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TABLE 2.Business indicators most frequently used for forecasting purpose

1

1939

1940

1941

1942

1943

1944

1945

1946

1947

Latest month,

1947 2

110
87.4

109
72. 5

125
81.3

162 103. 8

199
136.5

239
168.3

235
182.3

203
182.8

170 178: 2

3 186 4 200.1

192 November.

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Business indicator

Unit

1929

1935-39=100
Billions of dol-
lars.

do
do
do

do.
Millions of

dollars,
Thousands

Dollars

25. 31

Industrial production, Federal Reserve-
National income, Department of Commerce
Gross national product, Department of Commerce
Personal inc me, Department of Commerce
Personal savings, Department of Commerce
Corporate profits after taxes, Department of Commerce
Retail stores-average monthly sales, Department of Com-

merce.
Nonagricultural employment, monthly average, Bureau of

Labor Statistics.
Average weekly earnings, manufacturing, Bureau of Labor

Statistics.
Average wholesale prices, Bureau of Labor Statistics.
Consumers' price index, Bureau of Labor Statistics.
Average weekly stock prices, Standard and Poor's.
Carloadings, weekly average, Association of American Rail-

roads.
Construction contracts awarded, monthly average, F. W.

Dodge.
Agricultural production, Department of Agriculture-

1926=100.

1935-39=100.

.do.

Thousand cars.

Millions of

dollars. 1935-39=100

715.1

ber.

Novem.

99

106

110

.113

124

128

136

133

136

9 136

1 See American Statistical Association, Bulletin No. 2, May 1945, pp. 20-21, for method of determination of this list.
2 Preliminary:
3 Average of the first 11 months-seasonally adjusted.
4 Seasonally adjusted annual rate of the second quarter.
5 Seasonally adjusted annual rate of the third quarter.
6 Seasonally adjusted annual rate.
7 Estimate of the monthly average for the whole year based upon data for the first 10 months.
8 Average of the first 11 months.
* Preliminary estimate of the Department of Agriculture.

Mr. GAINSBRUGH. There, again, the study largely is qualitative in character, but since big business must have figures as well as qualitative discussion, we asked our participating economists to give us specific quantitative estimate of the major business indicators for the first half and the second half of the

year. This particular discussion took place late in November. Hence, the results of it might be regarded as dated.

There, again, I did for this session what we did with respect to our own business people. I polled the participants in the session and asked them how they would change the forecasts that were made late in November.

Almost in the same proportion as the businessmen, the economists who participated remained fixed in their viewpoint. Those who believed the business outlook was good for 1948 in November of 1947, still believe the business outlook is good in February of 1948. Those who believed we were in for a recession in 1948 now are convinced we will have a recession in 1948.

So, the figures they supplied us late in November are almost as applicable today as when they were given us then.

They need a slight increase, however, because the price movement since November has been such as to raise some of the figures.

The specific figure which is of most immediate interest is, I take it, the personal-income figure.

If you will look at this exhibit of business indicators, you will find there the personal-income figure which emerged from this symposium of views of nationally known authorities on business analysis for the first half of 1948 and the second half of 1948.

The first-half figure for personal income was placed at $203,000,000,000 using an arithmetic average, and $201,000,000,000 using the median. They are not very far apart.

As a result of the poll that we have taken, we would suggest that that figure be brought up to $205,000,000,000 and possibly $210,000,000,000. Price increases have been sharp enough to raise the level for the first half.

In fact, the personal income figure for January was of about that magnitude.

We have reason to believe that the employment figure, which is an arithmetical figure, for February will show little cut from the preceding month. Again, another note of stability.

But returning to this table, the figure that I would offer to the committee as being indicative of the group thinking of the entire Conference Board Economic Forum for the first half of the year is in the neighborhood of 205 to 210 billion dollars.

For the second half of the year, the view of the economists again is almost in accord with the view of the businessmen. They anticipate a slight downturn in the second half of 1948.

There is a spread between the arithmetic average and the median, and you can understand that. The few members of the forum who believe that a business recession will come in the closing half of 1948 are convinced that it is going to be a recession of major magnitude.

You will find in the business outlook for 1948, for example, that one of the participants was Robert Nathan, and that Mr. Nathan

a

believed that unemployment would reach at least 6,000,000 before the year's end.

I would suggest that for the second half of 1948 you use the median figure of 200 to 205 as indicative of magnitude rather than the arithmetic average because the arithmetic average is pulled down too far by decisive viewpoints of a few members of the forum. That is one reason why in this exhibit you will find the range shown as well.

The CHAIRMAN. Do you remember Mr. Edie's view ?

Mr. GAINSBRUGH. Yes; and I can confirm Mr. Edie's views by citing a speech he made a few days ago. He believes that business activity would continue high for the first half of 1948 but might turn down in the second half, primarily because of the lack of capital in industry.

In a subsequent speech which Mr. · Edie made 2 or 3 weeks ago, however, he shoved the period of recession into the last 4 months of 1948, and was almost inclined to believe that recession might not develop until the first half of 1949.

The CHAIRMAN. Did he measure the recession?

Mr. GAINSBRUGH. I do not know; and I would rather not quote him because his speech is contained in a very recent issue of Commercial and Financial Chronicle.

The CHAIRMAN. The reason I ask, he was here a year ago and most of his forecasts were remarkably accurate.

Mr. GAINSBRUGH. We have great respect for Mr. Edie, and you will find he was selected as our discussion leader for this round table. The discussion leader for the previous year had been Milton Gilbert.

That, then, Mr. Chairman, is what I thought I could report to you without in any way disturbing the board's charter and trying to be as specific as possible in connection with your own problem.

I thought, too, might be of interest to tell you at least in our group no one anticipated the same level of activity in the first half of 1948 and the second half of 1948 and in the first half of 1949.

Those who believe that underlying factors were favorable, anticipated a higher figure in the second half than in the first half. Those who thought of recession, thought of changes in magnitude, but there were quite positive movements. There was never any attempt to say there will be exactly the same in the first half and the second half.

The CHAIRMAN. With reference to these toboggan declines to which you have referred, have you considered there are some factors now at least mitigating that kind of a decline that were not present after World War I, such as, for example, our credit control in the banking structure; such as, for example, parity price formulas, as far as agricultural products are concerned?

Mr. GAINSBRUGH. Yes. There are a host of new institutional factors that are present that perhaps give great strength.

One I would cite immediately, and will leave this for the record, is in the agricultural area.

(The matter referred to is as follows:)

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(This is the second of a series in "Economic Fact or Fiction" which are available in pocket-size reprints for easy mailing. Single copies will be available free. Quantity prices will be furnished upon request.)

Food was vital in winning the war. It is equally vital today in staving off world hunger. With such a mounting demand, prices received by the farmer for his products have sharply increased. To what extent has the farmer profited from these higher consumer prices?

Intensive investigations of food prices both by Government and private agencies have revealed one common conclusion. This was recently summarized by a joint congressional committee:

"The net result of higher prices received by farmers, despite higher costs, has been greatly expanded incomes. Farm income has increased relatively more than nonfarm income. . . . Although it is not the purpose of this paper to appraise the level or share of net farm income-whether too high or too low—it is abundantly clear that a major portion of increased food costs to the consumer is reflected in farm prices and farmers' incomes.

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1 See Food Prices, Production, and Consumption, report prepared by Fred E. Berquist for the Joint Committee on the Economic Report, 80th Cong., 1st sess., 1947, p. 21.

Farm spokesmen stress the disadvantages at which the farmer finds himself even under these higher income levels. Assistant Secretary of Agriculture Brannan recently contended that a typical farm family receives an income about “56 percent less than that of their city counterparts." While he found that the typical American urban family was "safe, fairly comfortable, with a dozen household conveniences at the wife's fingertips,” the typical farm family lived in an old house in serious disrepair, without running water and other conveniences.

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1 Includes nonagricultural income of persons on farms.

2 Represents the ratio of per capita farm and nonfarm incomes expressed as a percentage of the 1910-14 average ratio. For example, farm income per capita in 1946 was 461 as compared with 100 in 1910–14; nonfarm income was 272 (1910-14-100). The index of farm income (461) divided by the index of nonfarm income (272) yields the parity income ratio (168).

Source: Department of Agriculture.

"Flies attend every meal, spring and summer,” he said. “There are mice in the kitchen and rats around the barn.” He placed particular stress upon the fact that "agriculture is disadvantaged in its share of the national income. Roughly one-fifth of our people live on farms. But last year agriculture received only one-ninth of the national income. Thus, even at the peak of prosperity, iarm income lags. In the valleys of depression the gap grows much wider.” ?

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Against this background of conflicting viewpoint, farm facts warrant careful review.

RELATIVE INCOMES

From official data prepared by the United States Department of Agriculture and the United States Department of Commerce, the following facts emerge about the comparative income status of agriculture :

1. Farmers are currently receiving the highest share of the national income on record. The net income from agriculture after deducting all production expenses will be about $18,000,000,000 in 1947. This is fully four times the comparable figure for 1939. It exceed the income in 1929 by about $12,000,000,000. It is nearly twice the total net income for 1919.

This rise was substantially greater than the increase in net income in the rest of the economy. As a result, agriculture's share of the national income reached 10.2 percent in 1946 as compared with 8.2 percent in 1939 and 8.9 percent in 1929. Even after allowance for the higher cost of farm operations currently, therefore, a larger share of the national income has gone to the farmer in recent years. There can be no doubt that the relative income status of farmers has been significantly improved.

2 Statement by Assistant Secretary of Agriculture Charles F. Brannan, before the House Committee on Agriculture and subcommittee of Senate Committee on Agriculture and Forestry : “Rural Facilities, Services, and Industries," October 6, 1947.

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