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Pago 35 35 36 37 39 48 48 51 58 65 70 70 70

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CHAPTER I. DEVELOPMENTS DURING 1952...
The economy in general..

Production...
Employment and unemployment..

Economic stability...
Trends within major sectors.

Consumers..
Business.
Government.

International developments..
CHAPTER II. Near-TERM PROSPECTS AND POLICIES.
The outlook...

Government expenditures and the fiscal outlook.
Private domestic investment.
Net foreign investment..
Personal income and consumption.
Supplies ...
Prices..

The composite near-term outlook.
Near-term policy issues ..

Defense mobilization policy..
Tax policy.....

International trade policy.
CHAPTER III. LONGER-RUN NEEDS AND PROSPECTS.

Introduction....
Employment and production needs, 1953–55.

The labor force.
Hours of work.
Productivity
Total needed production.

Amplifying comment by Mr. Keyserling.
Demand prospects for the longer run.

Prime assumptions.....
Government expenditures...
Private domestic investment..
Net foreign investment.
Consumer expenditures.
The composite longer-run outlook.
Separate note by Mr. Clark..

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CHAPTER IV. NEEDED POLICIES FOR SUSTAINED PROSPERITY..

The general nature of the adjustment problem..

The size of the problem...
The primacy of private adjustments.

The needed emphasis on consumption..
Workable lines of policy.....

Private price and wage policies..
Private investment policies.
Credit policy..

Tax policy...
Social security programs and other transfer payments.

Agricultural policies.
Housing policies......

Public developmental and service programs.
Two matters of emphasis ...

Anticipatory adjustments..

The responsibility of business.
CHAPTER V. INTERNATIONAL ECONOMIC ADJUSTMENTS.

Introduction..
The size of the problem.
The nature of the problem.
United States demand for imports.

Factors operating to curtail United States imports.
Foreign supply of exportable goods.

Industrialized areas.....

Food and raw material producing areas.
Conclusions regarding international economic policy.
APPENDIXES.

A. Statistical tables relating to the Nation's Economic Accounts.
B. Statistical tables relating to employment, production, and

purchasing power. INDEX...

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1

Chapter 1. Developments During 1952

THE ECONOMY IN GENERAL

AT

a

T THE BEGINNING of 1952, it appeared likely to most observers that

the security program, showing accelerated strength throughout the year and making heavier inroads into the stocks of scarce materials, would absorb all the expected gain in national output and curtail the production of consumers' durable goods and private construction.

By the second quarter of the year, however, these expectations had begun to waver, and by the fourth quarter they had been overturned. The economy was prosperous as it entered the year, and it was even more prosperous as it moved into 1953; but during the year the expansive factors of production and employment shifted from public demand toward private demand and were adequate to sustain both types of demand without strain. Meanwhile, a remarkable degree of price stability was achieved. Neither Government spending for security nor private demand expanded enough to force a rise in the general level of prices in the face of powerful general measures such as high taxation to restrain inflation, while wage and price controls served to curb increases in those selected areas where inflationary pressures were greatest.

In the first 6 months of the year, increasing Federal outlays for defense, together with a small rise in spending by consumers and a slight gain in other Government expenditures, more than offset a fall in net foreign investment and the drop in domestic private investment which resulted from a sharp decline in the rate of inventory accumulation. The combined effect of these changes (seasonally adjusted rates) was a moderate growth in total production. These developments were mainly a repetition of the second half of 1951, except that there seemed to be a few more soft spots in the economy, and the possibility of deflation began to receive some of the attention long given to inflation. (See appendix table B-1.)

In the second half, output expanded considerably faster than during the first half, despite the fact that national security expenditures were only slightly higher. There was a general rise in private demand, particularly in the last few months. Beginning in the third quarter, there was a marked upturn in the rate of net additions to business inventories, and in the fourth quarter, consumer expenditures made the best gain of the year. Net foreign investment continued to fall, and there was little change during the period as a whole in the rate of gross private domestic investment other than in inventories.

It is noteworthy that the accelerated rise in total demand during the last months of 1952 did not result in a new rise in prices. The increases in demand were heaviest in consumer goods areas where there had been some underutilization of productive capacity. Moreover, the rapid growth in productive capacity during the previous 2 years had improved the general

2 ability of the economy to meet increases in spending.

CHART 5

CHANGES IN TOTAL PRODUCTION

Total output of goods and services, measured in either current or constant prices, expanded about one-third as much in 1952 os in the preceding year.

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SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.

Production

The output of goods and services during 1952 totaled 345 billion dollars, compared with 329 billion during 1951, a rise of 16 billion or about 5

percent. When allowance is made for price changes, this represents an expansion of about 27/2 percent in physical output, much less than in 1951. (See chart 5 and appendix table B-2.) In 1951, production had responded to strong pressure from private expenditures only during the early months of the year, and to strong pressure from Government demand throughout. In contrast, additional demands were less in 1952, although private demand showed increasing vigor toward the end of the year while public demand was rising very little.

The monthly index of industrial production, which is more sensitive than gross national product to changes in the business weather, averaged

CHART 6

INDUSTRIAL PRODUCTION

Industrial production declined after the first quarter of 1952, and reached a low during July largely as a result of the steel strike. But it rebounded rapidly during the fall and ended the year about 5 percent above the 1951 high reached in April.

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JEMAM J J A S O N DJEM A M J J A S O N DJ F M A M J J A S O N D
1950
1951

1952

ADJUSTED FOR SEASONAL VARIATION.

SOURCE: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.

219 percent during 1952 (1935–39=100), or about the same as during the previous year, but varied considerably from month to month. (See chart 6 and appendix table B-17.) During the first quarter, the index averaged moderately higher than in the fourth quarter of 1951, but by July it had been pulled down 13 percent, as a work stoppage in the petroleum industry was followed by an 8-week shutdown in steel and iron ore production which in time curtailed the output of durable manufactures, notably automobiles. Industrial production rebounded rapidly in the third quarter to reach a new postwar high in September, as the output of steel soared to new record rates. During the fourth quarter, the index was pushed up further by generally increased production, which reflected in large part the rise in consumer and inventory buying. Employment and unemployment

Total civilian employment was estimated at 61.5 million in December 1952, or 500,000 more than in December 1951. Comparing the 2 years as a whole, the civilian labor force averaged about 63.0 million in 1952, or approximately the same as in 1951. (See chart 7 and appendix table

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