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Foreword, by Elburt F. Osborn, Director
Minor nonmetals (greensand, iodine, lithium, meerchaum, quartz,
crystal, staurolite, strontium, wollastonite), by Staff, Division of Non-
Review of the Mineral Industries
By Daniel E. Sullivan and Jeannette I. Baker 2
During the first half of 1971, rising prices, slacking industrial production, and high unemployment continued to characterize the U.S. economy. By midyear, with prob. lems mounting, the President announced a set of strong measures that were deemed necessary to correct the situation. The New Economic Policy (NEP) included a wageprice freeze, a 10-percent import surcharge, a repeal of the Federal excise tax on automobiles, a cut in foreign economic aid, and a number of tax measures designed to increase employment and ease the balance of payments situation. The program slowed the rate of inflation and eased the international pressures on the dollar. During the second half of 1971 employment rose, but because of an increase in the work force, the unemployment rate did not change. Real gross national product (GNP) increased in the fourth quarter although the Federal Reserve Board (FRB) Index of Industrial Production was sluggish.
Prices continued to rise in the first part of 1971. Consumer prices increased less rapidly in the early part of 1971 because of declining interest rates for home mortgages. When leveled out, the consumer price index began to rise more sharply again, reflecting a continuation of substantial price increases for most goods and services. Excluding mortgage costs, the price increase in the first half of 1971 was close to the 5-percent increase recorded in the second half of 1970. Wholesale prices rose at a 5-percent annual rate in the first 8 months of the year. During the freeze period, industrial commodity prices declined, and farm and food prices declined seasonally. Ce sumer prices rose less than 2 percent.
Real output grew at a disappointing rate for a recovery period. At market prices, the GNP increased 7.5 percent in 1971. Real GNP expanded 2.7 percent, and the implicit price deflator increased 4.6 percent. When the quarterly data are examined, they show a strong growth in the first quarter, slower
growth in the second and third quarters, and a better fourth quarter. Slack inventory demand can be blamed for the slow rate of recovery. The FRB Index of Industrial Production reflected the slow recovery. From November 1970 to August 1971 it had increased only 2.6 percent and was 6 percent below the level of the fall of 1969. The mining and metal sectors reflected the same sluggishness.
There was little reduction in unemployment in 1971. In the first half employment was roughly stable, and unemployment did not change. In the second half of the year, employment grew strongly, but so did the labor force, so unemployment continued at about the same level. The average unemployment rate was 5.9 percent, which was a decade-long high.
A generally expansive monetary policy was in effect in 1971. It was aimed at insuring that the credit needs of the expansion were met without difficulty. Interest rates declined. In early 1971 the growth of the money supply was sluggish but soon grew rapidly until midsummer. Interest rates, which were declining at the beginning of the year, then began to rise. After NEP was implemented, the money supply grew at a slower rate and interest rates declined to levels below those at the beginning of the year. The growth of the money supply for the year was 6.2 percent.
Federal fiscal policy was also expansive. There was a $10 billion increase in the actual budget deficit on the National Income Accounts basis. When NEP was implemented, the excise tax on automobiles was repealed and other taxes were cut.
Official U.S. gold reserves declined slightly during 1971. Most of this was in the first half of the year; the reserve was level during the second half of the year.
1 Economist, Office of Economic Analysis.
? Commodity research specialist, Office of Technical Data Services.
Figure 1.-Indexes of physical volume of mineral production
in the United States, by groups. The Bureau of Mines index of physical resenting 98 percent of the value of all volume of mineral production (1967 = 100) minerals produced in the United States in declined in 1971; the total index lost 1.5 the base period 1935–39. The number of points for the year. Although the overall series is smaller in the earlier years of the average for metals declined from 135.8 to index, partly because new minerals came 122.7, there were only small movements in into production during the long period covthe nonmetals and fuels components of the ered, and partly because data for minerals index. Ferrous metals declined more than in production were sometimes not available 10 percent, and nonferrous metals declined in the earlier years. Estimates were used more than 9 percent. Little change was in some cases when actual production data recorded for nonmetals production. Coal were not available. Over the long period declined over 9 percent, and crude oil and covered, the indexes were constructed by natural gas gained less than 1 percent. linking seven overlapping segments with
These index numbers constitute an up- seven different sets of value weights (value dating of the index numbers originally pre- at the mine, actual or estimated). The pared by Y. S. Leong, "Index of the Physi- weighting periods used were 1889-91 for cal Volume Production of Minerals, 1880 1880–1903; 1909–13 for 1897–1920; 1923–25 1948,” Journal of the American Statistical for 1917–39; 1935–39 for 1929 48; 1947–49 for Association, March 1950. Subsequently, 1941–56; 1957–59 for 1952–64; 1967 for Leong made revisions in his index for 1962–71. The separate segments of the in1930 48 to take account of a new natural- dexes were spliced to form continuous segas production series. Using essentially the ries covering the entire period by selecting same methods, the Bureau of Mines has a particular year as the splicing origin and brought the indexes up to date and has deriving averages of the two segments for a converted the entire index to a 1967 base. 3. to 5-year period centered on the splicing Leong included 63 series in his index, rep- origin.