The Contraction of 1953-1954
T HE I953-54 contraction in United States economic activity was brief and mild. According to the business cycle chronology of the National Bureau of Economic Research it lasted I3 months, extending from a peak in July I953 to a trough in August of the following year. Measured in constant dollars, gross national product declined I.5 per cent from I953 to I954. This decline in aggregate production reflected principally a 20 per cent reduction in the real volume of federal expenditures for final goods and services. The annual flow of consumer expenditures in I947 prices increased nearly two per cent. Residential construction was up I4 per cent, while other private construction rose 3 per cent and expenditures of state and local governments 9 per cent. In fact, the only major component of final expenditure which declined along with federal spending was private purchases of producers' durable equipment, which dropped 8 per cent. These figures suggest a somewhat cut-anddried picture of a strongly buoyant economy depressed briefly by an autonomous reduction in government expenditures. There is a great deal of truth in this impression, for the cutback in federal spending was the major deflationary force acting throughout the contraction, and the private economy quickly absorbed the impact of this and other depressing influences and began an early and vigorous recovery, though not without the assistance of contra-cyclical actions in the tax and monetary fields. The experience merits closer examination, however, for a number of reasons. To begin with, the processes by which the economy responds to external disturbances are an important part of the subject matter of cyclical analysis. The part played in the decline and recovery by induced changes in consumption and inventory investment will accordingly receive a good deal of attention below. But as soon as the subject is approached in this manner, it becomes apparent that the contraction was more than a passive response to the decline in government demand. For example, the rate of growth of consumer spending diminished
- DOI
- 10.2307/1926478
- Volume
- 40 (1)
- Pages
- 36
- Export
- BibTeX
- Sources
- openalex crossref