U.S. ECONOMIC TRENDS

Press, Volume LXXXIX, Issue 26986, 11 March 1953, Page 11

U.S. ECONOMIC TRENDS

Output And Income Both Increase

RISE IN CONSUMER SPENDING (From a Special Correspondent)

WASHINGTON. The United States Department of Commerce, totting up the nation’s accounts for 1952, reported that practically everything was on the upgrade —national output, national income and consumer spending. Among the outstanding influences reported in the department’s Survey of Current Business were continued increases in government spending as the defence programme pushed ahead, a drop in inventory accumulations, and production stoppages caused by labour disputes. Meantime, the Federal Reserve Board reported that bank credit expanded substantially during 1952. But, the report said, the Federal Reserve used its control over the money to limit the expansion. By the end of the year, the Federal Reserve said, it had tightened the money market so much that member banks were deeper in debt to the reserve system than at any time since 1921. Member banks borrow from the federal reserve when reserve policies make it difficult for them to obtain funds elsewhere. Federal Reserve Chairman William McChesney Martin, jun., is a proponent of controlling bank credit—a major inflationary influence —by restricting other sources of bank funds, such> as federal reserve purchases of government securities.

“Banks More Cautions’’ This forces member banks to go into debt to . the reserve system if they want to increase their own loans. But banks in debt to the reserve system, the report said, will be more cautious in making loans (and thereby contributing to inflation) because they must repay their debt to the federal reserve on call, and must meanwhile pay interest on the borrowed funds. The Survey of Current Business gave this report on the nation’s economy in 1952:

1. Gross national product (the sum total price of the nation’s output of goods and services) rose 5 per cent, in 1952 to 346,000,000,000 dollars. Half the rise represented increased output, the rest price increases.' 2. National income (all earnings connected with production and services) increased 4.7 per cent, in 1952, to 290,500,000,000. Income in government service showed the largest increase during the year for any single industry —l2 per cent,—and amounted in 1952 to nearly 40,000,000,000 dollars. This included salaries of the enlarged armed forces. Almost all the increase in income of employees in private industry during the year was the result of hourly wage hikes. Corporations earned less in 1952 than in 1951. This was largely because of narrower profit margins on sales and to some losses on the value of inventories, where prices declined during the year. After taxes, corporate profits declined about 1,500,000,000, without adjustment for inventory valuation. Farm Income DoWn

Earnings of farm workers declined slightly over 1 per cent, in 1952, as farm prices slowly fell off. The income of non-farm proprietors rose 5 per cent.

3. Personal income (individual earnings from all sources) was up 5.5 per cent, in 1952, at 268,500,000,000 dollars. 4. Consumer spending in 1952 amounted to 92 per cent, of spendable income (income left after taxes). This made the rate of saving 8 per cent., double the saving average of the 194749 period. 5. Private investment declined, from 58,500,000,000 in 1951 to 52,000,000,000 in 1952, the total drop being due to decline in the rate of inventory accumulation (the department considers a druggist’s stocks, for instance, an investment).

6. Inventories were scaled down through the first half of 1952, following a big build-up in 1950 and 1951 which contributed to the price rises of those years. Inventory build-up resumed, on a moderate scale, during the last half of 1952, but by and large businessmen bought fpr stocks only about as much as they sold during the year. 7. Residential construction, at 11.000,000,000. was unchanged from 1951, which was the second highest year on record.

8. Foreign investment remained small, and the same as in 1951, at 200,000,000.