survey of current business october 1944 - st. louis fedsurvey of current business volume 24, no. 10...

OCTOBER 1944

SURVEY OF

CURRENTBUSINESS

UNITED STATES DEPARTMENT OF COMMERCE

BUREAU OF FOREIGN AND DOMESTIC COMMERCE

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

Survey of

CURRENTBUSINESS

VOLUME 24, No. 10 OCTOBER 1944

Statutory Functions "The Bureau ofForeign and Domestic Commerce . . . tofoster', promote, and develop the foreignand domestic commerce of the UnitedStates" [Law creating the Bureau, Aug.23, 1912 \37 Stat. 408).]

Department of CommerceField Service

Atlanta 3, Ga., 603 Rhodes Bldg.Boston 9, Mass., 1800 Customhouse.Buffalo 3, N. Y.t 242 Federal Bldg.Charleston 3, S. C , Chamber of Commerce

Bldg.Chicago 4, 111., 357 U. S. Courthouse.Cincinnati 2, Ohio, Chamber of Commerce.Cleveland 14, Ohio, 750 Union Commerce

Bldg.Dallas 2, Tex., Chamber of Commerce Bldg.Denver 2, Colo., 566 Customhouse.Detroit 26, Mich., 1018 New Federal Bldg.Houston 14, Tex., 603 Federal Office Bldg.Jacksonville 1, Fla., 425 Federal Bldg.Kansas City 6, Mo., 724 Dwight Bldg.Los Angeles 12, Calif., 1540 U. S. Post Office

and Courthouse.Memphis 3, Tenn., 229 Federal Bldg.Minneapolis 1, Minn., 201 Federal Office Bldg.New Orleans 12, La., 408 Maritime Bldg.New York 18, N. Y., 17th Floor, 130 West

42d St.Philadelphia 2, Pa., 1510 Chestnut St.Pittsburgh 19, Pa., 1013 New Federal Bldg.Portland 4, Oreg., Room 313, 520 S. W. Mor-

rison St.Richmond 19, Va., Room 2, M ezzanine, 801

E. Broad St.St. Louis 1, Mo., 107 New Federal Bldg.San Francisco 11, Calif., 307 Customhouse.Savannah, Ga., 403 U. S. Post Office and

Courthouse Bldg.Seattle 4, Wash., 809 Federal Office Bldg.

ContentsPage

THE BUSINESS SITUATION 1

The Third Quarter 1

Munitions Production • 3

Agriculture • 4

RETAIL SALES AND CONSUMER INCOMES . 5

WARTIME CONSTRUCTION AND PLANT EX-PANSION . 15

STATISTICAL DATA:

Monthly Business Statistics • . . • 8-1

General Index • Inside back cover

l l O t C — Contents of this publication are not copyrighted andmay be reprinted freely. Mention of source will be appreciated.

Published by the Department of Commerce, JESSE H. JONES, Secretory, and issued through the Bureau of Foreignand Domestic Commerce, Amos E. Taylor, Director. Subscription price of the monthly SURVEY OF CURRENTBUSINESS, $1.75; Foreign, $2.50 a year. Single copy, 15 cents. Price of the 1942 Supplement is 50 cents. Makeremittances only to Superintendent of Documents, U. S. Government Printing Office, Washington 25, D. C.


The Business SituationLOOKING BACK at the third quarterit is apparent that earlier decisionsas to the allocation of resources for thisperiod determined the continued eventrend of output of both military andnonmilitary goods.

Though the progress of the invasionof Europe was accompanied by adjust-ments of some production schedules, thebasic decision to maintain output ofmilitary goods at peak rates dominatedtha whole of economic activity. Muni-tions output in the aggregate matchedthat of the preceding quarter and indi-vidual programs subject to special ex-pediting actions were pushed ahead atsubstantial rates of gain.

Trimming down of materiel procure-ment plans rather than expansion ofschedules was typical of the third quar-ter, but these had little influence on thevolume of output since they affect thefuture more than the present. For ex-ample, the recently announced reduc-tion by the Army of depot stocks andprocurement of supplies for the strategicreserves (initial equipment for an ad-ditional million men) will have con-siderable effect upon future procurementorders.

Favorable military developments, andthe freeing of resources with increasingefficiency achieved under conditions ofstable production of military essentials,made planning for reconversion and theundertaking of initial steps toward thisgoal a major requirement for the econo-my in the third quarter.

The immediate problem was whetherto permit resources released from themilitary sector of the economy to flowto unprogrammed uses, or to programan expansion of the output of the mostdesired types of nonmilitary goods andservices, while maintaining full assur-ances that military needs would be met.

Requiring early policy determinationand planning were the many questionsinvolved in shifting the huge war pro-duction machine to civilian purposeslater on when large reductions in mili-tary programs follow decisive militaryresults. Chief among these were con-tract termination, disposal of surplusplant and stocks, plant inventory liqui-dation, clearance of converted plants ofproductive equipment used for war pro-duction, and the installation of machin-ery and filling of pipe lines with the rawmaterials and components of civilianproduction.

As a step in the direction of meetingthe reconversion problems, the War Pro-duction Board issued its four-point re-conversion program which was discussedin the August issue. The portion of thisprogram of immediate significance, withrespect to changes in the allocation ofresources, was the "spot-authorization"Drder under which Regional War Pro-

609320—44 1

duction Board Directors were given theauthority to approve the resumption ofcivilian manufactures where manpowerconditions permitted. However, in allclassified labor market areas such ap-proval could not be given without theconsent of the area manpower prioritiescommittee or production urgency com-mittee and a written certification of theavailability of labor by a representativeof the War Manpower Commission.

A number of authorizations have beenmade since the order went into effect onAugust 15, but even after authorizationswere granted, procurement of materialsand components remained obstacles tothe resumption of civilian output. Whilealuminum was available and allotmentsof copper were made for this purpose,steel could be obtained only from surplusinventory.

The WPB is including in its steel allot-ments for the fourth quarter 125,000 tonsof steel for this purpose—-or about 5 per-cent of the steel used for durable goodsfor ultimate consumer use in 1940. How-ever, the authorizations granted by theend of the third quarter will require onlya minor part of this allotment.

Further expansion of civilian outputunder "spot-authorization" will dependupon the decisions made by the area-production urgency committees unlessthere is a change in the August 4 man-power directive of the Office of War Mo-bilization, The likelihood is that though"spot-authorizations" will have some ef-fect on certain types of civilian supplies,they will be limited in number and willalter but slightly the present distribu-tion between war and nonwar produc-tion.

Looking ahead to the problems of get-ting the industrial plant in shape for re-sumption of large-scale civilian output,authority was granted at the end of Julyto manufacturers of producers' equip-ment to accept and fill unrated orders.Prior to this, manufacturers were notpermitted to accept orders for produc-tive equipment unless a priority ratinghad been given by the armed services,the Maritime Commission, or the WarProduction Board.

During the first two months followingthe lifting of this restriction, unratedorders for 45 million dollars of machinetools were placed. While this volume ofmachine tool orders is large in absoluteterms, it represents less than two weeksactivity at the monthly peak productionattained by the industry in December1942.

However, at the present rate of output,which is only slightly more than one-quarter of that peak, this volume oforders is equivalent to more than fiveweeks' production. In view of the exist-ing backlog of rated orders and the cur-rent production volume at machine tool

builders' plants there is little hope thatany significant number of these orderswill be filled this year.

Since promised deliveries indicatedlong delays, the automotive manufac-turers, who placed most of these orders,requested the WPB to grant prioritiesto expedite deliveries to facilitate prep-aration for a start on passenger car pro-duction after Germany's defeat. Thisrequest, however, was denied.

Three bills designed to aid in expedit-ing and facilitating the economic transi-tion from peak war production have be-come law—one on contract termination,one dealing with the disposal of surplusproperty, and a third setting up a newOffice of War Mobilization and Recon-version. While this legislation coversvarious aspects of reconversion, thePresident in signing the latter two billsdrew attention to the need for additionalmeasures.

The importance of the reconversionsteps was indicated in the article in theAugust Survey on the transition prob-lems. Since this article was published,War Mobilization Director Byrnes an-nounced that the requirements of theprocurement agencies for materiel andsupplies will be reduced with the defeatof Germany by 40 percent. This is alarger cut than the minimum taken asthe basis of the above article, and thereare indications that the cut may bemade more rapidly than the six monthsperiod assumed for analytical purposesin the article. Therefore, it may be ex-pected that the repercussions upon theeconomy will be more extensive than theestimates which assumed the one-thirdcut.

The administrative methods adoptedto meet this situation when it arises aredesigned to release or modify after V-Eday existing production and distributioncontrols over and above those necessaryto assure the continuing military needsand programming of items which will re-main in short supply. The restrictionswill be lifted on the assumption that ade-quate supplies and facilities will becomeavailable at the end of the European warto permit civilian production of durablegoods at least equal to that of 1939. Thisdecision is also based on the expectationthat reconversion adjustments can bemade by business and industry with thei*esources that will be freed without cen-tralized decisions of the type essentialduring the war.

The Third QuarterThe September quarter is noteworthy

not for the changes in economic activitythat occurred but rather for the evennessof the trend during a period when wide-spread adjustments were made in themilitary programs, and constant consid-eration was being given to the impending

1Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

SURVEY OF CURRENT BUSINESS October 1944

changes presaged by the progress of theArmies in the field. During this periodthe major indices of economic trendsmirrored neither further advance nor de-clines; rather, the basic patterns tracedwere the same as in the first half of theyear.

Though the next major movement ineconomic activity will be downward, thetiming is uncertain since it is, and willcontinue to be, tied in with the march ofmilitary events in Europe. Only whenthe pressure which has served to sustainproduction of military goods is easedwill the basic economic indicators moveaway from the even plane traversedthroughout this year.

The cutbacks in military productionschedules, which are being announcedwith increasing frequency, affect prima-rily the production program for 1945, andwhile output is being restrained in somesegments, in the aggregate the cutbacksthrough September continued to be off-set by the rise in the programs still beingpushed ahead.

Employment trends in the third quar-ter continue these established earlier inthe year. Manufacturing employmentcontinued its decline although at a ratelower than that which had prevailedearlier in the year. In nonagriculturalnonmanufacturing establishments em-ployment is at the levels of a year ago.

Employment in transportation andpublic utilities in the third quarterreached the highest levels of the warperiod as a result of slow but uninter-rupted month-to-month increases dur-ing 1944. Employment in finance, serv-ices, and miscellaneous industries like-wise increased persistently and is nowback to 1942 levels. In contrast the min-ing and construction industries employ-Chart 1.—Employees in Nonagri-

cultural Establishments x

MILLIONS OF PERSONS30

25

2 0

10

4 NONMANUFACTURING

* MANUFACTURING

1942 1943 1944D D 44-651

1 Estimated average number for the quarter ;third quarter 1944 based upon July and Augustdata.

Source : U. S. Department of Labor.

ment was further reduced in the thirdquarter.

Special interest attaches to the trendsin munitions employment. Althoughmunitions production was maintained atthe peak level in the third quarter, em-ployment in this field continued to de-cline in the last 3 months, a trend whichhas now been in effect for almost a year.

Munitions employment in the third quar-ter was about one million, or 9 percent,below the high 10.4 million workers inNovember 1943. Since there have beenonly fractional changes in hours of workper week, there is indicated a decline inthe neighborhood of 9 percent in man-hours utilized per unit of production overthis 9-month interval.

Chart 2.—Munitions Industries:Employment and Production 1

NDE)20

0 0

8 0

60

40

2 0

0

October 1944 SURVEY OF CURRENT BUSINESS

of 1944 has permitted manufacturingfirms not only to stop the accumulationbut also to begin a gradual liquidation ofinventories.

Estimated average inventories for thethird quarter of 1944 were 17.2 billiondollars, 3 percent below the record fourthquarter of 1943. As chart 4 indicates,raw material inventories have been re-duced nearly 8 percent since that time.Inventories of finished goods, on theother hand, have increased somewhat.

Munitions ProductionThird quarter production of muni-

tions, virtually unchanged from that ofthe preceding quarter, marked the endof the first full year of a high level sta-bilized rate of supply of the essentialsof modern war. During this year out-put of war materiel, in terms of thestandard prices used by the War Pro-duction Board for measuring the vol-ume of output, exceeded 65 billion dol-lars, as compared with 50 billion dollarsin the 12 preceding months. In termsof current prices actually paid for thesemunitions, the value of output has beensomewhat less.

Chart 5 presents the trend of muni-tions output since Pearl Harbor for allcategories, and for seven major groups.From the top left chart, it may be seenhow rapid was the rise during the first 2years of war, and how steady has beenthe output during the past year.

All of the major segments of the pro-gram reveal the same general upwardtrend through 1943, except the combatand motor vehicle group. In this in-stance the early attainment of the peakrate of tank production, and the sub-sequent downward adjustment of re-quirements and schedules resulted insome irregularity of output for this groupduring 1943.

In the current year the charts reflectthe shifting of output among the indi-vidual programs to reflect the adequacyof supplies of some equipment and theneed for continued expansion in other

Chart 4.—Percentage Change inManufacturers' I n v e n t o r i e s ,Third Quarter 1944 from FourthQuarter 1943 1

Chart 5.—Munitions Production

PERCENT+ 6

+ 4

+ 2

0

- 2

- 4

- 6

- 8

•10TOTAL

• -[-• ••D. [j. 14-663

RAW GOODS IN FINISHEDMATERIALS PROCESS GOODS

1 Percentage change based upon quarterly.verages.

Source : U. S. Department of Commerce.

INDEX, QUARTERLY AV. 1943 « 1002 0 0

150

100

5 0

0

200

150

100

TOTAL MUNITIONS

INDEX, QUARTERLY AV. 1943 « 1001200

AIRCRAFT

SHIPS-^

150

100

50

AMMUNITION

COMBAT AND MOTOR VEHICLES

150

100

50

COMMUNICATION ANDELECTRONIC EQUIPMENT

GUNS AND FIRE CONTROL

OTHER EQUIPMENTAND SUPPLIES

150

100

50

0

200

100

50

0

200

150

100

50

200

150

100

50

1942Q U A R T E R S

1943 1944 1942Q U A R T E R S

1943 1944

1 Data for third quarter 1944 are preliminary estimates.2 Yalue-in-plaee basis.Source : Facts for Industry,, War Production Board.

types. The net result of such shifts, asstated above, has been to hold the over-all volume of output steady.

Expansion in aircraft output contin-ued through the first quarter of 1944, butthe slightly downward tendency sincehas resulted from the adequate supplyof most types of planes, rather than pro-duction difficulties which were the lim-iting factors in the earlier periods. Thefew types of planes which are still sched-uled for increases continue to moveahead.

Ships and communications and elec-tronics equipment have followed aboutthe same pattern—output of both cate-gories being relatively steady so far in1944 at a volume slightly below thefourth quarter 1943 rate. Within theships programs emphasis has beenshifted in the merchant type from theLiberty to the Victory model, and thecombat loaders; in the naval programfrom the antisubmarine vessels in 1943to the landing craft, with the combat

vessels receiving as much pressure aspossible throughout all the period.

The decline in the gun and fire-con-trol program indicates the decreasingpressure for many of these weapons asrequirements were filled. The heavyguns are those now sought in increasingamounts. The ammunition program isa composite of many types in which re-quired rates of output vary widely. Sometypes have been cut back sharply frompeak rates, while the output of others isbeing increased to match stepped-up re-quirements. The difficult current am-munition programs are in heavy shellsand some bombs, and here the difficultiesresult from the rapid rate of expansionset forth in the schedule.

Considerable progress was achieved inthe third quarter in increasing the out-put of critically needed combat items.The War Production Board reported thatproduction of several types of combatgoods, listed as subject to special expe-diting action at the start of the quarter,rose substantially in the succeedingDigitized for FRASER

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SURVEY OF CURRENT BUSINESS October 1944

months. These included heavy-dutytires, heavy-heavy trucks, superbombers,and large caliber artillery ammunition.

In some cases the favorable resultswere obtained through intensive drivesto break the bottlenecks, including thechanneling of increased labor forces tothose plants still requiring an increase.That the desired output was not in allinstances achieved was due in part tocontinuing shortages of essential partsas, for example, forgings and castings inthe heavy-heavy truck program, andsmokeless-powder ingredients and brasstubing in large caliber ammunition.

AgricultureFarm marketings in the third quarter

were lower than in the peak first twoquarters of 1944. The high levels of thefirst 6 months resulted almost entirelyfrom a 15-percent expansion in live-stock marketings. It was the shifts inthese products that was responsible forthe drop in cash income in July andlikewise for its rise in August.

The fact is that 1944 will be a banneryear from the standpoint of yield andthat farm income will continue at hightotals. The Nation's crop prospects thisautumn indicate that the second largestaggregate output on record is in sight,4 percent above that of last year.

It follows that crop marketings willbe maintained during the remainder ofthe year at the levels of the first threequarters. Indeed, since prospects arethat the 1944 crops are within 2 percentof the 1942 records, and, in view of thefavorable conditions which have contin-ued, it appears that the physical volumeof farm marketings and farm incomemay exceed previous records.

The volume of livestock marketings ona seasonally adjusted basis, is likely toshow a moderate decline in the fourthquarter from the high volume of the first

Chart 6.—Farm Marketings, Ad-justed for Seasonal Variation,and Prices Received by Farmers

INDEX, 1935-39 = !OO350

300 -

2 5 0

1 5 0

100

50

CASH INCOME FROMFARM MARKETINGS 1

PHYSICAL VOLUME

! i I I I 1 I i I i I I 1 1 1 1 1

1943

1 Excludes governmental payments.Sources: U. S. Department of Agriculture,

except indexes of physical volume of farm mar-ketings prior to 1943 which were computed bythe U. S. Department of Commerce in coopera-tion with the U. S. Department of Agriculture.Indexes of prices received by farmers were re-computed with 1935-39 as base.

Chart 7.—Percentage Change in Production of Major Crops and inLivestock on Farms, 1944 from 1943 1

- 3 0 - 2 0 - 1 0PERCENT

0 +10 + 20 + 30 + 40 + 50

APPLES

FEED

• •

1 iPEACHES AND PEARS

U/UCATw ntM i

TOBACCO

GRAINS, EXCEPT CORN

CORN

COTTON

1

*

1

^ - "

-

•

CATTLE ANO

HAY

POTATOES

HOGS1

I 1 !• • • • • • • • • • • •

• • a n

CALVES

DO. 44-662

1 Based upon September 1, 1944, Crop Reports, except livestock which is based upon cattle andhogs on farms, January 1, 1944, and an estimate as of January 1, 1945.

Source : U. S. Department of Agriculture.

9 months. This will be due chiefly to areduction of approximately one-fourthin the 1944 spring pig crop from that oflast year which in turn will be reflectedin lower marketings of hogs in the lastquarter.

The volume of this year's farm produc-tion and its effect on farm marketingscan be seen in chart 7. The eight majorcrops and two livestock classes shownrepresent well over one-half of the totalvolume of agricultural production. Thewheat crop, indicated at 1.1 billion bush-els, an increase of 33 percent, will be thelargest ever harvested and the secondbillion-bushel crop in United States his-tory. The prospective corn crop will besecond only to the record set in 1942; a4-percent increase in other feed grains(oats, barley, and sorghums) will be off-set by a 2-percent decline in the haycrop.

The favorable weather which aidedother crops came too late to be of bene-fit in some of the important potato-pro-ducing areas and a decline of 19 percentfrom last year's better-than-averagecrop is indicated. In the deciduous fruitgroup—apples, peaches, and pears—anincrease of more than 40 percent is fore-cast over last year's relatively small crop.The prospective production of fruits(deciduous and citrus combined) is ex-pected to be 10 to 15 percent more thanproduction in the 1943-44 season.

After increasing for the last 6 years,the peak in livestock population has beenreached. While the number of cattle onfarms is expected to show only a slightdecline, the number of hogs on farms onJanuary 1, 1945, is expected to be at least25 percent, and perhaps 30 percent, below1944 levels. The reduction in the cur-rent year's hog crop was largely the re-sult of (1) the hog-feed price relation-ships which during the past winter andspring were less favorable than thoseprevailing since late in 1940; and (2) a

very small supply of feed grains in rela-tion to the number of grain-consuminganimals.

The harvesting of the large grain cropshould go far toward relieving the na-tional feed situation. Large increases inlivestock and poultry numbers during1941-43, compared with supplies of feed,caused grain reserves to be reduced, not-withstanding the utilization of largequantities of wheat in the 1942 and 1943crop years.

The total supply of feed grains (pro-duction plus carry-over) will be slightlysmaller this year than the 1943-44supply. However, with reduced livestockproduction, particularly hogs, present in-dications point to 13 to 15 percent fewergrain consuming animals on farms nextJanuary than a year earlier. Thus, thesupply of feed grains, although smallerin total, would be about 9 percent largerper animal than last year.

In achieving this high agriculturalproduction, government assurances o1adequate prices covering increases ircosts of production have played a vitarole. Cost increases on major product;have not generally been reflected in retail ceiling prices, the latter having beeiheld down by the use of subsidies. According to recent estimates of the Officof Price Administration, current expenditures under the various food subsidy programs are running at a rate c1.3 billion dollars a year. Put in perspective, this sum is equivalent to abov4 percent of current consumers expenditures for foods and less than 2 pelcent of Federal war expenditures.

Almost three-quarters of these cosare incurred under the dairy and messubsidy programs. Increased feed pric<and labor costs to dairy farmers are r<suiting in payments of approximate400 million dollars a year to help ke<

(Continued on p. 14)Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

October 1944 SURVEY OF CURRENT BUSINESS

Retail Sales and Consumer IncomesBy Louis J. Paradise^ Chiefs Business Statistics Unit, Bureau of Foreign and Domestic Commerce

A LTHOUGH retailers as a group haveJ\. experienced record sales throughoutthe war period, the uneven flow of civil-ian goods resulted in significant distor-tions and shifts in the volume of salesby various lines of trade. As a conse-quence, most retailers increased theirsales with favorable profit returns; somethat felt the full impact of shortages inparticular lines were less favorably situ-ated. All are now concerned about theprospect, once the flow of income turnsdownward as it will with the collapseof Germany.

The end of the European phase of thewar will be the signal for the resumptionof the production of numerous civiliangoods whose supply has been greatly cur-tailed since Pearl Harbor. It is certainthat not all types of these goods willcome on the market at the same time.Increased supplies of some items will beavailable almost immediately—those re-quiring no conversion of facilities, suchas gasoline and clothing. Many otherproducts, however, such as passengerautomobiles, will require months beforethe first units are produced, and a highvolume of output will take a considerablylonger period. During readjustmentfrom war to civilian production, retailersin particular will be vitally concernednot only with the speed of the reconver-sion and the timing of production, butalso with the volume and character ofthe demand for goods.

In view of the many perplexing prob-lems which retailers face, an examina-tion of the factors affecting the volume

of retail trade should prove of value inappraising the outlook for the near fu-ture. This report appraises the statusof retail trade by kinds of business in1944, the peak year of our war effort,indicating how retail volume is affectedby changes in purchasing power of con-sumers. The outlook for retail tradeduring the transition period is alsobriefly reviewed. But of more funda-mental importance is the ; mlysis of howretail sales by kinds of bi siness are re-lated to consumer incomes and the dem-onstration of the manner in which theserelations can be used as guides to theanalysis of post-war markets.

Record Retail Sales in 1944An outstanding development during

the war period—one contrary to the ex-pectations of many—has been the steadyincrease in retail sales. In 1944, sales ofretail stores are estimated to reach atotal of 67 billion dollars. This is thehighest dollar aggregate on record—60percent above 1939, and 20 percent above1941. This means that on the averageevery man, woman, and child in thecountry will spend 510 dollars in retailstores this year, compared with an ex-penditure of 430 dollars in 1941 and 320dollars in 1939.

A large proportion of the sales risesince 1939, tiowever, is accounted for byhigher prices. An accurate measure ofprice changes in a war period is difficultto construct, and existing measuresprobably understate the actual price in- .crease. Nevertheless, the specially con-

Chart 1.—Sales of Retail Stores and Retail Prices

INDEX, 1935-39 = 100100

175

150

125

100

75

50

-

-

SALES^

1 1 f 1 ! !. 1 1 i I I

^M -

PRICES

% ESTIMATED

f i l l1929


'33 '35 '36 '37 *38 '39 *4b *4i *42 '43 '44D.D. 44-630

structed index of prices applicable topurchases at retail stores of the Depart-ment of Commerce t gives a rough meas-ure of the influence of changes in priceson sales. On the basis of this index,about 70 percent of the entire increasein retail sales from 1939 to 1944 is ac-counted for by higher prices. After al-lowing for the price change, it appearsthat the quantity of goods purchased inretail stores reached a peak in 1941. De-spite the wartime shortages of manyconsumer goods which have developedsince that year, the quantity of goodspurchased in 1944 was only about 5 per-cent less than in 1941, and exceeded 1939purchases by perhaps 15 percent, Acomparison of total retail sales and re-tail prices is shown in chart 1.

Actually the quantity of goods pur-chased this year at retail outlets will bedistributed among fewer consumers thanin the preceding war years because sev-eral millions of our armed forces areoverseas. Taking this fact into consid-eration it appears that the per capitaquantity of goods purchased at retailstores in 1944 was almost equal to thatof 1941. These few observations make itclear that the effect of the war on retailtrade has been to halt the rise in thequantity of goods purchased on an over-all basis rather than to curtail the vol-ume substantially.

There has been, of course, some de-terioration in the quality of goods avail-able, and likewise some curtailment inthe amount of services associated withthe sales. These modify the quantitycomparisons to some extent, but in noway qualify the general picture of highdomestic consumption during the war.

Sales Versus Purchasing PowerThat consumers would have purchased

more goods had the usual variety beenavailable is clearly evident on the basisof their past performance as is shown inchart 2. The chart shows the close rela-tion between the disposable income ofindividuals (their total income remainingafter payment of personal taxes) andsales of retail stores. It is to be notedthat for the 20-year period 1922-41, thepoints indicating the sales and incomefor each year fall very closely about awell-defined straight line representingthe sales-income relationship. On thebasis of the experience covered by the20-year period, an increase of 10 per-cent in disposable income of individualswas accompanied by an increase of about12 percent in retail sales.2 Expressed in

1 For a description of this index, see theSURVEY OF CURRENT BUSINESS, August 1943,p. 6.

2 This result was obtained by fitting a re-gression to the data from 1922-41 havingthe form: Sales = A (disposable income)0,where A and a are constants determinedfrom the data.


6 SURVEY OF CURRENT BUSINESS October 1944

other terms, the relationship implies thatabout 70 percent of any given increasein disposable income went for purchasesof goods at retail stores.

The persistence of this close corre-spondence in movement throughout thepeacetime period is indeed striking. Infact, the average annual error in thesales as computed by the formula 3 fromthe actual sales for the entire period isonly 1.4 percent while the maximum er-ror, which occurred in 1940, is only 4percent.4 This means that the changein consumer income is by far the mostimportant factor that retailers need toconsider in determining the outlook fortheir business. Retailers have alwaysknown this as a general proposition; thesignificant feature is the very high de-gree of correlation.

Although sales and income have fol-lowed a closely related pattern in thepeacetime years, such was not the caseduring the war years. The chart clearlyindicates the effects of wartime short-ages of goods. In contrast to the pre-war years when all points were close tothe line of relationship, the points for1942, 1943 and 1944 were considerablybelow the line. It follows that retailpurchases during the war period havefailed by a wide margin to keep up withthe wartime expansion in incomes.

There is little reason to believe, how-ever, that if supplies had been freelyavailable consumer purchases wouldnot have been in line with the past re-lation to income. Although it is im-possible to determine how the straight-line relationship might have shifted inthe area of the recent high levels of in-come in the absence of past experienceat these levels, nevertheless, within therange of the past experience there is noindication of a shifting of the line as in-come increased.

Assuming, therefore, that consumerswould have purchased goods in accord-ance with their past behavior, it is esti-mated that retail sales in 1942 wouldhave exceeded the actual sales by 13billion dollars, in 1943 by 17 billion dol-lars and in 1944 by almost 20 billion. Inother words, the total discrepancy be-tween potential sales and actual salesduring the war period amounted to al-most 50 billion dollars.5

This discrepancy has its counterpartin the greatly increased savings of in-

Chart 2.—Relationship Between Sales of All Retail Stores and DisposableIncome of Individuals

3 Based on a linear regression between salesand income using the data for the period1922-41: Sales (billions of dollars) =— 6.771+0.703 X disposable income. This is adifferent formulation from that shown infootnote 2 above but within the range of theobservations the "fit" of the two formulas isalmost identical. This formula has the ad-vantage that it gives a conservative estimatewhen extrapolating far beyond the range ofobservations. See Henry Schulz, "The Stand-ard Error of a Forecast from a Curve," Jour-nal of the American Statistical Association,June 1930, pp. 11-57.

4 The error is computed as the differencebetween actual sales and calculated sales ex-pressed as a percent of the calculated sales.

• These results are obtained on the basis ofextrapolating a linear regression betweensales and income using the data from 1922 to1941; see footnote 3.

9 0

. 8 0

< 70

oQ

Id

O

5 0

if)LJ

4 0

3 0

2 0

'44Esf.

'43

' 4 2

P ' 3 4

NOTE.- LINE OF REGRESSIONFITTED TO DATA, 1922-41.

40 60 80 100 120DISPOSABLE INCOME OF INDIVIDUALS (BILLIONS OF DOLLARS)

140


dividuals. These savings took suchforms as increased cash holdings, pur-chases of war bonds, and reduction ofdebt. Indeed, it appears that the 50-billion-dollar discrepancy noted aboveis about equal to the total volume ofliquid savings of individuals in the 3-yearperiod 1942-44, after allowance is madefor the normal increase in liquid savingswhich would have taken place at thecorresponding levels of income.

The wartime restrictions on the civil-ian use of metals and other critical ma-terials had their impact primarily on re-tailers selling durable goods. The effectof the curtailment on sales of these storesmay be seen from the fact that while in1939 their sales constituted 25 percent oftotal retail sales, in 1942 they accountedfor only 17 percent and in 1944 the pro-portion is estimated at 14 percent.

Even more striking is the contrast inthe sales of these stores with the salesof the nondurable goods stores, in rela-tion to the disposable incomes of indi-viduals, shown in chart 3. In the peace-time years since 1929, sales for eachgroup of stores were very closely asso-ciated with the changes in incomes. Theexperience in these years indicates thatan increase in the disposable income oJ10 percent resulted in a rise in sales o:durable goods stores of 18 percent.6 Thiiincrease in sales may be thought of a;the sales-equivalent of income. Fronthe demand side this may be termed thdemand-elasticity. The sales-equivalenfor the nondurable goods stores is mudless, amounting to 10 percent or a one

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

October 1944

Table 1.—Sales of Retail Stores

Year

192919331935 -193919401941194219431944

Total retail sales(billions of dollars)

Currentdollars

48.524.532.842.046.455.657.863.867.0

1941dollars 2

44.530.636.446.150.055.650.952.153.5

Per capita retailsales i (dollars)

Currentdollars

399195258321352418432480510

1941dollars -

366244286352379418380392407

1 Sales divided]by population exclusive of servicemenabroad.

2 Dollar sales adjusted for changes in the retail priceindex of the Department of Commerce.

Source: U. S. Department of Commerce,

to-one equivalence. This means that thedemand-elasticity for durable goods isalmost twice as much as for nondurables.

Since 1941, however, the sales-incomerelations of these two groups of storeshave shown sharply divergent patterns.The upper section of chart 3 pictures amost interesting development, namely,that sales of nondurable goods stores inthe war period continued to increase inalmost the same relation to income asin the prewar years. That they werevery slightly below the line of relation-ship in the war years is accounted foralmost entirely by the greatly reducedsales of filling stations resulting from thesharp cut in supplies of gasoline avail-able for civilian use.

In marked contrast to this stability inthe nondurable goods outlets, sales ofdurable goods stores fell very sharply be-low what would have been expected onthe basis of the purchasing power ofconsumers. It is this group of storesthat account for practically the entirediscrepancy between the potential re-tail sales and the actual sales during thewar period. For the 3-year period 1942-44, this discrepancy between sales thatcould have been expected at durablegoods stores, in view of the high levelsof income, and actual sales amounted to45 billion dollars. For the nondurablegoods stores the discrepancy was lessthan 5 billions.7

It must not be concluded from thisanalysis that there will necessarily be asales gap of 50 billion dollars to be filledby consumers at retail stores after thewar is over. The deferred demands willbe far less than this. While it is truethat the pent-up demand for goods, par-ticularly the durables, will be substantial,the magnitude of this demand will de-pend not so much upon the accumulatedsavings of individuals but on many otherfactors, the most important of which willbe the prevailing level of employmentand of consumer incomes in the post-war years.

The main conclusion to be drawn fromthe wartime spending pattern of con-

7 These results are based on the followinglinear regression between sales and incomeusing the data from 1929 to 1941: Sales ofdurable goods stores (billions of dollars) =— 6.946-f 0.259 X disposable income (billionsof dollars); sales of nondurable goods stores(billions of dollars) =0.3258+ 0.4466 X dispos-able income (billions of dollars).

SURVEY OF CURRENT BUSINESS

sumers is that there was no apparentspill-over of their greatly increased in-comes into the purchase of nondurablegoods as a result of the severe shortagesof durables. This result has an im-portant implication on the outlook fortrade in the future. It suggests thatthe sales for one large segment of retailtrade, the nondurable goods stores, haveshown a very high degree of stability inrelation to income. This was true eventhough the economy passed through pe-riods of depression, prosperity, and war.On the basis of this experience, it wouldseem that the aggregate sales of non-durable goods stores in the post-war pe-riod will be determined almost entirelyby the volume of consumer incomes pre-vailing at that time.

Sales in 1944 by Lines of TradeThe general wartime pattern of retail

sales became apparent soon after PearlHarbor, although the magnitude was nottoo clear at that time. With the com-plete stoppage of production of passen-

ger automobiles, of the major electricalappliances and many hardware goods,civilian demands for these commoditiescould only be filled from the existingstock pile. The problem was essentiallythat of how long it would be before re-tailers were completely sold out of suchgoods. The vital question in early 1942,therefore, was concerned with the extentof the curtailment of other commoditieswhose output was not expressly prohib-ited or curtailed by government order.Actually the output of these items wasnot greatly reduced during the war pe-riod since nearly all of the productionof nondurable goods for military use wassecured from an expansion in total out-put.

The wartime changes in retail salesare shown in table 2 which gives the per-centage change in sales for 25 kinds ofretail businesses from 1941 to 1944. Alldata for 1944 are, of course, preliminaryand are based on actual information forthe first 8 months of the year only.Sales by kinds of business in the remain-ing months of this year are expected to

Chart 3.

6 0

Relationship Between Sales of Durable and Nondurable GoodsRetail Stores and Disposable Income of Individuals x

50 —

if)

40 —oQix.OCO2

o

CD

w 30

^ 2 0

10 —

1

NONDURABLE GOODSSTORES

\

'40 /

- /

!

A•

'29

1

1 X/ / '44

/

DURABLE GOODSSTORES ~

'43 '44

® ESTIMATED

I I40 60 80 100 120

DISPOSABLE INCOME OF INDIVIDUALS (BILLIONS OF DOLLARS)140

D.D.44-6331 Lilies of regression were fitted to data for selected years, 1929-41.Source : U. S. Department of Commerce.



follow the seasonally adjusted trendsestablished in the preceding months andthe totals for the full year calculatedon this basis will not be significantly af-fected even if the war in Europe shouldend in the latter part of the year. It isapparent from the table that every groupof nondurable goods stores showed sig-nificant increases from 1941 to 1944 ex-cept filling stations whose sales were cur-tailed because of smaller allotments ofgasoline to civilians. On the other hand,of the 8 groups of durable goods stores,all but 3, i. e., automobile parts and ac-cessories dealers, hardware stores andjewelry stores, showed decreases.

The largest relative increase was thedoubling of sales of liquor stores. Eatingand drinking places, women's appareland accessory stores, feed and farm sup-ply stores and jewelry stores all recordedsales increases of more than 70 percent.Sharpest cuts were experienced by motorvehicle dealers and household appliancesand radio stores. These changes in dol-lar sales reflect the effect of price in-creases. In table 3 the adjustment hasbeen made in terms of constant prices(1935-39 average) for eleven major kinds

of retail business. While such adjust-ments can only be approximate, it willbe noted that, with few exceptions, thetrends shown by kinds of business weresimilar after adjustment for pricechanges.

Sales-EquivalentsOf particular interest to retailers is

the effect of a change in consumer in-come on sales by kind of business. It iswell known that when incomes of in-dividuals are on the increase certain linesof trade will feel the effects to a muchgreater degree than others.

Charts 4 and 5 show sales-income re-lations for twelve important nondurable-goods stores and nine durable-goodsstores. As in the case of charts 2 and3, the points represent for each yearsales for the particular kind of businessand the corresponding disposable in-come of individuals.

It is evident that for the period from1929 to 1941 the tendency has been forsales to increase with increasing in-comes, although the proportionate in-crease varies by lines of trade. In a

number of trades there was an upwardtrend or a downward trend with theshift in time from 1929 to 1941, asidefrom the effect of the change in income.For example, in the case of eating anddrinking places the time trend has beenprogressively upward; thus, although thedisposable income in 1940 was less thanin 1929, sales in 1940 were 80 percentabove 1929. Filling stations show aneven more pronounced upward move-ment through time. Men's clothingstores is an example of a business wherethe secular trend has been downward.

These shifts through the years, afterallowance for the effect of the changesin disposable income, are due to a num-ber of factors. The most importantwhich operate generally are (1) increasein the population, (2) an upward ordownward trend in prices charged forthe particular goods sold relative to thetrend in general retail prices, (3) grad-ual shift in the pattern of consumer pur-chases, i. e., away or toward certaintypes of commodities, and (4) shifts inthe character of stores which results ina change in classification from one type

Chart 4.—-Relationship Between Sales of Nondurable Goods Retail Stores, by Types of Stores, and DisposableIncome of Individuals

SALES(BILLIONS OF DOLLARS)3.5

3.0 -

2.5

WOMEN'S APPAREL ANDACCESSORIES STORES

L


SALES(BILLIONS OF DOLLARS)

MEN'S CLOTHING ANDFURNISHINGS STORES

I

.2

1.0

.8

.6

.4

.2

0

FAMILY AND OTHERAPPAREL STORES

AZ.

1929 4 U - ^

/33

1 1 1

44 ~EST.

43^-41

-

-

I40 60 80 100

.4

1.2

1.0

.8

.6

.4

.2

SHOE

-

-

A

- 3 3

1

STORES

/1929 /

IP

! 1

-

43

/ 44EST.

-

-

_

I

120 140 40 60 80 100 120 140 40 60 80 100

70 I

120 140

6.0

5.0

4.0

3.0

2.0

DEPARTMENT STORES INCLUD-ING MAIL ORDER

1

1.6

.4

.2

.0

.8

.6

.4

VARIETY

-

-

A

33

i

STORES n Hz

Ay37

-

-

0.0. 44-645

40 60 80 100 120 140 40 60 80 100 120 140 40 60 80 100 120 140DISPOSABLE INCOME OF INDIVIDUALS DISPOSABLE INCOME OF INDIVIDUALS DISPOSABLE INCOME OF INDIVIDUALS

(BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS)Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

October 1944 SURVEY OF CURRENT BUSINESS 9

of business to another. In this connec-tion, for example, there has been a shiftin stores classified as general stores andgeneral merchandise with food to thefood group. This explains in part theupward movement in sales of food storesthrough the years. Such shifts in trendsmust be taken into consideration if theserelations are used as indications of futurepatterns of sales.

In addition to the general factor thereare special cases, as in the instance ofeating and drinking places whose saleswere determined in considerable degreeby the repeal of the Prohibition Amend-ment in 1933. More recently the sub-stantially increased taxes on liquorshave increased prices and hence dollarvolumes.

The effect of wartime conditions onthe various kinds of business is vividlyshown in charts 4 and 5. In each of thenondurable goods groups in chart 4 therelation of sales to income for the pre-war years is very close. During thewar period none of the groups kept pace

with income except women's apparelstores which increased sharply as a re-sult of trading-up, relatively larger priceincreases, and the increased participa-tion of women in the economy as the useof resources intensified. The sharp dipin shoe-store sales since 1943 was, ofcourse, due to shortages which requiredthe imposition of rationing. Althoughsales of department stores increased sub-stantially throughout the war period, therise was not up to what would have beenexpected on the basis of incomes. Thisreflects in the main the short supply ofdurable goods which restricted the vol-ume of some departments.

The diverse movements in the non-durable groups illustrated in chart 4 arethe result of the wartime use character-istics of the products sold. For example,the sharp decline in sales of filling sta-tions results from the tremendous mili-tary needs for this product with the con-sequent stringent rationing of gasolinefor civilian use. The sharp upward move-ment of eating and drinking places is

due in part to the changing habits causedby wartime conditions. The sharper in-crease in 1944 sales of liquor stores isaccounted for by the freeing of largerquantities of liquor stocks and to an ad-ditional tax on alcoholic beverages, thelatter being included in the sales prices.

Somewhat surprising is the fact thatdespite rationing of many foods whichwere at times in relatively short supply,sales of food stores were fairly well inline with incomes. Although dollar saleswere influenced by price increases andtrading-up, on the whole, the civilianeconomy was well supplied with the basicfoodstuffs.

All of the durable goods groups inchart 5 experienced large declines insales, except the jewelry stores. Salesof the latter stores increased beyondwhat would be expected on the basis ofconsumer incomes as a result of in-creased sales of high-priced jewelry,stocks of which were very large and sup-plies to a considerable extent supple-mented by imports; of increased repair

Chart 4.—Relationship Between Sales of Nondurable Goods Retail Stores, by Types of Stores, and DisposableIncome of Individuals2—Continued



SALES(BILLIONS OF OOLLARS)

6.0

4.0

J2.0

fO.O

8.0

6.0

4.0

GROCERYSTORES

-

_

40

33

I

AND

1929

i

COMBINATION44EST.

2.0

0.0

8.0

6.0

4.0

2.0

0

EATING ANDPLACES

-

-

_38«S

3 5 * ^

33

1

^ 3 7

^ J 9 2 9

1

DRINKING

44EST

/

4 3 < /

-

1 1

3.2

2.8

2.4

2.0

1.6

1.2

.8

DRUG

-

-

-

38f

//

33

!

STORES

42

^ 3 6

1 1

44EST.

/

43-/

1

40 60 80 100 120 140 40 60 80 100 120 140 40 60 80 100 120 140

4.0

FILLING

4 0

4*35

" 3 3

I

STATIONS

Ax/ X

1929

-

42

\ 44\ EST.

43

-

-

!

1.0 -

3.0 -

2.5 -

2.0 -

1.5 -

1.040 60 80 100 120 140 40 SO 80 100 120 140 40 60 80 100 120 140

DISPOSABLE INCOME OF INDIVIDUALS DISPOSABLE 1MC0ME OF INDIVIDUALS DISPOSABLE INCOME OF INDIVIDUALS(BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS)

1 Data for 1929 are not available (prohibition year). Source: U. S. Department of Commerce.609320—44 2

2.4

2.0

1.6

1.2

.8

.4

0

LIQUOR STORES^-

- ?'V 1 1 !

-44EST.

0.0. 44-646



Table 2.—Sales of Ketail Stores, by Kinds of Business[Millions of dollars]

Kind of business

All retail stores

1939

Durable goods storesAutomotive group

Motor vehicle dealersParts and accessories

Building materials and hardwareBuilding materialsFarm implementsHardware

Home furnishings groupFurniture and housefurnishingsHousehold appliances and radio

Jewelry

Nondurable goods storesA pparel group

Men's clothing and furnishingsWomen's apparel and accessoriesFamily and other apparelShoes

Drug storesEating and drinking placesFood group

Grocery and combinationOther food

Filling stationsGeneral merchandise group

Department, including mail orderGeneral, including general merchandise with foodOther general merchandise and dry goods._ -Variety

1944 1| Percent

change! 1 f l /M +,-> TO/*

55.637 I 63,818 67,000 j

Feed and farm supplyFuel and iceLiquorOther

779 I1,014 i

586 ;

1,480 ;

15,6358,5447. 794

7503,8622.435

524903

2,6421,812

830587

40, 0024,1571,0961,690

605766

1,8754,796

12, 5769, 6042,9723,4547,9315,027

991738

1,1755, 2131,1191,260

8112,023

9,4802,7512,003

7483, 3662,079

385 I902 !

2,399 ;1.880 |

519 !964

54, 3386, 3231,4972, 893

9071,0262,7468,034

17,45013,2764,1742,4629,9656,1201,3011,1191,4257,3581,9621,6001,3862,410

9,6202,7201,900

8203,7102,280430

1,0002,1901,730460

1,000

57, 3806, 5501,4903,140940980

2, 970 !9, 07018,01013, 8404,1702,56010, 3306, 3501,3601,1601,4607, 8902,0401,7001,6402,510

+20

- 3 8-68- 7 0+9— 4— (•

—18

— 17_ 4

- 4 5-i-70

i-43+58+36+86+55+28+58+89+43+44+40-26+30+26+37+57+24+51-4-82+35

+102+24

1 Preliminary estimates based on data for the first 8 monthsthis year were based on the projections of trends established in

Source: U. S. Department of Commerce.

of the year. The estimates for the remaining months ofthe first 8 months.

come for the same year no modificationsneed to be made to the results obtainedby the use of the sales-equivalent givenin the table. However, if the effect onsales is to be determined for a givenchange in income from one year to an-other some allowance must be made forthe upward or downward tendencythrough the years shown by a number oflines of trade. The magnitude of thechange in sales from year to year, afterelimination of the effect of the incomevariations, can be ascertained from thesales-income formulas given in the ap-pendix to this article.

Retail Trade OutlookThe current year is expected to repre-

sent the peak for the war period. Planshave been developed for substantial cut-backs in production for military use withthe elimination of Germany from thewar, and these reductions will curtailconsumer incomes and will have sharprepercussions on retail trade. Therewill be considerable divergence amongparticular lines and, in general, we mayexpect that for an extended period salesof durable goods will continue to be lim-ited by the productive capacity whilesales of nondurable goods will react tothe downward shift in income. On theassumption that the German phase ofthe war is liquidated this year, or early inthe next, the following analysis indicatesthe general sales trends.

work, and of the considerably increasedoutput of variety items. Additional serv-icing and replacement of parts due tothe age of cars, and the substitutionof many nondurable lines of merchan-dise, enabled the parts and accessoriesdealers to bolster their sales.

These sales-income relations are notonly useful in indicating the trends andshifts in sales since 1929, but they alsodetermine the demand elasticity, orsales equivalent, for the goods sold ineach kind of business. Such measuresof the sales equivalent can be helpfulguides to retailers in the transition pe-riod and more importantly so in the post-war years after full reconversion of in-dustry has taken place. Table 4 presents

Table 3.—Sales of Retail Stores, byMajor Kinds of Business, Adjusted forPrice Change

[Billions of 1935-39 dollars]

Kind of business 11939 1941

All retail stores*

Durable goods storesAutomotiveBuilding materialsFurnitureJewelry

Nondurable goods storesFoodEating and drinkingApparelFilling stationsDragGeneral merchandiseOther

1943 1944

42.5 51.3148.1149.4

10. 0! 13. 55.2 7.12. 7 3. 4

2.51.7.4

32, 5! 37. 8 4110. 7J11. 9

53.9| 4.83.41 2.31.8! 2.37.44.9

6.81.7

7i 2 99j l.Q6j .60 42.56; 13. 28| 6.6

4.72.42.5

7! 7.6:

4l 5. 5;

Percentchange1941 to

1944

- 4

- 4 9- 7 6- 1 6- 3 4+32+12+11+46+22-30+37+3

+13

for each kind of business the sales equiv-alent associated with a 10-percentchange in disposable income of individ-uals.8 These are based \Ipon the experi-ence prevailing in each line of trade from1929 to 1941. The lines of trade in thetable are in order of decreasing salesequivalent.

It may be noted that the retail salesmost sensitive to changes in consumerincomes are those of motor vehicle deal-ers, jewelry stores and liquor stores.Each of these has a sales-equivalent of19 percent. At the other end of the scalethe least sensitive are variety stores, fill-ing stations and grocery stores, having asales-equivalent of 5, 6, and 7 percent,respectively. On the basis of these sales-equivalents retailers can determine thechange in sales to be expected with agiven change in disposable income ofconsumers. For example, a decline of 5percent in disposable income may beexpected to result in a decline of 7 per-cent in sales of men's clothing andfurnishings stores.

The sales-equivalents are valid if allthe factors influencing sales other thandisposable income are constant from oneyear to another. In determining the ef-fect on sales of a given change in in-

Source: U. S. Department of Commerce.

8 The general formula from which thesales-equivalent ratio was derived follows:

Sales=AX (disposable income)fl(l + r ) ^ r -where A, a, and r are constants determinedfrom the data by the method of least squaresfor each kind of business. For a descriptionof this method see M. Ezekiel, Methods ofCorrelation Analysis, John Wiley & Sons, NewYork, 1938. The constant a provides thebasis for determining the sales equivalent toa change in income.

Table 4.—Sales Equivalent of a Changein Income, by Kinds of Retail Business

Kind of business

Percentchangein sales

resultingfrom 10percentchangein dis-posableincomeof indi-

viduals 1

Sales-equiva-

lent group(percent)

All retail stores...Durable goods storesNondurable goods stores ..

Motor vehicle dealersJewelry storesLiquor storesBuilding materials dealersHousehold appliances and radio

storesFurniture and home furnishings

storesAuto parts and accessories stores..Family and other apparel stores..

Hardware storesMen's clothing and furnishings

storesWomen's apparel and accessories

storesShoe storesEating and drinking places

Department (including mail or-der) stores

Other general merchandise anddry goods stores . _

Fuel and ice dealersDrug storesGrocery and combination stores._Filling stationsVariety stores

12 i18 !10 j

i19191918

" I15 ,

15-20

10-15

Under 10

1 Based on regressions using the form: Y=A ( l+r) 'x°,where=disposable income of individuals, £ = year, r, a,and A are constants determined from the data for the per-iod 1929 to 1941 for each kind of business. The percentagesrepresent the net effect of a change in income and assumesall other factors influencing sales to be constant. Inother words,the effect of the net growth or decline insales is eliminated.Digitized for FRASER



Chart 5.—Relationship Between Sales of Durable Goods Retail Stores, by Types of Stores, and Disposable Incomeof Individuals *

SALES(BILLIONS OF DOLLARS)12.01 1 r~

10.0

8.0

6.0

4.0

2.0

MOTOR VEHICLEDEALERS



40 60 80 100 120 140DISPOSABLE INCOME OF INDIVIDUALS

(BILLIONS OF DOLLARS)

AUTOMOTIVE PARTSAND ACCESSORIESSTORES



3.2

2.8

2.4

2.0

1.6

1.2

.8

1

BUILDINGDEALERS

" /

A/ / 4°

- ft-// 6/ 35

• 33 |

! 1 1

MATERIAL

43 -

_

-

I ! f



1.2

1.0

HOUSEHOLD APPLIANCE AND RADIOSTORES

2.4

2.0

1.6

1.2

.8

.4

0

FURNITURE ANDHOUSEFURNISHINGS

" STORES ^ ^ ^ -

- //t/ _. 36/ / 38• 3 3

-

1 1 1

- ^ .43

44EST. _

_

-

-

_________

.4 -

40 60 80 100 120 140 40 60 80 100 120 140 40 60 80 100 120 140DISPOSABLE INCOME OF INDIVIDUALS DISPOSABLE INCOME OF INDIVIDUALS DISPOSABLE INCOME OF INDIVIDUALS

(BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS) (BILLIONS OF DOLLARS)

1.2

t.O

.6

.6

.4

.2

0

1 1 I

HARDWARESTORES

40_/

3 T / / 1 9 2 9

• J/•>7• 3 3

-

1 ! !

1

* \ /E4S4T

4 3

-

-

-

-

1



.6

.5

A

.2

FARM IMPLEMENTDEALERS

J I L

2.8

2 .0

1.6

1.2

.8

8 12 16 20 24CASH FARM INCOME


OTHER RETAILSTORES27

^1929

1

40 60 80 100 120 !,40DISPOSABLE INCOME OF INDIVIDUALS

(BILLIONS OF DOLLARS)1 Sales of farm implement dealers are related to cash farm income which includes governmental payments beginning with2 Includes both durable and nondurable goods stores. Source ; IT. S. Department of Commerce.

1933.


12 SURVEY OF CURRENT BUSINESS October 1944Consumer stocks of many durable

goods such as automobiles and householdappliances have been seriously depletedor worn out during the war. This de-ferred demand is too large to be mate-rially affected by any decline in individ-ual incomes that may occur in 1945 withthe war continuing on the Pacific front.Consequently, the factors limiting out-put will determine the volume of sales.The cut-backs in the military programfollowing upon the defeat of Germanywill release substantial quantities ofmaterials, men, and facilities, but theprocess of reconversion will take time—war contracts must be settled, plantsmust be cleared and new equipment in-stalled. Just how rapidly the reconver-sion will be accomplished will vary fromindustry to industry and from plant toplant, but it appears fairly evident thatanything like full capacity production ofconsumer durable goods will not be at-tained in 1945. Weighing these factorsit is expected that the 1945 sales of dur-able goods at retail stores will be morethan in 1944, although considerably be-low the 1941 peak.

With the release of considerableamounts of steel and other metals forcivilian use, household appliances andpre-war quality furniture will be pro-duced in enlarged quantities. Conse-quently, sales of stores handling thesegoods will rise sharply from the low war-time levels of 1944. The demand forfurniture will be favorably influenced,not only by those who have waited forbetter quality, but by the establishmentof new households by demobilized sol-diers and others having temporary ar-rangements because of the war.

Although the production of passengerautomobiles at best will be only a frac-tion of the industry's capacity output,sales of motor vehicle dealers will risesharply as soon as cars can be madeavailable. More parts and accessorieswill be available and because existingcars will be older and require more serv-icing, parts and auto repair shops willcontinue to experience a favorable de-mand for service which can be met morereadily with the easing of the manpowersituation.

Lumber will continue to be tight in1945 but—once Germany is defeated—nonwar new construction and mainte-nance activity will increase and sales oflumber and building material dealersand hardware stores will rise, althoughonly moderately. Of the major types ofdurable goods stores, the only groupwhich is expected to show lower sales in1945 is jewelry stores. These are ex-pected to follow the income trend.

For most of the nondurable goodsgroups the pre-war relationships betweensales and disposable income of individu-als will be applicable in appraising the1945 situation. In contrast to durablegoods, supplies of most nondurables willbe available in ample quantities and thepurchasing power of consumers will bethe most important factor affecting sales.As a result of cut-backs in the war pro-gram some unemployment will occur.Furthermore, when war production de-mands are eased, the take-home pay ofthose employed will be reduced as a re-sult of the shortening of the workweek,

Chart 6.—Relationship Between Consumers' Expenditures for Goods andServices and Disposable Income of Individuals

^ 8 0CDDC

-J

DO

L

u_

° 70CO

o_J_JCD

CO

a:LLJ

CO

oz<g 5 0ooCDQCOU_

to

£ 4 03

QZUJQ.XUJ

CO

zoo

2 0

i i 1

2

34. /

xX /X /— x/^ X/^^kl

/ XX XX X

xx

x\ \ \

1

29

X—26728

30 jT 27•/40

3 g j 9 T 25

3 V©24 /

i#>^22 >^/#,9

x

_

NOTE.- UPPER LINE OF ~REGRESSION FITTEDTO DATA, 192/-40;LOWER. 19/0-20.

20 30 40 50 60 70DISPOSABLE INCOME OF INDIVIDUALS (BILLIONS OF DOLLARS)

8 0


the down-grading of jobs within plants,and the shift from high-wage to low-wage industries. Consequently, a mod-erate reduction in consumer incomes isexpected in 1945 which in turn will entaila corresponding reduction in the totalsales of nondurable goods stores.

Not all groups of nondurable goodsstores, however, will be affected equallyby the expected cut in the disposableincomes of individuals. Sales of thosegroups with the highest sales-equivalentto change in income would be relativelymost affected by the reduction in income.Thus, the decline in sales of eating anddrinking places and of apparel stores,resulting from the anticipated decline indisposable income, would be expected tobe proportionately more than the de-crease in sales of grocery and varietystores.

In addition, there are a number of spe-cial factors which may affect the salesof some of the nondurable-goods groups.While total food production is expectedto be about the same in 1945 as in 1944(assuming a favorable growing season),it is not certain to what extent the declinein the needs of the armed forces will beoffset by the increase in the requirementsfor European relief. At the moment itappears that the quantities of food avail-able for civilians will be adequate next

: D. 44-644

year, while food prices are expected toaverage lower.

A similar situation maintains in thecase of clothing. Undoubtedly theamount of apparel that could be usedfor relief is almost unlimited but thereis no way of knowing at present howmuch will be taken for this purpose.The most important factor affecting salesof apparel stores will be the consumerdemand as supplies of most types ofclothing will be ample. Apparel storeswill not maintain the record dollar saleslevel of 1944. The factors that made forthis record will be reversed. Demandfor high-priced apparel will decreasewhile increased supplies of lower-pricedgoods will again activate price competi-tion. Reduced sales arising from thesefactors will be offset only in part by thedemands of demobilized soldiers who willuse their mustering-out pay to outfitthemselves.

In summary, the trends in retail tradefollowing the defeat of Germany will re-verse the movement of 1944. Sales ofdurable goods stores will be up becauseincreased production will be possible andthe demand will be insistent. Sales ofnondurable goods stores,"on the otherhand, will show mixed trends by kinds ofbusiness, but in total they are expectedto follow the downward trend in con-sumer income.



Retail Sales After TransitionThe period of transition will be essen-

tially one of readjustments for theeconomy as a whole and in particular forretail trade. Difficult as the problemswill be in this period, retailers are alsovitally concerned with the prospects inthe period following the transition. Willconsumers alter their buying habits orwill the prewar patterns tend to prevailafter most of the pent-up demands havebeen satisfied? Will consumer purchas-ing power be maintained at sufficientlyhigh levels to permit a profitable volumeof retail sales in the postwar years?Will new products be introduced whichwill stimulate industry and commerceand in turn generate an increasing vol-ume of retail purchases? Obviously, theanswer to these questions must wait uponfuture developments and cannot be givenat this time.

However, some light on possible post-war trends can be obtained by a studyof the experience in the periods beforeand after the first World War. Chart 6presents the relation between consumerexpenditures and disposable income forthe years 1910 to 1940.° A similar pat-tern would have been obtained if salesof retail stores, which constitute abouttwo-thirds of all consumer expenditures,had been used.

Two significant observations may bemade from this chart. The first is thatthe relation between the level of expendi-tures and income for the period 1910 to1920 did not continue into the 1920's and1930's. A shift in the relation occurred.The shift was such that consumer ex-penditures for the same amount of in-come were generally about 5 billion dol-lars higher in the period after 1920 thanin the earlier period. The implication ofthis is that consumers saved a relativelylarger proportion of their incomes inthe earlier period. The second observa-tion is that despite the difference in thelevel of expenditures in the two periods,a given change in consumer incomes re-sulted in the same proportionate changein their expenditures for each of the twoperiods.10 For example, an increase of10 billion dollars in disposable income ineither period resulted on the average inan increase of 8 billion dollars in con-sumer expenditures or, an increase of 5billion dollars in income resulted in anincrease of 4 billion dollars in expendi-tures.

9 The data used in this chart are based ona number of sources: Consumer expendituresfor 1909, 1914, 1919 based on estimates ofW. H. Lough, High-Level Consumption, Mc-Graw-Hill Book Co., Inc.; other years from1909 to 1919 interpolated by the Departmentof Commerce; from 1919 to 1928 based on H.Barger, Outlay and Income in the UnitedStates, 1921-38; from 1929 to 1940 based onestimates of the Department of Commerce.Disposable income estimated on the basis ofdata from the Department of Agriculture,National Bureau of Economic Research andDepartment of Commerce.

10 These results may be stated in more tech-nical terms as follows: The level of rela-tionship was translated by an expenditure of5 billion dollars from the first to the secondperiod while the slope of the relationshipremained the same.

That the relation between absolutechanges in consumer expenditures andabsolute changes in disposable incomehas been stable in the 30-year periodsince 1910 is indeed striking. It per-sisted under widely varying conditions—in a world war, in the prosperous yearsof the twenties^when many new productsand industrial techniques were de-veloped, in the great depression and inthe subsequent recovery years. The con-tinuity of the relation provides a highlyvaluable guide in appraising post-wartrends in retail sales. On this basis re-tailers can determine what the effect ofa change in the disposable income of in-dividuals in the post-war years would beon total retail sales. For this purposethe line in chart 2 or the formula in foot-note 3 provides the basis for the esti-mate.

It must be emphasized that this con-clusion is applicable to a determinationof the changes in total retail sales andnot necessarily to the changes in thesales of any particular line of trade or ofany individual firm. In appraising thesales prospects of particular firms orkinds of business, special developmentsapplicable to the individual firm or busi-ness must also be taken into considera-tion.

In order to determine total sales, how-ever, retailers must know not only thechange in sales corresponding to achange in disposable income, but alsothe level of sales which would corre-spond to a particular level of disposableincome. The answer to this latter prob-lem is more difficult to determine, sincepast experience has shown that in cer-tain periods consumers have tended toalter the savings-income pattern. Willthe level of consumer expenditures inrelation to incomes tend to shift in thepost-war years as was the case in theyears following the first World War?Will the expenditure pattern be estab-lished at a higher level relative to thatof the 1921-40 period?

While the answers to these questionscannot be given, several observations maybe made on possible post-war trends.Despite the fact we do not know whatthe expenditure-income pattern is likelyto be in the future, the close correlationbetween consumer expenditures and in-comes in the period from 1921-40 pro-vides the basis for the post-war outlook.Certain developments, however, mightresult in an upward shift in the relationwith a corresponding lowering of thesavings-expenditure ratio. New prod-ucts may come forth which will "catch"with the masses of the population andresult in wide repercussions on the na-ture and extent of consumer spending.This would be similar to the develop-ment in the twenties when the improve-ment of the automobile, and the devel-opment of all of the products and serv-ices associated with it, resulted in a shiftin the level of consumption. In fact, theratio of savings of individuals to theirdisposable income was reduced from anannual average of 16 percent, in theperiod 1910-20, to 9 percent in the pe-riod from 1921 to 1940.

A lifting of the expenditure line mightalso arise by the marketing of existing

products in a cheaper and more attrac-tive form. Example of this would belower-priced automobiles or low-costhouses which would broaden the marketsin the low income brackets. Finally, thesavings-income pattern can be alteredmaterially through government policywith respect to social security and taxpolicies.

These considerations point up the un-certainties involved in the prospects forretail trade in the post-war years. Thedominant factors will be the volume ofconsumer incomes and of employmentwhich will prevail. Past experience indi-cates the magnitude of the change insales to be expected with a change indisposable income. In the absence ofnew developments tending to alter thesavings-income pattern, the past rela-tionship should prove a helpful guide indetermining the level of expenditurescorresponding to a given level of dis-posable income.

A fundamental question arises in con-nection with the problem of full employ-ment. Is it necessary to get both a shiftin the level of the expenditure-incomeline of relation and a change in its slopein order to achieve and maintain fullemployment? This problem bears onthe relation of business investment toconsumer spending and saving. Thisaspect of the consumption problem re-quires further exploration.

Use of Sales-Income RelationsThe following example illustrates the

use of the sales-income relations in de-termining the probable post-war salesvolume of a particular retail firm undergiven assumptions as to the disposableincome of individuals. Let us select forpurposes of illustration the sales of aleading mail-order house. Sales of thiscompany are included in the departmentstores (including mail order) group.The relation of sales to disposable in-come for this group is shown in chart 4.The first step in the procedure is to de-termine the statistical formula repre-senting the relationship on the basis ofthe experience from 1929 to 1941. Sincein this period sales have shown a net

>• growth aside from changes in income, atime factor is used in the relation to ac-count for the element of growth. Thestraight line relation which best approx-imates the sales of the department storegroup is given by the following formula":

Sales (millions of dollars=299+53.04X disposable income of individuals (bil-lions of dollars)+20.45X (year—1936).

This formula gives a very close ap-proximation to sales for the period cov-ered. The average error made for theentire period is only 2 percent with themaximum error of 9 percent occurringin 1933. The formula implies that allother things being equal, an increase ofone billion dollars in disposable incomeresulted in an increase of 53 million dol-lars in department-^tore sales and con-versely. Also aside from the effect of in-

11 The formula is obtained by the use ofleast squares, a procedure which is describedin most textbooks on statistics. See M.Ezekiel, loc. cit.Digitized for FRASER


14 SURVEY OF CURRENT BUSINESS October 1944come, sales have tended to increase onthe average by about 20 million dollarsper year.

If in some post-war year, say 1948, itwere assumed that the level of disposableincome would amount to 100 billion dol-lars then the corresponding sales of de-partment stores given by the formulawould amount to about 5,850 million dol-lars.12 The level of 100 billion dollars ofdisposable income is above that whichoccurred in any peacetime year and is37 percent above that of 1940. With thelabor force which would prevail in 1948even this amount of disposable incomewould be considerably below that whichwould be associated with full employ-ment. The sales of department storeswhich could be expected at the 100 bil-lion dollars level of disposable income in1948 would also be a peacetime record,although somewhat below the 1943 sales.

In order to apply these results to thesales of the particular mail-order firm,it is first necessary to determine the re-lation of the sales of the firm to salesof all department stores. Since 1929the proportion of this firm's sales tototal department store sales has increasedsteadily from 10 percent in that year to19 percent in 1941. During 1942 and1943, however, the ratio declined rathersharply. At this point, the company'sexperience and knowledge of its marketswould be very helpful in deciding whetherfits proportion of total department storebusiness would resume the trend estab-lished in the pre-war years. If this pro-portion should amount to 20 percent,then sales of the firm in 1948 at a level of100-billion dollar disposal income couldbe expected to amount to 1,170 milliondollars.

While this analysis applies most read-ily to firms having Nation-wide markets,similar methods can be used for thosefirms whose sales are localized. Theproblems are those of getting the essen-tial information on sales and income forthe areas covered by the firm.

Appendix

For the convenience of those whomight be interested in calculating salesby kinds of business under different as-sumptions of disposable income of indi-viduals and the year, the following listis given of the regression formulas de-rived from the sales data and incomefrom 1929 to 1941. Sales by kinds ofbusiness for the period are published inthe SURVEY OF CURRENT BUSINESS, No-vember 1943, page 7. The disposable in-come of individuals is available in theSURVEY OF CURRENT BUSINESS, April 1944since 1938 and May 1932 from 1929 to1938. In the case of two kinds of busi-ness, namely feed and farm supply storesand farm implement dealers, sales wererelated to cash farm income (includinggovernment payments) instead of dis-posable income since purchases at thesestores were influenced by the purchasingpower of farmers.

The relations giving the sales were ob-

tained by the least square method. Eachcase was then examined from the pointof view of whether shifts in the relationoccurred in the period covered andwhether the linear formula would requiremodification. In no instance was thereany clear evidence for modifying theoriginal formula.

One measure of the reliability of theformulas is the annual average percenterror of the actual sales from sales cal-culated from the formulas. These arealso shown in the table below. It may be

noticed that the average error did notexceed 7 percent in any case and in 17kinds of business the average error wasless than 5 percent.

In each of the formulas £ representssales of the particular line of trade ex-pressed in millions of dollars, t repre-sents the year and is expressed in termsof deviations from 1936, / represents thedisposable income of individuals ex-pressed in billions of dollars, and C cashfarm income, also in billions of dollars.

Sales—Income Regressions

DURABLE GOODS STORESAutomotive group:

Motor vehicle dealers S = -3553+128.55 IParts and accessories S = — 271+11.37 I

Building materials and hardware group:Building materials S = -1252-35.22t+44.311Farm implements S = -93-2.86t+51.82 CHardware S=-212+6.79t+12.19 I

Home furnishings group:Furniture and housefumishings S=-930-22.14t+32.20 IHousehold appliances and radios S = —472—20.79t-f 15.83 I .

Jewelry S=-349-4.98t+10.62 I

NONDURABLE GOODS STORESApparel group:

Men's clothing and furnishings S =Women's apparel and accessories S =Family and other apparel S =Shoes S =

Drug stores : S=Eating and drinking places S =Food group:

Grocery and combination S =Other food S =

Filling stations S =General merchandise group:

Department, including mail order S =General, including general merchandise with food S =Other general merchandise and dry goods S =Variety S =

Other retail stores:Feed and farm supply S =Fuel and ice S =Liquor * S =Other i S =

Averagepercentage

error ofactual

sales fromcalculated

sales,1929-41

-358-31.52t+18.62 I..-124+20.61 I . .-146+9.02 I-30-8.53t+9.69 I

;249+18.53 I186+193.08t+40.90 I...

1837+127.35t+80.22 I..-367-70.20t+42.61 I..

;923+128.48t +22.01 I

= 299+20.45t+53.04 I:596-69.52t+8.14 I:-34-32.88t+10.47 I= 340+17.77t+8.47 I

-114+4.00t+105.11 C .a54+15.38t+12.26 I, -= -817+20.12 I= -1031-52.47t+37.52 I

i Includes book stores, news dealers, stationery stores, cigar stores, florists, office equipment and supply dealers,and other minor retail outlets.

NOTE.—S=sales, I=disposable income, t=year—1936, and C = cash farm income (incl. Government payments).

12 This is computed from the formula aboveas follows: Sales (millions of dollars) =299 + 53.04X100 + 20.45 X (1948-1936), = 299+ 5304 + 245 = 5,848 million dollars.

Business Situation(Continued from p. 4)

down prices of dairy products, particu-larly milk and butter. In addition"losses" are incurred by the CommodityCredit Corporation on regional sales offluid milk and on Cheddar cheese. These'losses" added to the direct payments tobutter manufacturers account for anadditional 100 million dollars a year inother dairy subsidy programs.

The meat subsidy currently being paidto slaughterers amounts to about 450million dollars, or slightly more thanone-third of the total food subsidy ex-penditures. The purpose of these pay-ments has been to reduce the prices ofmeat paid while keeping up the pricespaid for livestock, thus assuring an ade-quate flow of meat to fill military andcivilian demand.

Subsidies paid on certain uses of wheataccount for about 160 million dollars ayear, or about one-eighth of all food sub-sidies. The subsidy to users of wheat forlivestock comes to about 60 million dol-

lars, and takes the form of below-costsales by the Commodity Credit Corpora-tion of imported or, in some cases, do-mestic wheat used for feed purposes.The remaining 100-million-dollar wheatsubsidy represents a direct payment tomillers using wheat for flour. This isnecessitated in order to keep the priceof bread and family flour from reflectingincreased wheat prices.

The remaining 14 percent of food sub-sidy expenditures is spread over suchitems as oilseeds and products, canningvegetables, dry beans, prunes and raisins,and sugar. The general purpose in allthese cases is also to maintain or securedesired supplies in the face of increasedproduction costs while keeping relative-ly stable the prices of final productsinvolved.

It is not expected that the rate of sub-sidy payments will change in the nearfuture. Current subsidy payments areat levels which reflect the excess of costsover established price ceilings. Hence,as long as these cost-price relationshipsare maintained, subsidy payments willalso remain unaltered.Digitized for FRASER



Wartime Construction and Plant ExpansionBy D. Stevens Wilson, National Economics Unit, Bureau of Foreign and Domestic Commerce

THE basic facilities required for warare not all completed, but for allpractical purposes this phase of the warprogram is over. Taking an inventoryof wartime capital formation, indicat-ing the nature and purposes of theincreases in productive capacity, theareas in which facilities are likely to ex-ceed peacetime requirements, and thosein which capital outlays have been de-ficient is now pertinent.

Over 86 billion dollars were spent onnew construction, and for machineryand equipment other than combat items,in the three and a half years from July1940 to December, 1943.1 The total forthe three and a half years immediatelypreceding the wartime period, January1937 through the first half of 1940, wasonly about 40 billion dollars. Expendi-tures in the war period were not particu-larly large, however, when related to thevery high gross national product ofwhich they were a part.

The magnitude of the wartime expen-ditures is pointed up in table 1 whichcompares what will be called hereafterthe war period, July 1940 to December1943, with the period from January 1937to June 1940, which will be referred toas prewar. The table gives the approxi-mate amounts financed by public andprivate funds. No adjustment has beenmade for price changes. The periodsused have been selected somewhat on thebasis of convenience. The pre-war pe-riod does not represent a standard ornormal; it merely covers the sameelapsed time, 3y2 years, immediately be-fore the war, and serves to accent themagnitude of the changes.

Total expenditures for capital invest-ment more than doubled during the warperiod. The increase was largest in ma-chinery and equipment purchases whichrose 150 percent, as compared with 80percent for construction. The bulk ofthe increase was financed with publicfunds; private outlays remained aboutthe same for both periods. As a result,public funds accounted for 61 percentof the total expenditures during the waragainst 19 percent for the earlier period.These public capital expenditures repre-sented about 35 percent of the over-allpublic expenditures for war purposes,including pay for the armed forces.

1 Figures on private capital expendituresare from trie National Income Unit, U. S.Department of Commerce, "Total Construc-tion Activity in Continental United States",SURVEY OF CURRENT BUSINESS, June 1944, p.23; "National Income and National Productin 1943", SURVEY OF CURRENT BUSINESS, April1944, pp. 6-16. Figures for public expendi-tures for capital items derived from "War Pro-duction (Board data. This total covers allcategories normally a part of capital forma-tion although much of that used for warpurposes will be of doubtful peacetime value.

Investment directed primarily at warproduction comprised about 60 percentof the wartime aggregate. As shown inchart 1, capital expenditures for warpurposes more than accounted for theincrease from the pre-war period; therewas a slight over-all decline in the ex-penditures in categories not directly re-lated to the war effort.

Chart 1.-—Expenditures for NewConstruction a n d Producers9

Equipment, Pre-War and WarPeriods x

BILLIONS OF DOLLARS100

2 0

PRE-WAR WAR1 Pre-