New Look at Growth

One of the hottest politico-economic arguments in the U.S. involves the question: Is the U.S. growing fast enough? Last week the Federal Reserve Board produced factual proof that the industrial side of the U.S. economy is growing much faster than the Federal Reserve -- and most economists -- had charted. The faster pace was revealed when the Fed updated its industrial-production index for the first time since 1953; output has been rising at a rate of 4.1% a year from 1947 to date, v. 3.7% previously calculated. As a result, the revised index hit a peak of 166 (1947-49 equals 100) last June before the steel strike, instead of the 155 previously reported.

Behind the Fed's new and heartening figures lay years of careful work in sharpening its sampling techniques to reflect both the 1954 and 1957 census of busi ness, plus a wealth of fresh new information on what is really going on in the U.S. economy.

Caution. Among other things, the Fed's cautious statisticians discovered that they had been vastly understating the rise in production of U.S. consumer goods. In stead of gaining 3% a year, it has been going up 3.7% a year; the rise in twelve years was 58% instead of about 40% on the old index. Likewise, the Fed neglected to count in its industrial index the output of two rapidly expanding major indus tries, the electric and natural gas utilities. Finally, rapidly advancing technology and the changing character of U.S. daily life had made the importance assigned to many industries hopelessly outdated. The Fed had been judging the importance of different industries in its index on the basis of the 1947 business census.

Since that time, vast changes have occurred in the rate of growth of many items in the index, and the new index takes this into account.

Breakthrough. In announcing the new index, the Fed pointedly made no reference to the mounting attacks on its pol icy of credit restraint, which many Congressmen contend has sacrificed growth for stable prices. Last week Democrat Paul Douglas' Joint Economic Commit tee of Congress came out with a massive report on "employment, growth and price levels" that criticized the policies of Fed Chairman William McChesney Martin Jr. and Secretary of the Treasury Robert Anderson as "stepping too hard on the fiscal and monetary brakes,"thereby limiting economic expansion. But the Fed's bulletin makes clear that output has not been basically hampered. The year-end recovery in industrial output is expected to put the revised index back near the pre-steel-strike high of 166, up twelve points from the October low. It will be in position for a breakthrough to new high ground early this year, if automakers (see col. 2) get all the steel they need.

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