ECONOMIC

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During the fourth quarter the downturn in housing became more pronounced,and the adverse effects from the energy crisis began to be evident.A marked slump in automobile sales led to a build-up of inventories indealers' hands and to cutbacks in production. It was clear from the patternof sales that the fear of a gasoline shortage was the dominant influence onfourth quarter sales, since throughout the period demand for small carsincreased, while demand for large cars declined.TABLE 2.—Changes in gross national product in current and constant dollars, 1968 to 1973IPercentJComponent1968to19691969to19701970to19711971to19721972to19731CURRENT DOLLARSPercent change:Total GNP.7.65.08.09.411.5Personal consumption expenditures.Durable goodsNondurable goodsServices8.18.06.59.76.6.67.38.28.013.55.78.58.913.37.68.510.811.712.19.2Gross private domestic investment.Business fixed investmentResidential structures10.310.98.5-1.92.1-4.512.43.837.016.413.226.413.015.17.4Government purchasesFederal purchasesState and local purchases..5.2.010.34.6-2.610.96.72.010.48.86.510.58.72.413.2Addendum:Final salesDomestic final sales..7.67.75.45.37.98.29.510.011.510.6Change in billions of dollars:Inventory accumulationNet exports of goods and services...7-.6-3.31.71.5-2.8.0-5.41.49.2CONSTANT (1958) DOLLARSPercent change:Total GNP_Personal consumption expenditures.Durable goodsNondurable goodsServicesGross private domestic investment.Business fixed investmentResidential structuresGovernment purchasesFederal purchasesState and local purchases..2.73.65.32.14.55.06.02.2-1.2-5.94.0-0.41.8-2.12.62.7-6.4-3.6-6.3-4.5-12.53.63.23.910.02.52.86.7-1.430.6-.6-5.33.36.16.112.84.44.911.410.019.33.3-.26.15.95.310.23.84.57.210.5-1.71.3-5.86.4Addendum:Final salesDomestic final sales.2.72.8-.1-.33.03.36.26.55.94.8Change in billions of dollars:Inventory accumulationNet exports of goods and services...3-.8-2.82.11.4-1.9-.7-2.4.68.0i Preliminary.Source: Department of Commerce, Bureau of Economic Analysis.50
The 11.5 percent increase in nominal GNP fron calendar 1972 to calendar1973 was the largest annual rise in 22 years. It featured a dramaticshift from deficit to surplus in net exports, as well as unusually strongdemand by consumers, especially for durable goods; by business for newplant and equipment; and by State and local governments. There is alsoreason to believe that inventory demand was strong last year but that supplyconditions did not permit this demand to be satisfied. Federal purchases andhousing rose less than average and decreased in real terms (Table 2).Somewhat over half of the rise in demand from 1972 to 1973 was matchedby increased physical volume, the 5.9 percent increase coming quite closeto the 1972 rise and exceeding the long-term average of about 4 percent(Table 2). The inflation component of the rise in money GNP acceleratedsignificantly from the 3.2 percent rate of 1972 and the 2.7 percentaverage of the past 25 years.NONRESIDENTIAL FIXED INVESTMENTLast year's rise in nonresidential investment extended the upturn thatbegan in 1971 after a year of declining real outlays. The investment expansiongathered strength in late 1971, when rising production increasedcapacity requirements and accelerated the rise in internal funds. The liberalizeddepreciation regulations and investment tax credit of late 1971 helpedto bolster the rise in cash flow. The exceptionally large increases in outputduring late 1972 and early 1973, coinciding with similar production increasesabroad, put severe pressure on domestic capacity in several industries,especially those producing basic materials. In view of these pressures it isnot surprising that manufacturing firms, with a 21 percent rise, dominatedlast year's increase in plant and equipment outlays.TABLE 3.—Changes in manufacturing plant and equipment outlays and value of starts, 1971to 1973IndustryPercent changeTotal outlays 2Materials-producing industries 3Primary metals.._PaperChemicalPetroleum refining...RubberTextile..Stone, clay, and glassAllotherTotal starts.._.26-1 2710-2229204137258458251 Preliminary. Expenditures include anticipated outlays for fourth quarter 1973. For starts, fourth quarter 1973 wasassumed by the Council of Economic Advisers to be equal to average of second and third quarters of 1973.2 As published by the Department of Commerce, Bureau of Economic Analysis. The two groups "materials-producing"and "all other" will not add up to the Commerce total because nonmanufacturing petroleum outlays ordinarily includedin petroleum in this particular survey have been excluded by the Council of Economic Advisers from each group.3 Includes lumber not shown separately.* Less than 0.05 percent.Source: Department of Commerce, Bureau of Economic Analysis (except as noted).51
Page 1:
ECONOMICTRANSMITTEDTO THE CONGRESSF
Page 5: CONTENTSPageECONOMIC REPORT OF THE
Page 9 and 10: ECONOMIC REPORT OF THE PRESIDENTTo
Page 11 and 12: of the inflation rate of 1973, and
Page 13: or permit incentives—including hi
Page 16 and 17: people of an easy time. Like our pa
Page 19: THE PRESIDENT:LETTER OF TRANSMITTAL
Page 22 and 23: CHAPTER 3. INFLATION CONTROL UNDER
Page 24 and 25: Page7. Unemployment Rates by Sex an
Page 26 and 27: Page53. Maximum Percent Change in E
Page 28 and 29: We have specific problems, too, asi
Page 30 and 31: This curtailment of supply does, of
Page 32 and 33: consumption we would not have chose
Page 34 and 35: outside the food and fuel sectors a
Page 36 and 37: about $14 billion from deficit to s
Page 38 and 39: 8 percent, at annual rates. Continu
Page 40 and 41: A third method, which seems to have
Page 42 and 43: DEVELOPMENT OF LOW-COST ENERGY FOR
Page 44 and 45: would otherwise have been invested
Page 46 and 47: TRANSPORTATION REFORMLast year the
Page 48 and 49: constraints. Restrictions on entry
Page 50 and 51: In early 1974 the Commerce Departme
Page 52 and 53: Consumer SpendingConsumer expenditu
Page 54 and 55: Chart 1Changes in GNP, Real GNP, GN
Page 58 and 59: A number of points may be noted abo
Page 60 and 61: income do not appear to have played
Page 62 and 63: Chart 2Changes in Real GNPPERCENTUN
Page 64 and 65: of essentially declining participat
Page 66 and 67: The unemployment rate for adult mal
Page 68 and 69: from job losers, the remainder of t
Page 70 and 71: to maintain a somewhat larger work
Page 72 and 73: Chart 3Changes in Selected Price Me
Page 74 and 75: TABLE 12.—Changes in selected pri
Page 76 and 77: production workers, and it is sensi
Page 78 and 79: the profits that companies report a
Page 80 and 81: Two measures of changes in income t
Page 82 and 83: About $8 billion of the growth in e
Page 84 and 85: effect of covered wage and employme
Page 86 and 87: Since these apparent stabilization
Page 88 and 89: MONETARY POLICY AND FINANCIAL MARKE
Page 90 and 91: lation requiring ceilings on all CD
Page 92 and 93: TABLE 19.—Offerings of new securi
Page 94 and 95: CHAPTER 3Inflation Control Under th
Page 96 and 97: (A more detailed presentation of th
Page 98 and 99: ate of advance in grocery store foo
Page 100 and 101: to the economy but also in the sens
Page 102 and 103: were imposed, limiting prices to th
Page 104 and 105: spurring of domestic inflation by e
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was more than twice as high in 1973
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wage increases in many cases, const
Page 110 and 111:
TABLE 26.—Behavior of items in co
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Chart 6Changes in RelatedWholesale
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and natural gas. A complex set of f
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CHAPTER 4Energy and AgricultureFOR
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al gas have contributed to the low
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TABLE 30*—Wholesale prices, all i
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tion sector, which in 1972 accounte
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United States on oil imports, OPEC
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of old oil and prices of imported a
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LONG-TERM PROSPECTSThe price of imp
Page 130 and 131:
important that the higher costs be
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improving the environment. The fund
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pollutants into the atmosphere will
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of research and rapid mechanization
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lion in fiscal 1972. Actually the a
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a minimum income. Unless prices fal
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The Administration supports the exa
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and estimates of some of these effe
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Since families typically pool their
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ability were not perfectly correlat
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Farm wages and farm income received
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TABLE 37.—Average usual weekly ea
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Chart 9Real Incomes for Men in Diff
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ecause they have acquired more expe
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whose owners or white workers have
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Several factors can be mentioned to
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y social pressures, however, which
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TABLE 42.—Relation of wage and sa
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ferences in their mix of occupation
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for public housing may be valued by
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8 to 20 percent for black females.
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sufficiently high to cover the addi
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TABLE 45.—Federal Government tran
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given to the problems of poverty du
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TABLE 47.—Trends in the employmen
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enefit increases greater than the i
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(Table 45). Medicare is chiefly des
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Public assistance is specifically d
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Then, subtracting equation (4) from
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policies, and the tensions among co
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In the fourth quarter the dollar ro
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which include trade, grants and oth
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tarily by foreign central banks, ev
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ply of oil, and by domestic price c
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in the United States. In view of th
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TABLE 52.—U.S. balances on intern
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esult from changes in market value
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TABLE 54.—Major changes in capita
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attempt was made to agree on a code
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The official price of gold was rais
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system, these demand changes were a
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What Pressures Should Be Exerted on
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The composition of reserves among d
Page 216 and 217:
prices of approximately the same or
Page 218 and 219:
tained, they would probably be felt
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Reducing Nontariff BarriersIn order
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Structural problems. Agreements on
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arrangements which are designed to
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capital and the means of putting th
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Canada and four smaller countries u
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currencies have appreciated relativ
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Effective Changes in Other Currenci
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Activities of the Advisory Committe
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Appendix BREPORT TO THE PRESIDENT O
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Report to the President on the Acti
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govern the exploitation of the reso
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Manpower and Social Affairs Committ
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Junior Staff EconomistsJames S. Fac
Page 249:
Appendix CSTATISTICAL TABLES RELATI
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PRODUCTION AND BUSINESS ACTIVITY:Pa
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE C-2.—Gross national product
Page 259 and 260:
TABLE C-3.—Implicit price deflato
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Page 263 and 264:
Page 265 and 266:
TABLE C—8.—Gross national produ
Page 267 and 268:
TABLE C-10.—Gross national produc
Page 269 and 270:
TABLE C-12.—Personal consumption
Page 271 and 272:
TABLE C-14.—Relation of gross nat
Page 273 and 274:
TABLE C—16.—Relation of nationa
Page 275 and 276:
TABLE C-18.— Total and per capita
Page 277 and 278:
TABLE C-19.—Sources of personal i
Page 279 and 280:
TABLE C-21.—Saving by individuals
Page 281 and 282:
POPULATION, EMPLOYMENT, WAGES, ANDP
Page 283 and 284:
TABLE C-24.—Noninstitutional popu
Page 285 and 286:
TABLE C-26.— Selected unemploymen
Page 287 and 288:
TABLE C—28.—Unemployment insura
Page 289 and 290:
TABLE C-29.—Wage and salary worke
Page 291 and 292:
TABLE C-31.—.•Average weekly ea
Page 293 and 294:
TABLE C-33.—Changes in output per
Page 295 and 296:
TABLE C—35.—Industrial producti
Page 297 and 298:
TABLE C-37.—Capacity utilization
Page 299 and 300:
TABLE C—38.—New construction ac
Page 301 and 302:
TABLE C-39.—New housing starts an
Page 303 and 304:
TABLE C-41.—Sales and inventories
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TABLE C-43.—Manvjacturers* new an
Page 307 and 308:
TABLE O45.—Consumer price indexes
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TABLE C—47.—Consumer price inde
Page 311 and 312:
TABLE C~49.—Wholesale price index
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TABLE C-50.—Wholesale price index
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194819491950.,1951195219531954Yearo
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TABLE C-53.—Commercial bank loans
Page 319 and 320:
TABLE G-54.—Total funds raised in
Page 321 and 322:
TABLE C-56.—Federal Reserve Bank
Page 323 and 324:
TABLE C-58.—Bond yields and inter
Page 325 and 326:
TABLE C-59.—Short- and intermedia
Page 327 and 328:
TABLE C-61.—Mortgage debt outstan
Page 329 and 330:
TABLE C-63.—Net public and privat
Page 331 and 332:
TABLE C-65.—Federal budget receip
Page 333 and 334:
TABLE C-66.—Relation of the Feder
Page 335 and 336:
TABLE C-68.—Receipts and expendit
Page 337 and 338:
TABLE C-10.—State and local gover
Page 339 and 340:
TABLE C-72.—Estimated ownership o
Page 341 and 342:
CORPORATE PROFITS AND FINANCETABLE
Page 343 and 344:
TABLE C-76.—Relation of profits a
Page 345 and 346:
TABLE C-77.—Sources and uses of f
Page 347 and 348:
TABLE C-79.—State and municipal a
Page 349 and 350:
TABLE C-81.—Business formation an
Page 351 and 352:
Year1929...1933...1939...1940...194
Page 353 and 354:
TABLE C-85.—Indexes of prices rec
Page 355 and 356:
TABLE G-87.—Comparative balance s
Page 357 and 358:
TABLE G-88.— U.S. balance of paym
Page 359 and 360:
TABLE C-90.— U.S. merchandise exp
Page 361 and 362:
TABLE C-92.—International reserve
Page 363 and 364:
TABLE G-94.—International investm
Page 365:
TABLE C-96.—Consumer price indexe
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ECONOMIC

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