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commodities. Under the current mobilization program, early 1952 was the peak period of materials controls restraint. The improving materials supply situation was reflected in increased allocations for the second half of 1952 and the first half of 1953.

Moreover, important as all of these specific anti-inflationary programs were in 1952, probably the greatest supports to stability were those provided by the Nation's continued rapid expansion of productive capacity and by the maintenance of the high tax rates enacted in 1950 and 1951.

TRENDS WITHIN MAJOR SECTORS Consumers

Income. Personal income was about 14 billion dollars or 572 percent higher in 1952 than in 1951. Most of the 1952 rise occurred in the last months of the year as labor income, which had been creeping up gradually, began to climb sharply because of higher wages, increasing employment, and longer working hours. (See chart 13 and appendix tables B-6 and B–7.)

Net income of farm proprietors was slightly lower than in 1951, with prices falling and costs still rising. The level of net farm income in 1952 was substantially higher than in 1949-50, but well below 1948. Income from other businesses and the professions rose in 1952, but less rapidly than in the year before. Dividends, rents, interest, and transfer payments also increased.

Total personal earnings expanded about 6 percent during the year, but personal taxes went up at a faster rate, so that spendable income gained about 10 billion dollars or 4 percent. In constant prices, this rise in disposable personal income represents an increase in per capita purchasing power from $1,486 to $1,496 (1952 prices), a level exceeded only in 1944. (See appendix table B–10.)

Spending and saving. In 1952, for the second consecutive year, the average rate of personal saving was exceptionally high, measured by either prewar or earlier postwar experience. Consumer expenditures were about 8 billion dollars greater in 1952 than in 1951, an amount sufficiently less than the expansion in disposable income to lift the percent of income saved from 7.6 percent to approximately 8 percent. (See appendix tables B-4 and B-9.)

During the first half of the year, consumer buying (at seasonally adjusted annual rates) increased faster than relatively stable disposable income. The rate of saving dropped from about 9 percent in the second half of 1951, a postwar record, to less than 7.5 percent in the first half of 1952. (See chart 14.) During the third quarter, however, the rate of consumption expenditures remained steady, despite a considerable rise in earnings; and the saving ratio climbed most of the way back to the peak level reached in 1951. The third-quarter calm in the consumer markets was partly the result of the steel strike, which by sharply reducing the output of automobiles contributed to a reduction in sales.

CHART 13

PERSONAL INCOME

In 1952, personal income increased about half as much os in
1951, with most of the rise occurring in the second half of
the year. All major components except form proprietors’income
participated in the increase.
BILLIONS OF DOLLARS*

BILLIONS OF DOLLARS* 300

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AMJJASON DU F

1950

MJ J A S O N D J F M A M J J A S O N D
1951

1952

• SEASONALLY ADJUSTED ANNUAL RATES.

SOURCE: DEPARTMENT OF COMMERCE.

Compared with the third quarter, the fourth quarter was one of vigorous activity. Disposable income, seasonally adjusted, registered the largest quarter-to-quarter rise since the last 3 months of 1950, and spending the greatest gain since the first 3 months of 1951. The saving ratio, however, remained virtually unchanged from the previous quarter.

The markets for durable goods felt the greatest impact of the fourthquarter growth in consumer spending, as might be expected from the jump in automobile production following the end of the steel shutdown. But the increased buying was by no means limited to automobiles or to the relatively small number of other commodities which had been scarce. Nor can it be directly accounted for simply by the suspension of instalment credit

CHART 14

PERSONAL INCOME, SPENDING,
AND SAVING

Personal income and consumption expenditures expanded signifi-
cantly in the fourth quarter of 1952, ofter 3 quarters of
moderate growth. Saving for the year as a whole continued at
a high level.
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PERCENT

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NET SAVING
AS PERCENT OF DISPOSABLE INCOME

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*SEASONALLY ADJUSTED ANNUAL RATES.

SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS.

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controls early in May, which appeared to have given a fillip primarily to automobile sales. The rise in buying during the last months of 1952 embraced nondurable goods as well as durables, textiles as well as cars. felt throughout the Nation and in the markets for all major classes of commodities.

Housing. Expenditures for new residential construction in 1952, which had seemed to many analysts likely to fall from the 1951 level under the combined pressure of materials shortages, credit restrictions, tightness in the market for Government-insured or guaranteed mortgage loans, and a decline in the rate of new marriages, slightly exceeded the 1951 total of 11 billion dollars. New nonfarm housing starts, which had been just below 1.1 million units in 1951, were just above that level in 1952. (See appendix tables B-18 and B–19.)

Personal debt. Although consumer and residential mortage debt continued to increase, the former much more rapidly than in 1951, saving in the form of liquid and other financial assets also remained at a very high

The high rate of liquid saving, and the steadiness of the price level, probably resulted in some net improvement in the financial position of consumers in 1952 despite the rapid rise in debt.

Consumer credit outstanding expanded more than 3 billion dollars or about 15 percent, compared with about 0.5 billion or 2.7 percent in 1951, and 3.3 billion or 19.6 percent in 1950. Practically all of the 1952 expansion was in instalment credit, which began to climb largely in connection with purchases of automobiles after the suspension of the consumer credit regulations in May. (See chart 15 and appendix table B-27.)

It is estimated that in 1952 residential mortgage debt on 1- to 4-family nonfarm houses expanded 7 billion dollars or 14 percent, to reach a total of 59 billion. The dollar increase was about the same as in 1951, but about 10 percent lower than the increase in 1950. Business

As is apparent from the general production and employment data already cited, 1952 was a good year for business. The first half of the year was much like the last part of 1951. But the story of the second half of 1952 was quite different. It began quietly enough, but it ended with a display of activity which raised sales and incomes for the year as a whole above the levels in the last half of 1951 without causing significant upward pressures on prices. This rise was associated mainly with a pick-up in inventory buying and with a substantial increase in retail sales, particularly of durables. (See appendix tables B-21 and B-22.)

Inventories and sales. Beginning in the third quarter of 1951, the rate of business inventory accumulation declined, as businessmen attempted to bring over-plentiful stocks into line with sales volume. By mid-1952, sellers of such diverse commodities as textiles, apparel, autos, and home appliances appeared to have completed the process of paring down the excess inven

CHART 15

CONSUMER CREDIT

Consumer credit outstanding declined seasonally in the first
quarter of 1952, and then climbed in each succeeding month.
Most of the expansion was in instalment credit, reflecting
in part the rapid rise in loans on automobiles which followed
the suspension of consumer credit restrictions early in May.

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JEMAM J J A S O N DJEMAM J JASONDJFMAM J J A S O N D
1950
1951

1952
END OF MONTH

SOURCES: BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM AND

COUNCIL OF ECONOMIC ADVISERS.

tories which they had accumulated in the preceding months. Indeed, in some areas retail inventories had probably dipped below the levels required by sales, while business purchasing agents were pursuing a policy of handto-mouth ordering.

During the third quarter, a change became evident as nonfarm inventories were accumulated at an annual rate of 3 billion dollars. Since there was some decline in inventories of steel during this quarter, the rate of accumulation of nonsteel items exceeded 3 billion dollars. Most nondurable goods industries and the nonsteel-using segments of durable goods industries shared in this rise. However, business sales to ultimate consumers did not rise in line with inventories; production and shipment of producers' durables and automobiles fell, largely as a result of the steel strike. But as the final quarter of the year got under way, metal-using firms had already completed in most cases a remarkable recovery. Production and sales of automobiles, appliances, apparel, and almost all types of commodities expanded considerably. At the same time, inventories con.

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