Public and Private Debt in the United States

Transcription

1 September 94 0 SURVEY OF CURRENT BUSINESS September 94 Public Private Debt in the United s By Elwyn T. Bonnell WITH THE END OF THE WAR in August 945, the pattern of public private debt began to be affected by a new set of factors. Although net public debt continued to move upward, the rate of increase was considerably reduced by the sharp curtailment in Federal war expenditures. Minor indications of a prospective return to prewar conditions occurred in the urban mortgage consumer credit areas, as increased supplies of building materials consumers' durable goods became available. By the end of last year, however, the major effects of the end of hostilities were limited to a reduced rate of expansion in total debt. Not until well into 94 were there clear indications that wartime influences had given way to peacetime factors. It is expected that the broad trends in indebtedness evident during the war will have been substantially altered by the close of this year. The Treasury is continuing its debt reduction program begun in late February, thus bringing to a close a period of public debt expansion such as this country has never before known. The exping peacetime economy has already increased business needs for both long- shortterm capital. As production increases, government restrictions on construction activity consumer credit may be safely relaxed without danger of further inflation, permitting an increase in mortgage loans, consumer debt. Further Increase in Debt Continued deficit financing by the Federal Government, revival of urban noncorporate mortgage financing, expansion in short-term debt of both consumers unincorporated businesses, combined to raise total net indebtedness in the United s to billion dollars at the end of 945. The reduced rate of expansion in net public debt (chart ), together with a net decrease in private indebtedness, served to limit the advance in total net debt to 35 NOTE. Mr. Bonnell is a member of the National Income Division, Office of Business Economics. Changes in Net Public Private Debt, by Component Parts [Billions of dollars], public private Up Federal G overnrnent Urban mortgage, noncorporate Short-tenn, commercial financial, noncorporate., consumer Down local government, corporate., corporate.. _ Farm mortgage Outsting at end of Change from previous year billion dollars during 945, compared to a rise of billion dollars in 944. As in the previous war years, Federal debt was the fastest rising component of the total. Significant in offsetting a rise of 4 billion dollars in the Federal sector were reductions in local government debt, corporate obligations both long-term short-term, farm mortgages, in all totaling 0.4 billion dollars. As much as 8.8 billion dollars of this decline occurred in the corporate short-term category, largely because of decreased Federal income-tax liabilities. The 4-year interval between the close of 94 the close of 945, substantially spanning the recent war period, is reviewed in chart. net debt nearly doubled during this period. Federal net debt was more than five times as large at the end of 945 as on December 3, 94. short-term commercial financial loans were nearly one one-half times their earlier figure corporate short-term debt was moderately higher. Other classes of debt contracted in varying degrees during this 4-year period: urban noncorporate mortgage, 5 percent; corporate long-term, 0 percent; local government, percent; farm mortgage, percent; noncorporate short-term consumer, 3 percent. Net Debt Defined Net public private debt outsting is a comprehensive aggregate of the indebtedness of borrowers after elimination of certain duplicating governmental corporate debt. This measure of indebtedness provides a more significant indication of trends in the debt structure than does gross debt, since the effects of nominal changes in financial practices organization are largely removed. To obtain net figures, gross or total debt is adjusted for specific types of duplications pertaining to the following sectors or subsectors of the economy: () the Federal Government its corporations agencies generally; () local governments treated as a single entity; (3) within the corporate area, those affiliated but legally distinct corporations which operate under a single management may be treated as a unit. In the noncorporate private area, data are gross throughout with no adjustments for duplications. The net debt concept, then, depends upon the definitions employed in measuring gross duplicating debt. Gross debt, as defined in this study, consists of all classes of legal indebtedness except the following: () The deposit liability of banks the amount of bank notes in circulation; () the value of outsting policies annuities of life insurance carriers; (3) the short-term debts between individuals or unincorporated nonfinancial business firms ; (4) the nominal debt of nonrailway corporations, such as bonds which are authorized but unissued or outsting but reacquired. Duplicating debt may best be described with reference to the sectors mentioned above. Within the Federal Government its corporations agencies, duplicating debt consists principally of Federal holdings of Federal obligations. Also included in duplicating debt in the Federal sector are loans receivable by Federal credit agencies from the public,

2 September 94 September 94 SURVEY OF CURRENT BUSINESS including local governments. This treatment of loans receivable from the public is the only adjustment that cuts across sector lines in effect is a consolidation between the two major classes of debt, i. e., public private. Within the non-federal Government area, local government securities held in sinking, trust, or investment funds by either the issuer or other entities within the sector are considered duplicating debt eliminated. In the private corporate area, duplicating debt is defined as debt held either by the issuer or owed to other members of an affiliated system. Thus, to arrive at net debt, each sector except the noncorporate is adjusted to a net basis by certain consolidations within the sector. A summation of the consolidated estimates for each sector yields the total for net public private debt. Data showing adjustments for duplication involved in passing from gross to net debt are given in detail in tables 7 8. Federal Government Debt In the final year of the war the Federal Government continued to use deficit financing in meeting part of its current expenses. In consequence, net Federal debt increased 4 billion dollars, reaching 47 billion dollars at the end of December 945. On March 3, 94, the debt stood at 44 billion dollars, a decrease of 3 billion dollars in 3 months. The Treasury has since continued to repay portions of the debt, particularly that held by banks, with the result that as of June 30, net Federal debt had been reduced still further. The gross debt of the Federal Government, encompassing Federal direct debt as well as all debt of Federal agencies to other agencies the public, reached a total of 8 billion dollars at the end of 945. This represented an increase of 39 billion dollars during the year. By the end of March 94, however, gross Federal debt had dropped back to 79 billion dollars. The effects of wartime financing appear mainly in the direct debt of the Federal Government. This type of debt rose by 8 billion dollars in the first half of 945 by more than 9 billion dollars in the second half of the year. It is significant that this upward surge was halted in the first half of 94. After reaching its peak in February, Federal direct debt receded to 9 billion dollars on June 30, 94. The debt retirement program was financed by reductions in the Treasury's general fund cash balance. The volume of Federal direct debt outsting is given in table, by calendar Table. Federal Government Direct Debt, 94-4 Period _ _ 94 ( months) January _ February March April May June Outsting at end of period Source: U. S. Treasury Department. 58,00 08,70 5, ,30 78,5 9, 4 78,887 79, 4 7,0 73,898 7, 583 9, 4 Net change during period +, ,50 +57, , , 485-8, , 0 -,4 -,3-3, years from 94 to 945, monthly through the first half of 94. In contrast to the movement in Federal direct debt, the corporation agency debt of the Federal Government was reduced by 8,80 million dollars during 945. This resulted primarily from liquidation of the securities of other Federal agencies held by affiliates of the Reconstruction Finance Corporation. Recent changes in the debt position of Federal corporations agencies may be summarized as follows: On December 3, 944, agency bonds, debentures, notes payable totaled 3,04 million dollars; of this,,494 million dollars were held by the United s Treasury, 8,39 million dollars by other Federal agencies,,93 million dollars by the public. On December 3 r 945, the total amounted to 4,48 million dollars, of which,775 million,,04 million,,8 million dollars were held by the Treasury, other Federal agencies the public, respectively* By March 3 of this year, the total had receded to 3,930 million dollars, held by the Treasury, other Federal agencies, the public in the amounts of,84 million, 977 million,9 million dollars, respectively. In passing from gross to net debt, certain eliminations are made in consolidating the accounts of the Federal Government. In total, the duplicating debt of the Federal Government was reduced by 3,30 million dollars during 945, but advanced from 33,800 million to 34,57 million dollars in the first quarter of 94. The recent advance was due to increased holdings of Federal Government securities. Federal agency holdings of agency bonds, debentures, notes payable have been discussed under the debt position of Federal agencies, in a preceding paragraph. These investments, together with Federal trust account holdings of agency debt, which are no longer of significant amount, make up the second third items under Federal duplicating debt in table 7. The fourth item, Chart. Net Public Private Debt, End of Calendar Year BILLIONS OF DOLLARS TOTAL ^m* **"* PRIVATE PUBLIC H. «*u^^ 0 I I 9'7 '8 '9 '0' ' '3 '4 '5 ' '7 '8 '9 '30 '3 '3 '33 '34 '35 '3 '37 '38 '39 '40 '4 '4 '43 '44' Source of data : U. S. Department of Commerce, based upon data from various governmental private agencies. /

3 September 94 SURVEY OF CURRENT BUSINESS September 94 loans receivable by Federal agencies from the public, has moved in recent years from a peak of 8,487 million dollars in 94 to 5,78 million dollars at the close of 945, 5,507 million dollars on March 3, 94. Bonds, debentures, notes payable by Federal agencies to the Federal Treasury have been excluded from the gross public debt aggregates in table 7 in all years, on the grounds that funds so advanced are already included in Federal Government direct debt. This type of debt, consequently, is not a duplicating item in passing from gross to net indebtedness. For informational purposes, however, year-end data for this type of debt from 93 to 945 are presented in table. Local Government Debt local government gross debt was 883 million dollars less on June 30, 945, than on the same date a year earlier. government obligations accounted for 343 million dollars of the decline local government debt for 539 million dollars. The corresponding reduction of net debt amounted to 349 million dollars, of which 38 million dollars was accounted for by the s 3 million dollars by the local governmental bodies. Over the war period as a whole, movements in local government net debt were downward, from.3 billion dollars in 94 to 3.7 billion dollars in 945. The contrast between this change the movement in Federal debt is shown graphically in chart. local government debt was reduced by one-sixth in the 4-year period, while at the end of 945, Federal debt was well over five times its December 3, 94 volume. The limited opportunity for capital expenditure, reflecting wartime conditions with respect to supply of materials labor, plus steadily rising revenues, were responsible for the continuous reductions in the outsting debt of local governments during the period. In general, govern- Table. Federal Government Corporation Agency Bonds, Debentures Notes Payable, Held by U. S. Treasury, End of year Amount 0 80,350 3,585 4,095 3,85 3,0 788 End of year Source: U. S. Treasury Department. Amount ,93 7,843, 494,775 Chart. Net Debt December 3, 945, as a Percentage of Net Debt December 3, 94 TOTAL NET DEBT FEDERAL GOVERNMENT AND FEDERAL AGENCY NONCORPORATE SHORT- TERM, COMMERCIAL AND FINANCIAL CORPORATE SHORT-TERM NONCORPORATE URBAN (NONFARM) REAL ESTATE MORTGAGE CORPORATE LONG-TERM STATE AND LOCAL GOVERNMENT-^ FARM MORTGAGE NONCORPORATE SHORT- TERM, CONSUMER PERCENT Percentage based upon data for June 30 of each year. Source of data: U. S. Department of Commerce, based upon data from various governmental agencies. ments reduced gross debt during the war at a faster rate than was possible for local governments. revenues proved more sensitive to changes in economic activity than local revenues, the mainstay of the latter being, of course, the real property tax. Since the net debt of s was only one-tenth of total local obligations in 945, the effect on the total was negligible. The wartime reduction of outsting debt by local governments was less pronounced on the net than on the gross level. This is illustrated by the following comparisons: During the 4-year period ending in 945, total local net debt decreased by percent, government by percent, local government by 5 percent. The corresponding percentages on the gross level were 8, 9,, respectively. The explanation lies in the changing composition of local governmental investments, in the fact that only investments in local securities are counted in duplicating debt. local governments increased their investments in Federal securities from 0.4 billion dollars on June 30, 94, to 5. billion on June 30, 945. During the same period, their investments in local governmental securities were reduced from 3.9 billion dollars to.9 billion. Debt The total net corporate debt of nearly 8 billion dollars at the end of 945 was almost 0 billion dollars lower than in the preceding year. About four-fifths of the marked decline occurred in shortterm debt other than notes accounts payable, reflected in large part re- Table 3. Accrued Federal Income Tax Liability, End of year [Billions of dollars] 7... Railway Nonrailway Sources: Interstate Commerce Commission Securities Exchange Commission.

4 September 94 September 94 SURVEY OF CURRENT BUSINESS 3 Table 4. Increase in Consumer Debt, May 945 to May 94 consumer debt Installment sale credit- Automobile Other Installment loans Single payment loans.. Charge account credit- Service credit. duced Federal income excess profits tax liabilities. Table 3 traces the movement of these tax liabilities during the war years, separately for railway nonrairway corporations. From the estimates of net long-term corporate debt (table 8) it appears that corporations succeeded in reducing their long-term obligations outsting by 4.3 billion dollars since 94. Railway corporations account for almost three-fifths of this decline. The movement contrasts with the experience during the first World War, when outsting longterm obligations of corporations exped moderately. The altered pattern of the recent war period must be attributed mainly to the assumption by the Federal Government of much of the responsibility for emergency facility financing. This tended to limit new issues by companies with war contracts enabled corporations to reduce long-term debt out of wartime earnings. A secondary factor during recent years, but one that may become important in the postwar period, is the preference being shown for equity financing. debt of corporations in the form of notes accounts payable increased by.4 billion dollars in the 3 years after 94, but dropped back within 300 million dollars of the 94 level by the end of 945. Movements in short-term debt other than notes accounts payable were much more abrupt up 4. billion dollars through 944 back down to a gain of 7.8 billion dollars through 945. As indicated above, changes in accrued Federal income-tax liability were largely responsible for the latter shifts. During this same period (94-44)» total current assets of corporations other than banks insurance companies, as estimated by the Securities Exchange Commission, increased at a slightly faster rate than total current liabilities, resulting in an increasingly better net working capital position each year. In 945, the decrease in total current assets was extremely moderate com- December 94 3,744,94,80,80,0,74 0 May 945 5, ,43,348, May 94 7,53, ,777,730,8 8 Percent increase, Source: Board of Governors of the Federal Reserve System _ Table 5. Net Public Private Debt, End of Calendar Year, 9-45 * Year Public private, total Public [Billions of dollars] Private Federal Gov- ern- ment local government Federal agency mortgage Urban estate mortgage / Data for local government debt are for June 30 of each year. Components will not necessarily add to totals because of rounding. Data are for noncorporate borrowers only (see table 9). Sources: U. S. Department of Agriculture U. S. Department of Commerce. pared to the sharp drop in liabilities, so that corporations entered the reconversion period under the favorable circumstance of a strong net working capital position Urban Mortgages The downward trend in urban real estate mortgages, from 8.5 billion dollars at the end of 94 to 7. billion dollars at the end of 944, was reversed during 945. In the past year mortgages of this type increased by million dollars, as compared to a reduction of 74 million dollars during 944. The change in 945 is the composite result of an expansion of 0 million dollars in the to 4 family residential category continuing declines in the commercial multifamily residential areas. The several lending groups participated in varying degrees in the net increase in urban real estate mortgages during 945. Savings loan association mortgage loans outsting increased by about 4 percent, as against a -percent drop in mutual savings bank loans. Commercial bank holdings increased by 7 percent, individuals other by percent, while those of insurance company Home Owners' Loan Corporation decreased by l x / percent, respectively. The greatest absolute rise (85 million dollars) occurred in the commercial bank holdings, which amounted to 4,5 million dollars in 945, compared to 3,9 million dollars at the end of 944. The greatest absolute drop (39 million dollars) occurred in loans of the Home Owners' Loan Corporation. It is expected that mortgage loan financing will continue to exp at an increasing rate as housing construction gets under way. The turning point for mutual savings banks insurance companies appears to be approaching. The Home Owners' Loan Corporation, however, is continuing to liquidate its holdings; in April of this year the amount outsting was 773 million dollars, a drop of 99 million dollars from the balance at the end of 945. Farm Mortgages farm mortgage debt continued its steady decline since the early 90's, reaching its lowest level since 95. The balance outsting on January, 94, is estimated by the United s Department of Agriculture at 5,08 million dollars, a drop of 90 million dollars during the year. The past year's decline, however, was at a slower rate than prevailed in the past. This retardation coupled with the fact that 0 s

5 September 94 4 SURVEY OF CURRENT BUSINESS September 94 showed an absolute increase in 945 as compared to 8 s in the prior year, suggests that the long-continued downward trend of farm mortgage indebtedness may be halted soon. Movements in farm mortgage debt will soon be shaped more by the rise in the value of farm real estate more rapid turn-over than the retirement of debt made possible by higher income during the war. Chart 3. Consumer Debt Related to Disposable Income of Individuals Short-Term, Commercial Financial The trend of noncorporate short-term debt for commercial financial purposes has been upward since 94. The most pronounced rise occurred in 944, when the volume increased by.8 billion dollars. During 945, the increase of.5 billion dollars fell only a little short of that in 944. The rise in 945 was predominately due to the increase in short-term debt owed to banks, the most active category within this group being bank loans for purchasing or carrying securities. expansion in short-term bank loans amounted to,538 million dollars, of which,44 million dollars resulted from increased security loans, 78 million dollars from a rise in "other" loans, offset by a decrease of 44 million dollars in loans to farmers. Brokers' loans to customers also increased during 945, sting at,38 million dollars at the end of the year, an advance of 97 million dollars. By the end of April 94, however, the amount of this type of debt receded to 895 million dollars. Year CONSUMER DEBT AS PERCENT OF DISPOSABLE INCOME DISPOSABLE INCOME OF INDIVIDUALS, TOTAL FOR YEAR (BILLIONS OF DOLLARS) 4-57 Data for 94 for consumer debt are for end of quarter for disposable income are total for quarter, seasonally adjusted, at annual rate. Sources of data : Board of Governors of the Federal Reserve System U. S. Department of Commerce. Loans for the purpose of carrying securities are subject to governmental control in the form of margin requirements specified by the Board of Governors of the Federal Reserve System. Effective January, 94, the Board amended regulation T entitled "Extension Maintenance of Credit by Brokers, Deal- Table. Gross Public Private Debt, End of Calendar Year, l Public private, total Public Federal Government Federal agency [Billions of dollars] Private Individual other noncorporate Mortgage Farm Urban real estate local government Longterm Shortterm Shortterm i Data for local government debt are for June 30 of each year, Components will not necessarily add to totals because of rounding. Sources: U. S. Department of Agriculture U. S. Department of Commerce S ers, Members of National Securities Exchanges" regulation U entitled "Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange/' to raise margin requirements to 00 percent. These requirements relate only to purchases or sales of securities subsequent to January. Whenever securities held as collateral are sold, the proceeds must, however, be used to reduce or retire existing customers' indebtedness. Except to this extent, the regulations do not require reduction or liquidation of existing accounts or loans. These regulations have already shown their effectiveness in reducing security purchase loans. For some years prior to February 5, 945, the general rule prescribed under regulations T U was that margin requirements be maintained at 40 percent. At that time, requirements were raised to 50 percent. In further efforts to forestall security speculation, margin requirements were raised from 50 to 75 percent on July 5, 945, from 75 to 00 percent effective January, 94. Loans by the Federal Government its credit agencies to individual farmers farmers' cooperative organizations continued to diminish in volume. The drop of 94 million dollars during 945 proved larger than the decline of 5 million dollars in 944. Loans to individual farmers have fallen regularly since 940,

6 September 94 September 94 SURVEY OF CURRENT BUSINESS 5 while loans to farmers' cooperative organizations have contracted during the last 3 years. Short-Term Consumer Debt In peacetime, consumer debt has been closely related to disposable income of individuals, falling more rapidly than disposable income during periods of recession rising more rapidly during periods of increasing economic activity. During the war years this relationship was drastically altered. Despite the marked expansion of disposable income, consumer credit had fallen to the lowest level since 935 by early 944. In that year, this debt component gave evidence of stabilizing at a low level since then has exped at an increasing rate- In comparison with disposable income, however, consumer debt at the end of 945 was still at not more than half its peacetime level. Wartime credit controls, the short supply of consumers' durable goods, a larger relative volume of cash purchases, contributed to the unusual inverse relationship between movements in consumer debt disposable income after 94. The Federal Reserve Board's regulation W, relating to consumer credit, was adopted in the autumn of 94, exped strengthened in the spring of 94, continued in the latter form until October 5, 945. By limiting consumer credit, this regulation was intended to restrain dem for consumers' goods services thus to reduce the inflationary pressure on goods services in general. The effectiveness of the consumer credit controls may be seen at a glance in chart 3. In December 94 consumer short-term debt stood at percent of disposable income; at the end of 943, it had dropped to 4 percent. The basic requirements of the consumer credit control adopted during the war included the following: Charge-account credits should be paid up within 0 days from their date of origin or the account would be frozen; installment credits should have a maturity of not more than months; a down payment of at least one-third should be obtained on installment purchases of consumers' goods ( loans to make such purchases). Postwar Relaxation of Credit Controls In October 945, the Board of Governors relaxed the regulation in two respects. Restrictions were removed on loans for home-repair home-improvement purposes the maturity period on loans for the purchase of other than durable consumers' goods was lengthened from to 8 months. The first of these decontrols has thus far had little effect on the volume of consumer borrowing. During the 7 months following the relaxation of regulations a period of shortages in construction materials labor the gain in insured repair modernization loans accounted for less than 4 percent of the increase in total consumer credit. This type of credit represents about 3 percent of the total. The other change, however, making it easier for consumers to finance the purchase of many classes of commodities services at a time when these were becoming available, may have been a significant factor in the recent expansion of consumer credit. Table 4 reviews changes in the major categories of consumer credit from May Table 7. Gross Net Public Debt, End of Calendar Year, l Item Gross public debt Federal Government Federal agency Federal Government direct Interest-bearing Public issues (bonds, notes, certificates of indebtedness Treasury bills) Special issues to Government agencies trust funds Noninterest-bearing (including matured debt on which interest has ceased) Federal agency, excluding U. S. Treasury holdings Federal agency holdings Other holdings local government Local government County Municipal School district Special district Duplicating debt Federal Government Federal agency Federal Government Federal agency holdings of Federal Government securities- Federal Government (trust account) Federal agency holdings of agency debt... Loans receivable by Federal agency from other Federal agencies Loans receivable by Federal agencies from public local government holdings of local debt Sinking funds Investment trust funds Local government Sinking funds Investment trust funds Net public debt Federal Government Federal Agency. local government Local government _. 34, 7 7, 57,30,09,,9 7, , 934,70 9, 59, 95,449, 53,47 98,48 4, , 350, , 30 5, 00 3,70,58, , 7 7, 303,0 5,774,77,7 8, 459,444,05,434 9,99,098, 554,859,59 704,705 4, ,588 3, , 903 4, 784 4,9,9, 47 38,07 4,87 45,35 9,073, ,8 0,805 3^85 7,58 0,448 3,450,47,4 9, 534i,, 88,54 0, 458, 0,3, 50,55 0,943 4, ,0,57 3, 047, 5 5, 5,80 3,, 8, 9, 804,89, 908, 5; 0, 483, 07,53,787 3,8 07 3,08, ,085, , 040 8,97, 843,00 4,83 Data for local government debt are for June 30 of each year. Includes loans to local units. Sources: U. S. Treasury Department U. S. Department of Commerce.,55 5',494 9, 985 3, 08,97,5 0, 57',4,77 7,944 4, ,75 3, ,, , 407 0, 500, 907, , 50 34, 74 8,4S0 7, 944 5, , 85; 9, 8 3, 0,085,47! 9, 730, 078,800 4, 54, 99, , 44 3,5,03; ,78, , , , 557 9,59 7,00,34 5, , 33, 098,433 9,778,03,874 4,883, 58,73,0 37 8,43 3,97, ,98, ,04 4,05, ,07, 3,4,3 3,907 3,900,07 4, ,40 33,99,999,8 5,87 9. : 3, 38, 344,389 0, 058,949,948 5,,873,58,04 4 8, 3,388,( ,3, , 80 9, 53, 74, 53 4, 3, 88 44,34 37, 8 3, 75, 948,5 5,79 9, 594 3, 7, ,07,884,0, 330, 847 3,800, ,849 3,483, ,49, , 498 3, 387,, 04 4, 09, 5 4, 49 39, ,9 7,0, 08,8 9, 57 3,309, ;,8 9, 93,80, ,98 4, ,84 3,0, ,88, , 43 3, 8 5,975,99 3, ,008 50,0 4, 9 4, 45 8,05,70, 88 9, 99 3, 343, 53,9 0, 5,837,38 8,8 5,30, , 750 3,8, ,33, ,9 34, 88,34,974 4, , 53, ,47 8,439, 7 7,3 0, 4 3,5, 70,5 0,89,83,5 0, 397, ,94 3,785,433 33,070,35, 350,00 53, 38 3, 87,4,093 4, 38 87, , , 55 59, 797, 44 7, , 83J4, 00 80,85 58, 00 08,70 5, ,30 78,5 57, ,308 4, 508 8,89 75, 94 5,40 4,993 7,35 0, 097 3, 079 7, 38 8,88 33, 0' 34,488 35,75; 37, 34 39,0 50,55 98,7 5,805, 55 55, ,7 3,5 4,3 5,370,98 9,03, 703,3 0, ,370,739,4 9,9,3 7,55 0, 3,43,83,04 0, 0,787,770 3, 804 9, 95 94,5 8,487 3, 889, , 53, 33, ,849 4, 35 5,497 9,90 3,, 479,84 0,079,70,853 8, 97 4, ,543 8,7 3, 847,54 7, 5,30,344 9,945 7,835 5,0 8, 9, 909 5, 783,34 9,784,573,79 35, 35 3, 85 95,97 7,444 3, 80,57 30,70, 34,30 93, 570 8,39, , 78 4,703,94 8,844,45,700 40, ,0 45 8,508,835 3,397,35 47,04,04,4 904,70,04,8, 589,45 4, 4,545 8,589, 33,7 3, 4 33, 800 7,34 9, 49,98, 503,7 7,03 4,34!09,4, 880 9,4 0, , , , 04047, _ 05,337 5, 843 4,88 4, 074 3, 75,80,70, 333,47,379 4,477 4,73 3, 549, 57,34 0,03 5,78,84, ,

7 September 94 SURVEY OF CURRENT BUSINESS September to May 94; it includes outsting amounts at the end of 94 in order that the reductions since 94 can be taken into account in evaluating recent credit totals. At the end of May 94, for example, automobile sale credit was only about one-sixth of what it had been at the peak in 94, even though a 74-percent increase was scored during the year ending in May 94. In review of the recent position of consumer credit items against 94 positions, allowance should be made for the size of disposable income of the past months in comparison with its 94 level. It is significant that for some time, disposable income has maintained a rate about 50 percent above that of 94. For a more detailed account of recent changes in consumer credit, refer to the June 94 issue of the Federal Reserve Bulletin. Sources Methods The statistical sources methods employed in preparing the debt estimates presented in this article are generally similar to those used by the Department of Commerce in developing earlier estimates. Basic procedures are explained in detail in articles in the September 945 July 944 issues of the SURVEY OF CURRENT BUSINESS in the special bulletin entitled "Indebtedness in the United s, 99-94" (Department of Commerce, Economic Series No., U. S. Government Printing Office, 94). The discussion herein is limited to modifications in procedures that have been newly introduced, either in an attempt to improve prior techniques, or to take account of additional material that has become available since previous publications. It will be noted that revisions of data for are not discussed; such revisions may be assumed to reflect the use of information not available at earlier times. local government net debt, 99-44, has been modified by reason of revised figures now available for duplicating debt. Estimates for local government securities held in local government sinking, trust, investment funds have been reworked by the Bureau of the Census, Governments Division, for fiscal years from 937 to 945. Component series lor prior years were revised by adjusting to the new 937 levels. long- short-term debt series, both gross net, have been revised in their entirety. New ratios have been introduced in raising the debt of nonrailway corporations reporting balance sheets to the level of all nonrailway corporations filing returns. The estimates presented in the September 945 SURVEY employed a yearly ratio of the interest paid by all corporations (reporting to the Bureau of Internal Revenue) to the interest paid by corporations submitting balance sheets. In this article, the estimates of debt owed by corporations submitting balance sheets are raised by ratios of interest paid by all corporations except those in the transportation industry (largely railroads) to the interest paid by corporations reporting balance sheets, again excluding the transportation industry. The effect of the revision is to raise the estimates for all years, since a larger proportion of corporations classified under transportation have submitted balance sheets than has been true of corporations in other industries. Table 8. Gross Net Debt, End of Calendar Year, Item GROSS CORPORATE DEBT, all corporations l i i... Railway corporations Nonrailway corporations INTERCORPORATE DEBT, all corporations Other, including lax liability Railway corporations Nonrailway corporations NET CORPORATE DEBT, all corporations. Railway corporations Nonrailway corporations _ ,: 9 08,, 9330,894 58,,594,3 50,48 4,339 40, 35,43 3,79 8,754 4,98 4,00, 508 7, 73,0, , 9 4, 45 48, 7 34,7 4,00 9, 778 0,94 8,84,75,589,708, ,070 8,403 8,7,74,493 88, 90 47,347 4, 554 9,,393 5,005 3, 505, ,89 33,84 40,054 8, 537, ,858,4, ,075 4,370 44,705 3,4 3,08 9, 7,54 8,5 5,7,43,533, ,43 9,8 7,957 5,9,38 89, 57 5,070 38,87,558,9 5,35 3,88, ,93 37,84 3, 748 5, 995 0, ,9,340, ,978 45, 9 38, 8 8,048 0, f" 8,39, 39 7,C~ 5,C,,57, ,85 8,950,875 4,984,89 83,498 50,303 33,95 3,7 9,54 5,345 3,9, ,53 3,34 3,8 3,04 8, ,079 0,73 37,348 5, 89,059 8,388,8, ,9 43, 90 35, 78 4,03,78 8,04, 540,54 4,449,075 3,040, T '" 94 5,04 8,94,330 4,353,977 80, 05 49,9 30,84 0, 840 5,348 3,975, , 7 35, 9, 45 0, 50 9, ,403 59,9 35, 3,87,385 8,487,88, , 9 4, 33 33, 553 3,37 0,4 7,4, 3,44 4,90,954 3,38, , 38 8,39 5,!"" 4,093,843 7, ,89 9,08 9,37 9,43 5,349 3,898, , ,97 7,7 9,044 8, , 73 55,30 37,4 5,809,3 8, 50,79,78 85,043 74,03 38, ,94 5,4 0, 570 7, 9 0,90,59 4,538,99 3,37 3, ,98 7,7,3 4,44 i,r~ 75, , 30,893,7 9, 5, 83 3,773, , 30,838 9,383 0,8 8, , 54,053 37,83 5,95,879 8,49,39,857 9,5 73,388 37,44 35, 974 5, 0 0, 74 7, 09 0,49,00 4,5,034 3,7 3, , 84 7,40,34 4,49,895 74, ,5 3,3,38 9,845 5,9 3,08, 595,0 59, 54 9,954 9,0 0,79 8, ,79 5,7 40,407 7,088 3,39 8,475,398,077 83,394 74, 04 35,874 38,330, 405,95, 9,753,83 4,48,5 3,03, , 585,977,08 4,55,05 7,03 4, 59 33, 544, 440,04 5,444 3,,8 587,35 0, 9 8,897 3,7, , 37 53, 38,70 5, 573 3,37 8, 79,4,7 3,495 73,58 3,998 3, 583 4, 94, 4, 59 0,49,40 4,83,37 3,48 3, ,0,948,53 4,95,958 75,803 43, 53 3, 90, 90,000 5,33 3,43 '544,3 0,480 30,050 30, 430 0, 74 9, , ,000 33, 933,7,30 8,93,49,8 9,53 70,00 38,35 3,5 0,998 0,53 5,4 0,58 5,484 3,534,950 3,499 3, ,43,949 5,94 3,44,748 73,9 44,84 8,449 8,093 0,35 5,43 3,440,99 54,45 57,859 3, 40, 457 7, 55 8, , 94 54,5 34,94,7, 57 9,03,4,489 33,85 9,843 37,38 3,05, 534 0,7 5,40 9,88 5,55 3,7,839 3,57 3, , i,85 5,99 3,588, 73,545 44, 3 9,79 8,49 0,88 5,58 3,43,73 545,8 57,959 30,953 7,00 7, 94 9, ,05 53,8 37, 733, 77 5,0 9,9,593, 500, 7, 79 3, 89 35,07, 7, 890 5,439 9,9 5,80 3,780,030 3,49 3, 33 70,947,48 5,479 3,70,79 75, 57 43,53 3, 93 8, 937, 98 5, 77 3, 43,95 430,85 59,849 30, 9, 8 8, 507, 94 9,,34,90 59,39 80,35 3,857 43, 378 5, 7 7, 75,058 9,589,49 4,34,3 3,44 3, ,,50,4 4,7,84 83, , 4 39,89,80 8,09 5,84 3, 59,55 455,0 7,9 30,355 37, 4, 355 5, ,43 5,94 3, ,7 88,47 3,8 5,45 5,448 7,07, 4 9,457 7,84 4,33,8 3,44 3, ,95,383,8 4,4,570 9, 49 4,7 48, 98,709 7, 73,97,88 3,39 503,8 75,45 9,799 45, 53, 0 4, ,048 5,308 4, ,87 93,43 35,77 57,9,059 3, 907,90 9,87 7,3 4,44 3,59 3,475 3, , 435,3 7, 4,344, 9, 38 4, 98 55,083,43 3,0,573, 44 4, ,58 79,808 9,054 50, 754,75 9, ,9 4,595 4, ,757 93, 38 34,957 58,44,949 3,475, 935 9,55 7,80 4,08 3,07 3,480 3, ,455, 7,89 4,49,797 95, 37 40, 97 55, 340 3,80 3,0 I 99, 50 08,90 3,9, 570, ,03 5,4 50, ,55 48, 49 4,98 5,,70 3,00 53,538,5,03,97 7,788, 540 0,4 30,34 35,779 35,3,998 5,7, 50 4, ,48 79,9 8,79 5,35,45" 8,78 7,47 3,883 3, ,5 84, 07 34,3 49,994 5,5 4,34,5 9,49 7,003 4,400,03 3,49 3, ,73,0,7 4,7,34 85,88 39, 347 4, 535,40 4, 395 3,998 0,840 3,58 74,394 7,884 8, ,377,37,00 i debt is defined as having an original maturity of year or more from date of issue; short-term debt as having an original maturity of less than year. 3 The amount of Federal income tax liability, separately for railway nonrailway corporations, as of the end of each year, 94-45, is shown in table 3. Sources: 7. S. Treasury Department, Interstate Commerce Commission, TJ. S. Department of Commerce.

8 i Less than $500,000. Sources: U. S. Treasury Department, XT. S. Department of Agriculture, Board of Governors of the Federal Reserve System, U. S. Department of Commerce September 94 September 948 SURVEY OF CUEEENT BUSINESS 7 A further revision was made in nonrailway corporation short-term debt, other than notes accounts payable, in both the gross net series. This revision represents an improvement in the method of estimating "other liabilities" of banks. As reported to the Bureau of Internal Revenue, the "other liabilities" of banks includes deposits. Consequently, bank deposits were estimated on the basis of data for all active banks, obtained from annual reports of the Comptroller of the Currency, deducted from the "other liabilities" series. Urban (nonfarm) real estate mortgages were revised slightly in total in the multifamily commercial categories. These revisions were occasioned by changes in the method of estimating total urban mortgage holdings of insurance companies. Mortgage loans by insurance companies were obtained from "Insurance Yearbooks," published by The Spectator Co. Insurance company holdings of farm mortgage debt were deducted from the total of mortgage loans in each year. Data for life insurance company holdings of farm mortgage debt were supplied by the Bureau of Agricultural Economics, non-life-insurance company holdings were estimated on the basis of ratios of farm mortgage to total mortgage loans of lifeinsurance companies. These calculations were carried back to 938, the series for prior years adjusted to the revised 938 levels. short-term debt for commercial financial purposes was revised within the category "owed to banks." Loans for purchasing or carrying securities loans to farmers for all active banks were taken from Annual Reports of the Comptroller of the Currency for the United s, exclusive of possessions. Commercial industrial loans to unincorporated businesses were estimated on the basis of total com- (Continued on p. 4) Table 9. Urban (Nonfarm) Residential Commercial Real Estate Mortgages of Mortgagors, End of Calendar Year, l Residential commercial Residential Commercial Year All residential Multifamily -4 family ,4 38, , ,40 3,807 30, 95 9, 899 9, 493 9,488 9, , 34 3, 55 3, 407 3, , , 93 "5,345 5,439 5,409 5,3 4,030 3,90 3,59 3, 3,78 3,73 3,87 3,94 3,845 3,903 3,8 3,4 3,40 3,08 33,35 3, , 504 7, 777 7,055, 40 5,83 5,80 5, 970,443 7,33 8, 5 8,004 7, 308 7,34 7, 9 9,47 30,07 9, 54 7, 505 5, 09 5,038 4, 84 3, 755 3, 750 3, 97 4, 9 5, 57,, 349 5, 73 5, 59 5, 70,734,779,70,50,409,78,30,08,05,054,34,93,53,,55,05,09,43 7, 38, 55 4, 945 3, 00, 70,54,87, 99, 873, 485 3, 374 4, 359 4,3 3, 08 3,44 3, 5 8,758 8,59 8,3 7,73 7,8,774,530,40,8,403,44,57,44,,04,000,8,7,8,598,55,385,54,07,84,7,3,38,48,3,78,9,,408 7,04,90,5, 5,79 5,50 5,33 5, 5,09 5,80 5, 5,9 5,0 5,043 4,9 4,879,058,59 0, 85 9, , 857 7, 50 7, 5 7, 344 7, 4 8, 9,03 0, 095 9, 908 9, 54 9, 58 9, 70,053,03, , ,005 0,9 9, 5 8, 80, 984, 94, 34, 34, 477, 74 7, 305 8,48 9, 090 8,93 8, 55 8, 55 8, 77 8,79 8,557 8,59 8,35,98 5,97 5,5 5,738 5,738 5,80 5,95 5,88 5,795 5,558 5,3 5, 5,7,,0,707,57,,3,59,593,7,709,737,73,59,77,53,54,53 5,8 5,897 5,8 5,559 4,577 4,95 4,08 4,45 4, 4,097 3,958 3,957 4,03 3,88 3,700 3,70 3,45 The data represent mortgage loans on commercial residential property, exclude real estate mortgage bonds. Multifamily commercial property mortgages owed by corporations held by other nonfinancial corporations are also excluded. The corporate mortgage debt total is included in the total corporate long-term debt outsting in table 9. Sources: Federal Home Loan Bank Administration U. S. Department of Commerce. Table 0. Short-Term Debt of Individual Other Borrowers, End of Calendar Year, Item Commercial financial purposes Owed to banks For purchasing or carrying securities By farmers. Other Owed to brokers.. _ Owed to Government By individual farmers. Emergency crop feed loans Federal intermediate credit banks _ Regional agricultural credit corporations Production credit associations Commodity Credit Corporation (direct loans) Farm Security Administration... By farmers' cooperative organizations Federal intermediate credit banks Banks for cooperatives. _. Agricultural Marketing Act revolving fund- Rural Electrification Administration Farm Security Administration Commodity Credit Corporation Consumer purposes Installment sale credit. Automobile Other Installment loans... Single-payment loans Charge account credit Service credit 8,845, 9 0, 8.5,9, 77, 7 3, 58 5, 087,05 5,0 5, 85 7,5 9,83 5,049 4, 707 7, _, 08, 5, ,37,55, ,5, , 857, 785, ,03 98,04 74,949, 573 5, 3, , ?, rpo 5, , 09 0, , , < ), ,333,90, I 4,378, , ,09,03, ) 0) 5 49, S5 80,048,9 47 8, 3, 0, l', 89, 47, 05, 33 4Q 50 8,589, ,47,75,384,38,95,504, ,99 5,87 99, ,030,33 970,343,5,44, , 8, , 08 90, ? 8 5S , ^ 7,5^5, 44, 48, ,0,05,93,5 3,57 77, ,53 3,450,79,7,005,488, ,94 7,98,37,498 5,7 00, ,899 3,744, 94 80,80, 0,74 0 8,54, 43,57,97 3, , ,485,49 48,009,44,39, ,39 7,3,37,545 3,5 788, , ,47,9,498 87, 8 9, 743 4, , 395, 04, ,,, 4,,, Q

9 September 94 4 SURVEY OF CURRENT BUSINESS September 94 incomes expenditures remain at relatively high levels, at least some of the economies achieved under the abnormal conditions of wartime may be carried over into the postwar years. Thus, while the basic factors responsible for the general upward trend of retail expense ratios will probably continue to operate in the postwar years, changes in retail service policies may lower the level at which the trend appears. Faced with a shortage of experienced salespeople during the war, many department specialty stores adopted limited clerk-service policies. Should self-selection self-service policies be retained in those stores that adopted them during the war, spread to other stores departments now offering full service, the long-run tendencies toward higher expense ratios may be retarded. But innovations of this type are not likely to make expenses more flexible; nor, if past records of retail innovations are a guide, will they remove in their entirety the forces which tend to push expenses upward. At the same time a force for higher expense ratios is beginning to be felt. During the war, comparatively few new stores of the types studied were established. Consequently, few buildings were erected or modernized at the high levels of construction costs. But the expansion of existing store facilities the construction of new ones at present levels of building costs are introducing high fixed costs which, in subsequent years of possibly lower sales volume, could result in extremely high rates of occupancy expense. The Business Situation (Continued from p. 9) including 3 industries reporting deficits. Of the industries registering gains, 7 reported increases of well over 50 percent, ranging up to the very large increase reported for retail wholesale trade. The increase in the latter is a reflection of the effects of sharply increased sales volumes upon a relatively fixed plant structure. Among the nonmanufacturing industries, a very large gain was reported also for the entertainment group, due both to Chart 7. Net Profits of Manufacturing Corporations by Quarters x INDEX, Quarterly Av. i940 =! * y* NONDURABLE GOODS (04 COMPANIES) W! I i!! II l I I A. V / y DURABLE GOODS (35 COMPANIES),! * Dencir Net profits refer to income after all charges taxes, but before dividends. Sources : Basic data, Board of Governors of the Federal Reserve System ; indexes computed by U. S. Department of Commerce. the favorable trend of receipts to the removal of the excess profits tax. In this group in the trade classification, the majority of the reporting companies showed increases of over 00 percent there were no cases of earnings lower than in the first months of 945. Deficits In Transportation Industries Both air railroad transportation incurred operating losses for the first half year. In the case of air-transportation companies the loss reflected exceptionally heavy expenses associated with a rapid expansion of their operations. The -month deficit for class I railroads amounted to approximately 30 million dollars. This is in striking contrast with the comparable period of last year when profits after taxes totaled 3 million dollars. The drastic decline was due chiefly to lower freight passenger revenues to higher wage other operating costs. Railroad earnings are likely to improve in the second - half of this year as carloadings normally reach their peak in the fall months. Revenues will be bolstered by a V -percent increase in freight rates which went into effect on July. The Interstate Commerce Commission has under consideration the request of the railroads for a further increase in freight rates. Large Declines in Reconversion Area Although a large number of companies in durable goods manufacturing showed decreases in net income for the first half of this year as compared with 945, the bulk of the declines was due to the greatly reduced profits or deficits incurred when output was very low during the first quarter of the year. With exping operations earnings rebounded sharply most companies were able to add to their earnings or to reduce or eliminate their first quarter losses entirely. In varying degree, the earnings position of many companies was improved by the utilization of tax credits, representing partial refunds of the heavy taxes paid during the war, to offset operating losses. In contrast to the heavy goods producers, more than three-fourths of the companies producing soft goods reported gains for the -month period. On the whole, profits, production, sales in these industries have been at record volume this year. Public Private Debt in the United s (Continued from p. 7) mercial industrial loans (Comptroller of the Currency) percentages in each year for the proportion of noncorporate to total loans. The proportion was set at.3 percent as of June 30, 939 (see article in the September 945 SURVEY). Annual variations since 939 were determined by movements in the ratios of noncorporate to total dem deposits from estimates published in the February 94 Federal Reserve Bulletin, "Distribution of Liquid Assets." The revisions explained above were carried back to 939, the former series, 9-38, for "owed to banks" was adjusted to the new 939 level. consumer loans are estimated currently by the Board of Governors of the Federal Reserve System reported in the Federal Reserve Bulletin. Several components of the consumer credit series have been revised recently, as explained in the April 94 Bulletin. Data for were not affected.