SCB_011968

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

,'OFJANUARY 1968/ VOLUME 48 NUMBER

; , , ; ; ; ' > ; V , ;\ /CONTENTS

The Economy in 1967 1

National Income and Product in 1967 3

National Income and Product Tables 16

Employment-PricesFinance 20

The Balance of Payments 27

Personal Income Rises in All Regions in Third Quarter 30

CURRENT BUSINESS STATISTICS

General S1-S24

Industry S24-S40

Subject Index (Inside Back Cover)

- ''

Alexander B. Trpwbridge / SecretaryWilliam H. Shaw / Assistant Secretary

for Economic AffairsOffice -of Business Economies ' . ' . : . ' '

George Jaszi / DirectorMorris R. Goldman Louis J. Faradiso

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

''STAFF d)m^ ' : .National Income and Product;

Mabel A* Smith George M, CobreiiHenry Shavell Charles A WaiteGenevieve B. Winasatt John A, GormanDonald A, King Leo Bernstein

Employment-*- PricesFinance:Mabel A. Smith Donald A, KingDavid R. Hull, Jr.

The Balance of Payments:Evelyn M. Parrish

Personal Income:Robert B.Bretzfelder

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The Economy in 1967

A HE year 1967 was another one ofexpansion in the U.S. economy-theseventh in a row since the upturn thatstarted in early 1961. During the year,rising demand, chiefly under the stimu-lus of increasing government purchasesand the recovery in homebuilding,again brought new records in produc-tion and sales, income, employment,and living standards. The economicclimate in the first half of 1967 was quitedifferent from that of the second.Activity was slow in the first halfbecause of a major adjustment inbusiness inventories, but it improvedafter midyear and was rising briskly atyearend.

Most of the gains from 1966 to 1967were smaller than those from 1965 to1966. The contrast was pronounced inmanufacturing, especially durable goods,where the inventory adjustment, aleveling out in capital investment, anda decline in automobile demand thatwas aggravated by a strike had theirmajor impact. The sluggish activity indurable goods was primarily responsi-ble for a decline in corporate profitsthe first annual decrease since 1960.

The demand for labor was not quiteso intense as it had been in 1966, whenlabor shortages were fairly common.Hours of work were cut back and em-ployment grew less rapidly, mainly be-cause there was little growth in manu-facturing. The increase in employmentfell somewhat short of the rise in thelabor force so that unemploymentshowed a small increase for the firstyear since 1963; however, because therise in the labor force was rather large,the average rate of unemployment wasunchanged from the recent low reachedin 1966. Unemployment rates contin-

ued to be high for teenagers andNegroes, and employers continued toplace a premium on skill and experience.Despite last year's slower growth,workers obtained the largest increasesin wages and fringe benefits since themidfifties.

The economy in 1967 was beset witha number of difficult problems; amongthe most important were the continuedrise in prices, the worsening in the Na-tion's balance-of-payments deficit, andhigh interest rates. The price rise wasa continuation of the 1966 experience,but reflected chiefly the pressure ofcosts rather than of demand. Unit laborcosts showed a substantial increase, theresult of a large rise in wage rates thatexceeded the rise in productivity; theadvance in productivity was much less

CHART

Gross National Product

Billion $ (ratio scale)850

800

700

600 -

500

450 I I l I I I I I II I I I _L 1 11960 61 62 63 64 65 66 67

Quarterly, Seasonally Adjusted at Annual Rates

U.S. Department of Commerce, Office of Business Economics 68-1-1

than average for the postwar period.Part of this cost rise was absorbed byprofit margins, especially in the firsthalf, but most of it was passed on inthe form of higher prices. An offsettingfactor last year was the decline in farmprices, which made possible a slight de-crease in retail store food prices.

The balance-of-payments deficit in1967 showed a marked increase as com-pared with 1965 and 1966. Concern overthe U.S. international payments posi-tion and its relation to the world mone-tary system mounted sharply in mid-November when the British pound wasdevalued. The devaluation greatly in-creased foreign demand for gold, whichin turn led to heavy gold outflows fromthis country late in the year. The deteri-oration in our balance of payments ledat the start of 1968 to a rnultifacetedadministration program involving man-datory controls over capital outflowsand a proposal to curb tourist expendi-tures.

Credit was much more freely avail-able in 1967 than in 1966 as a result ofthe expansionary policy followed bythe monetary authorities after thecredit stringency of 1966. In responseto the slowdown in activity around theend of 1966, the Federal Reserve lostlittle time in adopting a policy ofstimulation after the restrictive postureof 1966. Heavy open market purchasesand reductions in both reserve require-ments and the discount rate served tobring about a large expansion in mem-ber bank reserves and a record expan-sion in commercial bank credit. How-ever, a shift toward restraint becameevident late in the year when the dis-count rate was raised and reserverequirements were increased.

l


SUEVEY OF CUKEENT BUSINESS January 1968

Although borrowers were much moresuccessful in obtaining funds last yearthan the year before, long-term interestrates rose almost without interruptionafter early spring to levels that ex-ceeded those reached during the heightof the credit restraint of 1966. The risein rates stemmed mainly from a recordvolume of new security offerings, espe-cially by corporations. This, in turn,reflected a number of factors: Contin-uing large requirements, the desire bycorporations to bolster liquidity posi-tions, which had deteriorated sharplyin 1965 and 1966, and expectations offurther increases in interest rates andprices.

Fourth quarter GNPThe more rapid rate of expansion

that became evident in the summercontinued in the final quarter of theyear. According to preliminary esti-mates, GNP rose $16% billion to aseasonally adjusted annual rate of$807X billion. The 2-percent advancein current dollars was divided aboutequally between an increase in physicalvolume and an increase in price, andin broad outline resembled the changein the quarter before.

A large part of the GNP advancealmost one-thirdwas attributable toan increase in the rate of inventoryaccumulation, mainly by trade firms.The inventory figures are quite tenta-tive since they are based on incompletedata. The increase in final sales$11billionwas the smallest quarterlygain of the year. As in the third quarter,the rise in final sales reflected modestadvances in personal consumption ex-penditures, nonresidential fixed invest-ment, and Federal Government pur-chases, and further large increases inresidential construction outlays andState and local purchases. The pre-liminary figures suggest that net ex-ports declined as exports leveled offand imports rose rather sharply.

Wage and salary disbursements madetheir largest quarterly gain of theyear$9% billionwith increases wide-spread among industries. The rise ingovernment payrolls was unusuallylarge as a result of pay increasesgranted to Federal military and civilianpersonnel. Dividend payments regis-tered their first quarterly decline of1967 because yearend extras weresmaller than usual. With most othertypes of income making small gains,total personal income was up $11

During 1967 changes in GNP . . .

CHART 2

Billion $ Change

reflected continuing gains in final sales,

and pronounced shifts in inventory investment

-5 -

-10 -

-151966 ' 1967

Change From Previous QuarterSeasonally Adjusted at Annual Rates

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

billion, slightly less than the thirdquarter advance. Disposable incomerose $9% billion, a little more than inthe third quarter, but with consump-tion showing no acceleration, there wasa sizable increase in both the level andthe rate of personal saving.

Activity up in DecemberBecause of the strike in the motor

vehicle industry, the quarter startedout with activity rather sluggish, butended up on a stronger note. Theeconomy was continuing to recoverfrom the slowdown earlier in the year,and output was receiving an addedfillip as a result of the recovery fromthe auto strike and the apparent startof another round of steel stockpiling.

Most broad measures of activity-personal income, nonfarm employment,the unemployment rate, and indus-trial productionimproved in De-cember after seasonal adjustment.Paced by a sharp rise in durable goodsmanufacturing, industrial productionwas up 1% percent after a 1.7-percentrise in November. Except for ma-chinery output, which was unchanged,all durable goods industries rose overthe month, with steel and motorvehicles accounting for better thanhalf of the increase in the total index.

Personal income in December showedanother unusually large rise$5.7 bil-lion at an annual rateafter a $6.5billion increase the month before. InDecember, the President signed intolaw a pay raise for Federal workersthat was retroactive to October. Lump-sum disbursements of retroactive payand the new pay scale were mainlyresponsible for a $4.7 billion increasein government payrolls. Private pay-rolls advanced $2 billion in December,reflecting principally an employmentincrease of 200,000 workers in nonfarmestablishments. Aside from a sharp$2 billion drop in dividends, most otherincome changes in December were minor.


National Income and Product in 1967

THE gross national product rose to$785 billion in 1967, an increase of $42billion, or 5% percent, over 1966.Prices rose 3 percent in overall termsso that the rise in the physical volumeof production was only 2.K percent,the smallest annual increase since 1961.

Much of the slowdown in the GNPincrease was attributable to inventories,which rose $13% billion in 1966 andabout $5 billion in 1967. The cutbackin inventory investment, a partialcorrection of the excessive accumula-tion of 1966, was concentrated in thefirst half of 1967. It was so severe that,in spite of sizable advances in finalsales, total production grew very littlein that periodin real terms, only 1percent at an annual rate from thefourth quarter of 1966 to the secondquarter of 1967. However, in thesecond half, the rate of inventoryaccumulation was stepped up, and withfinal sales continuing to increase, thoughat a less rapid pace, real GNP ad-vanced at a rate of better than 4percent.

In the aggregate, the relative in-crease in final sales was almost as largein 1967 as in 19667 percent as against8 percent, measured in current dollars.For the full year, by far the largestpercentage increases were shown byFederal defense purchases and Stateand local government outlays. Con-sumer spending rose about as much asGNP while fixed investment increasedonly slightly and net exports were notmuch different from the year before.

Personal income made a better show-ing than GNP, rising more than 7

percent over 1966. This came aboutfor a variety of reasonspartly be-cause government transfer payments,notably for medicare, showed a verylarge increase and partly because cor-porations increased their dividend pay-

CHART 3

Percent Changes in Current Dollar GNP

-10

Percent Change0 10 20

GNP, TOTAL

State and LocalGovernmentPurchases

30


ments even though their profits fell.Higher incomes brought personal

consumption expenditures to a newpeak with increases in all major cate-goriesdurable goods, nondurablegoods, and services. However, the risein durable goods was quite small be-cause of lagging sales of automobiles.Auto sales were depressed early in theyear when economic activity was slug-gish; they were held down in the secondhalf mainly by the 2-month strike thatstarted in early September at the FordMotor Co. In addition, consumerssaved relatively more of their incomelast year than in any other year since1958.

After several years of substantialincreases, business spending for struc-tures and equipment showed littlegrowth in 1967. With many industriesoperating well under preferred rates ofcapacity utilization and with profitslower than in 1966, spending for theyear rose only 3 percent. In terms ofphysical volume, it appears that ex-penditures were about unchanged.

Homebuilding showed a considerablerecovery during 1967 following thesharp cutback in 1966 caused bytight money. As credit conditions im-proved after the autumn of 1966, resi-dential construction expenditures roseat an accelerating pace from the lowfourth quarter rates. Private nonfarmhousing starts rose from a seasonallyadjusted annual rate of 1.1 millionunits in the first quarter to 1.2 millionin the second and 1.4 million in thethird; in October and November, therate of starts was approximately 1.5million units.


SURVEY OF CUEEENT BUSINESS January 1968

Purchases of goods and servicesby government Federal, State, andlocalincreased about 15 percent in1967, providing the main stimulus tothe rise in economic activity. Becauseof the expansion of the war in Vietnam,purchases for national defense in-creased about one-fifth over 1966,approximately matching the largeadvance of the year before. The in-crease was extremely large in the firsthalf of 1967, but it diminished con-

CHART 4

Percent Changes in Real GNPby Type of Product Real GNP grew 2^2 percent from 1966 to 1967,

well below the pace of recent years All types of output reflected the slowdown

the change in durable goods was pronouncedPercent Change

TOTAL

NONDURABLE GOODS

SERVICES

1947-67Avg.

1963

siderably in the second half. Spendingby State and local governments con-tinued to rise about in line with itslong-term growth.

Last year's rise in national income,although sizable, was not as widelydistributed as in other recent years.With employment higher and with

rates of pay up considerably, totalemployee compensation showed a 1%-percent increase over 1966 after arise of 10% percent the year before.However, the income of farm pro-prietors fell because of lower farmprices, and corporate profits were re-duced because of a cost squeeze.

Personal Income, Consumption, and Saving

Change From Previous Year or Half Year

* Based on seasonally adjusted annual rates.U.S. Department of Commerce, Office of Business Economics

PERSONAL income rose to $626 bil-lion in 1967, registering a sizable in-crease of $42 billion, or 7.2 percent,over 1966. Although the 1967 advancein personal income fell short of the8 ^ -percent gain achieved in the pre-vious year, it was much more pro-nounced than the 5.6 percent growthin GNP. It may be noted that in theprevious 4 years the percentage gainsin personal income about matched theincreases in GNP. Personal income heldup better than GNP last year for twomain reasons: The first was the con-tinued rise ($1.3 billion) in dividendpayments despite a $3 billion reductionin before-tax profits in 1967. Second,and even more importantly, there wasan unusual rise in transfer paymentsin 1967 resulting mainly from the firstfull year of medicare benefit payments.Government transfer payments in-creased by a record $7.9 billion in 1967.

As compared with 1966, the slow-down in the growth of personal incomereflected a dampening of the increasein wage and salary disbursements, from$35^ billion in 1966 to $29 billion in1967, due to a smaller employmentincrease and a cut in hours in somemajor industries. Larger supplies offarm products led to lower farm pricesand resulted in a decline of $1.3 billionin farm proprietors' income, after anincrease of $1.3 billion in 1966.

Personal tax liabilities to Federal andState and local governments rose to$81% billion in 1967, about $6% billionmore than in 1966. As a result of thehigher personal taxes, disposable per-sonal income in 1967 increased lessthan personal income$36 billion, or

7.0 percent, to a total of $544% billion.The 1966 rise was $36% billion, or7.8 percent.

A large part of the 1967 increase inspendable income was dissipated inhigher prices. Consumer prices (GNPbasis) rose 2.6 percent in 1967, aboutthe same as in 1966; indeed, in thesecond half of the year, the increaseaccelerated to an annual rate of over3% percent. Allowing for the higherprices, real disposable income in 1967was 4.3 percent above 1966. On a percapita bsbsis, the rise was 3.2 percent,much less than the average annual in-crease of close to 5 percent in the preced-ing 3 years. Furthermore, following alarge gain in real spendable income percapita in the first quarter of 1967, theadvance moderated to an average riseof only 2 percent at an annual rate inthe final three quarters of the year.

Consumer outlays

Consumer spending was unusuallyrestrained in 1967. Personal consump-tion expenditures increased 5.5 percentover 1966much less than the rise indisposable personal income. This wasin marked contrast to each of theprevious 2 years, when the percentageincrease in spending was about equal tothe income rise of 7.8 percent.

With expenditures rising irregularlythrough the year, consumers spent atotal of $492 billion in 1967, $26 billionmore than they spent in 1966. The risein real personal consumption expendi-tures was a little less than 3 percent, ascompared with a 5-percent expansionin 1966.


January 1968 SURVEY OF CUERENT BUSINESS

Auto purchases lagWhen consumer spending is viewed

by major categories, the 1967 patternof demand reveals some rather inter-esting developments. The most strikingwas the continued sluggish behavior ofspending on automobiles and parts,which showed no increase from 1965to 1966 and declined by $% billion toa total of $29 billion from 1966 to1967. The failure of auto purchases torise from 1965 to 1966 probably reflectsthe fact that purchases in 1965 wereunusually high; the upsurge in salesearly that year after the strikes in theprevious autumn was an importantfactor affecting 1965 purchases. Thereis no single explanation for the decreasefrom 1966 to 1967. Sales were obviouslydepressed early in the year by thegeneral slowdown in economic activity,and may also have been adverselyaffected by low inventories in dealers7hands in the summer months. Althoughthe strikes held down sales from latesummer through much of the fall, theimprovement in sales in December wasnot especially noteworthy.

Last year's decline in expenditureswas attributable to a decrease in salesof domestically produced cars. For 1967as a whole, sales of such cars totaled7.6 million units, 10 percent below1966. Sales in the last quarter of 1966were relatively good, at a seasonallyadjusted annual rate of 8.2 millionunits. In the first quarter of 1967, salesdipped to a rate of only 7.2 million.They rose to a rate of 8.1 million in thenext quarter but fell back to 7.7 millionin the third and 7.3 million in thefourth. Sales of imported cars in 1967fared much better than domestic cars,rising 17 percent over 1966 to a totalof 770,000 units.

Other divergent patterns

Consumer expenditures excludingautos and parts held up much betterthan autos last year. However, di-vergent trends are apparent among themajor categories. This is clearly indi-cated from the percent distribution ofpersonal consumption expenditures,based on current dollars, given in thetext table.

The $2 billion increase in consumerexpenditures for durable goods in 1967,to a total of $72 billion, was due mainlyto higher spending for furniture andhousehold equipment. These purchasesaccounted for 6K percent of total con-sumer expenditures about the samepercentage as in 1966 but larger than inany other year of the past decade.

Spending for nondurable goods in1967 increased 5 percent to a total of$218 billion. These expenditures com-prised 44.2 percent of total spending,slightly lower than in 1966.

Expenditures for the large categoryof food and beverages amounted to $111billion, 3.7 percent more than in 1966;in real terms, the increase was 2.6percent. The ratio of these expendituresto total spending dropped from 22.9

Percentage Distribution of PersonalConsumption Expenditures

CHART 5

Personal Consumption Expendituresand Saving Rate

Billion $ (ratio scale)240

PERSONAL CONSUMPTIONEXPENDITURES (Annual rates)

200

160

120

Nondurable Goods

\

PERSONAL SAVING RATE

/ I1960-66 Average -

itI 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 I J i

Personal consumptionexpenditures. -

Durable goodsAutomobiles and

parts..Furniture and

householdequipment

OtherNondurable goods

Food andbeverages. _ __

Clothing andshoes.- _ _

Gasoline and oilOther

ServicesHousingHousehold

operation ... _TransportationOther

1963

100.014.4

6.5

5.92.0

45.0

23. 58.23.69.7

40.6

14.86.23.0

16.6

1964

100.014.8

6.4

6.22.1

44.5

23.2

8.33.59.5

40.7

14.8

6.02.9

17.0

1965

100.015.2

6.9

6.22.1

44.1

22.8

8.33.59.5

40.6

14.7

5.92.9

17.1

1966

100.015.1

6.4

6.42.3

44.5

22.9

8.63.59.5

40.4

14.4

5.82.9

17.3

1967

100.014.7

6.0

6.52.2

44.2

22.5

8.73.69.5

41.1

14.5

5.73.0

17.9

I960 61 62 63 64 65 66 6^Quarterly, Seasonally Adjusted


percent in 1966 to 22.5 percent in 1967,thus continuing its long-term down-trend. Expenditures for clothing andshoes rose by 6 percent, and increasedfrom 8.6 percent of total expendituresin 1966 to 8.7 percent in 1967. Pricesof clothing and shoes increased sub-stantially and accounted for two-thirdsof the dollar value rise. Expendituresfor other nondurable goods moved upat about the same rate as total expendi-tures.

Consumer outlays for services in1967 rose 1% percent, or $14 billion, toa total of $202 billion. They accountedfor a little over 41 percent of totalconsumer spendinga somewhat higherproportion than in 1966. A large part ofthe increase reflected continued strongprice advances, and in real terms therise was 3.7 percent, a little less thanthe year before.

Spending for housing and householdoperation rose 5.8 percent in 1967, andthe ratio to total expenditures remainedabout the same as in 196620.3percentfollowing a decline from 1963to 1966 when sales of new homes lagged.In contrast, expenditures for otherservices, including transportation, med-ical, recreation, personal business, andeducation, rose 9 percent and increasedfrom 20.2 percent of all expendituresin 1966 to 20.8 percent in 1967, in largepart reflecting sharply rising prices for


6 SURVEY OF CURRENT BUSINESS January 1968many of these services, particularlythose for medical care and transpor-tation.

Personal saving highThe obverse of a low consumer spend-

ing rate is, of course, a high saving rate.In 1967, personal saving reached a rec-ord high of $39 billion, as comparedwith $30 billion in 1966. As a result, thesaving rate (personal saving as a percentof disposable personal income) movedup from nearly 6 percent in 1966 to 7

percent in 1967; this high rate was main-tained in both halves of the year (chart5). During the postwar period, savingrates of this order have for the mostpart occurred only in recession yearsand in the Korean war period. Theaverage annual rate during 1960-66 was5% percent.

The high rate in 1967 appears to havereflected mainly the lag in automobilesales, but even after allowance is madefor autos, there remains some indicationthat the saving rate was high.

Business Fixed InvestmentBUSINESS purchases of durable equip-ment and structures, which had shownunusual increases in 1965 and 1966,constituted one of the few lagging sec-tors of the economy during 1967. Non-residential fixed investment totaled$82% billion or $2% billion more thanin 1966. The small 3-percent increasecontrasts with rises of 16 percent and 13percent in 1965 and 1966 respectively(chart 7).

Investment reached a high of $82.8billion, at a seasonally adjusted annualrate, in the fourth quarter of 1966. Itdeclined during the first half of lastyear to $81.7 billion and recovered inthe second half to $83.3 billion.

Movements in outlays for structuresand for producers' durable equipmentwere somewhat diverse. Expendituresfor construction posted a high in thethird quarter of 1966, fell through thesecond quarter of 1967, and thensteadied in the final two quarters of1967. Outlays for the year as a wholetotaled $26.8 billion, about 4 percentbelow 1966; in real terms the declinewas almost twice as large. Declineswere reported for industrial construc-tion and religious, hospital, and insti-tutional building, but commercial con-struction rose.

Although investment in new equip-ment was hardly buoyant during 1967,outlays did rise in each quarter exceptthe first. Expenditures for the full yearreached $55.7 billion or almost 7 per-

cent above 1966. However, when al-lowance is made for price increases, therise over the previous year was 4percent.

Last year's business fixed invest-ment was still high relative to GNP(chart 8). In real terms, nonresidentialfixed investment was equal to 10.9 per-cent of GNPhigher than in any otheryear in the fifties and sixties except1966.

The slackening rate of business in-vestment during 1967 reflected theweakening of several influences thathad stimulated the demand for capitalgoods in the previous few years. TotalGNP, in real terms, showed littlechange during the first half of 1967; atthe same time, investment continuedat a rate sufficiently high to add ap-preciably to the Nation's productivecapacity so that capacity utilizationdeclined. As an example of the dimin-ished pressure on capacitythe propor-tion of industrial facilities regarded asinadequate by manufacturers to meettheir production requirements declinedin contrast to persistent increases inprevious years. Furthermore, reducedprofits not only affected the availabilityof internal funds but also tended tomake the expected rate of return oninvestment less attractive. In addition,the credit stringency of 1966 had adelayed impact on investment in 1967.

That the forces which had led to thesurge in investment in the 1964-66

period had begun to subside by late1966 is evident from the modest invest-ment program outlined by businessmenin their initial capital budgets for 1967.In February businessmen reporting inthe OBE-SEC survey projected a 4-percent increase for 1967. Each of thesuccessive quarterly surveys of busi-nessmen's spending intentions indicatedactual expenditures below anticipationsand by December the increase for thefull year appeared to be about 1%percent. Sales disappointments were nodoubt an important factor in last year'sshortfall from the early anticipations.Sales increases in manufacturing andtrade averaged 2% percent in 1967 as

CHART 7

Nonresidential Fixed InvestmentIn current dollars, continued to rise in 1967 but at amarkedly slower p a c e . . .

Percent Change20 ;

as a decline in outlays for structures-the first since 1958 . . .

partially offset a rise in equipment outlays

1963 1964 1965 1966 1967Change From Previous Year

U.S. Department of Commerce, Office of Business Economic^ 68-1-7


January 1968 SURVEY OF CURRENT BUSINESS

compared with expectations in Feb-ruary of 7l/2 and 6 percent, respectively.

Industry patterns

Within the framework of small in-creases in investment for the economyas a whole, industry patterns were verymixed. Public utilities and nonrailtransportation companies posted in-vestment increases of 14 and 13 percent,respectively. These advances, thoughsubstantial, compared with gains ofone-fifth in the preceding year. Com-munications firms also spent more in1967 than in 1966. However, mining,railroad, and commercial companiesreduced their investment in 1967 belowa year earlier.

Manufacturers maintained theirspending for new plant and equipmentin 1967 at about the 1966 record rate.This leveling off followed 3 years ofrapid expansion, amounting to about20 percent per year.

For the durable goods group as awhole, capital outlays declined almost2 percent from 1966 to 1967. Sharp re-ductions were reported by the motorvehicle and the stone, clay, and glassindustries, but both primary metal andmachinery producers set new records in1967.

CHART 8

The Share of Capital Goods in Total OutputEdged Down but Remained High in 1967

13

10

BUSINESS FIXED INVESTMENTAS PERCENT OF GNP

. (Based.on.l958$).. X /

Capital outlays by nondurable goodsproducers were up fractionally over the1966 record. Paper and rubber com-panies expanded their spending sub-stantially, and the food-beverage and

petroleum industries also showed somerise. Spending by chemical companieswas slightly under 1966 while textileproducers cut back their expendituresvery sharply.

Residential ConstructionAFTER its serious setback in 1966,residential construction recovered im-pressively during 1967 and made animportant contribution to the rise inoverall demand. The major factorsresponsible for last year's rebound inhousing activity were the shift togenerally easier credit conditions andthe substantially enlarged flows of fundsto mortgage markets.

The response of housing to the im-proved financial situation emergedagainst a background of a large poten-tial demand for housingan inheritanceof the very low level of starts in 1966.In that year, as the rate of housingstarts fell far below the requirementsfor new household formation and re-placement needs, vacancy rates forboth homeowner and rental housingdeclined. Vacancy rates decreased fur-ther in 1967, and for rental housing,they were at their lowest point since1965.

The 1967 recovery in homebuildingactivity began slowly but gatheredmomentum as the year progressed.From the fourth quarter of 1966 tothe first quarter of 1967, private non-farm residential investment showedlittle change from its low of $20.4billion (seasonally adjusted annualrate), but it rose sharply thereafter,reaching a rate of $27% billion in thefourth quarter (chart 9). Total expend-itures for the full year 1967, however,were little different from 1966 becausethe recovery started from such a low

1947 50 55 60 65


Measured in constant dollars, resi-dential outlays in 1967 failed to matchthe 1966 total/Residential constructioncosts, which had shown a sizable ad-vance in 1966, rose even more in 1967

mainly because of sharp increases inwage rates.

The upturn in expenditures during1967 reflected a steady rise in housingstarts. Private nonfarm starts hadfallen to a low of 0.9 million units inthe fourth quarter of 1966, but in Octo-ber and November of 1967, they wererunning at a rate of 1.5 million. Thetotal for 1967 came to 1.3 million units,as compared with 1.14 million for 1966and 1.45 million for 1965.

Although the 1967 recovery in resi-dential construction carried to all classesof dwelling units, it was particularlypronounced for apartment houses.Starts on new apartment buildingsincreased about 20 percent from 1966to 1967 while starts on single familyunits recorded a more modest gain ofabout 10 percent. This shift towardapartment units, which are much lowerin price than single family dwellings,had a dampening effect on the recoveryin residential outlays.Mortgage financing

Last year, savings institutions andother mortgage lenders benefited fromunusually large inflows of funds. Al-though these institutions devoted mostof their efforts to rebuilding depletedliquidity positions early in the year,their lending activities picked up in thespring and accelerated in the summer.On the basis of incomplete data, therise in mortgage lending in the fourthquarter surpassed the advance in thesummer. For the year as a whole, theincrease in total nonfarm mortgagedebt appears to have exceeded $20billion, as compared with $18.6 billionin 1966 and $23.9 billion in 1965.

In addition to last year's improvedfinancial positions for lenders, mortgage


8markets received substantial supportfrom the Federal National MortgageAssociation (FNMA), especially in thesecond half of the year. Total mortgageholdings of FNMA, which had increased$2.3 billion during the 1966 squeeze,rose less than $% billion during thefirst half of 1967. However, as pres-sures mounted rapidly in financialmarkets, and as mortgage inves-tors sought more portfolio flexibility,FNMA's secondary market purchasesaccelerated sharply, and after midyear,total mortgage holdings increased ap-proximately $1.3 billion.

During the severe credit stringencyof 1966, home financing costs rose tolevels not seen in several decades.From November 1965 to the peakreached a year later, yields on FHAnew home mortgages rose from 5.5 to6.8 percent. As credit conditions easedin late 1966 and early 1967, yieldsturned lower and by April had declinedby nearly one-half of 1 percent. How-ever, yields on other long-term instru-ments had begun to rise somewhatearlier, and with a short lag, mortgagemarket yields followed suit. By De-

SUKVEY OF CUREENT BUSINESS

cember, the yield on FHA new homemortgages had returned to the peaklevel of late 1966.

In the latter part of 1967, mortgagemarkets were faced with growing un-certainty over the availability of mort-gage funds. With the strong advancein interest rates, it became increasinglymore attractive for investors"to shiftassets from share accounts and time andsavings type deposits to higher yieldingmarket securities. This shift of fundsaway from financial intermediarieswhich are major mortgage lenderswas a primary factor in the drying upof mortgage funds in 1966. As of late1967, there was only spotty evidenceto suggest that this type of shift wasin fact recurring.

Although the present situation con-fronting financial intermediaries is inmany respects similar to that of late1965 and early 1966, there are severalnotable differences that could limit apotential deposit drain and cushion its

January 1968

impact. First, during 1967 substantialprogress was made by financial insti-tutions and by the Federal Home LoanBank System toward rebuilding liquid-ity. Currently, these institutions arein a much more favorable position foraccommodating potential deposit with-drawals. Second, savings and loan asso-ciations acquired added flexibility in1967 with their new authority to issuesavings certificates. With these certifi-cates, savings and loan associations canoffer higher rates than those paid onpassbook deposits and can compete forinterest-sensitive money without re-sorting to the expensive, across-the-board increase in rates on all depositliabilities. Third, legislation now regu-lates the maximum interest payable bycommercial banks and thrift institu-tions on time and savings deposits.This has the effect of restraining thecompetition for deposits among thesefinancial intermediaries; such competi-tion was troublesome for thrift insti-tutions in 1966.

CHART 9

Private Residential Structures, NonfarmExpenditures and starts made a pronouncedrecovery during 1967

Billion $35

25

EXPENDITURES

Current Dollars

Constant 1958 Dollars'

i i i I i i . i1965 1966 1967

Million Units

2.0

1.5

1.0

HOUSING STARTS

j_ i I1965 1966 \ 1967



Inventory InvestmentTHE year 1967 was characterized bywide shifts in inventory investment asbusiness attempted to correct the ex-cessive inventory accumulation thatdeveloped after the opening quarter of1966. For the full year 1967, businessinvestment in inventories totaled about$5 billion, considerably below therecord $13.4 billion in 1966. Thisreduction in investment, which wasattributable about equally to manu-facturing and to trade firms, accountedfor the greater part of the slowdownin output growth in 1967. Farm inven-tories, which fell $0.3 billion in 1966,rose $0.4 billion in 1967.

Nonfarm inventory investmenttotaled about $4.7 billion in 1967almost all of it occurring in manu-facturing. Trade firms liquidated nearly$% billion of stocks as compared withan accumulation of $4 billion in 1966.

Durable goods manufacturers in-creased their stocks by about $3%

billion in 1967 in contrast to a rise of$7 billion the year before. Nondurablegoods manufacturers added $1 billionto their stocks last year after a $2billion rise in 1966.

Although additions to inventorieswere made during each quarter of 1967,the investment rate fell sharply in thefirst halffrom a seasonally adjustedannual rate of $18% billion in the finalquarter of 1966 to only $% billion inthe second quarter of 1967 (chart 10).This period witnessed significant cut-backs in rates of accumulation bydurable goods manufacturers and sub-stantial liquidations by durable goodsretailers and wholesalers. However, therate rose to almost $4 billion in thethird quarter and to $9 billion in thefourth. Inventory accumulation waswidespread in the latter period.

The following table, which comparesthe quarterly changes in inventory in-vestment, final sales, and GNP in 1967,


January 1968

clearly shows the adverse impact ofinventory investment on GNP in thefirst half and its stimulating effect inthe second. (These data are also shownin chart 2.)

1966 I V _ _

1967 1_ _ _ _ . _IIIIIIV (preliminary)

Change in billions of dollars*

Inventoryinvestment

7.1-11.4-6.6

3.35.2

Finalsales

6.215.615.412.811.3

GNP

13.34.28.8

16.116.4

*Seasonally adjusted at annual rates.The ratio of nonfarm stocks to GNP

in 1958 dollars (chart 11) rose from0.222 in the fourth quarter of 1966 to0.226 during the first quarter of 1967,the highest ratio since early 1961.Additions to inventories almost matchedthe rise in GNP during the remainderof the year, and in the closing monthsof 1967, the ratio was 0.224.

When viewed in terms of the stock-output ratio, the inventory correctiondoes not seem to have fully run itscourse. However, businessmen may notbe too concerned with the present levelof inventories, given their reportedoptimism regarding near-term salesprospects, expectations of higher prices,and uncertainties related to Vietnam,

CHART 10

INVENTORY INVESTMENT plummeted in thefirst half of 1967, but rose in the second

Billion

10 -

5 -

1965 19661967



285-347 O - 68 - 2

SURVEY OF CUEEENT BUSINESS

1968 wage negotiations, and otherfactors.

Manufacturing inventories upAn examination of inventory move-

ments in terms of book values, wheremore industry detail is available, in-dicates that manufacturing and tradefirms increased their inventories by $5billion in 1967; about $1 billion of thisrise was attributable to higher inven-tory costs. The record book value increaseof $15 billion in 1966 also reflectedhigher costs but to a proportionatelysmaller extent.

Increases in stocks were pervasiveamong the manufacturing industries,and in the aggregate they accounted foralmost all of the 1967 rise in businessinventories. Wholesalers' stocks edgedup slightly, and retailers' stocks wereoff fractionally, in contrast to wide-spread advances for all sectors in 1966.

Manufacturers of durable goodsadded about $4 billion to their stocks in1967, after an increase of nearly $8billion in 1966. Nearly one-half of the1967 gain was reported by defensegoods producers and another one-fifthby machinery and equipment producers.While defense goods inventories roseappreciably throughout 1967, the rateof rise fell off during the year. Stocks ofmotor vehicle and parts producers roseappreciably in the second halfmorethan offsetting the liquidation in thefirst half.

Nondurable goods manufacturersadded about $900 million to theirstocks in 1967, with only minor in-creases during the latter part of theyear. These companies had steadily in-creased inventories throughout 1966,adding $2.2 billion for the year as awhole. Chemical companies accountedfor about one-half of the 1967 rise ascompared with one-third of the previousyear's accumulation.

Manufacturers continued to expandtheir work-in-process inventories in1967. The increase in these stocks,though smaller than that in 1966, ac-counted for a larger share of the totalinventory change since manufacturersmaintained a relatively tight rein ontheir purchases of materials and werealso able to cut back on increases in-finished goods.

9As the year ended, stocks were 2.3

times sales for the durable goods man-ufacturing industries. This ratio was up10 percent from the end of 1966 and,except for a few months in 1967, thehighest since early 1958. Increaseswere general among the major durablegoods industries. In contrast, the ratioof stocks of nondurable goods to salesshowed little change through most of1967 but in the closing months of theyear fell to its lowest point of thepostwar period.

Trade inventoriesEetailers cut their inventories by

about $250 million in 1967, as comparedwith an accumulation of $2.4 billion in1966. Stocks at the end of the yearwere equal to 1.4 months of sales, downfrom 1.5 at the end of 1966 and aboutthe same as the average ratios in1964 and 1965.

Stocks of durable goods retailers fellabout $750 million during the yearwhile those of nondurable goodsdealers rose $500 million. The changesin durable goods retail inventories overthe year were influenced chieflyby movements in automobile stocks.Car dealers, faced with sluggish de-mand, particularly in the openingquarter of 1967, cut their stocks byabout $1 billion in 1967; virtually allof this liquidation occurred in the firsthalf. Changes reported by the other

CHART 11

Ratio of Real Nonfarm Stocks to GNPPercent24.0

23.0

22.0

21.0

I 'i i i [ i i i r i i i I i i i I i l l I t I i1960 61 62 63 64 65 66 67

, Note.Based on seasonally adjusted constant dollar data.Stocks, average for quarter. GNP at annual rate.



10durable goods retail groups were smalland largely offsetting. General mer-chandise stores accounted for morethan one-half of the rise in nondurablegoods stocks.

Merchant wholesalers added about$500 million to stocks during 1967; thiscompares with almost $2.5 billion in

SURVEY OF CUREENT BUSINESS

1966. Moderate increases were reportedin 1967 by all major kinds of businessexcept dry goods, apparel, and con-struction materials. At the end of theyear, merchant wholesalers' stocks wereequal to 1.20 months of sales, downslightly from 1.22 at the end of 1966but higher than in other recent periods.

January 1968

in 1966, the sharp decline in corporateprofits, the less rapid growth in personalincome and unusually large income taxrefunds.

Government Expenditures and ReceiptsFEDERAL and State and local govern-ment purchases of goods and servicesincreased $22 billion from 1966 to 1967,accounting for more than half of therise in GNP for the year. Defense spend-ing was the most important factor inthis advance, but all other purchases(including those of State and local gov-ernments) also expanded rapidly, ex-ceeding the gains in 1966. The followingtable summarizes the yearly increasesin government purchases of goods andservices during the 1960's and showstheir proportion of the GNP rise.

Other government expenditures, suchas transfer payments, grants-in-aid, andinterest, also increased sharply in 1967.Total expenditures at all levels of gov-ernment advanced $30 billion, exceed-ing the increase in receipts by $16 bil-lion. The 1966-67 rise in receipts waswell below the $24K billion advance reg-istered a year earlier, mainly because ofslower growth in the economy but alsobecause changes in Federal tax legisla-tion, which hac! an important effect on1966 receipts, were largely absent in1967.

Shift to deficitWith expenditures increasing faster

than receipts, both Federal and Stateand local governments exhibited markedshifts from their fiscal positions in theprevious year. The swing was most pro-nounced in the Federal sector, whichshifted from a slight surplus in 1966 toa deficit of $12% billion last year. Indollar terms, this was the largest deficitrecorded on a national income accountsbasis since World War II and, as a per-centage of GNP, the largest since therecession year of 1958. In terms ofquarterly patterns, the shift was froma surplus in mid-1966 to a mountingdeficit, which reached a peak in thesecond quarter of 1967 and easedsomewhat in the second half of the year.

In the first half of 1967, the shiftfrom surplus to deficit provided a fiscalstimulus that helped to moderate theslowdown in overall economic activity.Among the major factors contributingto the widening deficit in the first halfof last year were the rapid expansionof defense purchases, the acceleration ofmedicare payments after a slow start

Changes in Government Purchases, Relative to Total GNP Changes, 1961-67

Year

1961196219631964..196519661967...

Current dollar changes (billions)

GNP

16.440.230. 2

41.951.559.4

41.8

Totalgov't

8.09.55.46.27.7

17.922.1

Defense

2.93.8-.8

-.8.1

10.4

12.1

All other(State-local

and Federal)

5.15.76.2

7.07.67.5

10. 0

Percent of GNP change

Totalgov't

492418151530

53

Defense

1810-3

-2

18

29

All other

311421

17151324

Surge in defense purchases

Higher outlays for national defense,medicare, and other transfer paymentsaccounted for the bulk of the $21 billionrise in Federal expendituresthe larg-est annual increase in spending sinceWorld War II (chart 12).

National defense purchases advancedfrom $60% billion in 1966 to $72% bil-lion last year. The increase of $12billion compares with a $10 billion risea year earlier. However, much of theexpansion occurred early in 1967; onlymodest increases were recorded in laterquarters.

A sizable shift in the composition ofpurchases was reflected in the 1967increase. Deliveries of goods (durablesand nondurables) accounted for a muchlarger proportion of the rise than in1966. Militaiy and civilian payrolls alsocontinued to advance, but at a some-what slower pace. The strength of theArmed Forces averaged about 3.4 mil-lion persons as compared with 3.2 mil-lion in 1966 and 2.7 million in 1965.The advance in Department of Defensecivilian personnel also slackened. How-ever, the military and civilian payraise, effective in October, added about$% billion to total 1967 defense pur-chases.

Procurement costs climbed rapidlyfrom 1966 to 1967. The increase in de-liveries in 1967 for ordnance and air-craft was especially pronounced. Newand more expensive types of ammuni-tion played an increasing role in Viet-nam. The growth in purchases of heli-copters and tactical fixed wing aircraftcontinued, both for replacement andto augment existing air strength. Inaddition, operation and maintenanceexpenditures exceeded earlier estimates,largely as a result of deployment costsof the increasing number of troops inVietnam. In contrast, expenditures forguided missiles and ships showed littlechange and military construction wasdown.


January 1968

Federal nondefense purchases, whichhad dipped in 1966reflecting a largereduction in CCC agricultural inven-toriesincreased nearly $1 billion lastyear. This was the result of large, par-tially offsetting changes in NASA andCCC program outlays. Space expendi-tures fell for the first time since theprogram got underway, dropping about$1 billion below their 1966 level. Thisdecline was more than offset by a moremoderate liquidation of CCC inven-tories than in 1966.

Medicare transfers mount sharplyOther categories of Federal expendi-

turestransfers, grants, interest, andsubsidiesadvanced about $8% billion,only slightly less than the record rise

CHART 12

Annual Changes in federal GovernmentExpendituresNATIONAL DEFENSE PURCHASES spurred by Vietnam spending

_4

NONDEFENSE PURCHASES reverse 1966 decline

TRANSFER PAYMENTS register large advance due to medicare

OTHER EXPENDITURES* rise less than previous year

1963 19671964 1965 1966Change From Previous Year

^Includes grants-in-aid, net interest, and subsidies less current surplus.


SURVEY OF CURRENT BUSINESS

of the previous year. Transfer pay-ments to persons were by far thestrongest element in this advance,accounting for nearly $7 billion of thetotal increase. Medicare transfers,which began in mid-1966 and whichadded $1 billion to transfers in thatyear, mounted sharply to $4% billionin 1967 and represented half of theincrease in total transfer payments.

These payments resulted in thelargest absolute and relative increasein Government expenditures for healthand medical care since World War" II,when expenditures almost doubled ina year as a result of medical require-ments of the military services.

Over 17% million persons are cur-rently enrolled in the medicare pro-gram, and about 6 milliou utilizedcovered services last year. Per capitabenefit payments amounted to about$135 under the hospital insuranceprogram (part A) and about $40 underthe supplementary medical insuranceprogram (part B) in the year endingJune 30, 1967. The bulk of the pay-ments under part A were for inpatienthospital care, while, under part B,reimbursements for physicians7 serv-ices represented the major outlay.

On January 1, 1967, the medicareprogram was expanded to include ex-tended care facilities such as nursinghomes. Admissions to these facilitiesin the first 6 months amounted toalmost 200,000 persons.

The rise in transfers also reflectedcontinued growth in OASDI benefitslargely because of the increasing num-ber of eligible beneficiariesandsharply higher military and veterans'benefitsdue mainly to increasing edu-cation and other benefits for returningVietnam veterans. Slated this Marchare a 13-percent across-the-board in-crease in social security retirementbenefits, higher minimum payments,and other program changes that willfurther augment personal transfers.

Grants-in-aid to State and localgovernments rose about $1 billion.This represented a much smaller ad-vance than the unusually large in-crease of a year ago, which was mainlythe result of the introduction of newprograms of aid to education. Theseprograms, while maintained at ad-

11

vanced levels, were not a major sourceof higher spending for grants-in-aid in1967.

Public assistance grants climbed rap-idly, particularly for aid to dependentchildren and medicaid. However, high-way aid, one of the largest grant-in-aidprograms, declined slightly as a resultof anti-inflationary measures takenlate in 1966.

Advance in receipts slows

Federal receipts in 1967 advanced$8% billion, well below the record $18%billion rise of the previous year. Severalfactors contributed to this sharp con-trast. First, tax changes, which had amajor influence on receipts in 1966,had only a small effect on 1,967 receipts.

Annual Changes in Federal GovernmentReceiptsPERSONAL TAX AND NONTAX RECEIPTS showmoderate increase

Billion $

CORPORATE PROFITS TAX ACCRUALS fall for first timesince 1960

4

-4 mmSOCIAL INSURANCE CONTRIBUTIONS bolstered by rate changes

0

INDIRECT BUSINESS TAX AND NONTAX ACCRUALS resumeupward trend4

mmm

1963 1964 1965 1966Change From Previous Year



12 SUEVEY OF CUKKENT BUSINESS January 1968

The large increase in the social securitytax base together with the change inrates accounted for about one-third ofthe 1965-66 change in total receipts.Social security rates were raised againin 1967, but the revenue gain was muchless. Second, the 1967 decline in corpo-rate profits led to a substantial de-cline in tax accruals (which rose $3billion in 1966). Third, the introductionof graduated withholding of incometaxes in May 1966 shifted, to calendar1966, payments that otherwise wouldhave been made in the spring of 1967.Fourth, the 1966-67 increase in personalincome was more moderate than in theprevious year.

The largest category of NIA re-ceiptspersonal tax and nontax pay-mentsrose $5 billion to $66% billion(chart 13). The entire increase camefrom withheld income taxes. Nonwith-held payments (less refunds) fell $1%billion mainly because the introductionof graduated withholding caused agreater proportion of 1966 liabilities tobe paid in calendar 1966 and thus re-duced net settlements in 1967. In ad-dition, the capital gains component ofnet settlements was well below theprevious year.

Contributions rise sharply againContributions for social insurance

advanced by $4% billion. Althoughsubstantially below the large 1966 in-crease, it was still well above theincreases of previous years. Most of the1967 rise came in OASDHI contribu-tions, where the payroll tax rates wereraised from 8.4 to 8.8 percent on Jan-uary 1, 1967. Higher rates were alsoimposed on self-employed persons, who,in addition to paying their 1966 liabil-ities, began making quarterly paymentson their current year liabilities for thefirst time; thus, payments that other-wise would have been made in 1968were added to 1967. Also contributingto the 1967 increase was the first full-year effect of the voluntary $3 permonth contributions to the supplemen-tary medical insurance (SMI) trustfund; these payments began in July1966.

Two significant changes affectingsocial insurance contributions are sched-uled to take effect early this year. In

January, the maximum, earnings subjectto the OASDHI tax will be increasedfrom $6,600 to $7,800; in April, thevoluntary SMI monthly payments willadvance to $4.

Corporate tax accruals dropped about$1% billion, reflecting a decline of over$3K billion in profits before taxes.Indirect business taxes, with a rise ofabout $% billion, resumed the upwardtrend that had been temporarily inter-rupted in 1966 by reductions in taxrates. Telephone, alcohol, and gasolineexcise taxes led the advance. Auto andtruck tax liabilities were off somewhat,reflecting the decline in productionduring the year.

State and local purchases upPurchases of goods and services by

State and local governments rose $9billion in 1967 to a total of almost$86% billion. The 12-percent increasewas slightly larger than the rise in theprevious year.

Higher payrolls accounted for about60 percent of the total advance. Em-ployment in the State and local sectorshowed a record gain, increasing byover 500,000. As the accompanyingtable indicates, State and local per-sonnel has more than doubled since1950.

State and. Local Employment[Full-time equivalent basis]

19501955

19601965 . .

1966. _ _ _ .1967

Total

3.5s-?.r

5.26.46.97.4

School

(Millions)

1.5.1.92.53.33.64.0

Nonschool

1.92.2

2.73.13.33.4

The increase in educational staff in1967 was larger than in the previousyear and accounted for over two-thirds of the total increase in State andlocal employment. In many schooldistricts, particularly in metropolitanareas, this advance was related tointensive efforts to lower the pupil-teacher ratio and improve the qualityof education. In addition, average payadvanced by nearly 4 percent.

In other functional areas, such ashealth, welfare, police, and fire pro-tection, employment and average payeach rose about 5 percent.

Constructioir outlays showed a some-what greater increase than in 1966 evenafter allowance for higher costs. Schoolconstruction increased at about thesame rate as in the previous year whilehighway and street programs progressedat a somewhat slower pace. State andlocal hospital construction, which hadexperienced a decline in 1966, increasedsubstantially, partly in response to thedemand created by the new medicareand medicaid programs. Another signif-icant development was the large in-crease in public construction for suchfacilities as airfields and electric power.

The aggregate of other goods andservices also increased in line withrecent trends.

Receipts lag expendituresLast year's advance in State and

local government receipts, like that ofthe Federal Government, was belowthe strong advance of 1966 and failedto match rapidly mounting expendi-tures. As a consequence, there was aswing from a surplus of over $3 billionin 1966 to an approximate balance lastyear.

The 1966-67 increase in receiptsamounted to about $7 billion as com-pared with $9% billion in the previousyear. This change was due in largemeasure to the smaller increase inFederal grants, which rose about 7percent, as compared with the excep-tional 32 percent rise in 1966. AlthoughState and local revenues from theirown sources increased by about thesame amount, $6 billion, in both 1966and 1967, a greater proportion of lastyear's rise appears to have been theresult of rate increases in existing taxesand the imposition of new levies.

Twenty-four States enacted signif-icant tax changes. Minnesota andNebraska adopted general sales taxes,bringing to 44 the number of Statesthat now impose this type of tax.Nine States increased their rate and/orbase of existing sales taxes. Ten Statesboosted cigarette tax rates, and nineincreased rates on motor fuel.


January 1968 SURVEY OF CURRENT BUSINESS 13

Income taxes also drew legislativeattention. Three States adopted andsix States increased corporate incometaxes, while two States adopted andfour States increased personal incometaxes.

General property taxes/the mainstayof local government revenues, showedone of the largest increases in recent

years. Because these taxes have beensubject to mounting criticism, localgovernments have been actively seekingnew sources of revenue. Last year,cities and localities in four States werepermitted to add sales taxes to existingState levies. This increased the numberof States permitting local sales taxesfrom 12 to 16.

CHART 1-4

GNP by Type of ProductLAST year's reduced rate of economicexpansion was reflected in slower growthin all major types of output. The slow-down was most marked in durable goods,which increased only 3 percent in cur-rent dollars last year, after an 11 per-cent gain the year before. Slower ratesof increase were also evident last yearin nondurable goods, structures, andservices. Much of the tapering in therate of increase in goods productionstemmed from the sharp drop in in-ventory accumulation; however, finalpurchases of both durable and non-durable goods also rose less in 1967than in 1966.

The physical volume of production ofdurable goods last year was about thesame as in 1966 mainly because durablesbore the brunt of the severe inventoryadjustment. Final sales of durable goodsto all marketsconsumers, business,government, and foreigners*increasedabout 5% percent, but this was offset bylower inventory investment in the dur-able sector, about $2 billion in constant(1958) dollars as compared with $9 bil-lion in 1966. Virtually all of the gain infinal sales of hard goods was attribu-table to government purchases, which

rose around 25 percent after a very smallgain in 1965.

The volume of production of non-durable goods rose 4 percent in 1967,not much below the 5-percent gain in1966. However, inventory investmentin nondurables declined much less thanin durables; it amounted to $3 billionin 1966 and fell to $2 billion last year.As was the case with durables, pur-chases by government increased mark-edly while consumer spendingby farthe largest part of nondurablesshoweda smaller gain than in 1966.

The output of services last year rose4% percent, less than the 5% percentgain of 1966. Consumer purchases ofservices were up 4 percent, about thesame as in 1966, but government pur-chases of services, although up 7 percentin 1967, rose less than in 1966 when theheavy buildup in the military forceswas underway.

The physical volume of constructiondeclined about 2 percent last year. Asmall rise in government constructionwas more than offset by the depressedactivity in residential building; privatenonresidential construction was alsodown a little because of the softening ininvestment.

National IncomeNATIONAL income last year amount-ed to $650 billion, a gain of 5% percent.The increase in 1967 was considerablybelow the rise of almost 10 percent in1966 and was reflected in smaller gainsfor most industry groups (chart 14).

Income originating in agriculturerecorded a decline of $1 billion in 1967as prices for farm products fell. The

marked slowing in durable goods, notedabove, resulted in a negligible gain inincome originating in durable goodsmanufacturing, which had risen 13 per-cent the year before. A number ofindustries had moderate gains that wereless than in 1966. For example, incomeoriginating in trade was up 6 percent ascompared with a rise of 8 percent in

National IncomeIn contrast to previous years, corporateand proprietors' incomes declined

Percent Change0 5 10 15

NATIONAL INCOMETOTAL

Compensation ofEmployees

CorporateProfits and IVA

Proprietors'Income

Other Income

Includes rental income of persons and net interest.


1966; nondurable manufacturing gained4 percent as compared with 10 percent;communications, mining, and construc-tion also recorded smaller gains than in1966. Transportation, utilities, andservices were up almost as much as theyear before, and finance, insurance, andreal estate reported a slightly largerrise than in 1966.

Employee compensation upEmployee compensation increased by

$34 billion in 1967 as compared witha record gain of $42 billion the yearbefore. About $20 billion of the 1967rise was in private wages and salaries;government payrolls were up more than$8 billion, about the same as in 1966,and supplements to wages and salaries(which consist of employer paymentsfor social insurance and private pensionand health programs) increased $4%billion after a $6% rise in 1966.

About three-fourths of the $20 billionrise in wages and salaries of the privatesector was due to higher average hourly


14

earnings. The relative contribution oftotal man-hours was small because adecline in average weekly hours ofwork per employee partly offset therise in employment. From 1965 to 1966,man-hours accounted for about half ofthe increase in private payrolls as

CHART 15

Manufacturing PayrollsIn 1967, PAYROLLS of production workersincreased only 2 percent

Percent Change12

GROSS AVERAGE HOURLY EARNINGSrose at about the same pace as in 1966

but both EMPLOYMENT and ,

AVERAGE WEEKLY HOURS were lower

1947-67

Avg.1963 1964 1965 1966 1967

Change From Previous Year

SUKVEY OF CUKEENT BUSINESS

employment rose sharply and weeklyhours were little changed.

Total payrolls in manufacturing rose5 percent last year, and for productionworkers only, the rise was 2 percent(chart 15). For manufacturing pro-duction workers, all of the payroll gainwas due to the increase in averagehourly earnings. Although gross hourlypay showed about the same large in-crease as in 1966, straight time earnings(which exclude overtime at premiumpay) increased a full percentage pointmore than the year before. It was thelargest rise in straight time earnings inabout a decade.

As was noted earlier, the gain ingovernment payrolls last year wasabout the same as in 1966; however,in that year, wages and salaries paidby both Federal and State and localgovernments rose about the sameamount$4% billion. In 1967, theFederal increase was about $3% billionwhile State and local governmentsadded $5 billion to their payrolls. Theslower rise for the Federal Govern-ment was due to a somewhat smallergain in employment as compared with1966, when the Armed Forces wereincreased substantially.

Corporate profits downAfter several years of sizable gains,

corporate profits (before taxes and in-cluding IVA) declined 4 percent, from$82 billion to $79 billion. The decrease,was over by the first quarter of .196.7];profits leveled off in the

w spring andshowed modest increases in the ^ thirdand fourth quarters. Manufacturing,particularly durable goods, accountedfor the bulk of the reduction in earn-ings. Most other broad industry grpups;experienced either little change or small,

January 1968

Book profits (excluding IVA) decline$3.7 billion to a total of $80 billion;tax liabilities absorbed about $1^billion of this decline and after-taxprofits about $2 billion. Despite thereduction in aftertax earnings, corpora-tions stepped up their dividend pay-ments by $1% billionsomewhat lessthan in recent yearsso that undistrib-uted profits fell approximately $3%billion (chart 16).

CHART 16

CORPORATE PROFITS declined in 1967 . . .Billion $ . .TOO

40 -

20 -

however, corporations continued toexpand DIVIDEND payments. . .

40

20 -

so that-UNDISTRIBUTED PROFITS declined/,more than total after iw profits :~

40

,20

1963 64 65 66> -r67 ' 1966 . '- 1967

.* Excluding IVA 1st _J2d 1 st * 2d- Half YearsSeasonally Adjusted

at'Annual Rates ,

U.S. Department of. Commerce/ Off ice of Business Economics 68-1-15 increases." __ yA'Departmenf of Commerce, Office of'Business Economics ''


January 1968 SUKVEY OF CURRENT BUSINESS 15

Corporate Output, Prices, Costs, and Profitsmargins per unit declined 6% percentlast year, after a 2-percent gain in 1966.The decline in unit profits followed 5consecutive years of increases thatbrought the 1966 margin almost to apostwar peak, close to the 1951 high.

THE corporate sector provides a usefulfocus for an examination of income flowsin relation to real output, not only be-cause it accounts for a large share oftotal income and output but also be-causeunlike the noncorporate sector-it provides clear-cut distinctions be-tween employee compensation and prof-its. Labor costs per unit of output areobtained by dividing aggregate com-pensation of employees of corporationsby real corporate output. Other factorand nonfactor costs of production perunit of output are similarly calculated;their sum equals total price per unit ofoutput.

The slowdown in the expansion inthe early part of 1967 had its most pro-nounced impact on the output of non-financial corporations. The physicalvolume of output of corporations fellsharply from the fourth quarter of 1966to the first quarter 1967. Although therewas a significant recovery in the secondhalf of the year, output for 1967 as awhole was only 1 percent above 1966.

Price per unit of Corporate outputrose 3.^ percent last year,, a substantialaicderatioii over the f96 riBe of \%percent and, indeed, the largest rise in10 years (chart 17). With demand lessth&n buoyant, business firms were lim-ited in their ability to recoup increasesin labor and nonlabor costs, and profitmargins narrowed. *^:\ * v*Labor costs spurt"^ < , r ;, , . - ? -

Labor costst per oinit/of putput rosemore than 5 percent in 1967| a rate ofincrease approximately twice as large*as in 1966 and one not matched for overa decade. The acceleration of the rise

in unit labor costs resulted from astep-up in the growth of hourly payand a deceleration in the growth oflabor productivity. The small gain inproductivity was due mainly to thelower utilization of plant capacity dur-ing the year but it also reflected thedesire of corporations to maintain theirwork forces because they viewed theslowdown in the first half as temporary.

The 1967 experience continued thatof 1966, when a significant rise in unitlabor costs broke a long 5-year periodof comparative stability. During the5 years prior to 1966, relative gains inhourly wage rates and fringe benefitswere offset by approximately equalincreases in labor productivity. In 1966,the increase in hourly wage rates wassomewhat greater than in precedingyears, while the growth of labor pro-ductivity slowed.Nonlabor costs also up

Nonlabor costs per unit of nonfinan-cial corporate output rose more than 5percent last year after a decline of 1%:percent in 1966. Nonlabor costs com-prise capital consumption allowances,indirect business taxes, business transfer>payments less subsidies, and interest.^Most of these costs are fixed in-; the ?short run, so that they -tend to mo^einan inverse relation to output. The slow-"'ing of the: output rise .h^lped^)usH>up;these unit costs in the first/hall of 1967;lidwever, they changed relatively little in; the ;$econd hajf wifli th^ more rapid 1advaiice in output. - Inci%ases in s,ales *and excise taxes from 1966 to 1967 alsoadded to unit nonlabor costs last year.

With unit costs increasing, profit

CHART 17

Prices, Costs, and Profits Per Unitof Real Corporate ProductPrice per unit of real product rose morelast year than in 1966 . . .

Dollars

1.15"-?'/:-;vi'.:-'^;

1.10 ^

1.00 \-::...:i:i '^:ii^l:l^i',7^:;;;r :' / ' u.Lr' .vi t "1"

as did unit labor costs

.60Nonlabor costs turned up . . .

,25

.15 'T./ fc:i-: ': t

, '-.and -unit profits fell -' " ''f' , '**'-

2Q -. PROFITS mJMJ!^,^\

.10"I960 61 62 63 64 65

Quarterly, Seasonally AdjustedNote.Nonfinancial corporations only. "

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


16 SURVEY OF CURRENT BUSINESS January 1968

NATIONAL INCOME AND PRODUCT TABLES

1966 1967*

1966

III IV

1967

II Ill IV

Seasonally adjusted at annual rates

Billions of current dollars

1966 1967 ^

1966

III IV

1967

II III IV P


Billions of 1958 dollars

Table 1.Gross National Product in Current and Constant Dollars (1.1, 1.2)

Gross national product _Persona! consumption expenditures

Durable goods.. _ _ _ _ _ _ _Nondurable goodsServices _ _ _ _ _

Gross private domestic investmentFixed investment

NonresidentialStructures _Producers' durable equipment-

Residential structuresNonfarm _Farm

Change in business inventories. _ _ _ _NonfarmFarm.. _

Net exports of goods and servicesExportsImports

Government purchases of goods and servicesFederal

National defenseOther..

State and local

743 3

465 970.3

207.5188 1

118 0104 6

80 227 952 324 423 85

13 413 7 3

5 I43 037 9

154 377 060 516.577.2

785.1491 672.1

217. 5202 1

112.1

107 0

82 526 855 724 523 96

5 14 7

4

5 045 440 4

176 389 972 617.3

86.4

748 8

470 1

70.9209.5189 8

116.4104 9

81 228 253 123 723 25

11 412 0 54 6

43 739 0

157 779 563 016.6

78.1

762 1473 g

70.6210.3192 9

122 2

103 7

82 827 755 120 920 45

18 519 0 5

4.344 039 7

161 7

81 565 615.980.2

766.3480 2

69.4214.2196 6

110.4

103 3

81 927 754 221 420 9

6

7.17 3

2

5 345 339 9

170 4

87 170 216.8

83.3

775.1

489.772.5

217.2200 0

105.1

104 681 526 355 223 122 56

56

_ i

5.345 139 8

175.089 572 517.0

85.4

791 2

495 372 7

218.5204 1

112 2

108 4

82 826 656 225 625 0g

3 83 4

4

5 445 640 2

178 2

90 973 317.6

87.4

807.6501 473.7

220.2207 5120.7

111 7

83 826 557.327 927.4

6

9.07 51 54.0

45.641 6

181.592 074 317.7

89.5

652.6418 071.3

187.7159.1

105.693 072 823 649.220 219.75

12.612 9 3

4.4

40.836 4

124 564 7

59.9

669.2429 972.1

192.8164. 9

96.992 1

73 021 851.219 218.7

5

4.74 3

4

3.842.538 7

138 674 o

64.6

654.8420 4

71.9188.8159. 8

103.693.073 623.749.919.419.0

5

10.611 1.54.1

41.437 3

126.666 4

60.1

661.1420.4

71.1188.4160.9

108. 4

91.2

74.223.051.217.016.5

.517.217.7.53.2

41.238.0

129.1

67.8

61.3

660.7424.2

69.7191.8162.6

96.990.2

73.022.950.117.316.8

.56.76.8-.2

4.1

42.438.3

135. 572.3

63.2

664.7430.672. 9

193.6164.191.3

90.9

72.621.751.018.317.8

.5

.4

.5.1

4.1

42.338.2

138.7

74.4

64.3

672.0431.572.7

192.8166.096.4

92.973.221.551.719.719.2

.4

3.53.2.4

4.2

42.838.6

139.975.1

64.9

679.4433.273.0

193.2167.1102.9

94.573.221.251.921.320.9

.4

8.46.91.52.9

42. 739.9

140.4

74.4

66.0

Table 2.Gross National Product by Major Type of Product in Current and Constant Dollars (1.3, 1.5)

Gross national productFinal salesChange in business inventories

Goods output _Final salesChange in business inventories _ _

Durable goods..Final sales _ _Change in business inventories

Nondurable goodsFinal salesChange in business inventories _

Services _ _Structures _ _

743 3729.913 4

379.6366 213.4

154 6144 7

9 9225 0221 5

3 5287 276 5

785 1780.0

5 1396.2391 1

5 1158 8155 9

2 8237 5235 2

2 3311 0

77 8

748 8

737.411 4

381 8

370 311 4

155 7145 8

9 9226 1224 5

1 5291 6

75 5

762 1743.618 5

391.7373 218 5

161 1148 312 8

230 6224 9

5 7296 973 5

766 3759.2

7 i

388 1380 9

7 i

153 9150 5

3 4234 2230 5

3 7

303 175 2

775 1774 65

392.1391 6

5

155 5156 0

6236 6235 5

1 1

307 875 2

791 2787.4

3 8

398 7394 9

3 8

161 4157 9

3 5237 3237 03

313 579 0

807 6798.7

9 0406.1

397 19.0

164 4159 3

5 1241 8237 8

4 0319 781 9

652 6639.912 6

353.7341.012.6

150.0140.6

9 3203 7200 4

3 3

235 263.7

669 2664.5

4 7

361.5

356.74.7

150. 5148.0

2 5211 0208 8

2 2

245 662.1

654 8644.210.6

354. 7344.110.6

150.8141.6

9.2203.9202 5

1.4

237.962.2

661.1643.917.2

361.1343.917.2

154.2142.311.9

206.9201.6

5.3239.860.2

660.7654.0

6.7

356.6349.9

6.7146.6143.6

3.0210.0206.3

3.6242.761.3

664.7664.3

.4

359.5359.1

.4

148.3148.9-.6

211.2210.2

1.0244.460.8

672.0668.5

3.5362.9359.4

3.5153.0149.8

3.2209.8209.5

.3

246.962.3

679.4671.0

8.4

366.9358.6

8.4

154.1149.6

4.6212.8209.0

3.8248.464.1

Table 3.Gross National Product by Sector in Current and Constant Dollars (1.7, 1.8)

Gross national productPrivate

BusinessNonfarmFarm

Households and institutionsRest of the world. _

General government

743 3

666 7642 4617 624 8

20 1

4 2

76 6

785. 1699 7673 8649 824 0

21 5

4 5

85 4

748 8

670 6646 2621 624 6

20 3

4 1

78 2

762 1

681 9656 9633 023 9

20 6

4 4

80 2

766 3

683 9658 7635 123 6

21 1

4 1

82 5

775.1690 9

665 3641 923 3

21 4

4 2

84 2

791 2705 2679 0654 6

24 4

21 24 9

86 0

807.6719 0692 2667 424 8

22 24 6

88 7

652.6597 5578 9556 422 4

14.7

4 0

55 0

669.2610 2590 6566 524 1

15.34 3

59 1

654.8599 0580 2558 022.2

14.8

4.0

55 8

661.1604.2585 1562.722.4

14.94.3

56 9

660.7602.7583.6559.923.7

15.14.0

57.9

664.7606.0586. 6563. 023.6

15.34.0

58.7

672.0612. 5592. 7568.424.2

15.04.8

59.6

679.4619.4599.4574.624.8

15.54.4

60.0

p Preliminary.


January 1968 SUEVEY OF CURRENT BUSINESS 17

1966 1967 P

1966

III IV I I

1967

I III IV P


Billions of dollars

Table 4.Relation of Gross National Product, National Income,and Personal Income (1.9)

Gross national product _ _ .Less: Capital consumption allowances -Equals: Net national productLess: Indirect business tax and nontax

liability .Business transfer payments _S tatistical discrepancy _ . . .

Plus: Subsidies less current surplus ofgovernment enterprises

Equals: National income _ _ _ _ ...Less: Corporate profits and inventory

valuation adjustmentContributions for social insur-

anceWage accruals less disburse-

ments

Plus: Government transfer paymentsto persons

Interest paid by government(net) and by consumersDividends.Business transfer payments

Equals: Personal income

743.363.5

679.8

65.12.7

-2.6

2.2

616.7

82.2

38.2

.0

41.2

22.321.52.7

584 0

785.167.0

718.1

69.72.8

-2.2

1.8649.6

79.143.0

0

49.124.122.82.8

626.3

748.863.9

684.9

65.92.7

-3.2

2.7

622.1

81.938.9

.0

41.322.421.62.7

589 3

762.1

64.7697. 4

67.02.8

-3.8

2.6634.1

84.6

39.8.0

44.7

23.221.22.8

601 6

766.365.5

700.8

67.92.8

-4.0

2.3

636.4

78.1

42.2

0

48.1

23.722.22.8

612 9

775.166.4

708.7

69.12.8

-2.8

2 0641.6

78.3

42 5o

48.623 923 12.8

619 1

791.2

67.6723.6

70.22.8

1.2

1 6653.4

79.2

43 3

0

49 6

24 223 42.8

631 0

807.668.6

739.0

71.42.8

1 5

44 1

0

50 124 722 42.8

642 1

Table 5.Gross Auto Product in Current and Constant Dollars(1.15,1.16)

Gross auto product 1

Personal consumption expenditures _Producers' durable equipment __Change in dealers' auto inventories..Net exports

Exports _Imports .

Addenda:New cars, domestic 2New cars, foreign.

Gross auto product 1

Personal consumption expenditures.Producers' durable equipmentChange in dealers' auto inventories. .Net exports

ExportsImports

Addenda:

New cars, domestic 2New cars, foreign

Billions of current 'dollars

29.824.94.4.4.0

1.31.2

27.61.8

27.7

23.94 2- 5- 11 61 7

25.22.6

28.2

24.74.4

-1.3

.31.51.3

26.11.9

29.624.54.3.6.0

1.51.5

27.42.1

25.022.23.9

-1.1

-.31.31.6

22.82.2

27.824.64.3

-1.2

-.11.61.7

25.32.7

27.924.54.3

-1.2.1

1.91.7

25.42.6

30.024.24.21.3.0

1.81.8

27.52.7

Billions of 1958 dollars

30.325.44.4.4

.11.31.2

28.21.8

27.824.04.2-.6

.01.71.7

25.52.5

28.825.34.4

-1.4

.31.61.3

26.61.8

29.924.74.3.7

.11.51.5

27.82.1

25.322.63.9

-1.1

-.21.31.6

23.32.2

28.225.04.3

-1.3.0

1.61.7

25.82.7

27.924.64.3

-1.3.2

1.91.7

25.62.6

29.723.94.21.4

.01.81.8

27.42.7

annuaUgrforStahet0 I?lcthfcotal mcludes Government purchases, which amount to $0.2 billionp Prdfminm the grSS aUt product total by the markuP on both used cars and foreign cars.

1966 1967 P

1966

III IV

1967

I II III IV P


Billions of dollars

Table 6.National Income by Type of Income (1.10)

National income

Compensation of employeesWages and salaries _ _

PrivateMilitaryG ov eminent civilian _ _ . _

Supplements to wages and salaries. _.Employer contributions for social

insuranceOther labor income . . .

Employer contributions to pri-vate pension and welfare funds

OtherProprietors' income

Business and professional*Income of unincorporated enter-

prisesInventory valuation adjustment

Farm _

Rental income of persons. .Corporate profits and inventory valua-

tion adjustmentProfits before tax

Profits tax liabilityProfits after tax

Dividends...Undistributed profits ._

Inventory valuation adjustmentNet interest .

616.7

435. 7394.6316. 714.763.2

41.1

20.3

20.8

17.33.5

59.343.2

43.6 4

16.1

19.4

82.2

83 8

34.549.321.527.8

-1.620.2

649.6469. 6

423.7337.416.469.8

45.922.623.2

58.4

43.6

43.9-.3

14.8

20.1

79.180 1

33.047.222.824.4

-1.0

22.4

622.1

441.2

399.6320.115.164.3

41.620.6

21.1

59.243.3

15.9

19.4

81.984 0

34.649.421.627.8

-2.2

20.4

634.1

450.2407.4326.115.865.642.7

21.1

21.7

58.643.4

15.119.6

84.683 934.649.321.228.2

.7

21.1

636.4459.1414.7

331.416.167.344.4

22.2

22.2

57.843.2

14.6

19.8

78.1

79 0

32.546.522.224.2

-.8

21.6

641.6

463.4418.3333.216.268.945.2

22.3

22.9

57.843.4

14.3

20.0

78.378.9

32.546.523.123.4-.7

22.1

653.4472.6426.2339.416.370.6

46.4

22.8

23.6

58.843.8

15.020.2

79.2

80 0

32.947.123.423.6

-.822.7

483.2435.6345.817.372.547.6

23.3

24.3

59.344.1

15.220.4

~22.~4~

-1.8

23.3

Table 7.National Income by Industry Division (1.11)

All industries, totalAgriculture, forestry, and fisheriesMining and construction _ .Manufacturing

Nondurable goodsDurable goods _ _ . . .

Transportation. _. ._ _ _ _C ommunicationElectric, gas, and sanitary servicesWholesale and retail trade- _Finance, insurance, and real estate.-...ServicesGovernment and government enter-

prises--. . . _ _Rest of the world _

616.722.738.2

192.173.2

118.924.812.412.190.865.669.384.64.2

649. 6

21.840.3

196. 376.2

120.1

26.113.012. 895.970.474 7

93.94.5

622.1

22.638.4

193.673.8

119.824.712.712.491.166.270.286.34.1

634.1

22.038.7

198.875.3

123.525.412.712.392.667.571.388.44.4

636.421.639.8

195.075.9

119.225.512.812.493.568.472.690.84.1

641.6

21.339.7

194.075.1

118.9

25.713.012.694.9

69.674.1

92.54.2

653.422.040.3

196.075.9

120.0

26.513.212.996.970.975.394.54.9

Table 8.Corporate Profits (Before Tax) and Inventory ValuationAdjustment by Broad Industry Groups (6.12)

AH industries, totalFinancial institutions

MutualStock

Non financial corporationsM anuf acturing

Nondurable goodsDurable goods

Transportation, communication,and public utilities

All other industries

82.2

9.31.97.4

72.9

43.118.724.4

11.918.0

79.19.7

69.4

39.018 021.012. 018.4

81.9

9.5

72.4

42.718.823.911.817.9

84.6

9.6

75.0

44.419.225.312.018.6

78.19.6

68. 5"39.618.421.1

11.717.3

78.39.5

68.838.917.821.111.918.0

79.29.6

69.638.217.720.512.119.3


18 SURVEY OF CURRENT BUSINESS January 1968

1966 1967*

1966

III IV

1967

I II III IV*


Billions of dollars

Table 9.Gross Corporate Productl (1.14)

Gross corporate productCapital consumption allowancesIndirect business taxes plus transfer

payments less subsidies _Income originating in corporate busi-

ness

Compensation of employees. _Wages and salaries -Supplements

Net interestCorporate profits and inventory

valuation adjustmentProfits before tax

Profits tax liability.. _Profits after tax

Dividends .Undistributed profits

Inventory valuation adjustment..Cash flow, gross of dividendsCash flow, net of dividends.

Gross product originating infinancial institutions

Gross product originating innonfinancial corporations

Capital consumption allowancesIndirect business taxes plus transfer

payments less subsidies. _Income originating in nonfinancial

corporationsCompensation of employees

Wages and salaries _ _ ___ _Supplements

Net interest __ _Corporate profits and inventory

valuation adjustment. _Profits before tax

Profits tax liabilityProfits after tax

Dividends _Undistributed profits

Inventory valuation adjustment.' Cash flow," gross of dividends.. . - _'Cash flow, net of dividends' _

Gross product originating innonfinancial corporations... .

g ' . ,

Current dollar cost pei; unit of-- 1958. dollar gross, product

originating in nonfinancial,\- -corporations 2_ V-, i_^_ .

* i ^. y ~ " - ]jtsCapital consumption allowances" !.:_-_Indirecf; business taxes plus transfer

payments less subsidiesCompensation of employeesNet interest

Corporate profits and inventory valu-ation adjustment

Profits tax liability.Profit

Documents

SCB_011968