletions had exceeded the prestrike rate as earl}7 as Septem-ber and in the fourth quarter hit close to 1.7 million carsand trucks (see chart).

On the basis of production for January and February andprojected schedules for March the industry in the currentquarter is expected to turn out 1.5 million passenger carsand 350,000 trucks for a total of 1,850,000 units, up nearly200,000 from the fourth quarter of 1952 and 560 thousandabove the year-ago volume. This production performancewould represent the best quarter since the April-June 1951

period. It would virtually equal the quarterly average rateof the first half of 1950, "but still less than the peak ratereached in the third quarter of 1950.

All of the increase in production in the current quarter ascompared with the October-December 1952 period will bein passenger cars as assemblies of trucks are expected toshow a small decline. Truck production has been gener-ally more stable throughout most of the postwar periodthan was the case for passenger cars.

To achieve the high volume indicated for the January-March period, the industry supplemented its allotments ofsteel by the continued use of conversion and foreign steeland by borrowing on the second quarter's allotment.

In addition to the continued strong domestic demand formotor vehicles and parts, foreign demand for these productshave accounted for a significant proportion of the total sales.About 7 percent of the total value of United States exports

Motor VehicleMILLIONS OF UM1TSi 0

TOTAL MOTOR VEHICLES

\

TRUCKS AND BUSSES

I I I I I I I I I1929 3! 33 35 37 39 41

ANNUAL TOTALS

47 49 I960 I 1951 I 1952 1953QUARTERLY TOTALS,

AT ANNUAL RATES

U. S. DEPARTMENT OP COMMERCE. OFFICE OF BUSINESS ECONOMICS

consists of motor vehicles and related products. Factorysales of motor vehicles to foreign markets in the past twoyears averaged close to 7 percent of total production, withexports accounting for 4 percent of passenger cars and 14percent of trucks and busses.

The pickup in production in the most recent months hasbeen accompanied by a considerable increase in the numberof new cars in the hands of retail dealers. However, someaccumulation usually occurs in the early months of theyear, in anticipation of the normally high spring sellingseason, and the current buildup is from an exceptionallylow level last summer. In February of this year stocks,while up substantially from the low^ point of midsummer of1952 and moderately higher than year-ago levels, were stilllow relative to sales on the basis of prewar standards.

On February 1 dealers stocks of passenger cars and truckswere each considerably less than one month's production.The number of passenger cars held by dealers and in transitaveraged a little more than 8 cars per dealer. This compareswith an average of nearly 10 cars in May 1951, the high forthat year, and around 11 in June 1950. Thus, it appears


SURVEY OF CURRENT BUSINESS Mnrcli

that dealers are in a position to add to existing stocks so asto offer car buyers a wider selection of models and colorsduring the current selling season. The recent increases innew car sales have also been accompanied by higher dealerinventories of used cars.

Large producer of nonautomotive linesBesides producing motor vehicles and related products,

the automobile industry is also engaged in the production ofsuch nonautomotive lines as refrigerators, freezers, washingmachines, diesel-electric locomotives, and other products. Inaddition, since the outbreak of hostilities in Korea in June1950 the industry has been producing for defense economy.

Hence, total production and emplo3Tinent in the industryhave been less closely tied to motor vehicle production thanis normally the case.

On the basis of shipments data submitted to NationalProduction Authority by the metal fabricating industriesit is estimated that shipments against military and otherrelated orders in 1952 accounted for approximately one-fifthof total shipments of the automobile industry. In a recentlabor market study by the Bureau of Labor Statistics it wasestimated that roughly 22 percent of employees in theautomobile industry in November of 1952 were engaged in theproduction of defense and related lines. Despite the rise ofdefense production, sales to the civilian market still constituteby far the greater proportion of the total.

Recent Trends in Manufacturers' OrdersT,HE high rate of manufacturing output in recent months

has generally been matched by the rate of incoming orders.Backlogs, as a consequence, have held at about $73 billionsince last Novemberas compared to an average of $75billion in the third quarter of 1952. The volume of ordersto be filled is now three times as large as in the early part of1950.

The moderate decline in unfilled orders from last Septem-ber was in part due to seasonal influences and to cancellationsof some orders as a result of rescheduling of several armamentprograms. Movements in recent months, however, pointto a flattening out in the trend of manufacturers' backlogs,after an almost uninterrupted expansion in the 27 monthsfollowing the Korean outbreak.

Defense and civilian backlogs about equalThe shift from continuous growth of unfilled orders to

relative balance between now orders and deliveries is pri-marily an indicator of the progress of the defense mobilizationprogram.

Although it is difficult to ascertain how much of thecurrent backlogs on books of manufacturers representeddefense contracts, available information indicates that thelatter accounted for roughly half the total. Defense con-tracts outstanding have been on a plateau in recent monthsas have total unfilled orders.

Unfilled orders steadyThe recent cessation of advances in unfilled orders has not

resulted from any shrinkage in new orders for producers ofeither durables or iiondurables. New business expanded inearly fall and has since held relatively firm.

Total outstanding commitments for durable goods inJanuary were $7.5 billion more than in the correspondingmonth a year ago. Transportation equipment and electricalmachinery producers accounted for all of this rise in backlogs.Relative to sales in the respective periods, however, backlogsare now equivalent to 6 months of shipments, or just underthe vear-ago rates. The backlog-sales ratio for the electrical

machinery industry is currently higher than a year agowhile for other major durable-goods industries it was slightlybelow January 1952 rates.

Variations in backlogsAs rioted earlier, the rise in shipments over the past year

has tended to lower slightly the average number of monthsof sales represented by the volume of unfilled orders on hand.In order to derive some insight into the varying experiencewithin this average, a special tabulation was made coveringthe transportation equipment, electrical machinery, andnonelectrical machinery fields. These industry groups heldmore than two-thirds of all manufacturers' unfilled ordersat the beginning of 1953.

Table 1.Manufacturers' Unfilled Orders and Unfilled Order-SalesRatios, by Major Durable-Goods Industries

Industry

All durable goods _Primary metalsFabricated metalsElectrical machinery-Other machineryTransportation equipinen tOther durable goods

Unfilled orders (billions ofdollars)

Jan. 1950

19.23.82.52.83. 14. 12.8

Jan. 1952

63.58.15.99.0

12.222.20.0

Jan. 1953

70.08.05.8

11.510.128.56.1

Ratio of unfilled orders toseasonally adjusted sales(number of months)

Jan. 1950

2.72.93. 34.12.82.61. 7

Jan. 1952

5.84.14.88.55. 99. 7

Jan. 1953

5.73.84.19.64.89.42.4

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

At the start of this year unfilled orders held by almostone-half of these companies were about the same or higherthan a year earlier. Sales of most concerns, however, roseduring 1952 and as a result backlog-sales ratios for themajority were lowered. As can be seen in table 2, theratios of 65 percent of the companies were reduced by morethan 10 percent during 1952, while only slightly more thanone-fifth of the firms reported increases of over 10 percent.It may be noted however, that current backlog-sales ratios


March 1953 SURVEY OF CURRENT BUSINESS

for the bulk of these companies are far in excess of theirearly 1950 rates.

There were divergent industry trends within the group of^machinery and transportation equipment companies. Therelative dispersion of companies according to changes intheir backlog-sales ratio between the beginning and endof 1952 was more favorable for electrical machinery producersthan for nonelectrical machinery and transportation equip-ment companies.

Transportation equipment new orders risingAt the end of January, backlogs of the transportation

equipment group aggregated $27 billionalmost entirelydefense contracts. The January total was $1.5 billionbelow last September, but some $5 billion above January1952.

The ratio of unfilled contracts on hand to sales in thetransportation equipment industry at the end of Januarywas 10 months, or about the same as last January. Sincemany of the contracts placed with this industry involvedlong blueprint, tooling-up and production periods, it wasnot until September 1952 that deliveries were made inquantities even approaching the volume of new orders.During the fall the expansion in shipments was a littlelarger than the rise in new orders, but by late winter thetwo were in balance.

The aircraft sector shows the highest average ratio ofunfilled orders to salesabout 30 months. However, thisindustry has begun to cut into its high backlog. For morethan one-half of the reporting firms, the volume of businesson hand was lower relative to sales at the end of 1952 than

~i year earlier, while only a fourth had increases of morethan 10 percent in unfilled orders-sales ratios.

For other transportation equipment producers exceptmotor vehicles current backlogs equal 8 months of salesadecline of 4 months from early 1952. Few companies haveincreased their ratios of backlogs to sales over the past year.

Machinery backlogs still highUnfilled orders of machinery producers aggregated more

than $21 billion at the end of January, about the same as inJanuary 1952, and $15 billion higher than in the immediatepre-Korean period. A large portion of this total is currentlyin defense contracts, but civilian goodsboth producers'and consumers'constitute an important part of the businessin this area. Since the production periods for these com-panies are generally shorter than those in the transportationequipment group, machinery deliveries began to match theinflow of new orders early last spring.

N ew orders for machinery have shown considerablestrengthening in the late fall and winter. The firmnessstemmed primarily from the electrical machinery sectorwhere new orders have moved up relatively more in recentmonths than any other major industry. Late winter back-logs of outstanding contracts held by electrical machineryproducers are now back to the October high of $11.5 billion.This total represented nearly 10 months of sales at currentrates, as compared with 8.5 months a year ago.

In addition to sizable defense business, orders of electricalequipment producers have benefited from the rapidly ex-panding electronics field, the opening of new television sta-tions, as well as from the autumn upturn in consumer de-mand for television receivers and electrical appliances.Producers in the radio, radar, television, and other communi-cations equipment group received new orders totaling about4 percent more in 1952 than a year earlier. In spite of in-

creasing deliveries, backlogs rose by a third from the begin-ning of 1952 to early this year. The rise brought theJanuary ratio of backlogs to sales to 13 months.

Manufacturers of electrical generating and transmissionequipment have shown about the same orders and sales pat-tern as the commimicatioiis group. The January averagebacklog ratio was nearly 12 months as compared with a littleless than 8 months a year ago.

For other electrical machinery producers, orders on handrepresented about 6 months of sales. About a third of thereporting companies improved their order-sales position atthe beginning of 1953 over early 1952, while about halfshowed some deterioration in this ratio.

Industrial machinery backlogs reducedA somewhat different pattern of orders trends is found

among manufacturers of metalworking, special, and generalindustrial machinery. New orders in this industry reacheda high in late 1951. Since then, the value of new businessreceived has moved* down moderately, while deliveries havebeen sharply expanded.

As a result, industrial machinery backlogs which reacheda peak of 9 months of sales in February of last year now rep-

Table 2.Unfilled Orders Position of Machinery and Transporta-tion Equipment Companies

[Percentage of companies]

Changes in unfilled orders Jan. 1, 1952, to Jan.1, 1953:

Increases of more than 10 percent.. ..(+) 10 percent to ( ) 10 percent

Decreases of more than 10 percent. . ...Changes in ratios of unfilled orders to sales, Jan.

1, 1952, to January 1, 1953:Increases of more than 10 percent(+) 10 percent to ( ) 10 percent _ ._ -Decreases of more than 10 percent _ _ _ _

All com-panies

29.717.153.2

20. 514.465. 1

Electricalmachin-

45.811.942.4

26.326.347.4

Othermacbin-

17.810.462.8

17.811.570.7

Trans-portationequip-ment

50.714.934.4

19.89 .X

70.4

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

resent 7 months of current sales. The pre-Korean ratio ofunfilled orders to sales, it may be noted, was only 3 months.Only one-sixth of the companies have maintained or in-creased their unfilled orders-sales position. These firms weremore usually manufacturers of special industry machinery.

While declining backlog ratios were characteristic of allsegments of the industrial machinery industry, machine-toolsproducers reported the largest decreases. Unfilled-orderratios of machine-tool companies have been about halvedfrom the beginning of 1952, although they are still close to 10months of shipments. Deliveries, it may be noted, are nowdouble their year-ago rates,

Commercial machinery orders risingIn the nonindustrial machinery fieldequipment and ap-

pliances for agriculture, construction, offices, stores, services,and homesoverall orders trends have been similar to thosein industrial machinery. Exceptions are office and storemachinery and household and service equipment where thegrowing availability of all types of metals for civilian use andthe lifting of commercial construction controls have resultedin recent expansion of both orders and deliveries in thesefields. Unfilled orders for household and service machineryhave reached new hidis.


6 SUEVEY OF CURRENT BUSINESS March 3955

1953 Investment Programs IncreasedB,BUSINESS has scheduled expenditures for new plant

and equipment during 1953 at a continued high rate, accord-ing to reports submitted between mid-February and mid-March to the Office of Business Economics and the Securitiesand Exchange Commission.1 Nonfarm producers haveprogramed capital spending this year at $27.0 billion, ascompared to $26.5 billion last year, and $25.6 billion in 1951.

Capital goods prices are currently only slightly above theiraverage for the full year 1952 and have shown little changein recent quarters. It thus appears that the 1953 programsnow contemplated represent a high year not only in dollarterms but also in physical volume of additions to productivefacilities.

Public utilities have scheduled 1953 expenditures at $4.4billion, or 14 percent higher than in 1952. Mining companiesand nonrail transport companies expect more moderate in-creases. Manufacturing companies are planning 1953 out-lays of $12 billion, about equal to expenditures made lastyear. Anticipated additions of $1.3 billion by the railroads,on the other hand, are down 7 percent from last year.

Investment programs now higherPrograms reported for 1953 in the current survey corrob-

orate and reinforce the finding in a similar survey con-

ducted last October that business was planning another highyear of new plant and equipment expenditures. Presentprograms are 5 percent higher than those reported earlierwith almost every major industry contributing to theincrease.

While it is not possible to determine precisely the factorswhich raised the 1953 expenditure projections between thetwo survey periods, the higher current programs may reflectthe sizable expansion in business activity in the interimperiod and the greater completeness of 1953 programs nowas compared to those available last October.

Investment during 1953The quarterly survey indicates that new plant and equip-

ment expenditures are scheduled at seasonally adjustedannual rates of $27.5 billion and $28.1 billion, respectively, inthe first two quarters of this year. Additions to productivefacilities in this period, if realized, would be 4 percent higherthan the rate in the first half of 1952, and 6 percent higherthan in the strike-affected second half of last year.

The scheduled capital spending of $27.8 billion (at season-ally adjusted annual rates) in the first half of this yearimplies an annual rate of fixed investment of some $26.2 bil-lion in the last half of 1953. However, past experience with

Table 3.Expenditures for New Plant and Equipment by United States Business, 1951-53 1

[Millions of dollars]

All industries

ManufacturingMining. .. - _Railroads

Transportation, other than railPublic utilitiesCommercial and other 3

AH industries

1951

25, 644

10, 852929

1,474

1,4903, 6647,235

1952

26, 455

11, 994880

1,391

1,3633,8386,989

1953 2

26,991

12, 039910

1,294

1,3804, 3387,000

1951

I

5,465

2,157194294

354729

1,737

II

6,502

2,743242394

415897

1,811

III

6,505

2,738241354

375983

1,814

1952

IV

7,173

3,214252432

3461, 0551,874

I

6,141

2,650217360

356821

1,737

II

6,808

3,156228386

372928

1,738

III

6,244

2,820206289

302947

1,680

IV

7,265

3,367229357

3351, 1421,835

1953

12

6,541

3,028208335

3041,0301,636

112

6,968

3,163213396

3151,1991,682

Seasonally adjusted at annual rates[Billions of dollars]

Manufacturing iMining 'Railroads . _ _ i

Transportation, other than railPublic utilitiesCommercial and other 3

23.74

9.59.82

1.28

1.433.397 23

25.47

10.63.96

1.47

1.523.627.27

26.49

11.30.96

1.52

1.583.857.28

26.56

11.69.96

1.60

1.433.737.15

26.72

11.78.93

1.56

1.443.827.19

26.58

12.24.90

1.44

1.363.756.89

25. 49

11. 64.83

1.24

1.273.716.80

26.96

12.23.87

1.32

1.384.047.12

1 27. 54

12.78.84

1.31

1. 234.556.83

28.07

12.99.84

1.48

1.164.846.76

1. Data exclude expenditures of agricultural business and outlays charged to current account..>,! _,* ~.,_4._~ ~t -, n ro ,1 ,_ __ nro _ _ i)asc(i on anticipated expenditures reported by business between mid-February and mid-March. In addition to seasonal2. Data for the first and second quarters of 1953 and for year 1953 are based on anticipated expenditures

adjustment, the quarterly data are adjusted when necessary for systematic tendencies in anticipatory data.3. Data include trade, service, finance, communication and construction.Sources: U. S. Department of Commerce, Office of Business Economics, and Securities and Exchange Commission.

these anticipatory surveys have indicated a tendency for thelatter part of the year (as well as the year as a whole) tobe understated relative to the earlier months of the year dueto the lesser completeness of future plans as compared tonear-term programs.

1. In order to provide SURVEY readers with new information as quickly as it becomesavailable, this analysis presents only the highlights of the current survey of business capitalbudgets. A more detailed analysis of 1953 investment programs, as well as the results of theassociated survey of businessmen's 1953 sales expectations, will be presented in the AprilSUEVEY. It may be noted that the estimates presented here are based on more completedata for 1951. Earlier estimates are not affected by this revision.

Considering for this factor, it would appear that the antici-pated rates of fixed investment in the halves of 1953 are notsignificantly different.

Manufacturers' 1953 programsThe maintenance of 1952 rates of fixed investment expected

by manufacturers in 1953 reflects the offsetting effects of(Continued on page 19)


by Walther Lederer

The Balance of Payments in 1952JL HE improvement in the financial position of foreign

countries, which was indicated by the international transac-tions of the United States during the second and third quar-ters of 1952, continued in the last quarter of the year. Dur-ing these nine months foreign countries were able, throughtheir transactions with the United States, to raise their hold-ings of gold and dollar assets by nearly $1.6 billion. Thesegains helped to bring total foreign gold and liquid dollarresources (excluding those of the International Bank and theInternational Monetary Fund) to over $20 billion by the endof 1952, almost the same amount as at the end of 1945, theprevious peak.

Foreign reserves continue to increaseAlthough foreign countries continued to add to their gold

and dollar holdings in the fourth quarter, a rise in the UnitedStates export balance on goods and services from the third tothe fourth quarter was largely responsible for a decline in

f )ld and dollar transfers from $765 million to $395 million,he export rise must be attributed, however, mainly toseasonal and temporary factors, such as the upswing in

^agricultural exports and, to a lesser extent, the rise in ship-^Aients of steel and steel productsthe latter having beencurtailed during the previous quarter because of the steelstrike. In addition, income on investments advanced to theusual seasonal peak in the last quarter of the year.

Table 1 indicates in simplified form the basic features andtrends of the balance of payments since the middle of 1950.

Although substantial progress toward a better balancein international transactions has been achieved since thefirst quarter of 1952, net foreign purchases of goods andservices here in the fourth quarter of 1952 were still largerby an annual rate of $500 millionthan the amount of fundscurrently earned by foreign countries from United Statesimports or supplied by private United States investments andremittances.

United States exports declineSeveral factors contributed to a decline in United States

exports, which was the major reason that foreign countrieswere able to reduce the imbalance in their transactions withthe United States during 1952.

First, business activity in the United States expandedfaster than in Western Europe in contrast to all other postwaryears, when the rise from each year to the next was greaterabroad than in the United States. Europe's faster advancesin the earlier years represented, of course, recovery from theunduly low levels of production which prevailed immediatelyafter the war.

The index of industrial production in the United States^during the last quarter of the year averaged about 5 percent*higher than during the first quarter. The rise in industrialproduction in Western Europe was only approximately halfas much. This relative difference in expansion of industrial

activity between this country and Western Europe couldordinarily be expected to raise the demand for imports hereand at the same time increase European incentives to exportto this country. Several factors, however, accentuated thenormally to be expected effects on international transactionsof these differences in the movement of production.

Table 1.Summary of the United States Balance of Payments,July 1950-December 1952

[Millions of dollars, quarterly totals or rates]

Foreign countries earned from thesale of goods and services to theUnited States

Foreign countries obtained totalgoods and services from theUnited States valued at

Less those furnished undermilitary aid

Other goods and services pur-chased in the United States

Thus, foreign net expenditures ongoods and services (excludingthose furnished under militaryaid) were

To finance these net purchases,foreign countries had at theirdisposal the following amountsof dollars received from UnitedStates sources:

Investments in United Statescontrolled enterprises abroad.

Other private loans and remit-tances

Government economic grants,other transfers, and loans(net)

Total foreign dollar receiptsfrom investments, gifts, andloans

Thus, known foreign dollar re-ceipts exceeded (+) or fell short( ) of known foreign dollarexpenditures by

However, unaccounted-for trans-actions required ( ) or supplied(+) additional dollar exchange of-

So that foreign gold and dollarassets increased (+) or declined( ) by these amounts

Line intable 2

16

g

20

24

\ 18, 25,J 26

1 19, 21,f 97 901 it, ZO

35

34

July1950-June1951

3,685

4,324

294

4,030

345

173

} 348

i 816J

1,337

+992

105

+887

July-De-

cember1951

3,603

5,284

374

4,910

1,307

134

227

746

1,107

-200

100

-300

I

3,867

5,347

440

4,907

1,040

180

151

557

888

-152

-230

-382

19

II

3,867

5,322

589

4,733

866

372

241

860

1,473

+607

-203

+404

52

III

3,911

4,604

616

3,988

77

75

21

768

864

+787

-22

+765

IV

4,083

5,428

949

4,479

396

84

187

303

574

+178

+217

+395

NOTEMR. LEDERER IS A MEMBER OF THE BALANCE OF PAY-MENTS DIVISION, OFFICE OF BUSINESS ECONOMICS.

The textile industry, which underwent the relativelygreatest decline in output abroad, depends to a large extentupon raw materials from the United States, so that theimpact from the change in its activity was directly trans-ferred to United States exports.

Also, the decline in demand for coal from the UnitedStates may in part be ascribed to the failure of industrialproduction in Western Europe to maintain the previousrate of expansion while coal production there continued to

7


8 SURVEY OF CURRENT BUSINESS March 1953

[Millions of dollars]Table 2.Balance of Payments of the United

LineNo.

12346

67

8

91011

121314151617

18192021

22

23

242526272829

30

31323334

35

Item

Exports of goods and services:Merchandise, adjustedTransportationTravelMiscellaneous services:

PrivateGovernment - -

Income on investments:PrivateGovernment

TotalImports of goods and services:

Merchandise, adjustedTransportation _TravelMiscellaneous services:

PrivateGovernment


TotalBalance on goods and servicesUnilateral transfers (net, to for-

eign countries ( )):Private --Government:

Economic aidMilitary aidOther

TotalBalance on goods and services

and unilateral transfers (bal-ance for "all areas" equals netforeign investment) .

United States capital (net, out-flow (-)V.

Private:Direct investmentsOther long-termShort-term

Government:Long-term -Short-term __ _

TotalForeign capital (net, outflow

(-)):Long-term:

Transactions in UnitedStates Governmentbonds.

Other investmentsShort-term

Gold sales (purchases ( ))Balance on foreign capital and

gold.Transfers of funds between for-

eign areas (receipts from otherareas ( )) and errors andomissions.

All areas

1951

15, 4851,487

420

623211

1,800192

20,218

11,668933722

2491,084

35147

15, 0545,164

-412

-2, 969-1,402

-70-4,913

251

-604-359-103-140-23

-1,229

-688

1451,038-53442

536

1952

I"

4,177392102

16094

39329

5,347

2,962245132

62377

7712

3,8671,480

-387-440-30

-953527

-180-59

4

-1411

-375

8

172

-555-382

230

II

4,088375141

155109440

14

5,322

2,844276203

623739712

3,8671,455

-94

-615-589-35

-1,333122

-372-88-59

-187-23

-729

14

4498

-104404

203

III'

3,436289160154104

42041

4,604

2,689276343

65439

7920

3,911693

-103

-538-616-31

-1,288-595

-755032

-187-12

-192

54

35669

7

765

22

IVi>

4,158317109154116458116

5,428

3,024254145

64472

10420

4,083

1,345

-122

-364-949-34

-1,469-124

-84-23-42

106-11

-54

228

91-198

274

395

-217

Year

15, 8591,373

512

623423

1,711200

20,701

11, 5191,051

823

2531,661

35764

15, 7284,973

-415-1,904

2 594-130

-5,043-70

-711-120-65

-409-45

-1,350

304

1151,141

-3781,182

238

Western Europe *

1951

6,32775637

273133150163

6,839

2,175463188

20636226314

3,6713,168

-192

-2, 192-1,111

11

-3,484-316

-783144

117

107

-109

127178

-295-99

308

1952

I'

1, 439204

86972

3623

1,851

55212022

50137594

944907

-44

-286-358

7

-695212

122

23-64-3

-30

10

058

-549-481

299

II

1,383172136846385

1,725

5461577551

135604

1,028697

40

461-498

-1,009-312

-18-39

12

-10015

-130

7

-30220

199

243

IIP

1,08313113

66353929

1,396

52215010354

157588

1,052344

-47

-422-475

-5-949-605

16K

-21

-8112

-79

34

31453

1519

165

IV*

1,669142

9665336

1062,081

64112642

53171

698

1,110971

-62

-272-815

-6-1,155

-184

520

-32132-4

121

39

56-92225228

-165

Year

5,57464943

269206149163

7,053

2,261553242

208600

24624

4,1342,919

-196-1,441-2, 146

-25-3,808

-889

15-22-18

-11320

-118

90

57639

-321465

542

Dependencies 2 JM

1C51

504617

8(*)

102()

682

1,0561945

() 352

(*)1,157-475

-15

()-1

-16-491

-59

-4

-18-2

-20

9-51216

495

-^

1952

I

150142

2()

23

191

3036

16

(*)2911

356-165

(")-3

-168

71

-1

-3()

4

11

22

162

II

1491332

()30

197

2937

12

(-)20

1()

333-136

4

()-4

-140

121

-1

-2()

10

1151

17

113

III-

119113

3C)

22

158

1927

13

()18

11

232-74

-4

()-4

-78

134

-24()

-7

1281

30

55

IV P

131122

3(*)

28

176

2547

10

W171

1

290-114

-4

()-4

-118

(-)

1

7

134

2

38

73

Year

5495010

10()

103

722

1,0422751

(-) 8443

1,211

-489

-15

()-15

-504

}

3923,

I-30!

()14

2787

87

403

' Less than $500,000. r Revised. Preliminary. 1. Western Europe includes the OEEC countries, Finland, Spain, and Yugoslavia.

increase. Favorable weather conditions and the increasinguse of other sources of energy were additional factors re-ducing the consumption of coal. The decline in coal exportsto Western Europe from 3 million tons per month duringthe last half of 1951, to a 1-million ton rate during the last6 months of 1952 cannot be solely ascribed, therefore, tohigher coal production abroad, which accounted for only 1million tons of the difference. Reduced coal shipments fromthe United States over that period resulted in a decline inforeign dollar expenditures, including those for shipping, byabout $200 million. This was approximately 15 percentof the decline in the export surplus on goods and serviceswith Western Europe exclusive of exports under the mili-tary aid program.

In contrast to the reduced rate of expansion in industrialproduction abroad, the accelerated rise in production and

incomes here had stimulated imports by the end of 1952 tothe highest volume since the previous postwar peak fol-lowing the invasion of South Korea. The limited demandfrom other countries not only facilitated a rise in importsfrom Europe by 20 percent from the last quarter of 1951 tothe same period of 1952, but also permitted increased pur-chases of raw materials without price rises. The stabilityof prices in the face of rising demands by the United Stateswas in sharp contrast to the period immediately after tbinvasion of South Korea.

Second, production of wheat in Canada and WesternEurope during the summer months was about 7.4 milliontons higher than during the previous season, and the graincrops in the southern hemisphere and in East Asia werealso substantially improved. Foreign purchases of Americanwheat during the second half of the calendar year in terms


larch 1953 SURVEY OF CURRENT BUSINESS 9tates by Areas, 1951, and 1952 by Quarters


Eastern Europe

1951

8

4

15

18

76

6

82

-64

-18

13(*)

R

-69

j 1; 16

1

17

, -1i -11

-12

1

1952

I

1

(i)

1(*)

1

3

10

(*)

10

-7

-4

-4

-11

(*)

1-1

0

2-1

-4

15

II

1

1

1

3

9

2

11

-8

_4

(*)

-4

-12

(*)0

(*)

-1-1

-2

14

III'

1

1

57

11

1

12-5

0

-3

-8

-1

2-1

0

13

4

4

IV*

2

1(*)

(*)3

9

1

107

-4

-4

-11

(*)1

1

-2

-2

12

Year

5(*)

4(*)

7

16

39

4

43

-27

-15

(*)

(*)-15

-42

-1(*)

4-2

1

-3

-4

45

Canada

1951

2,68271

236

824

401

3,476

2, 296107255

1824

6315

2,778

698

-10

6

-16

682

-271220

53

-5

-444

-554

-8535

2

-25

-213

1952

I

6702057

20

71

838

5692424

510

123

647

191

1

-2

-3

188

-43-48

25

(*)(*)-66

6

-815

-3

10

-132

11

8193085

236

96(*)

1,059

6022156

510

313

728

331

3

328

-203-6

6

-3

-206

11

19159

7

182

-304

III'

72525

101

252

84

962

58622

155

517

155

805

157

-3

-2

-5

152

-6837-6

-2(*)-39

20

-144

68

-181

IV*

7862561

241

121(*)

1,018

6832140

540

285

822

196

i

C)

-3

193

-639

i

-60

176

28-135

2

71

-204

Year

3,000100304

929

372(*)

3,877

2,44088

275

2077

8616

3,002

875

-6

-8

-14

861

-377820

-6(*)

-371

219

3883

-9

331

-821

Latin American Republics

1951

3,802328113

12421

74816

5,152

3, 533269216

1965

134

4,119

1,033

-41

-17-63

-126

907

-18729

-139

-85 1

-383

11-99

124

34

1952

I

1,0168130

348

1623

1,334

9087665

521

31

1,079

255

-9

-7-32-2

-50

205

-6611

-80

-10

-146

-1

212

-5

8

-67

II

931

II1

1576

1,258

8596654

522

31

1,010

248

-9

-18i

-35

213

-112

-115

1-224

-3

547

-95

-46

57

III'

7727836

30

164

1, 090

66

519

31

1,051

39

-14

5

-\-21

18

-129

29

-39(*)-13

1

086

SS

-93

IV *

8008531

308

170

1,131

9357348

521

31

1,086

45

-13

6-2

-22

23

-59

-5

-2

-1

36

65

-86

Year

3, 519339128

12332

65319

4,813

3, 589285233

2083

124

4,226

587

-45

-25-53

a

-128

459

-19535

-167

-591

-385

-4

12170

-63

115

-189

All other countries

1951

3,16127027

7753

3928

3,988

2, 5157518

6560

106

3,190

798

135

-520-301-69

-1,025

-227

-63-56-73

-142

-341

A

,

454

80

534

34

1952

I

90170

5

2214

962

1, 110

618195

2178

21

825

285

-35

-73-50-19

-177

108

-90

37

-636

-129

-2

0119

0

117

-96

II

805649

2048

1192

1,067

531256

1184

22

751

316

-33

131-73-25

-262

54

-511

39

-40

-126

-1

032

22

50

III'

73244

1760

1064

970

491276

1202

731

239

-32

-108-140-23

-303

-64

-241 11

26

-42; -23

-52

-8

2-42

9

-39

155

IV* Year

770 3, 20853 2316 27

17 7654 176

102 4233 11

1,005 4,152

501 2, 14127 985 22

li 5219 | 783

3 92 7

758 3, 065

247 1,087

38 i 138

-66 -378-132; -395

25! 92

-261J -1,003

-14J 84

i

-28| -193-2| -9 5j 97

-19; -199- ' j

-61 1 -368

j

1 -10

1 315 124

4 4

2l! 121

54 i 163

1

International institutions

1951

11

55

6

63

17

32

8

57

6

-240

-241

-235

1952

I

3

12

5

20

2

2

2

6

14

-21

-21

-7

-153 -6

-12 -2

-165J -8

-19J -4

3J 2

24 \ (*)>

-6 -34

406J 49

II

1

12

13

4

w

2

6

7

-16

-16q

III'

4

12

5

21

25

328

-7

-3

-3

-10

IV*>

(*)

13

1

14

1

3

3

7

7

-20

-20

-13

-51 -11 -59(*) (') - --2 l l -1

-53 -2 -60

l i 12ii

2 l! 126 97 j -434 -4! 4

32 95^ -26

30 -83 99

Year

44

49

11

68

7

30

10

47

21

-60

-6

-39

-117(*)-6

-123

9

648

4

67

95

LineNo.

123

4567

8

91011

1213

1415

16

17

18

192021

22

23

242526

2728

29

30

3132

33

34

35

2. Dependencies include Spanish dependencies.Source: U. S. Department of Commerce, Office of Business Economics,

of tons, were 28 percent below those a year earlier. Forthe whole year, exports were smaller than in any otherpostwar year except 1950.

Third, changing inventories of American products inforeign countries also influenced our exports. Inventories ofmanufactured goods as well as raw materials such as cottonand tobacco accumulated during the period of heavy exportsfrom this country which lasted until the middle of 1952.The lower exports during the second half of the year mayreflect either a decline of foreign purchases for inventorypurposes or, in some instances, inventory liquidations tomeet current demands.

NOTE.Basic data for the years 1946 to 1951, in addition to detailed explanations of themethods used in estimating balance of payment data may be found in the Balance of Pay-ments 1949-51 supplement to the SURVEY OF CURRENT BUSINESS, published in November1952 and available at $1.25 at the United States Government Printing Office, Washington 25,D. C., or Department of Commerce Field Offices.

Not only were cotton stocks large in consuming countriesrelative to current utilization at the middle of 1952, butsubstantial stocks had also accumulated in other producingcountries. At the end of the second quarter of 1952 cottonstocks in the United Kingdom amounted to nearly 14 months'consumption as compared with 6.7 months' supplies a yearearlier.

Fourth, tightened exchange controls reduced purchases inthe United States, particularly by Brazil and to a lesserextent by the sterling area countries. Exports to Brazilalone declined from an annual rate of $748 million duringthe first half of 1952 to $336 million during the last quarter.The effect of exchange controls upon exports to the sterlingarea are less certain, since indirect controls, such as creditrestrictions, and declining incomes resulting from reduced


10 SURVEY OF CURRENT BUSINESS


March 195

Table 3.Balance of Payments of th

Item

Exports of goods and services: 1Merchandise, adjustedTransportation _ . _ _ _ _ _ _TravelMiscellaneous services:

PrivateGovernment _ _


TotalImports of goods and services:

Merchandise, adjusted .TransportationTravel - .. ---Miscellaneous services:

Private -G o vernment


Total - -Balance on goods and services _ _Unilateral transfers (net) :

PrivateGovernment:

Economic aidMilitary aid __ _Other

Total

Balance on goods and services and unilateral transfers

United States capital (net) :Private:

Direct investmentsOther long-termShort-term

Government:Long-termShort-term _ _ _ _ _ _ _ _ _

Total _

Foreign capital (net) :Long-term:

Transactions in United States Government bondsOther _ _ _ _

Short-term

Gold sales (purchases ( ))Balance on foreign capital and gold

Transfers of funds between foreign areas (receipts fromother areas ( )) and errors and omissions.

Total

1951

2, 3312.,f>

27

19317

22588

3,167

2, 22618490

18092

1372

2,911

256

-67

-253(2)

-6

-326

-70

-63-14

87

-368

-18

-328968

-514

-389

477

1952

Year I

2,06923530

20329

23994

2,899

1,942232

94

173156

1326

2,735

164

-73

-431(2)

-511

-347

-2258

-13012

-84

i 87! 3

169

-448

-189

! 620

73880

5

515

59

938

5375119

4336

321

719

219

-16

-20(2)

-2

-38

181

-24

14

-52-1

-70

9

117

-521

-398] 287

II

4886011

485

57()

669

5326726

4339

321

740

-71

-16

-162(2)

-2

-180

-251

n

219

-7815

-52

12-30

22

-11

n

310

in>

384458

5213

63(*)

565

4256432

4439

322

638

-73

-16

-144(2) 2-162

-235

19-127

-37, 2

6

319

65

3

108

121

IV*

459506

526

6094

727

4485017

4342

362

638

89

25

-105(2)

-1

-131

-42

9-12-2

37(*)

32

3527

-35

81

108

-98

United Kingdom

1951

i91114311

16015

8988

1,417

48314837

17862

1342

1,044

373

-32

-218(2)

-4

-254

119

-26-680

890

137

-3383

5

-464

-419

1G3

1952

Year

68213813

16813

8190

1,185

57519441

172106

1286

1,222

-37

-35

-404(2)

-443

-480

21 524

56

51

860

165

-440

-189

618

I

24339

2

414

24

353

157423

4224

311

300

53

0

-17(2)

-26

27

13-314

-2(*)

22

8-2

| 139; 520

-375

i 326

1II Illr IV P

156 11937 30

4 4

40 443 3

17 21

257 221

147 13158 5412 ! 19

43 4427 26

31 311 2

319 i 307

-62 -86

-155 i -134(2) (2)

-1 -1

-163 ! -142

-225 -228

-4 9-3 -2-6 ; 16j

-45 (*)13 -7

-45 16

12 31-31 7

10 69

(z)9 107

279 105

164323

433

1990

354

14040

4329

352

296

58

-13

-98(2)

-112

-54

33

(*) .52

(*)58

3526

-53

80

88

! ~92

export prices reduced domestic demand and consequentlyalso the need for direct import restrictions.

Military expenditures risingForeign dollar receipts were also increased by Government

expenditures abroad for goods and services, including1 "off-shore purchases/' troop expenditures, and our contributionsto "infrastructure" facilities for interallied use. The rise insuch expenditures started in Japan shortly after the invasionof South Korea. Expenditures in Japan declined, however,from the first to the second half of 1952 while those in West-ern Europe increased.

Transactions in civilian services also increased foreigndollar receipts or reduced foreign dollar outlays. Foreignnet expenditures on transportation declined because of re-duced tonnage of exports from the United States, greaterparticipation of foreign vessels in the trade, lower freightrates and increased tourist travel on foreign carriers.

Although tourist expenditures abroad were rising over theyear, foreign tourist expenditures in the United States rosenearly as much, leaving the balance virtually unchanged.

Income on investments, however, appears to have declinedas compared with the previous year. Rising costs abroadincluding taxes, and either stable or in some cases decliningprices of the goods produced seem to have reduced the returnon our foreign investments.

Marked change in unrecorded transactionsThe last major item which improved the financial position

of foreign countries includes all those transactions which canonly be inferred from the difference between the known dollarreceipts and payments. These missing transactions ("Errorsand omissions'7) declined from net receipts of $433 millionduring the first half of 1952 to net payments of $195 millionin the second half. Although in several other postwar yearsthis item declined from the first to the second half, the changeby over $600 million was far more than had previously beenexperienced and may be assumed to reflect more than randomerrors and the lack of data for certain recurrent transactions.

There have been three major shifts in this item since thewar, all of which seem to have been closely related to thechanging strength of the pound sterling. In each of these


March 1953

United States With the Sterling Area

SUEVEY OF CURRENT BUSINESS


11

Other Western Europe

6171

1(*)(*)

70

173

1952

Year

5341

I

203

(*)

II

9(*)

1

(*) (') (*)(x) (*) (x)

(X) (^2

60 23 10

24 10 54 1 14 2 ! (*) ; i

(T) !4 3

(z) (*}

28 33

(*) 1(X) (x)

11 8

42 27 12 2

III r IV P

10 14(z) 1(*) (*)c) i c)(X) (.)

2

Dependencies

1952

Year

205 21130 205 6

i

5461

6 7 2

II

5352

1(X) (X) (X) (X)

79 89(*}21 25

i10 17 325 333 84 86

j i j5 4 1 738 i 042 187 1821 1 i 11 14 31 (*) ! 42 ; 45

i i

8 6

314 11

(x) ' ( J ) (x,) f x }13 ! ' 1 4 3 3

2 i 4i 1 i 1

III--

50422

(*)22

80

1284

11(x)

41

1

806 719 208 200

2 11 ! -481 -386 -124 j -114148

-68

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11 10

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-1 | (2) | (')

i434 | -397

6 348 1

1 3

11 201 (*)

1 18

6 2-19 6

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-y I 13-8 -9 j -10 4 2 --5 502 | 368


Offsetting in part the transactions which resulted in risingforeign dollar receipts were declines in Government economicgrants and loans and private capital movements. Govern-ment grants and loans are discussed in the following articlein this issue of the SURVEY. Various factors accounted forthe change in net loan disbursements between the first threequarters and the last quarter of the year. Loans under theMutual Security Act (10 percent of the aid under the fiscal1952 appropriation had to be given in loans), and theutilization of the second half of the $190 million grain loanto India provided most of the large disbursements duringthe first two quarters. The loan disbursements during thethird quarter include a $154 million advance by the Export-Import Bank to France against military contracts, of which$49 million was repaid by the end of the year. Annual loanrepayments of $50 million by the United Kingdom addedto the capital inflow during the last quarter of the year.

Private investments declinePrivate capital movements declined during the year and

were over $100 million smaller than in 1951. The declinefrom 1951 was concentrated in portfolio investments, mostlyin Canadian securities. Although direct investments in 1952were about $100 million higher than in 1951, the trend afterthe middle of the year was downward. Completion offacilities in the oil industry in Latin America and the MiddleEast appear to be a major factor in the decline. Increasedsupplies of oil and oil products in relation to demand mayalso have reduced the need for further expansion.

Canada is the major area where large direct investmentsare still going forward. Development of oil and mineral de-posits appears to continue at previous rates, although therewas an apparent high point in the second quarter resultingfrom the sale of securities by American controlled Canadiancompanies to obtain funds for later investment.

Temporary factors in reserve riseIn order to evaluate the significance of the changes in the

balance of payments during 1952 it is important to examinewhether the developments which on balance facili tated therelatively large accumulation of foreign reserves are likely tobe temporary, or whether they may be expected to continuefor some time.

The relatively greater rise in business activity in theUnited States as compared with foreign industrial nations isnot likely to continue to the same extent. Textile productionabroad, one of the major industries which held down overallforeign production, was again on the upswing at the end of theyear. This may indicate that the demand for textile rawmaterials, including cotton, was near bottom during the lastmonths of the year. At the same time, however, excesscapacity in the metal products industries appeared to berising in the United Kingdom. In the event that Britishindustries are successful in utilizing their excess capacity inthe metal products industries for increased exports, compe-tition for similar exports from the United States may well

The decline in exports of coal to overseas countries duringthe second half of 1952 was in part due to temporary factors.However, large stocks of coal abroad will postpone the needfor imports even if the demand for coal should increase.

The rise in wheat production from 1951 to 1952 in Europeand Canada was somewhat more than the average rise duringrecent years and may have been due in part to unusuallyfavorable weather conditions. Less favorable climatic con-ditions may again raise the demand for supplies from theUnited States. Inventories held abroad would, however,postpone an upturn in foreign purchases here, even if theforeign supply situation becomes less favorable.

Possibly another temporary factor was the movement offunds abroad as reflected in the changes of unrecorded trans-actions. Not only is the amount of funds available for trans-fer abroad limited, particularly if business activity here re-mains at a high level, but the recent rise in short-term interestrates in this country has probably reduced the incentive forsuch transfers.

The volume of merchandise imports required for currentuse in 1953 is likely to remain as high as in 1952, as long as theprospects for domestic business activity remain favorable.With a steady demand here and perhaps a rising demandabroad, prices of imported goods may not continue to declinebelow the last quarter of 1952 but even if prices stabilize atthe level of that period, they would average about 3-4 per-cent lowerin 1953 than in 1952.

The major source from which foreign countries can expecthigher dollar receipts is military expenditures, which arelikely to increase as deliveries are made on contracts for mili-tary equipment previously placed.

Government aid, other than military, may be expected tocontinue the downward trend which has been taking placesince 1949, although a temporary upturn of grants over therelatively low rate during the fourth quarter of 1952 is likely.Private investments, however, may not decline below therate during the second half of 1952, since, with the exceptionof Canada, the net outflow of funds for direct investmentshad already shrunk to an annual rate of less than $100 million.

On balance, therefore, it appears that, with favorable cli-matic conditions abroad and continued favorable businessconditions in the United States, foreign countries should beable to raise their gold and dollar assets again in 1953, al-though probably at a slower rate. This tendency would befurther strengthened if those foreign countries which had re-duced their stocks of American goods, should resume theirpurchases, particularly of those goods which are essentialfor the continued operation of their economies. This mayapply even to those countries which restricted imports fromthe United States through exchange controls.

Even if net dollar receipts by all foreign countries declineagain during the year, the portion accruing to the sterlingarea may continue to rise, as it did during the closing monthsof last year. The increase in foreign gold purchases whichstarted in December and which,had continued during thefirst months of this year reflected largely the shift in foreigndollar earnings to the sterling area. British reserves, moreso than those of most other countries, are usually held in goldrather than in the form of dollar deposits or other liquid dol-lar assets.


by E. S. Kerber

United States Foreign Aid in 1952

JL HE composition of United States Government foreign aidshifted during the course of 1952, with economic assistancedeclining and military aid rising. By the final quarter, mil-itary assistance was close to $1 billion, and made up overtwo-thirds of the gross foreign aid.

Total gross aid of $5.6 billion was 10 percent more than inthe preceding year. For the entire year, military aidamounted to $2% billionalmost double the 1951 figureand comprised 49 percent of all gross aid.

The reduction in economic assistance programed for thefiscal year beginning July 1951 was reflected in the actual aidprovided in 1952. Gross economic assistance contracted toless than half a billion dollars in the December quarter; ittotaled $2.8 billion for the calendar year as a wholeone-fifth less than in 1951.

Net Foreign Aidmilitary M

economic assistance by fh* end of 1952Of DOtUMtS

.8

NET ECONOMIC ANDTECHNICAL ASSISTANCE

NET MILITARY AID

I I I

The emerging predominance of military aid is even morestrikingly portrayed on the basis of net foreign aid, as canbe seen in the accompanying chart. Net foreign aid, whichtakes into account the receipts by the United States Govern-ment of reverse grants and returns on grants, as well as therepayment of credits, was $5 billion in 1952.

NOTEMR. KERBER IS A MEMBER OF THE CLEARING OFFICE FORFOREIGN TRANSACTIONS, OFFICE OF BUSINESS ECONOMICS.

During the year Congress raised the required counterpartreturn for economic grants under the mutual-security pro-gram from 5 to 10 percent; in the last quarter, these counter-part collections showed a corresponding increase which re-duced net economic aid. Another major factor in the declineof net economic assistance in 1952 was the larger repaymentson postwar credits, several of which had terms deferringprincipal repayments until last year. Thus, in the lastquarter of 1952, credit repayments exceeded credit utiliza-tions by $107 million.Grants six-sevenths of total

Grants continued to dominate foreign aid last year despitethe fact that credit utilizations doubled to comprise 15 per-cent of gross aid. As a result of the large credit repayments,net credit utilizations were $400 million, or 8 percent of theannual net foreign aid. This 1952 net credit utilization raisedto $10.7 billion foreign indebtedness on loans and othercredits made by the United States Government since thebeginning of World War II. The United States Governmentcollected $204 million in interest on this indebtedness in 1952.

Most of the outstanding indebtedness was built up in theearly postwar period. Credit utilization constituted 38 per-cent of the gross aid in the postwar period prior to the Com-munist invasion of the Republic of Korea.

Postwar aid $41 billionGross foreign aid for the postwar period through 1952

totals $41 billion, exclusive of the Government's investmentof $3.4 billion in the International Bank for Reconstructionand Development and the International Monetary Fund.Net foreign aid in the same 7/^-year period totals nearly $38billion. At the present rate, net foreign aid since V-J Daywill soon exceed the total of the 5-year war period.

Most of the foreign-aid programs of the United StatesGovernment were integrated into one mutual-securityprogram in 1951. Through the latter program the UnitedStates Government now provides aid to other nations in theeffort to improve their economic and military stability andsecurity. Mutual-security-program foreign aid includes mil-itary and economic and technical assistance.

Mutual-security programAid furnished under the mutual-security program corn-

prised 88 percent of gross foreign aid in 1952, in comparisonwith 86 percent in 1951 and 75 percent for comparable pro-grams in 1950. Under the coordination of the Director forMutual Security the nonmilitary or economic aid programsare operated for the most part by the Mutual Security Agencyand by the Technical Cooperation Administration of theState Department. Military aid is provided by the DefenseDepartment.

The significant portions of foreign economic aid not pro-vided under the mutual-security program include the creditsof die Export-Import Bank, which accounted for 9 percent

13



of gross 1952 aid, and civilian-supply grants by the ArmyDepartment to Korea and the Ryukyu Islands.

Western Europe major beneficiaryIn the last quarter of 1951, the European program for

economic and technical assistance represented the largestindividual component and comprised one-half of gross foreignaid. A sharp decline has since occurred in European eco-nomic aid. In 1952 this segment represented less than one-third of gross foreign aid. In the final quarter it wasone-fifth.

Nevertheless, Western Europe continued in 1952 to be thelargest beneficiary of United States Government foreign aid.It received mutual-security-program military aid totaling$2% billion in the year, double such aid in the preceding year.This total in the }^ear 1952 was more than the aggregate ofmilitary grants to the area in the entire preceding 6K-yearpostwar period.

The doubling of military aid to the European countriesparticipating in the North Atlantic Treaty Organization(NATO) more than offset the $625-million decline in eco-nomic assistance to Western Europe in 1952. Gross foreignaid to the area amounted to $4% billion, up 14 percent.

Military aid strengthens alliesMilitary aid provided to European countries in 1952 in-

cluded $2,062 million representing shipment of actual militaryequipment, $83 million in services (including military train-ing) and $34 million for the ocean freight of the materialwhen carried on United States vessels.

During the past calendar year the United States Govern-ment also contributed $73 million to NATO toward the costof fixed facilities which are needed for effective defense andwhich are used jointly by the integrated combat forces underthe NATO program. The United States is participatingwith Canada and eight other NATO nations in a multilateralfinancing of these common facilities.

The total for the first three annual construction programsamounts to $739 million, of which the United States Govern-ment is to contribute $288 million. In December 1952 theNATO Council voted to build $230 million worth of thefourth annual program, and in February 1953 approval forthis fourth program was increased to $450 million. TheUnited States contribution to the December authorizationhas been announced as $92 million.

Aid fosters European integrationThe United States programs for aid to Western Europe

recognize the need to encourage and facilitate the mutualefforts of the European community to increase its defenseand economic status by political federation, military integra-tion, and economic unification. In the Mutual Security Actof 1952 the Congress specifically directed that the programshould be administered to support these ends. During 1952the High Authority for the European Coal and Steel Com-munity, joining the coal and steel industries of six continental

NOTE.For a detailed description of aid furnished during the war period and the 5-year post-war period prior to the Korean invasion see the Foreign Aid supplement to the SURVEY OFCURRENT BUSINESS, published November 1952. Available at $1 from the Superintendent ofDocuments, Washington 25, D. C. or the various Department of Commerce Field Offices.

nations, began operations. The treaty establishing theEuropean Defense Community was signed in May 1952 andis pending ratification by the participating nations. Con-gress has authorized the provision of military aid directly tothe European Defense Community.

The European Payments Union (EPU), by which membersof the Organization for European Economic Cooperationengage in multilateral exchange clearance, received no directassistance from the United States Government in 1952. In1950 and 1951, payments of $43 million and $195 million,respectively, were made to EPU as part of mutual-security-program economic assistance. These funds constitute a con-tribution to the capital of EPU. Of the previous UnitedStates Government pledge to the capital fund, $123 millionwas still available at the end of 1952. Although no addi-tional capital contributions were made to EPU in 1952, over$135 million was granted as United States Government eco-nomic aid to Austria, Greece, Iceland, Turkey, and theUnited Kingdom to assist these countries in meeting theirobligations to EPU.

Country changesDeclines were effected in the economic aid furnished to

most European countries in 1952. The decreases rangedfrom 23 percent for Yugoslavia to 84 percent for Denmark.The contraction in economic aid followed the general eco-nomic recovery throughout Europe. Gold and dollar re-sources of Western European countries (excluding Switzer-land and the United Kingdom) rose from $4J4 billion to $5/2billion during the year. Early in 1953 the Netherlandsannounced that it would not require any fiscal year 1953allotments, in view of the improvement in its hard-currencyposition.

Ireland and Sweden received almost no aid at all in the lastyear, in contrast to the approximately $25 million each hadbeen furnished in 1951. Allotments of mutual-security-program economic aid were terminated for these two nationsbeginning with fiscal year 1952.

On the other hand, nonmilitary aid to Turkey increased 15percent. Spain, with postwar aid confined to credit utiliza-tions in 1951 and 1952, drew more in the latter yearprinci-pally from the special $62X-tnillion congressional loanauthorization made as part of the mutual-security-programappropriation in September 1950.

Gross economic aid to France and the United Kingdomrose during the past year. The total to these two countriesconstituted half of the economic assistance aiforced WesternEurope.

United Kingdom again receives large aidThe United Kingdom in 1951 dropped from the position of

the largest recipient of United States Government economicassistance, in consequence of the almost complete cessation ofaid allocations for that country after December 31, 1950.However, that nation experienced an adverse shift in its netdollar and gold position in the last six months of 1951, sus-taining a drain of over $1/2 billion upon its gold and dollarresources. During this period the United Kingdom sold$950 million in gold to the United States.

Despite restrictions of dollar imports and other controlsexercised by the British Commonwealth countries in thesterling area, continuing deterioration made necessary a


March 1953 SUEVEY OF CURKENT BUSINESS 15Table 1.Summary of Foreign Aid (Grants and Credits), by Program: July 1, 1945, Through Dec. 31, 1952


Program

Gross foreign aid *Grants utilizedLess: Credit-agreement offsets to

grants - _ .Credits utilized- _

I^ess: ReturnsReverse grants and returns on grants .Principal collected on credits. _ .

Equals: Net foreign aid __Net grants -- -Net credits

Grants utilizedLend-lease -,Mutual security:

Economic and technical assist-ance

Military aid 2Civilian suppliesUNRRA, post-UNRRA, and in-

terim aid _ . _ _ _ . _ .Philippine rehabilitationGreek-Turkish aidChinese stabilization and military

aid -Other ---

Reverse grants and returns on grantsReverse lend-iease _ . _ __Return of lend-lease shipsWar-account cash settlements-..Counterpart funds:

Economic and technical assist-ance

Military aid -- -Credits utilized

British loan _Export-Import Bank (for own ac-

count) -- -Direct loansLoans through agent banks. _

Surplus property (including mer-chant ships)

Credit-agreement offsets to grants-Lend-lease (excluding settlement

credits)Mutual security (including loans to

Spain and India) -- -Other

Principal collected on creditsBritish loanExport-Import Bank (for own ac-

count)Direct loansLoans through agent banks _ _

Surplus property (including mer-chant ships) _ _ _ _ _ _

Credit-agreement offsets to grantsLend-lease (excluding settlement

credits) _ _ .Other 6

Totalpostwarperiod

41,03430, 247

1,25612, 044

3,422

1,2302,191

37,612

27, 7609,852

30,247

1,932

12, 7114,6875,340

3,443634659

243597

1,230

133370120

59116

12, 044

3,750

3,4153, 237

127

1,4871,256

71

1,608458

2,191

90

1,125953172

27662

40600

BeforeKorean

invasion

28, 15918, 824

1,25610, 5912,178

8741, 304

25,98116, 6939,287

15,8241,932

7,00463

4,5643,443

519636238426874133287120

3331

10,5913,7502,6512,498

1531,4841,256

69990390

1,304

6324821491232221

507

After Korean invasion

Total

12,87511, 423

1,4521,243

356887

11,63111, 067

56511,423

5,7074,624

776

115235

171

356

83

25815

1,452

763789

*Cr 262

2

61767

887

9049347023

153401993

July-De-cember

1950

2,2232,021

201217

65152

2,0061,956

502,021

1,189402257

100152

5665

633

201

8184

* C r 3

(3)

(3)7842

152

887414

251

633

1951

Total

5,0744,646

428452140312

4,6224,506

1164,646

2,6681,484

366

1293

105140

23

1106

428

204222

5 Cr 182

20913

31244

134130

55621

749

January-March

1,2361,114

122

103

3964

1,133

1, 07558

1,114

64730690

43

(3)6439

10

271

122

79835 C r 4

(3)

394

64

31301

2211

10

April-June

1,383

1,287

96843549

1,2991,252

47

1,287

690414148

432

2635

332

96

6681

Cr 151

254

49

19182

131

(3)16

July-Sep-tember

1,2501,146

104

117

3384

1,133

1,11419

1,146

62243081

23

(3)8

33

303

104

oo

CO CO

704

84

33321

11135

23

October-December

1,2051,098

106

14834

114

1,0561,064

-81,098

70833546

11

(3)

34

13

201

106

2828

(3)1

752

114

44

51502

127

(3)

1952

Total

5,5784,756

823

574151423

5,0044,605

3994,756

1,8502,739

154

4(4)

10151

60

856

823

478483

* C r 5

2

33112

423

45271267

471186

12

January-March

1,088885

203

902763

998858140

885

382457

44

1(*)

1

27

2

222

203

7980

* C r 2

2

1212

63

46451

13(3)

13

April-June

1,5371,291

246137

7562

1,4001,216

184

1,291

59565143

1(4)

1

75

58

17(3)

246

106106

(3)

1354

62

39382

15(3)(3)

July-Sep-tember

1,5231,215

30914822

126

1,3751,193

182

1,215

52165041

2

1

22

(3)

202

309

2442476 C r 3

624

126

8686

(3)2811

(3)

October-December

1,4301,365

6519927

172

1,2311,338 107

1,365

352981

26

(3)

7

27

261

65

4949

(3)

142

1724599981

1675

16 SURVEY OF CURRENT BUSINESS MarchTable 2.Summary of Foreign Aid (Grants and Credits), by Major Country: July 1, 1945, Through Dec. 31, 1952

[Millions of dollars j

Major country !

Gross foreign aid (grants and credits) 2 _ .Less: Returns, _ . __ . ..Equals: Net foreign aidWestern Europe and dependent areas:

Gross foreign aid - - _ ... -Less: ReturnsEquals: Net foreign aidAustria:

Gross foreign aidLoss* ReturnsEquals: Net foreign aid

Belgium - Luxem bourg :Gross foreign a idLess: Returns . - -Equals: Net foreign aid _

British Commonwealth: UnitedKingdom :

Gross foreign aidLess* ReturnsEquals* Net foreign aid

Denmark:Gross foreign aid _ . .Lpss' ReturnsEquals: Net foreign a id .___

Finland:Gross foreign aidLess* ReturnsEquals' Net foreign aid

France:Gross foreign aid.Less* Returns --Equals* Net foreign aid

Germany:Gross foreign aidLess* ReturnsEquals: Net foreign aid_

Greece:Gross foreign aidLess* Returns _-Equals' Net foreign aid

Iceland:Gross foreign aid .Less- Returns . _.Equals' Net foreign aid

Ireland:Gross foreign aidLess: Returns _Equals' Net foreign aid

Italy:Gross foreign aidLess* ReturnsEquals' Net foreign aid _ , _

Netherlands:Gross foreign aid ....Les^' ReturnsEquals: Net foreign aid-

Norway:Gross foreign aid ..Less1 Returns ,Equals' Not foreign aid

Portugal :Gross foreign. -u< 1Le^s: ReturnsE qua Is : N et foreign aid - .

Spain:Gross and net foreign aid

Sweden:Gross foreign aidLess: Returns .Equals: Net foreign aid

Trieste:Gross foreign aid . _Less: Returns..Equals: Net foreign aid

Turkey:Gross foreign aidLess: ReturnsEquals: Net foreign a id _ -

Yugoslavia:Gross foreign aidLess: Returns .Equals: Net foreign aid

See footnotes at end of table.

Total ipostwarperiod

41,0343,422

37,612

30, 1282,213

27, 915

1,01358

950

80668

738

7,441882

6, 559

29116

275

1283791

5, 070438

4, 631

3,891173

3,718

1. 58785

1 502

281

26

1471

146

2, 64716S

2, 478

1. 243185

1, 058

32848

i 281

47 2

45

i 41

! 112! 3i 109

1 4H1 9

44j! 398i 38i 360

525I 8518

Before iKorean

T ,invasion

Tota] J

^

1i

28, 159 12, 8752,178 1,243

25,981 11,631

20, 500 9, 6281 194 1,019

19,306 8.609

722 29125 32

697 259

634 17234 33

600 139

6, 445 997652 231

5, 793 766i\ I193 99

8 8185 91

128 (3)27 10101 -10

3.877 1,192166 273

3. 712 920

3. 139 75282 91

3. 057 061

1,173 414i 32 54! 1.142 360

,0 17(3) 1

10 16

99 48(?) ! 1 ...

99 47

: 2, 024 62375 93

1 . 949 530

; 906 336

; 50 135857 201

215 11423 25

: 192 89i i

5 42(3) 2

5 -10

i

SCB_031953

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