FOR
INDIANA
FARMERS
INFORMATION
Prepared  by Members of the Agricultural  Staff of  Purdue University,  Lafayette,  Indiana.   May 24,  1955.
What's Ahead for General Business?
By
R.  H.  BAUMAN,  Agricultural Economics
ON the whole, 1955 will be a very-
good year for general business.
The total value of all goods and services produced in 1955 is expected to
exceed 1954 and may excel the record high year of 1953.
Changes in business activity stem
predominantly from changes in private capital investment and changes
in government receipts and spending.
Although changes in consumer expenditures are also important, the
level of employment and consumer
buying are largely dependent upon
business and government activity.
The other factor affecting the business outlook is the foreign trade balance.
Gross Private Investment
Gross private investment has absorbed about 14 percent of our national output in recent years (Table
on page 2). This consists of investment in plant and equipment, housing, other private construction, and
in business inventories.
Plant and Equipment Expenditures
to Increase Moderately
Business, plant and equipment expenditures amounted to $30.6 billion
m 1954. This declined slightly in each
quarter beginning with the third
quarter of 1953 through the first
quarter of 1955, for a drop of about
10 percent. According to a recent
government survey of businessmen's
'mentions, outlays for plant and
equipment hit bottom in the first
quarter of 1955 and may be expected
l<> advance moderately during the
coming months of this year. For 1955
as a whole, purchases of new plant
and equipment are expected to be a
little higher than in 1954.
Farm Expenditures to Continue
Stable
Investment in farm equipment and
construction was running at the 1954
average rate in the last quarter of
1954 and is expected to hold near
the 1954 average rate for 1955.
Residential Construction to
Continue High
Present indications are that the
number of new housing starts will be
about 1.4 million in 1955 compared
with 1.2 million in 1954.
Investment in new housing increased from the seasonally adjusted
annual rate of $11.7 billion in the
first quarter of 1954 to $14.8 billion
in the last quarter of the year. Currently, residential construction outlays appear to be running near the
$16 billion annual rate, almost one-
third higher than a year earlier, and
well above any previous level.
While this amount of new housing
is well in excess of new family formation plus wear-out and destruction of
existing housing and is not expected
to be indefinitely sustained, the housing boom shows no signs of slowing.
This is one of the strongest sustaining factors in the short run business
outlook.
Other private construction relates
to non-profit organizations such as
hospitals and charitable institutions.
This is relatively small, amounting
to $2.1 billion in 1954. It likely will
be about the same, possibly a little
higher, in 1955.
Further  Inventory  Liquidation
Unlikely
Business inventories were stable in
the first quarter of 1955. This indicates that the recent inventory liquidation is probably at an end so
far as 1955 is concerned. For the
calendar year 1954 the net reduction
in inventory investment was $3.6 billion. In the last quarter of 1954
business inventory reduction was
only $1.3 billion.
Adding up the various areas of
private investment gives a total of
approximately $51 billion compared
with $46.1 billion in 1954.
Federal Cash Budget to Be About
in Balance
The Federal cash budget shows a
deficit of $2.4 billion in the fiscal
year ending June 30, 1954. In the
next fiscal year beginning July 1,
1955, the budget shows a cash surplus of $600 million. The near balance in the estimated cash receipts
and expenses for the fiscal year ahead