SCB_121956

DECEMBER 1956

U. S. DEPARTMENT OF COMMERCE

OFFICE OF BUSINESS ECONOMICS

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

SURVEY F CtimiiENT BUSINESS

No. 12

DECEMBER 1956

PAGETHE BUSINESS SITUATION...., 1

Business Investment Plans-First Quarter of 1957. 2

Third Quarter U. S. Balance of Payments-Rise in Exports and Foreign Investments.. 4

* * *

SPECIAL ARTICLESExports and Domestic Business.... 8Economic Aspects of the New Highway Pro-

gram 19

Income of Lawyers in the Postwar PeriodFactors Affecting the Distribution of Earn-

ings 26

* * *

MONTHLY BUSINESS STATISTICS S-l to S-40Statistical Index .Inside back cover

Published by the U. S. Department of Commerce, SINCLAIR WEEKS,Secretary. Office of Business Economics, M. JOSEPH ME EH AN,Director. Subscription price^ including meekly statistical supplement, is$4.00 a year; foreign mailings $5.75. Single copy, 30 cents. Send remit-tances to any Department of Commerce Field Office or to the Superintendent ofDocuments, United States Government Printing Office, Washington 25, D. C.Special subscription arrangements, including changes of address, should bemade directly with the Superintendent of Documents, Make checks payableto Superintendent of Documents.

DEPARTMENT OF COMMERCEFIELD SERVICE

Albuquerque, N. Mex.321 Post Office Bldg.

Atlanta 3, Ga.66 Luckie St. NW.

Boston 9, Mass.U. S. Post Office andCourthouse Bldg.

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Chicago 6, 111.226 W. Jackson Blvd.

Cincinnati 2, Ohio442 U. S. Post Officeand Courthouse

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For local telephone listing, consult sectiondevoted to U. S. Government


DECEMBER 1956

Plant and Equipment Investment- *!

Programed at higher rate in early 1957BILLIONS OF DOLLARS (ratio scale)60

50

40 TOTAL

30

20

109

MANUFACTURING

Anticipate^

' 1953 1954 1955 1956 1957

QUARTERLY TOTALS, SEASONALLY ADJUSTED, AT ANNUAL RATES

Industry gains widespreadPercent change 1st qtr. 1957over 1956 quarter ly average

0 +5 tlO -H5 +20 t25

TOTAL

Railroad

Public Utilities

Nondurable Mfg.

Durable Mfg.

Other Transportation

Commercial a Other

Mining

U. S. Department of Commerce, Office of Business EconomicsQata: SEC 8 QBE

56-43-1

BBy the Office of Business Economics

USINESS activity has continued to reflect strong de-mand in most major sectors of the economy during the finalquarter of the year. Further advances in the income flowand the high rate of employment were being reflected in briskbuying at retail stores.

The latest survey of investment demand, reported indetail on the following pages, points to a further increase inexpenditures for plant and equipment in the current quarterand in the first 3 months of 1957, although the rate of in-crease appears to have moderated from that of the past year.Additions to business inventories in October continued atthe September rate, substantially above that of July-August when the flow of steel was interrupted but aboutequal to the monthly advance in the first half of the year.Most of the recent rise in inventories has occurred in thosedurable manufacturing industries which have been expand-ing output.

Consumer buying has been high as the holiday shoppingseason progressed. Retail sales in October and Novemberwere 1 percent above the third quarter monthly rate, sea-sonally adjusted, and 3 percent above the same months ayear ago. Except for automotive stores and lumber andbuilding materials dealers, sales in all major retail businesseswere ahove last year. A large part of the year-to-yearrise, however, was due to higher retail commodity prices.

Government purchasing of goods and services has alsobeen increasing. The rise in Federal expenditures has beenmainly in national security programs and reflects to someextent higher prices. Increases in outlays of State and localgovernments are largely ascribable to growing constructionprograms and increased employee compensation.

Total construction activity has remained virtually un-changed over the last half-year, on a seasonally adjustedbasis, with residential construction lowered while publicconstruction has been moving ahead. In an effort to stim-ulate the lagging flow of funds into home financing, theFederal housing agency recently announced an increase ofone-half percentage point in the ceiling interest rate per-mitted on FHA mortgages.

Total personal income in October reached a seasonallyadjusted annual rate of $332% billion, up to $3 billion fromSeptember and $21 billion or 6% percent above a year ago.In comparison with last year these gains reflected for themost part higher pay scales and substantially increasedemployment.

The pattern of employment in November was mixed, andsubject to seasonal influences (including the end of agri-cultural harvest in some areas) which resulted in a declinein the total number at work, and a rise in the volume ofunemployment from October. Employment in nonagri-cultural establishments, seasonally corrected, continued atthe October volume of nearly 52 million, an increase of overa million from November of 1955. The rise over the pastyear has been mainly in nonmanufacturing industries, with


SUEVEY OF CUEEENT BUSINESS December 1956the major increases concentrated in trade, construction, andState and local government. Slight variations in seasonallycorrected employment characterized the major kinds ofbusiness from October to November. This generalizationapplied to the manufacturing subgroups as well, with theexceptions being moderate declines in the lumber, furniture,and rubber products industries, and a rise in the automobileindustry where employment and overtime operations havebeen rising with the acceleration of 1957 model production.

The consumer price index rose one-half percent fromSeptember to October, and was about 2% percent above a

year ago. The wholesale price index rose slightly fromOctober to November as appreciable declines in farmproduct prices partly offset the continued rise to a new highof nonfarm, nonfood commodities; in comparison withNovember 1955 the advance was 4 percent.

The pressure for funds by business and individuals forcapital and other purposes, with the monetary authoritiescontinuing to exercise a policy of restraint, has resulted in afurther upward movement of interest rates which arecurrently at new highs for the postwar period.

Business Investment PlansFirst Quarter of 1957THE two major aspects of the recently completed survey ofbusiness investment intentions are, first, the expectation ofa continued rise in plant and equipment expenditures,seasonally adjusted, into the early months of 1957, andsecond, that expenditures fell somewhat short of expectationsfor the second half of this year as reported in the Septem-ber survey.

Reports submitted to the Department of Commerce andthe Securities and Exchange Commission from mid-Octoberthrough November indicate that nonfarm businesses areplanning to purchase new plant and equipment at a season-ally adjusted annual rate of $38 billion in the first quarterof 1957. This compares with actual spending at a rate ofalmost $36 billion in the third quarter of this year and withanticipated expenditures of $37.3 billion in the final quarter.Three months ago business expected third and fourth quarteroutlays to be $36.3 and $38.0 billion, respectively. Theprojected rise for the first quarter is at a slower rate than thequarterly increases which occurred during 1956.

If realized, these programs would start the first quarter ofthe coming year at a rate one-sixth above the openingquarter of 1956, and 8 percent greater than the average forthe full year 1956.

As the following table shows, scheduled first quarter capitalspending is at least 5 percent higher than the 1956 average inall industry divisions except mining. Railroads, up 23 per-cent, and electric and gas utilities, up 13 percent, expect thelargest relative gains over 1956; the rate scheduled by manu-facturing companies is 9 percent higher.

The available data indicate that 1956 capital outlays willtotal $35 billion, 22 percent higher than 1955 investment

M anuf act uringMining _ _RailroadsOther transportationPublic Utilities _ .Commercial and other

Total

Percent changes,seasonally adjusted first quarter

1957, from

1956First quarter

228

2313186

16

1956Quarterlyaverage

9 1236

134

8

and virtually the same as the aggregate anticipated bybusiness for 1956 as determined by the OBE-SEC annualsurvey conducted early in the year.

The overall increase of $0.6 billion at seasonally adjustedannual rates planned from the fourth to the first quartercompares with the average quarter-to-quarter gain of $1.7billion that has characterized plant and equipment spendingsince the rapid expansion began in the first quarter of 1955,an expansion that has raised this key economic stimulus byalmost 50 percent.

For the first time in 2 years the rate of investment in anumber of important industry groupsdurable goods manu-facturing, mining, nonrail transportation and commercialshows a tendency to level or to decrease. These offset tosome extent planned increases in spending by nondurablemanufacturing, railroad, electric and gas utility, and com-munication companies.

Revisions in earlier plansFor most industry divisions actual capital outlays in the

third quarter and projected outlays in the fourth quarterwere lower than had been reported in the previous survey.These downward adjustments may be considered in largepart an aftermath of last summer's steel strike. In thisrespect the current revisionsthough considerably smallerresemble those that followed the somewhat longer 1952 workstoppage in steel. Third and fourth quarter revisions wereespecially pronounced in railroads, gas utilities and petro-leum, industries in which capital outlays are especiallysensitive to the shortages in heavy plate and pipe.

Manufacturing trends mixedManufacturing firms have scheduled expenditures at a

seasonally adjusted annual rate of $16.5 billion in the firstquarter of 1957, one-fifth higher than actual outlays in theopening quarter of 1956 but not much different from sched-uled fourth quarter spending. This time the non-durable-goods group shows greater strength, with continued advancesplanned through the first quarter, while durable-goods pro-ducers expect a slight dip in the first quarter of next year.

In durable-goods manufacturing it appears that, if a roughallowance is made for the typical seasonal movements, theadvances after the third quarter are most pronounced inprimary iron and steel and nonferrous metals, and in trans-portation equipment other than motor vehicles. Smaller


December 1956 SUEVEY OF CUKRENT BUSINESS

rises are expected by the machinery industries. In all thesecases the rate of increase from the fourth to first quarter ismuch lower than from the third to fourth quarter.

On the other hand the motor vehicle group is planning toreduce spending somewhat from recent peak high rates.Companies in stone, clay, and glass manufacturing show adownward movement in programed outlays.

The seasonally adjusted rise in expenditures in nondurable^oods after the third quarter is attributable largely to theprograms of petroleum companies. After allowance is madefor seasonal fluctuations it appears that sizable advanceshave been planned for both fourth and first quarters. Thesurvey also indicates a slowing in the rate of growth in out-lays by chemicals, paper, and rubber companies, whileinvestments by food and textile companies is declining.

Nonmanufacturing industriesEarly this year railroads scheduled expenditures of $1.3

billion, an increase of 42 percent over 1955 outlays. Actualspending in 1956 will come quite close to this figure, althougha higher expenditure might have been made had steel sup-plies been easier. The present survey shows increased

outlays scheduled for the current and succeeding quarters,from $1.2 billion in the third quarter to $1.5 billion in thefirst quarter of 1957, at seasonally adjusted annual rates.An almost identical pattern of advance two quarters aheadappeared in the surveys published last June and Septemberand, as noted earlier, the shortfall may be attributed to ma-terial shortages affecting freight-car production.

Expenditures by electric and gas utilities this year total$4.8 billion, $yz billion more than was spent in 1955 but-some what less than had been scheduled at the beginning of1956. The current survey shows that, after seasonal adjust-ment, both groups expect first quarter spending to be higherthan actual outlays in the third quarter, following a dipin projected fourth quarter spending.

The commercial and other group has scheduled outlaysof $11.5 billion, at a seasonally adjusted annual rate, ineach of the fourth and first quarters. Commercial construc-tion has been showing declining tendencies in recent months,following a long upward trend in expenditures.

A strong advance in investment programs is reported bythe communications industries. Mining and nonrail trans-portation companies show slight decreases in seasonallyadjusted outlays from the fourth to the first quarters.

Table 1.Expenditures on New Plant and Equipment by United States Business,1 1954-57[Millions of dollars]

Manufacturing

Durable-goods industriesPrimary iron and steelPrimary nonferrous metals _ _ __Electrical machinery and equipmentMachinery except electrical _ . _ _

Motor vehicles and equipment-Transportation equipment excluding motor vehicles...Stone, clay and glass products-Other durable goods 3

Nondurable-goods industries

Food and beveragesTextile mill products ._ _ _ _ _ _Paper and allied productsChemicals and allied products

Petroleum and coal productsRubber productsOther nondurable goods 4 ._- ._ __

Mining

Railroad

Transportation, other than rail

Public utilities.. _

Communications

Commercial and other 8

Total

1954

11,038

5,091754246439694

1,295191361

1,110

5,948

765331455

1,130

2,684131451

975

854

1,512

4,219

1,717

6,513

26,827

1955

11,4395,436

863214436809

1,128274498

1, 214

6,003

718366518

1,016

2,798150437

957

923

1,602

4,309

1,983

7,488

28, 701

1956 2

14, 934

7,5731,223

404606

1,067

1,720468689

1,396

7,361

798450808

1,468

3,182193462

1,231

1,263

1,753

4,817

I 10,919

34,917

1955

Jan.-Mar.

2,249

1,0631544189

158

2244888

260

1,186

1707792

231

4903096

186

179

359

845

J 422

1 1, 608

5,847

Apr.-June

2,795

1,27821145

102188

25665

106306

1,517

19692

120230

73036

113

235

217

420

1,052

471

1,819

7,009

July-Sept.

2,899

1,37821458

108206

29572

121304

1,521

17183

142239

74139

106

248

215

401

1,174

491

2,021

7,449

Oct-Dec.

3,499

1,718283

71138257

35488

183344

1,781

182115164317

83645

122

288

312

421

1,238

599

2,041

8,398

] 956

Jan.- Apr.-Mar. June

2, 958

1,46221969

104227

34177

132293

1,496

178108155283

62740

105

262

297

396

936

I 2, 613

7,462

3,734

1,86230688

142254

431103172366

1,872

208126203364

80350

118

319

325

423

1,199

2,880

8,880

July-Sept.

3,834

1,960296103158267

464120181371

1,874

203110206370

81350

122

314

277

443

1,308

2,725

8,901

Oct.-Dec.2

4, 408

2,289402144202319

484168204366

2,119

209106244451

93953

117

336

364

491

1,374

2,701

9,674

1957,Jan.-Mar.'

3, 812

1,915350145153280

370165149297

1,897

19397

220409

8414493

300

392

445

1,159

2,609

8,717

Seasonally Adjusted at Annual Rates[Billions of dollars]

Manufacturing _. _Durable. _Nondurable.. _ _

Mining _ ___ - __RailroadTransportation, other than rail.. _ . ___Public utilitiesCommercial and other 8

Total ._- _.

10.174.785.39.80.74

1.464 018.46

25.65

10.845.065.78.94.80

1.624 098.90

27.19

11.975.776.20.99.96

1.604 439.70

29.65

12.486.006.481.081.171.704 48

10 5431.45

13.456 576.88

1.131 251 654 56

10 7832 82

14.657 387.27

1.281 221 634 61

11 1034 49

15.788.207.581.261 201.795 08

10 7635 87

16.418.398.02

1.281 341.944 87

11 49

37 33

16. 4(8 1*8. 2^

1.221 541.8f5 40

11 4837 96

1. Data exclude expenditures of agricultural business and outlays charged to current account.2. Estimates for the fourth quarter 1956 and the first quarter 1957 are based on anticipated

capital expenditures reported by business in late October and November 1956. The year1956 includes the anticipated expenditures for the fourth quarter. The seasonally adjusteddata include in addition to a seasonal correction, an adjustment when necessary, for syste-matic tendencies in anticipatory data.3. Includes fabricated metal products, lumber products, furniture and fixtures, instruments,

ordnance, and miscellaneous manufactures.

4. Includes apparel and related products, tobacco, leather and leather products, and printingand publishing.5. Figures for 1954-57 include trade, service, finance, and construction. Data for 1956-57

also include communications.NOTE.Data for earlier years were published in the June 1956 SURVEY OF CURRENT BUSI-

NESS, p. 6.Source: U. S. Department of Commerce, Office of Business Economics, and Securities and

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

SURVEY OF CURRENT BUSINESS December 1936

Third Quarter U. S. Balance of PaymentsRise in Exports and Foreign Investments

INTERNATIONAL transactions of the United States continuedto expand in the third quarter after making allowance forseasonal variations. Payments to foreign countries, con-sisting of imports of goods and services, private and Gov-ernment donations (other than military), and the net outflowof United States capital rose from seasonally adjusted annualrate of $25.2 billion in the second quarter, to $26.6 billion inthe third. Foreign expenditures in the United States ongoods and services and for long-term investments advancedduring the same time from $23.8 billion to $24.3 billion.Over the last year international transactions advanced byabout one-sixth in value.

Although international transactions are much more sensi-tive than domestic business to political and economic dis-turbances abroad (as for instance after the start of the war inKorea), the spurt in foreign business through the third quar-ter does not seem to be a reaction to the growing tension inthe Middle East following the nationalization of the SuezCanal by Egypt in July. In 1950, after the outbreak ofhostilities in Korea, merchandise imports and later exportsbounded upward partly as a result of price rises, and largemovements of capital set in consisting of international trans-actions in securities and international shifts of short-termfunds.

In contrast, the rise in payments during the third quarterwas largely the result of long-term investments by Americancorporations in foreign branches and subsidiaries. Recordedcapital movements through security purchases and othershort-term shifts of funds did not show significant changes.The advance in seasonally adjusted merchandise importswas moderate and import unit values declined slightly. Therise in receipts from merchandise exports while substantialwas slower than in the first half of the year. The relativelyhigh amount of unexplained net receipts, during the thirdquarter, may indicate, however, some unrecorded inflows ofcapital as a result of uncertainties developing abroad.

Foreign investments advance sharplyThe recorded transactions reflect principally the current

expansion in business both here and abroad and the effectsof Government policies fostering foreign sales af agriculturalproducts. The rise in seasonally adjusted payments by theUnited States to foreign countries by $360 million from thesecond to the third quarter was primarily due to an increasein the outflow of United States capital. The rise was con-trary to usual seasonal expectations and consisted primarilyof higher investments by American companies in foreignbranches and subsidiaries. Most important was the pur-chase of a British oil company for $176 million, purchases ofoil concessions in Venezuela requiring over $50 million, andsecurity issues of about $45 million by a Canadian pipelinecompany. Other direct investments were about as high asin the second quarter although a decline over this period hasbeen the seasonal pattern in preceding years. The large out-

flow of private short- and medium-term capital includes a$50 million bank loan to France. The outflow of long-termGovernment capital was raised by the $35 million capitalsubscription to the new International Finance Corporation.

The purchase of the foreign oil company and the subscrip-tion to the International Finance Corporation may be con-sidered special transactions limited to this quarter. Theother transactions, however, appear to be a part of invest-ment developments extending over longer periods of time.Purchases of oil concessions in Venezuela continued in thefourth quarter and are likely to be followed by investmentsto explore and develop the oil resources in the new territories.Investments in Canadian pipelines will also continue.

Other capital outflows were stimulated by high interestrates and credit restrictions abroad, which in some instancesmade it less desirable for American enterprises operatingabroad to obtain capital from local resources arid inducedthem to transfer more funds from the United States. Higherinterest rates abroad also contributed to the continued largeoutflow of portfolio capital, mainly through bond issues byCanada and medium-term bank loans, mainly to Europeancountries.

The rise in the outflow of private capital during the thirdquarter consisted to a larger extent than usual of cashtransfers rather than of equipment or other merchandise,and, therefore, augmented immediately foreign dollar re-sources, rather than United States exports.

The decline in the outflow of Government long-termcapital (excluding the contribution to the InternationalFinance Corporation) from the second quarter was largelydue to a smaller utilization for loan purposes of foreigncurrencies accumulated through sales of agricultural com-modities. Receipts of foreign currencies (or claims for suchcurrencies) through such operations were about $260 millionor $54 million smaller than in the second quarter, but becauseof lesser utilizations for loans and grants the accumulationwas higher.

Merchandise imports at $13 billion rateMerchandise imports in the third quarter did not change

much from the preceding quarter but after seasonal adjust-ments appear to have risen by about $150 million, andreached an annual rate in excess of $13 billion. Imports forconsumption increased even more than total imports (afterseasonal adjustment) as net additions to stocks in bondedwarehouses were smaller.

Although the data for imports of individual commoditiesor groups of commodities have not been adjusted for seasonalvariations, it seems that the larger receipts of coffee werean important factor in the seasonally adjusted import rise.Imports of raw materials, with the major exceptions of copperand rubber, also advanced more than normally between thesecond and third quarters, and except for agricultural ma-chinery that was also true of finished manufactures. Both


December 1956 SURVEY OF CURKENT BUSINESS

copper and rubber went through major market adjustmentswhich were reflected by the decline in prices and importvolumes.

The change in seasonally adjusted imports from a relativestability during the first half of the year to a rise in thethird quarter was similar to the changes in industrial produc-tion, although the rise in the latter during the third quarterfollowed a slow decline during the first half of the year.

The increase in United States demand benefited primarilyCanada and some of the other countries in the WesternHemisphere such as Brazil and Venezuela. Deliveries fromthe Middle Eastern oil producing countries advanced fasterthan last year and were substantially higher than duringthe summer of 1955. Purchases from Asia, other thanJapan, were smaller than in the second quarter of this }^earor a year ago, mostly as a result of the smaller expenditureson rubber. Imports from Japan and the industrializedcountries of Europe which had risen sharply last year, con-tinued to rise, but at a slower rate. Sales to the UnitedStates by other European countries such as Spain andTurkey fell off, however.

Foreign incomes from the sale of services to the UnitedStates did not show the usual seasonal gain during the thirdquarter. The main reason was the apparently more thannormal decline in military expenditures, a part of which,however, may have been due to an unusually high concentra-tion of reported expenditures in the second quarter andpossibty some reporting lags in the third. Most of thereported decline was in payments on offshore procurementcontracts for goods transferred to allied forces.

Table 2.Balance of Payments, Seasonally Adjusted (ExcludingMilitary Grant-Aid)By Quarters, 1955-56

[Millions of dollars]

United States payments, total . _ _Imports total

Merchandise.- _ ...Services

Remittances and pensionsGovernment grants and related

capital movements ._United States private and other

Government capitalUnited States receipts, total

Exports, total -Merchandise _ _ _ _ _ -Services .

Foreign long-term investments inthe United States

Errors and omissions (net receipts) ....Increase in foreign gold and liquid

dollar assets through transactionswith the United States ._ .

L

5,1004,2202, 686I 534

147

G68

654,9324, 8383,4761,362

94104

64

19

II

5, 5354,3732,7611 612

146

568

4484,9104,8153,4301,385

95127

498

55

III

5,4834,5572,9281 629

153

467

3065,1735,0703,6731,397

10315

295

IV

5,7224,7733,1411 632

151

421

3775,2445,1923,6851,507

52205

273

I

6,1184,9243,1481,776

150

452

5925,5265,4153,9351,480

111

47

545

1956

II

6,2954,9203, 1181,802

159

512

7045,9505,7874,2431,544

16350

295

III

6,6534,9713, 2651 706

178

459

1,045

6,0685,9534,4001, 553

115237

348

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

Preliminary estimates of travel expenditures abroad indi-cate an increase over the previous quarter in accordancewith the usual seasonal pattern. Compared with last yearthey were about 9 percent higher. In Europe alone, travelexpenditures during the summer season were about 14 per-cent more than a }^ear ago.

About half of the $110 million decline in Governmentgrants consisted of smaller utilizations of foreign currencieswhich had been paid to the United States for agricultural com-modities, either in the same or in previous periods. Smallerdonations of agricultural products for foreign relief accountedfor another fourth of the decline. To a large extent the drop

in grants during the third quarter appears to be temporarywith much of the decline being of a seasonal character.Furthermore, the large accumulations of foreign currenciesduring the third quarter indicate larger disbursements forgrants or loans during subsequent periods.

Export rise continuedOf the total amount of $6.6 billion received by foreign

countries from the United States in the third quarter, theyspent in the United States about $5.7 billion on goods andservices including income payments on United States in-vestments abroad, invested about $100 million in UnitedStates private securities and enterprises operating hereunder their control, and added $520 million to their liquidgold and dollar holdings. The remaining amount of $265million represents as yet unrecorded net receipts by theUnited States which, as already mentioned, were relativelylarge during the third quarter.

Exports of goods and services in the third quarter wereat seasonally adjusted annual rate of $23.8 billion, about$600 million more than during the second quarter and $3.5billion or 17 percent more than a year earlier. Without thestrike in the steel industry, the rise in merchandise exportswhich reached an annual rate of $17.6 billion would havebeen even larger.

Exports to Canada dropped somewhat more than inprevious years between the second and third quarters, thoseto Latin America approximately by the average amount ofthe last years, and those to Europe and Asia somewhat less.Exports to Europe, while still advancing after seasonaladjustment, are doing so at a slower rate, however, whilethose to Asia have accelerated in their upward movement.The latter development reflects the increased shipments ofagricultural commodities under Government financial ar-rangements.

About two-thirds of the $160 million increase in theseasonally adjusted exports from the second to the thirdquarter was in cotton. Whereas during the 5 preceding-years cotton exports declined during that period by anaverage of about $100 million, in 1956 they increased by$10 million. The rise this year can be attributed to thedepletion of cotton stock held abroad and the policy of theGovernment of selling cotton abroad at world marketrather than at the higher domestic prices. The averageforeign sales price during the third quarter was $155 a bale,as against $187 a year earlier.

Coal shipments which advanced to $219 million during thethird quarter also had a major share in the export rise. Thehigher demand for coal comes largely from Europe andreflects the spreading gap between locally available energyresources and requirements, as European production, parti-cularly of steel and hard goods, expands.

Investments raise foreign reservesThe $520 million rise in foreign gold and liquid dollar

assets through transactions with the United States, broughtthe total for the first 9 months of the year to about $1.3billion compared with $970 million during the same periodof 1955. About $170 million of the additions to foreigngold and liquid dollar assets in the third quarter may beattributed to seasonal factors which lowered foreign expendi-tures in the United States more than United States expendi-tures abroad, and about $250 million to the special capitalmovements, including the $50 million loan to France men-tioned earlier, which took the form of dollar transfers.


6 SUEVEY OF CURRENT BUSINESS December 195The remaining amount of $100 million was lower than

the rise in foreign gold and liquid dollar assets in any other3-month period since the first quarter of 1955. Most of thedifference between this amount and the seasonally adjustedforeign accumulation of gold and liquid dollars during thesecond quarter of about $300 million can be attributed tothe rise in unaccounted for transactions, a large part of whichmay consist of unrecorded acquisitions of dollar assets byforeigners.

The recorded transactions between the United States ancthe rest of the world do not indicate major developments iithe basic balance of payments adverse to foreign countrie;as a whole, even if the special capital transactions mentionecabove are left out of considerations. Transactions witlindividual countries or areas did change, however, and thenwere also considerable shifts in the net dollar flow amon^them, which affected their gold and dollar reserves.

Net payments to the United Kingdom, the dependencies

Table 3.United States Balance of Pay[Millions of dollars]

Line

12

3456

8

9

1011121314

15If)171819

2021

2223

242526

27282930

3132333435303738394041

42

43

44

45464748

Item

Exports of goods and services, to talMilitary transfers under grants, net,

total.Other goods and services, total

Merchandise, adjusted, excludingmilitary.

TransportationTravelMiscellaneous services:

PrivateGovernment, excluding mili-

tary.Military transactions, -Income on investments:

Direct investments . _ _ ._Other private - _ . .-_Government

Imports of goods and services, totalMerchandise, adjusted, excluding mili-

tary.TransportationTravel --Miscellaneous services:

PrivateGovernment, excluding military

Military expenditures -Income on investments:

PrivateGovernment

Balance on goods and services:TotalExcluding military transfers _ __ .

Unilateral transfers, net [to foreign coun-tries (-)]:

Total . - - -Excluding military supplies and servicesPrivate remittances _ _ _ ._ _ _Government:

Military supplies and services- _ _ .Other grantsPensions and other transfers

United States capital, net [outflow offunds (-)].

Private net totalDirect investments, netNew issues . _.Redemptions _Other long-term, netShort-term net

Government, net, totalLong-term capital, outflowRepaymentsShort-term, net _ _ _

Foreign capital, net [outflow of funds( )],total.

Direct and long-term portfolio invest-ments other than United StatesGovernment securities.

Transactions in United States Govern-ment securities.

Short-term liabilities to foreign banksand official institutions.

Other short-term liabilitiesGold sales [purchases ( )]Foreign capital and gold, totalErrors and omissions and transfer of funds

between foreign areas [receipts by foreignareas ( )], net.

All areas

1955

I

5,273530

4,7433,471

309127

2023549

4426048

4,1452,775

25818011352

6569516

1,128598

-1,269-739-108-530-593-38

-125-48-81-68

95-511

-77-45

70-102

15694

196-177

4330

18680

II

5,468571

4,8973, 554

32817019632

48454

6649

4,4972,805

31230511856

77510620

971400

-1,199-628-111

-571-484-33

-577-412-262-17

59-103-89

-165-151

85-9953595

107448

-11534

569236

III

5,444610

4,8343,396

34820419732

53480

6361

4,6232,820

33145112782

682103

27

821211

-1,131-521-111-610-376-34

-237

-191-124-13

28-137

55-46-75104

75519103

192144

80-1550443

1956

I

5,969'654

5,3153,936

36414621030

314886248

4,8443. 249

32520812157

73211933

1,125471

-1,200-546-118

r -654-400-28

-546-427-297-103

75-108

6-119-105

89-103

610111

-25069851

-1259823

II"

7, 0231,0935,9304. 406

41018521030

565057850

5,0533,165

38934112258

83211234

1,970877

-1,711-618-119

-1,093-461-38

-868-661-324-92

14-94165

-207-184

99-122

553163

6028050

-103450159

III v

6,108447

5,6614, 075

41022321230

305329257

5,0343, 142

38749413990

64010339

1,074627

-965-518-135447-350-33

-1,009-824-518-103

28-132-99

-185-113

120-192

798115

108

51758

-163635265

Western Europe

19

II

1,818437

1,3811,007

14517

8716

7

601725

1,508557

108132

24471

6613

310-127

-659-222-54

-437-158-10

-141

-71-51-9

5-34

18-70-37

36-69264

66

71

168-41

42306184

55

III

1,835434

1,4011,010

1521683157

601147

1,4815801701667424

3817016

354-80

-650-216-55

-434-150-11-33-37-25

3-40

254

-1273

-57341

114

27

16139

341-12

1956

II r

2,554790

1,7641,325

19821

909

18611824

1,7917132091547418

524

22

763-27

-1,007-217-61

-790-143-13

-177

-118-35

4-45

42-59-45

50-64154123

68-52

15154267

III*

2,015310

1,7051,250

19719928

10651945

1,6106942011897419

334

7326

40595

-476-166-59

-310-96-11

-422

406-256

2-92-60-16-16

80-80402

112

39277

-266

40885

Western Europeandependencies

1955

II

181

181127

1133

(*)(*)

37

(*)308238

72112

381

(*)-127-127

-5

(*)(*)-5-7-6

(*)2

r*)2(*)

-4

3

(")-5

2

-4141

III

166

16611512341

(')31

(*)282212

71722

4011

-116-116

-5-5-4

(*)191914

23

()(')(*)

1

()-1

4

498

1956

II r

228

228162

1633

()(*)

44

(*)294235

725

11

241

(*)-66-66

7n

26-27-19

1-9

1

.....

7

3

(*)-4

8

792

III*

214

2141461533

(*)(*)

461

(*)294228

822

12

321

(*)-80-80

-6-6

-1(*)

541

121

1

""21

1

155

2160

Eastern Europe

1955

II

13

134

(')1

(')

81111

(*)

(*)(*)

22

-3-3

(*)

(*)(-)wl

1(\

2

December 1956 SUKVEY OF CURRENT BUSINESS

and the other European sterling area countries, includingthe payment for the aforementioned oil company, wereabout $360 million, as against $90 million a year earlierindicating a substantial improvement for the United King-dom in its transactions with United States. The drop inofficial British reserves during the third quarter by $57million shows, however, that the net payments by theUnited States to the United Kingdom were more than offsetby United Kingdom dollar payments to other countries,some shifts of dollars to nonofficial British accounts or

possibly some unrecorded payments to the United States.Net payments to continental Europe and its dependencies

dropped, however, from about $225 million in the thirdquarter of last year to $95 million in the third quarter of1956 including the $50 million short-term loan to France.The fact that continental Europe's liquid dollar resourcesincreased during the latter period by more than $310 million,indicates that the smaller net receipts of these countries fromthe United States were compensated for by larger net dollarreceipts from the United Kingdom.

by AreasSecond and Third Quarters, 1955 and 1956[Millions of dollars]

Latin AmericanRepublics

1955

11

1,1706

1,164805

8148

386

5

1628

111,028821

7080

31166

31

142136

-33-27-9

6-17j-164

-134-111

3-3913

-306637-1127

6

2

145

-26()127-72

III

1,2128

1,204799

8455

416

2

20476

1,049813

7789

43165

42

163155

-39-31-10

-8-20-1-49

-242 1

6138

-25-3220

-1314

(*)

20

-42

-113

-78

1956

II r

1,37022

1,348951

8354

437

4

1831112

1,169939

8183

36168

42

201179

-56-34-12

-22-20

2-192

-175-111

2-1-65-17-2639

-3080

5

0056

19-2060

-13

III v

1,37620

1,356921

8361

437

5

219125

1,200939

8495

53167

42

176156

-52-32-14

-20-16-2

-215

-175-137

2-14-26-40-3120

-29137

4

2

88

47-855239

All other countries

1955

II

1,105128

977711

676

319

13

13055

768496

4410

312201

11

337209

-463-335-37

-128-278-20-180

-110-36-8115

-82-70-48

7-29140

2

-1

136

300140166

III

1,082168

914633

74

3110

22

12476

783507

489213201

21

299131

-414-246-37

-168-189-20-90

-63-34-123

-11-9-27-31

7-3130

3

7

134

-142

13273

1956

II '

1, 437281

1,156838

876

3514

16

14686

846535

6112

520208

32

591310

-620-339-37

-281-283-19-259

-124-45-22(*)-11-46-135-113

6-2877

4

1

73

-1

"~77211

III *

1,199117

1,082779

857

3514

8

138106

827523

6110

421203

32

372255

-401-284-53

-117-213-18-118

-20-19-6135

-13-98-3116

-8326

1

1

6

18

"""26121

International institutions

1955

II

23

238

11

4

3

1

()2

2020

-31-31

-31

-7

-7

-7

i

2

-45

40

2-8-927

III

21

216

11

4

28

26

(X)

2rr

-7

-16-16

-16

-19

-21

-2100

2

2

-3

4.

3

-10

()-6-951

1956

II r

22

228

11

3

4

1

(X)

3

1818

-14-14

-14

-9

-9

1-10()

112

2

-2

115

- 3-8329

-24

Hip

23

238

11

4

35

31

(X)

-12-12

-21-21

-21

-36

-3

1-4

"-33-35

2

77

4

75

-2

"83-675

Sterling area

Total

1955

II

n.s.s.n.s.s.

734478

6012

665

1

911011814466

6448

665

124

392

n.s s-80

n.s.s.-113-22

n.s.s.-89

2-25

-5-39

(')-1448

-20-10

3-13156

53

32

107

-36(*)15662

III

n.s.s.n.s.s.

764516

6210

656

11

8581

775452

6049

64798

432

n.s.s-11

n.s.s.-75-21

n.s.s.-51

-19

4-6-62

-1327

-23-94

-18-95

15

6

-141

25

-95200

1956

II'

n.s.s.n.s.s.

850553

7513-

706

3

1071112922507

7557

627

166

453

n.s.s.-72

n.s.s.-101-22

n.s.s.-77-2

-141

-131-75-1100-32-13-10-3620650

63

11

-14

-10

50264

m*

n.s.s.n.s.s.

835537

7311

696

2

1241-3

'*)842485

7059i

628

111

434

n.s.s.-7

n.s.s.-67-22

n.s.s.-43

2-303

-243-201

13-57

2-60-926

-7742

51

12

-21

42335

United Kingdom andother Europe

1955

II

n.s.s.n.s.s.

355206

407

502

00349

438150

5527

641

101

382

n.s.s.-83

n.s.s.-50-12

n.s.s.-36

2-3

4-24

-1947-7

00130

50

31

89

-40

1306

III

n.s.s.n.s.s.

399267

425

492

1

285

(X)

429160

5132

63277

422

n.s.s.-30

n.s.s.-14-12

n s.s.0)-2-10

5-4

-1928

-15

2-17-97

14

6

-142

25

-97151

1956

II*

n.s.s.n.s.s.

391224

498

542

003897

545201

6531

601

141.

433

n.s.s.-154

n.s.s.-39-13

n.s.s.-25-1-34

-63-31

-21-1129

161364

60

11

2

-9

64163

III"

n.s.s.n.s.s.

390225

476

532

1

479

()481a976036

601

81

424

n.s.s.-91

n.s.s.-18-12

n.s s.4

-255

-255-199

-571

18-1842

51

12

10

-31

42322

Dependencies

1955

II

103

10359

62

3()()33

(*)187149

419

1112

1

-84-84

-4-4-4

(*)(*)

-1-2

00CO(*)(*)()

3

C)1

-3190

III

93

9355

52

31

()27

(*)163131

415

129

1

-70-70

-4-4-4

0)(*)22

2220

2~~(V>"

00001

()-5

-456

1956

II'

138

13885

92

2(*)("040

(*)173133

523

119

1

-35-35

-6-6-4

-i-1-19

-19-17

00-20000(*)

3

by Marie T. Bradshaw, Daniel Roxon, and Max Lechter

Exports and Domestic Business

JCjXPr^'ANSION in export business stands out as one of theimportant demand factors underlying the buoyancy of thedomestic economy in 1956. Merchandise exports (exclud-ing military aid goods) climbed to an unprecedented $16.8billion at an annual rate during January-October 1956, upnearly 20 percent from the like period of 1955. Taken asan aggregate, exports during 1956 claimed a larger share ofnational output than in any year since the post-Koreanboom period of 1951.

Merchandise Exports and GrossNational Product

INDEX, 1925-55=100 (ratio scale)200

150 -

100

90

80

70

60

50

40

MERCHANDISE EXPORTS,QUANTITY

. MILITARY GRANT-AID)

GROSS NATIONALPRODUCT

(BASED ON CONSTANT DOLLARS)

First nine months,at annual rate

3 0 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 I I I I I 1 I

1925 , 30 35 40 45 50 55 60

Basic Data: Exports, Bur. of Foreign Commerce

U. S, Department of Commerce, Office of Business Economics 56-43-2

During 1956 and throughout the postwar period exports,particularly of agricultural items, have been facilitated byGovernment aid and special financing arrangements. Ex-ports (excluding military aid) over the period 1946-56 haveaggregated $143 billion while Government net economic aidsince the end of World War II has totaled about $39 billion.

NOTE.MISS BRADSHAW, MR. ROXON, AND MR. LECHTER ARE MEM.BERS OF THE BALANCE OF PAYMENTS DIVISION, OFFICE OF BUSINESSECONOMICS.

8

The major expansion in markets abroad during the cur-rent year makes particularly relevant the present study oflong-run changes in the composition and direction of UnitedStates exports and their implications for the domesticeconomy. The review, which covers the period from 1925 to1956, complements a somewhat similar analysis of merchan-dise imports presented in the November 1955 issue of theSURVEY. Both studies have involved a complete reclassifi-cation of the foreign trade data into new commodity cate-gories which can be compared with broad domestic1 andforeign indicators of production and demand as well as out-put in individual domestic industries.

Exports and gross national productThe chart pictures the overall comparisons of the move-

ments since 1925 of gross national product expressed inconstant dollars and the volume of exports of domestically-produced goods. Over this long period the average yearlyincrease in the real gross national product was 3 percentwhile the annual increment in the volume of export businessaveraged 2.6 percent.

The 1956 ratio of exports to gross national product is nearthe ratio associated with the post-Korean scare-buying periodof 1951 although below that of the years immediately fol-lowing World War IIparticularly in 1947 when pent-updemands abroad resulted in a record volume of exports. Eachof the consecutive annual gains in exports over the pastthree years, however, has resulted in a higher relationship ofexports to the gross national product. In 1954 exports ex-panded and thus aided in offsetting a moderate dip in othercomponents of the gross national product, while in 1955and 1956 the growth in export sales was proportionatelygreater than the increase in domestic sales of the Nation'soverall output.

The claim of exports on the gross national product during1956, moreover, is relatively greater than during the 1930'sincluding the years immediately preceding World War IIwhen exports had regained much of the ground lost duringthe recession of 1930-32.

As compared to the 1920's, however, exportsnotwith-standing their recent gain?have declined relative to thegross national product. This development, which must beattributed mainly to the changes in the flow of dollars abroadand other demands on foreign dollar resources, appears to haveaffected mostly our agricultural exports over this period.From 1929 to January-September 1956 the quantity ofagricultural exports increased by about one-third while thegross national product in constant dollars expanded byaround 120 percent. Over the same period, the volume ofnonagricultural exports had risen relatively faster than thegross national productby almost 140 percent.

It is true that the expansion in the volume of agriculturalexports since 1929 has been proportionately about as greatas the real rise in gross farm product while the long-termincrease in nonfarm exports matched an almost equal relativegrowth in the volume of nonf arm gross national product.Yet the fact that agricultural exports have continued


December 1956 SUEVEY OF CUEEENT BUSINESS 9

throughout the entire period to account for a relatively muchlarger component of total exports than farm product has ofthe aggregate national product, accounts in large measurefor the decline in the overall relationship between total ex-ports and total domestic output.

In further evaluating the somewhat greater rise in grossnational product than in exports since the 1920's it shouldbe noted that a considerable portion of the long-term rise ingross national product has consisted of Government servicesand other nonmerchandise items. Hence the ratio of exportsto domestic output of movable goods alone shows an evenmore moderate decline than the ratio of exports to the overallgross national product.

Notwithstanding their reduced claim on domestic outputsince the 1920's, exports during intervals of decliningdomestic business activity have behaved more favorably inthe postwar period than in prewar years. In 1948-49 aswell as during 1953-54, the volume of exports expanded andthus compensated in part for the slack in domestic demands.This contrasts with developments in 1930-32 when a rela-tively sharper drop occurred in exports than in domesticbusiness, largely because of the rapidly shrinking outflow ofUnited States capital. In 1937-38 exports also dipped al-though on slightly and relatively far less than domesticoutput.

The relationship between exports and gross nationalproduct in current dollars would be substantially similar tothat pictured in the chart. The current value data, how-over, show a much steeper decline in exports relative to thegross national product during the early 1930's. During thatperiod prices of farm products, which weigh far more heavilyin exports than in gross national product, moved downwardconsiderably faster than prices of other goods. Looking atthe more recent period, 1954-56, the rise in the current valueof exports relative to the current value of gross nationalproduct is somewhat less accentuated than that shown onthe constant value chart due to the downtrend in exportprices of some major agricultural export items.

Trends in the relationship of exports to the gross nationalproduct obviously provide only a summary evaluation of thechanging claim of exports on domestic economic output.Hence in the discussion which follows, broad shifts in thecommodity structure and direction of exports are analyzed

and related to basic developments abroad and correspondingchanges in the output of major groups of domestic industries.Changed commodity structure of exports

For purposes of this study, exports have been reclassifiedinto four major categories: Capital equipment, consistingof machinery and commercial transportation equipment;producers' supplies and materials including both crude andfabricated materials (except food and drugs); food and drugs;and finished consumer items except food and drugs. Thesegroupings, in turn, have been subdivided into their respectiveagricultural and nonagricultural components.

The chart on p. 10 contrasts the patterns of change since1925-29 in each of these major categories of exports, andillustrates the extent to which nonagricultural products (ex-cluding food and drugs), particularly capital equipment, dom-inated the rise in exports from the prewar to the postwarperiods.

In the first 9 months of 1956 our foreign customers hadraised their dollar expenditures for United States-producedcapital equipment to an annual rate of $5.2 billion or bynearly 600 percent as compared with 1925-29 and by over 900percent as compared with 1930-39. Exports of machineryand commercial transportation equipment, moreover, com-prised nearly one-third of total domestic exports duringJanuary-September 1956, a share greatly in excess of that-prevailing during either the 1920's or the 1930's (see table 1).

The less spectacular but nevertheless significant growthsince the prewar years in foreign purchases of nonagriculturalproducers' supplies and materials is also highlighted in thechart and contrasts sharply with the behavior of exportsof agricultural materials over the same period. Whereasin January-September 1956 the value of exports of nonagri-cultural materials had climbed to $5.6 billion at an annualrate as compared with yearly averages of $1.7 billion in1925-29 and hardly $1.0 billion in the 1930-39 period, thecurrent rate of agricultural raw material exports is scarcelyhigher than in the years 1925-29. The latter developmentreflects primarily the declining relative importance of rawcotton which comprised 18 percent of total United States ex-ports in 1925-29 and considerably less than 5 percent inrecent years.

Notwithstanding its far less prominent role as a supplierof raw material exports, the agricultural sector of the

Table 1.Domestic Exports of Agricultural and Nonagricultural Products, by Economic Categories, 1925-56

Category

Total domestic exports, adjusted(excluding military grant aid) 2 .. .

AgriculturalNonagricultural _ _ _

Producers' supplies and materialsAgricultural . __ _ _Nonagricultural.- _

Capital equipment.

Food and drugs _AgriculturalNonagricultural (mainly drugs)

Finished consumer goods (excluding foodand drugs)

All other and unclassified (mainly ship-ments valued under $100)

Yearly averages

1925-29

Milliondollars

4,874

1,8802,994

2,8001,1031,697

76582277745

481

6

Percent

100.0

38.661.4

57.422.634.8

15.7

16.916.0

.9

9.9

.1

1930-39

Milliondollars

2,548

7831,7651,474

50197352731228230

232

3

Percent

100.0

30.869.257.819.738.1

20.7

12.311. 11.2

9.1

.1

1946-49

Milliondollars

12, 137

3,5438,594

4,8271,0123,815

3,332

2,7652,531

234

1,072

141

Percent

100.029.270.8

39.88.4

31.427.4

22.820.82.0

8.8

1.2

1950-53

Milliondollars

12, 193

3,2998,894

5,1941,3673,827

3,664

2,2051,932

273

976

154

Percent

100.027.172.942.611.231.430.0

18.115.92.2

8.0

1.3

1954

Milliondollars

12, 707

3,0549,6535,4601,4084,052

4,037

1,9281,646

282

1,112

170

Percent

100.0

24.175.943.011.131.931.815.213.02.2

8.7

1.3

1955

Milliondollars

14, 116

3,19610,920

6,0581,1834,875

4,350

2.2842; 013

271

1,245

179

Percent

100.022.777.342.98.4

34.5

30.8

16.214.31.9

8.8

1.3

1956 i(Jan.-Sept. atannual rate)

Milliondollars

16, 376

3,79412,582

6,8581,2185,640

5,216

2,8592,576

283

1,265

178

Percent

100.0

23.276.841.97.5

34-431.9

17.415.71.7

7.7

1.1

1. Unadjusted for seasonal variations. 2. Adjusted to exclude household and personal effects and motion picture films exported on a royalty basis.Source: U. S. Department of Commerce, Office of Business Economics.

408827 56 2Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

10 SURVEY OF CURRENT BUSINESS December 1956economy has accounted for the bulk of the increase since theprewar period in United States exports of consumer-typeitems. A comparison of the two lower panels on the chartshows that during the postwar years shipments of foodstuffshave far overshadowed our aggregate exports of a widerange of finished consumer items (except food and drugs).Throughout the postwar period, moreover, foodstuffs havecomprised a considerably larger component of total UnitedStates exports than during the 1930's while finished consumeritems (other than food and drugs) have become somewhatless important relative to the overall export picture.

The relatively minor share of finished nonfood consumeritems in our total postwar exports (less than 8 percent inJanuary-September 1956) can be attributed, among otherfactors, to the discrimination against consumer goods in favorof capital equipment by means of import and foreign ex-change controls in many of our leading foreign markets.

Shift to Western Hemisphere marketsThese long-term variations in the commodity pattern of

United States export trade obviously resulted to a majorextent from shifts in the relative importance of our leading-export markets, each of which has displayed its own distinctpattern of commodity demand. Most pronounced amongsuch shifts since the prewar period has been the far greaterprominence of Western Hemisphere countries, and the di-minished role of European countries, as destinations forUnited States exports. This development, it will be recalled,is analagous to a somewhat similar secular change in therelative position of these areas as suppliers of United Statesmerchandise imports. Such similar shifts in the geographicalpattern of both our exports and imports as compared to theperiod before World War II are of course far from beingcoincidental, since the postwar rise in the quantity and price

Merchandise Exports by Economic CategoriesExcluding Military Grant-Aid

BILLIONS OF DOLLARS8 -

CAPITAL EQUIPMENT PRODUCERS1 SUPPLIES AND MATERIALS

NONAGRICULTURAL PRODUCTS

AGRICULTURAL PRODUCTS

6

4 -

4 -FOOD AND DRUGS

1925- 30- 46-29 39 49

+ - ANNUAL AVERAGES

50-53

54

*first nine months, at annual rates

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

OTHER CONSUMER GOODSC I N C L . PASSENGER CARS)

Hi n - i1925- 30- 46- 50- 54 55 56*29 39 49 53

ANNUAL AVERAGES

Baiio

December 1956 SURVEY OF CURRENT BUSINESS 11of United States imports from Western Hemisphere coun-tries has contributed prominently to their purchasing power.Moreover, the reemergence in recent years of other industrialcountries as export competitors has not advanced sufficientlyto substantially diminish the dominant position of the UnitedStates as a supplier in these markets.

Canada supersedes UK as leading marketTable 2 shows that in recent years, including the first 9

months of 1956, our customers in the Western Hemisphereclaimed around one-half of total United States exports,whereas in each of the periods 1925-29 and 1930-39 theircombined share aggregated about one-third.

Currently, Canada alone accounts for one-fourth of ourtotal export sales. In January-September 1956, Canadianpurchases in the United States climbed to a record annualrate of $4.1 billion and were over 5 times as great as our salesto the United Kingdom which had been the leading individualUnited States export market during the prewar period (seetable 2).

Rise in Latin American export businessAlthough mainly due to the declining importance of Argen-

tina as a market, the relative expansion in United States salesto Latin America as a whole was somewhat less remarkablethan the corresponding increase in shipments to Canada, thegrowth in certain individual Latin American export markets,particularly Mexico, Colombia, and Venezuela, was propor-tionately even greater that than occurring in the case of theCanadian market (see table 2).

These long-term gains in exports to Western Hemispherecountries are in part a reflection of our increased importancerelative to other exporting countries as a supplier of bothCanadian and Latin American imports. The share of theUnited States in total Canadian imports rose from aboutthree-fifths in 1937 to nearly three-fourths in the first halfof 1956 while our proportionate contribution to aggregateLatin American imports increased over the same periodfrom about one-third to roughly one-half.

Table 2.Exports (including reexports) by Continents and Selected Countries of Destination,1 1925-56

Area and country

Total exports (excluding military grant aid)Western Hemisphere

CanadaOther

MexicoCubaColombiaVenezuelaArgentinaBrazil..ChileCentral American Republics .Other s

Rest of worldEurope .......

SwedenUnited KingdomBelgiumFranceNetherlandsGermany. - . _ _ _ .Switzerland "ItalySpainGreeceYugoslaviaTurkeyOther *

Asia. ...India-PakistanPhilippinesJapan ... _ .Korea _Iran _IraqIsraelSaudi ArabiaThailandIndochina (Vietnam, Laos, Cambodia)China. .P"ormosaOther s

Oceania. _Australia. -New Zealand- ... - _ .Other 3

AfricaEgypt _ __- _Belgian CongoUnion of South AfricaOthers . . . . __ .

Yearly averages

1925-29

Milliondollars

4,9911,718

8278911281544937

169964477

1373,2732,392

49908112256139439

10162781514

219578}

5273

259n. a.

112122

117n a

68

19415438

2

109111

5344

Percent

100.0

34.416.617.82.63.11.0.7

3.41.9.9

1.52.7

65.6

47.91.0

18.22.25.12.88.8.2

3.21.6.3

(*).1

4-411.61.11.55.2

n. a.(*)(*)(*)(*)(-)(')2.4n. a

1.43.93.1.8

(*)2.2.2

(*)1.1.9

1930-39

Milliondollars

2,604

853406447

696227296549204185

1,751

1,17145

45563

14271

130106630

736

143

4193364

19811. a.

423

1123

66n. a.

33

7152172

9091

5030

Percent

100.0

32.815.617.22.62.41.01.12.51.9.8

1.63.3

67.2

45.01.7

17.5fj. 45.52 75.0i2.5

'.3.1.2

5.5

16.11.32.57.6

n. a..1.1.1 4'.1

2.5n. a.

1.3

2.72.0.6.1

3.4.3

001.91.2

1946-49 | 1950-53

Milliondollars

12,345

5, 0091,8703,139

531396185419346470113241438

7, 336

4, 55120282635865430358815443738

414248

460356

1,910f 284\ 32

41132845451140641716

27817

322

196144466

6794643

350240

Percent

100.0

40.615.225. 44.3

1.53.42.83.8.9

2.03.5

59.4

36.81.66.72.95.32.44.81.23.5.3

n. a..4

n. a.2.9

15.5

'.33.32.7.4.4.1.3.5.1.1

~'A2.6

1.61.2

(*)'5.5'4,

2.81.9

Milliondollars

12, 346

6, 1582,7343,424

635486243467158479117249590

6,188

3, 378115672294369262440152375

71728656

414

2,055303

57302577652720926448288

53411

2221504032

5336258

198215

Percent

100.0

49.822.127.75.13.92.03.81.33.9.9

2.04.8

50.2

27.4.9

5.42.43.02.13.61.23.0.6.6.7.5

3.416.72.5.5

2.54:l.2.2.7.5 4.2.1 4

3.3

1.81.2.3.3

4.3.5.5

1.61.7

1954

Milliondollars

12,851

6,4752,9663, 509

634429343534123456

75300615

6, 376

3, 486119692270333423494154305

9948

10079

3702,010

16233

32668087462876434351

94341

2631904330

6174049

229299

Percent

100.0

50.423.127.34.93. 32.74. *1.03.5.6

2.34.8

49.6

27.1.9

5.42.12.63.33.81.22,4.8 'i.8.6

2.8

15.71.3.3

2.55.3.7.4.2.6.3

4.7

2.7

2.01.5

:l4.8.3 4

1.82.3

1955

Milliondollars

14, 262

6,8903,4003.490

70045133155614824191

295677

7, 372

4, 29816292431935947659516435615476

13196

4862,145

18750

339643126543490695033

105365

2942015241

6357953

261242

Percent

100.0

48.323.824.54.93.22.33.91.01.7.6

2.14.8

51.7

30.11.16.52 22.53 3

1.22.51.1.5.9.7

3.415.0

1.3

2.44.5.9.4.2.6.5.4.2

.72.5

2.11.4

'.8

4.5.6.4

1.81.7

1956 2(Jan.-Sept. atannual rate)

Milliondollars

16, 570

7,9904,0653,925

804489347611203288137304742

8,580

4, 98517880039953553370820349623590

121110577

2,575225141311759157723997765170

107470

2551654644

76512061

272312

Percent

100.0

48.224. 523. 14.93.02 13.71. 21.7.8

1.84.5

51.8

30.11. 14.82.43.23.24. 31.23.01.4.7

,1 615.5

1.4.9

1.94. c>.9

'.2.6. 5.3

.62.8

1.61.0.3.3

4.6.7 4

1.61.9

n. a. Not available. * Less than one-tenth of one percent. 2. Unadjusted for seasonal variations.1. Global and area totals (and Canada) include "cash special category" exports (potential 3. Including "cash special category" for the entire area.

military end-items not shipped under military grant aid programs). Individual country 4. Yearly average for 1S46-1947.totals exclude all "special category" exports.

gource: ^ g DepartJJjent of Commerce, Office of Business Economics.


12 SURVEY OF CURRENT BUSINESS December 1956

Impact of U. S. direct investmentsUnited States investments are a major factor contributing

to our stronger position in both these markets. During thepostwar years Canada has been the most prominent countryreceiving United States capital. The heavy outflow of suchfunds from the United States has greatly facilitated the highrate of development and expansion which has characterizedthe Canadian economy in recent years and which, in turn,has stimulated Canadian demands for imported capitalequipment, industrial materials, and other goods.

In Latin America, the other major area to which UnitedStates private foreign investment activity has been directedsince World War II, Venezuela provides an outstandingexample of the link between such investments and thedemand for United States exports. To an important extentdue to the large-scale development by American-controlledcompanies of Venezuela's petroleum, and more recently itsiron ore industry, Venezuela's national income in 1955 was9 times as great as in 1937. Over the same period, Vene-zuelan imports from the United States underwent a twelve-fold expansion and climbed even further in the first 9 monthsof 1956 to an annual rate of over $600 million.Declining role ofUK market

Although during the first three quarters of 1956 UnitedStates nonmilitary exports to Europe were at an annual rateof nearly $5 billion, the highest since 1947, Europe continuedto account for a considerably smaller portion of our totalexports than during either the 1920's or the 1930's. Thisdevelopment reflects primarily the relative decline in ship-ments to the United Kingdom which since World War IIhas obtained a far greater portion of its import requirementsfrom the rest of the sterling area.

Although over this period Germany and France alsoclaimed a diminishing share of United States exports, con-tinental European countries as a group claimed about one-fourth of our total exports during 1955 and the first 9 monthsof 1956, a portion nearly as large as during the prewar period.This reflects the currently greater importance of Nether-lands, Switzerland, Greece, Yugoslavia, and Turkey in ouroverall exports than in the years before World War II.

New markets in Middle East and AfricaThe emergence of new markets, particularly in Middle-

Eastern countries where United States interests have made

prominent contributions to the development of the petroleumindustry, has also been a noteworthy feature of our postwarexport trade. Exports to countries such as Iran, Iraq, andSaudi Arabia, almost negligible before World War II, havedisplayed an almost steady uptrend in recent years. Israel,another large postwar recipient of United States capital andof private and Government aid has likewise become a fairlysignificant market for United States merchandise, as haveThailand, Egypt, and the Belgian Congo.

Exports to Asia rise faster than importsIt is interesting to note that as compared with the prewar

period United States exports to Asia have risen relativelymuch faster than our imports from Asia, while at the sametime, exports to Canada, Latin America, and Europe haveincreased in very roughly the same proportions as ourrespective merchandise imports from these areas.

Whereas during the prewar period Japan financed itsdollar purchases by maintaining an export surplus with theUnited States, during the postwar period Japan has financeda sizable portion of its increased dollar imports by means ofUnited States Government aid and receipts from UnitedStates military expenditures. Our enhanced exports duringthe postwar period to some other Asiatic countriespar-ticularly Korea, Formosa, and Indochina, have also beenfinanced to a large extent by Government economic aid.

Diverse trends in outer sterling area markets

Export sales to India and Pakistan, also consisting in partof commodities shipped under special Government programs,have risen relatively much faster as compared with theprewar period than United States imports from these coun-tries. In recent years the Union of South Africa has likewisedeveloped into a far more prominent export market thanbefore World War II, but without the need for Governmentaid.

United States trading relationships with Australia andNew Zealand, on the other hand, have undergone an oppositelong-term change, the expansion in exports to these twosterling area countries since the prewar period having beenrelatively moderate, especially when contrasted to thecorresponding rise in their sales to the United States.

Table 3.Domestic Exports in 1955 by Geographic Areas and by Economic Categories

Area

Total domestic exports, ad-justed 2(excluding military grantaid)

CanadaOther Western Hemisphere-EuropeAsia and. OceaniaAfrica"Cash special category"

Exports of each economic category by area

All categories,total

Milliondollars

14,116

3,1313,3074,1162,321

586655

Per-cent

100.0

22.228. 529.116.44.24.6

Capitalequipment

Milliondollars

4,350

1,1711,180

662665236436

Per-cent

100.0

26.927.215.215.35.4

10.0

Producers'supplies,materials

Milliondollars

6,058

1,2861,1522,231

982188219

Per-cent

100.0

21 19.036.816.23.13.7

Food anddrugs

Milliondollars

2,284

238465

1,00950765

Per-cent

100.0

10.420.444.222.22.8

Finished con-sumer goods l

Milliondollars

1,245

37944019314687

Per-cent

100.0

30.535.315. 511.77.0

Unclassified

Milliondollars

179

5770212110

Per-cent

100.0

31.939.111.711.75.6

I i """

Percent distribution of exports to each area byeconomic category

Allcatego-

ries,total

Percent

3 100.0

3 100.03 100. 03 100. 03 100. 03 100. 0

Capitalequip-ment

Percent

330.8

35.234.015.627.437.3

Pro-ducers'

supplies,materials

Percent

342.9

38.733.152.440.429.7

i "

Foodand

drugs

Percent

16.2

7.213.423.720.910.3

Finishedcon-

sumergoods i

Percent

8.8

11.412.74.56.0

13.7

Un-classi-fied

Per-cent

1.3

3 7. 5

*6.833.83J.33.9.0

1. Excluding food and drugs.2. Adjusted to exclude household and personal effects and motion picture films exported

on a royalty basis.

3. Includes ''cash special category" exports; these are not available on a continent by eco-nomic category basis.

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


December 1956 SURVEY OF CURRENT BUSINESS 13

Demand patterns differ by areaTable 3 shows the relative weights of each of the four

major commodity categories in our exports to each continentduring 1955. It contrasts, the remarkably similar patternsof demand on the part of Canada, Latin America, and Africa,with the considerably different structures of demandreflected in our exports to Europe and Asia.

Whereas machinery and commercial transportation equip-ment comprised over one-third of the total value of ourexports to Canada, Latin America, and Africa, it representedonly 27 percent of total United States exports to Asia andless than 16 percent of our aggregate shipments to Europe.Moreover, finished consumer items (other than food anddrugs), a fairly substantial component of our export tradewith Western Hemisphere countries and with Africa, ac-counted for hardly 5 and 6 percent of total 1955 exports toEurope and Asia, respectively.

Although producers' supplies and materials ranked inimportance with capital equipment as an outstanding seg-ment of United States export trade with both Canada andLatin America, this commodity category formed an evenmore dominant portion of our exports to the rest of the world,particularly to Europe.

The extent to which European demand was concentratedon producers' supplies and materials and on foodstuffs, isespecially striking. These basic items, which comprised overthree-fourths of our overall $4.1 billion of nonmilitary exportshipments to Europe in 1955, were relatively even a largerpart of our total sales to prominent individual Europeancustomers such as the United Kingdom, Germany, theNetherlands, and Italy.

Exports to Japan were dominated by foodstuffs andindustrial supplies and materials to an even greater extentthan exports to Europe. This was not true, however, ofexports to a number of other countries in Asia and Oceania.Sales of capital equipment bulked large in our shipments toAustralia, New Zealand, India, Pakistan, Thailand, and theoil-producing countries in the Middle East. Middle Easterncountries, moreover, also devoted a sizeable portion of theirtotal dollar expenditures to the purchase of durable consumergoods such as appliances and passenger cars.

Due to limitations in the export statistics themselves, andto the changing relative importance and varied demandcharacteristics of individual export markets within eachmajor area, it is somewhat difficult to generalize and to com-pare these recent patterns of demand with the patterns whichcharacterized our trade with each continent during the1920's and the 1930's. Several outstanding changes shouldbe noted, however, from the standpoint of their contributionto the major shifts which have occurred in the overall com-modity structure of our export trade.

Heavy equipment to Western HemisphereDuring the postwar period machinery and commercial

transportation equipment have comprised a substantiallylarger share of total United States exports to both Canadaand Latin America than during the years before World WarII, a development which accounts in large measure for themore prominent role of capital equipment in the makeup ofour overall exports during recent years.

The more than fivefold rise in such sales to Canada from1929 to 1955 and the even greater gain as compared with1937, coupled with similar relative advances in Canadiandomestic investment, have been a major factor in the riseof the Canadian gross national product. Record shipmentsof capital equipment to Canada during 1956, moreover,reflect new peaks in Canadian expenditures both for newconstruction and for machinery and equipment.

Our currently high sales of capital equipment to LatinAmerica, which reflect absolute and relative long-term gainsrivalling those which occurred in exports to Canada, like-wise may be attributed to the long-term growth of invest-ment outlays in that area, including large United Statesinvestments. In recent years such expenditures haveclaimed a considerably larger share of the total goods andservices available to Latin America as a whole than in either1929 or 1937.

Since it is anticipated that in Latin America as well asin Canada, heavy construction activity will reach an all-timehigh in 1956, it is not surprising that construction and miningmachinery, tractors, electrical machinery, engines andturbines and other heavy equipment bulk large in our currentsales to both areas. Since World War II, trucks and busesand some other forms of commercial transport equipmenthave also become relatively more important items in exportsto both areas, particularly to Latin America where much ofthe recent increase in new construction activity has beenin highway development and improvement.

Accelerated development and expansion programs in anumber of countries in Asia and Africa have likewise con-tributed to the increased relative importance of capitalequipment in our total exports as compared with the prewarperiod. Nevertheless, in 1955, Canada and Latin Americaeach accounted for between 25 and 30 percent of overallexport sales in this category.

Consumer goods sales to nearby marketsThe dominant role of the rest of the Western Hemisphere

as a market for finished consumer goods (excluding food anddrugs) was also a notable feature of our postwar exporttrade. As a group, Western Hemisphere countries ac-counted for nearly two-thirds of total United States exportsiii this category during 1955, a portion considerably greaterthan before World War II.

Ranked in order of their importance, the three top cus-tomers in 1955Canada, Venezuela, and Cubaaccountedfor nearly one-half of our total foreign sales within thisgroup. These three markets, significantly enough, areamong the few which have been relatively free from importand exchange controls during the postwar period. InMexico, which rivaled Cuba as a market for American con-sumer goods, import and exchange controls have also beenconsiderably less restrictive than those enforced by themajority of other countries.Exports of radio., TV, and appliances

Exports of radio and TV, electrical appliances, and phono-graphs and records were among those consumer items toshow the largest relative gains since the prewar period. In1955 sales to Western Hemisphere countries claimed 83percent of our exports of radios and TV, nearly three-fourthsof total foreign sales of electrical appliances, and two-thirdsof our exports of phonographs and records. Perhaps evenmore interesting is the fact that Canada by itself claimeda share of over 45 percent in aggregate United States exportsof these three products.

Smaller gains in passenger car salesWhereas exports of passenger cars to Western Hemisphere

countries had more than doubled from 1929 to 1955, ship-ments to the rest of the world gained by one-third. Euro-pean purchases rose by even less than one-third while salesto Australia and New Zealand showed a large absolute,decline.


14 SURVEY OF CURRENT BUSINESS December 195(It is true that in 1955 the dollar volume of passenger car

sales to Asiatic countries was twice as high as in 1929,while exports to the Union of South Africaour outstandingmarket in Africahad enjoyed an even greater relativeexpansion. The latter two markets, however, accounted forabout one-fifth of total passenger car exports in 1955, onlyhalf the share accounted for by Latin America alone.

Sales of most other major types of nonfood consumer goodsexportsincluding textiles, leather goods, and durablehousehold equipment other than appliancesto Canadaand other Western Hemisphere countries similarly exceededour sales to the rest of the world.

Limited consumer goods sales to EuropeIn Europe, Belgium and Switzerland stand out as fairly

significant markets for American consumer goods, especiallypassenger cars. Excluding purchases by these two countries,amounting to roughly $70 million in 1955, European expendi-tures for such items, including passenger cars, aggregatedhardly $100 million. A few countries, moreover, notablySweden, France, and the Netherlands accounted for the bulkof these purchases.

Aside from shipments to the Western Hemisphere andthese live European countries, the Middle East, the Philip-pines, and South Africa account for most of our remainingcurrent export sales of such consumer end-items.

Wide gains in nonfarm basic exportsIn contrast to the long-term gains in exports of capital

equipment and consumer goods which were concentratedto a large extent in Western Hemisphere markets, the risein exports of nonagricultural raw materials reflects acceler-ated shipments to every continent except Oceania. On theother hand, the relative long-run decline in sales of agricul-tural raw materials, particularly unmanufactured cotton,was almost entirely due to the weakening of demand inEurope.

Europe shifts to nonagricultural materialsEurope has continued to constitute the largest foreign

market for both agricultural and nonagricultural suppliesand materials. The pattern of European purchases, how-ever, has undergone major changes. Whereas in 1929,European expenditures for imports of producers' suppliesfrom the United States had been almost equally distributedbetween agricultural and nonagricultural materials, in 1955Europe spent more than twice as much on nonagriculturalsupplies as on agricultural raw materials.

In 1929 and 1937, respectively, unmanufactured cottonhud accounted for about one-fourth and one-fifth of ouraggregate exports to Europe. Although during 1955 cottonprices were nearly 80 percent higher than in 1929 and nearly200 percent greater than in 1937, United States sales ofunmanufactured cotton to Europe were value-wise only afraction of our shipments in 1929 and were even lower thanin 1937. While in 1955 the value of exports of unmanufac-tured tobacco to Europe was more than twice as high as in1929 and 1937, this was mainly a reflection of the highertobacco prices prevailing in 1955.

By way of contrast, a number of industrially produceditems such as coal, steel scrap, synthetic rubber, chemicals,and synthetic textile materials, which had been relativelyinsignificant or negligible in our export business with Europebefore World War II, comprise a major segment of currentUnited States export sales to that continent. Heavier ship-ments during recent years of these and other industrialmaterials such as metals and steel have far overshadowed

the long-run decline in our sales of petroleum products inEuropean markets. In the prewar period, when Europeanrefineries had a far smaller capacity than in recent years,petroleum products, particularly lubricating oils and gaso-line, had comprised well over 10 percent of the value of ouitotal exports of all goods to Europe.

In the case of Asia, somewhat similar changes appear inthe long-run pattern of demand for producers' supplies andmaterials. Over the entire period under study, Asia, espe-cially Japan, has ranked second to Europe as a market forUnited States cotton. Although sales of unmanufacturedcotton to Asia have been maintained to a relatively greaterextent than to Europe, during recent years agricultural rawmaterials as a group have represented a far smaller share ofout total sales to Asia, as well as to Europe, than beforeWorld War II. At the same time, a number of nonagricul-tural materials, especially coal, fertilizers, insecticides, andindustrial chemicals, have become prominent items in therecent makeup of our overall exports to Asia.

Industrial materials to nearby areasThe outstanding contribution of Canada and Latin Amer-

ica to the long-term overall gain in exports of industrially-produced supplies and materials should be noted also. In1955, shipments to Canada alone, amounting to over $1.2billion, were three-fourths as large as our sales in this categoryto all of Europe, while exports to Latin America aggregatedwell over $1 billion. Such sales to Western Hemispherecountries, moreover, have displayed an even greater long-term growth than our exports to Europe.

Throughout the postwar period larger sales of a varietyof products, including chemicals, textile materials, paper,iron and steel, and glass and other miscellaneous buildingmaterials, have characterized the overall growth in suchexports to Western Hemisphere countries. In these marketssales of chemicals alone (excluding drugs