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Monthly Review
Index—1957
FEDERAL RESERVE BANK OF ST. LOUIS
PAGE NUMBER GUIDE
Month of Issue
1-16
July
17-32
August
33-48
September
October
49-60
November.
61-72
December
73-84
Month of Issue
January
February
March
April
May
June
Agriculture*
Pages
Farm Production and Income 1956—
More Production with Fewer Farmers
Construction Activity 1956-Eighth District
9-12
49-57
Consumer Spending 1956-Eighth District
14
District Income 1956
14
Economic Development of Southwest Missouri.
Bank Credit 1956-Eighth District
14,15
Demand for Money and Capital 1956—National
6
Directors and Officers of the Federal Reserve
Bank of St. Louis, February 1957. .
28
44,45
7
Financing Local Government Expenditures 145,147-152
Liquidity of Eighth District Banks
Operations of the Federal Reserve Bank of
St. Louis, 1956
85, 87-93
25-27,29
The Changing Ozarks
The Southeast Missouri Mining Region
1-15
17-24
97-104
65, 67
Residential Mortgage Market Changes, 1955-57 73-80
The Commercial Banking System and Competing
Nonmonetary Intermediaries
61-69
Total Assets of Major Financial Institutions,
1910-1956 (tables)
63,64
17-24
Eighth District Income and Its Changing
Geographic Pattern
121-129
Federal Highway Legislation 1956, Major
37
Provisions
Impact of the Federal Highway Program on
the Nation and the Eighth District
33-43
Map and Geologic Cross Section of Southeast
Missouri Mining Region
101
National System of Interstate and Defense
Highways (map)
36
New Manufacturing Plants and Expansions in
the Eighth District in 1956 (map)
11
Restraining the Boom: 1956 in Review
Principal Liabilities of Major Financial
Institutions, 1910-1956 (tables)
8
12
Banking and Finance*
Federal Reserve Policy 1956
Business Conditions/ Income, Population*
Business Activity 1956-Eighth District
Eighth District
District Member Bank Earnings in 1956
Pages
85-96
97-108
109-120
121-132
133-144
145-156
District Business Statistics
The District Record (monthly tables on district
agriculture, banking, construction, industry
and trade)
16, 32, 48, 60, 72, 84, 96, 108, 120, 132, 144, 156
*See, also, District Business Statistics and Survey of Current Business Conditions
MONTHLY REVIEW INDEX
Industry*
Pages
Principal Types of Timber in Eighth District
States
114,115
Pulpwood Production, Current and Prospective,
in Eighth District States
109, 111-117
Current and Prospective Pulpwood Production
in Eighth District States
109, 111-117
District Manufacturing Trends 1956
10
Employment 1956-Eighth District.
12
Employment and Earnings 1956—National
Employment in Various District Areas 1 9 5 6 . . . .
Gross National Product 1956
4
Survey of Current Business Conditions
Survey of Current Business Conditions as of:
13
February 1
March 1
April 1
May 1
June 1
July 1
3
Industrial Growth of the Eighth District. . . 133, 135-141
Industrial Production 1956-Eighth District
8, 9
Industrial Production 1956—National
3, 4
Investment in Plant and Equipment 1956—
National
,
Manufacturing Data for Selected Metropolitan
Areas in Eighth District, 1954 (table)
Manufacturing Trends 1956, District
2, 3
30-31
46-47
58-59
70-71
82-83
94-95
August 1. . . .
September 1.
October 1. . . .
November 1. .
December 1. .
105-107
118-119
130-131
142-143
154-155
Trade*
141
10
Revised Indexes of Department Store
Sales and Stocks
153
5
Sales of Goods and Services 1956—National.
ARTICLES
Title
Restraining the Boom: 1956 in Review
The Changing Ozarks
1956 Operations of the Federal Reserve Bank of St. Louis
Impact of the Federal Highway Program on the Nation and the Eighth District
District Member Bank Earnings in 1956
More Production with Fewer Farmers
The Commercial Banking System and Competing Nonmonetary Intermediaries
Residential Mortgage Market Changes: 1955-1957
Liquidity of Eighth District Banks
The Southeast Missouri Mining Region
Current and Prospective Pulpwood Production in Eighth District States
Eighth District Income and Its Changing Geographic Pattern
Industrial Growth of the Eighth District
Financing Local Government Expenditures
Revised Indexes of Department Store Sales and Stocks
Author
Pages
(Staff)
A. J. Meigs
1-15
17-24
25-29
33-43
44-45
49-57
61-69
73-80
D. C. Hastings
Norman N. Bowsher
Clifton B. Luttrell
Ross M. Robertson
Ross M. Robertson
Norman N. Bowsher
Marie Wahlig
85, 87-93
Harry B. Kircher
97-104
Clifton B. Luttrell
A. J. Meigs
109, 111-117
Werner Hochwald
A. J. Meigs
121-129
William H. Kester
133, 135-141
Norman N. Bowsher
145, 147-152
153
*See, also, District Business Statistics and Survey of Current Business
Conditions
May 1957
Volume X X X I X
Number 5
The Commercial Banking System and
Competing Nonmonetary Intermediaries
HERE IS A STRONG IMPRESSION CURRENT that the commercial banking system has
within the past generation become a much smaller part of the whole financial apparatus, with
the consequence that monetary policy is less pervasive and effective than it once was. It is
true that many old and some new nonmonetary intermediaries have increased in importance
for several decades. Nevertheless, a reading of the recent history suggests that the commercial
banking system may not have lost relative position as much as is generally surmised. Moreover, because of the nature of the assets held by the chief intermediaries there is little reason
to suppose that monetary policy has been made less effective by their continuing growth.
A half-century comparison of changes in the assets of the banking system with changes in
asset$ of the three largest nonmonetary intermediaries reveals two swings in the proportion of
the tbtal held by banks. Similarly, a comparison of changes in the principal liabilities of the
banking system with changes in the chief claims against the nonmonetary intermediaries
shows! two pronounced cycles. The relative position of the banking system became stronger
consequent upon the deficit financing of two great wars; it was weakest in the depths of the
Great Depression. At the end of 1956 assets of commercial banks amounted to 55 per cent of
the total assets of commercial banks, life insurance companies, savings and loan associations,
and mutual savings banks. At the same time principal liabilities of commercial banks equalled
2 per cent of total claims against these four institutions.
It is possible that the assets and liabilities of commercial banks, taken as a percentage of
the total owned and owed by the four financial institutions, may once again be restored to
their historic highs, particularly in the event of governmental deficit financing on a large scale.
But even if intermediaries, old and new, should continue to grow relative to the banking system, monetary policy may well remain as effective as it has ever been. This is so because comflME$«jgJ banks alone participate with the central bank in the expansion and contraction of the
money supply and because the nonmonetary intermediaries cannot escape the influence of monetary policy, which affects their invpshnftnt bph^vinr by bringing about changes in the market
value of their chief assets, long-term secu
money" means "tight finance,'
and "easy money" means "easy finance.
Federal
Bank
St. Louis
The Commercial Banking System and
Competing Nonmonetary Intermediaries
I N THE 1957 ECONOMIC REPORT the President
repeated his request to Congress, made but a few
days before in the State of the Union Message, to
authorize a National Monetary and Financial Commission. The request was substantiated with a single
sentence: "Recent changes in our financial structure
and practices call for careful study of the adequacy
of existing facilities for meeting the Nation's capital
and credit requirements and of the means for exercising appropriate controls over credit."
That the nation's financial institutions have recently
undergone a fundamental structural change is a common observation among economists and financial observers as well as among their lay brethren. In particular there is a strong impression that the commercial banking system has become a much smaller part
of the whole financial mechanism, with the consequence that monetary policy is less pervasive and
effective than it once was. Some writers have even
suggested that certain of the rapidly growing nonmonetary intermediaries should be brought under
separate regulation so as to control the supply of
financial assets which they create. 1
Unquestionably, many old and some new financial
intermediaries have increased in importance for several decades. Self-financing of households and business units, though continuing to be substantial, has
to some extent beeri replaced by external financingborrowing from other units. External financing may,
of course, be direct or indirect; i. e., a borrowing
(deficit) unit may obtain funds directly from a lending (surplus) unit, or it may obtain them indirectly
from an intermediary. It is the business of most intermediaries to exchange their own liabilities for
funds, which are in turn lent to business or household units in exchange for securities such as bonds
or mortgages. Indirect financing has for more than
half a century increased at the expense of self-financing and direct financing with the result that financial
intermediaries have grown, some of them remarkably. 2
1 See especially J. G. Gurley and E. S. Shaw, "Financial Aspects of
Economic Development," American Economic Review, September 1955, pp.
515-538 and "Financial Intermediaries and the Savings-Investment Process,"
The Journal of Finance, May 1956, pp. 257-276.
2
See R. W. Goldsmith, The Share of Financial Intermediaries in National Wealth and National Assets, 1900-1949, Occasional Paper 42, National Bureau of Economic Research, Inc., 1954, esp. p. 97. See also R. W.
Page 62
The commercial banking system has developed tremendously along with the nonmonetary intermediaries. The question so frequently raised nowadays is
this: how has the banking system grown in comparison with the nonmonetary intermediaries, which are
at once the customers and the competitors of the commercial banks? And after this question is answered,
another arises. Given the relative rates of growth of
the several institutional types over the recent decades, are there implications for monetary policy in
these changes? More precisely, have financial developments outside the commercial banking system
meant a lessening impact of central bank action?
Categorical answers to these questions do not
emerge from the historical record. Moreover, the upsurge in assets of intermediaries almost unknown a
generation ago will necessitate repeated assessments
of their relative importance. Nevertheless, a reading
of the recent history suggests that the commercial
banking system may not have lost relative position as
much as is generally surmised. Moreover, because of
the nature of the assets held by the chief intermediaries there is little reason to suppose that monetary
policy has been made appreciably less effective by
the continuing growth of financial intermediaries.
The Banking System and Three
Nonmonetary
Intermediaries Historically
Compared
Table I shows the change since 1910 in assets of
commercial banks and the three intermediaries which
loom largest in total assets and in the total of claims
which they issue.3 The data of Table I are spread
in a semi-logarithmic graph in Chart I so that a comparison of the slopes of the several lines permits a
comparison of the rates of growth of the different institutions. It is quickly apparent that during the two
great wars falling within the 46-year period studied
the commercial banking system grew more rapidly
than the other types of intermediary. Measured in
Goldsmith, "Financial Structure and Economic Growth in Advanced Countries," Capital Formation and Economic Growth, Princeton: Princeton University Press, 1955, pp. 113-160.
8 For a full classification of intermediaries and trends in their growth to
1949 see Goldsmith, The Share of Financial Intermediaries in National Wealth
and National Assets, 1900-1949, especially p. 26. Large public intermediaries,
such as Federal pension and retirement funds and Government lending
agencies, are omitted from present consideration. Some rapidly growing
institutions, such as private self-administered pension funds, will be considered later.
Chart I
Growth of Total Assets
of Major Financial Institutions
Million Dollars
500,000
-
s^
r^
TOTAL
-
/S
s^S
—
s~S
j - \
/ f^ ^
S*^
/
S*
MUTUAL
/
SAVINGS B A N K S /
s
"
*>~
'* _
—
*•*
*
5,000 -
"**
Source:
_
-
*-''
/**/•*"«* ^v
—
-
/
_ /
/
"
1,000
1910
BANKS
/
/
z
TABLE I
/COMMERCIAL
^*
•^
I 0,000 -
^
X/r
•^^^/ J/
_
^
/
>/^
/ /1 f
50,000 -
_.
/
J
x—v
100,000 -
#*
*
*v
*" — - « '
—
.
/
,' <"_
1
1920
1
1
1
1940
1950
—
I960
From Table I
terms of assets held, the sharpest retrogression of the
banking system occurred with the deflation of the
Great Depression, but it is a fact worth noting that
total bank assets continued to rise during the recession years of 1948-49 and 1953-54. During the three
years 1954-56 there was a pronounced tendency for
the total curve and the curve of commercial-bank
assets to diverge.
Growth of life insurance company assets has been
continuous since 1910, though the rise in assets was
very small during three years of deepest depression.
The long-term contractual nature of the savings involved plus the fact that households feel strongly the
need for protection even in bad times accounts for
the smooth upward thrust of the curve. Mutual savings banks were adversely affected by almost a decade of below-normal economic activity, but actual decreases in asset holdings were infrequent and mild.
Savings and loan associations proved vulnerable to
the onslaught of a major depression, and for nine successive years (1931-39, inclusive) suffered a decrease
in assets. Since 1946, however, the rate of growth of
the savings and loan associations has been greater
than that of commercial banks, life insurance companies or mutual savings banks and has somewhat
exceeded their own rate of growth in the 1920's. Indeed, the effectiveness of savings and loan efforts to
attract savings has been in large part responsible for
much of the current agitation for a re-examination of
the competitive positions of commercial banks and
nonmonetary intermediaries. 4
TOTAL ASSETS OF MAJOR FINANCIAL INSTITUTIONS
(MILLIONS O F DOLLARS)
End
of
Year
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956 p
Life
Commercial Insurance
Banks
Companies
19,226
20,574
21,822
22,683
23,058
27,527
30,972
36,747
40,988
47,843
46,644
42,208
47,267
49,203
54,224
57,475
58,105
61,433
66,429
65,621
61,985
51,420
45,738
40,640
47,586
52,338
57,672
55,475
58,243
65,216
72,799
79,104
96,891
114,199
137,090
160,312
149,517
155,377
154,506
157,462
168,932
179,464
188,603
193,010
202,378
210,734
213,760
3,876
4,164
4,409
4,659
4,935
5,190
5,537
5,941
6,475
6,791
7,320
7,936
8,652
9,455
10,394
11,538
12,940
14,392
15,961
17,482
18,880
20,160
20,754
20,896
21,844
23,216
24,874
26,249
27,755
29,243
30,802
32,731
34,931
37,766
41,054
44,797
48,191
51,743
55,512
59,630
64,020
68,278
73,375
78,533
84,486
90,432
95,819
Savings and
Loan
Associations
932
1,031
1,138
1,248
1,358
1,484
1,599
1,769
1,898
2,127
2,520
2,891
3,343
3,943
4,766
5,509
6,334
7,179
8,016
8,695
8,829
8,417
7,737
7,018
6,406
5,875
5,772
5,682
5,632
5,597
5,733
6,049
6,150
6,604
7,458
8,747
10,202
11,687
13,028
14,622
16,893
19,222
22,660
26,733
31,736
37,880
43,098
Mutual
Savings
Banks
3,690
3,837
4,015
4,170
4,273
4,408
4,651
4,810
4,940
5,363
5,840
6,160
6,597
7,023
7,538
8,025
8,572
9,240
9,780
9,873
10,540
11,137
11,103
10,758
11,008
11,173
11,485
11,562
11,611
11,852
11,981
11,808
11,907
13,024
14,761
16,987
18,665
19,714
20,474
21,493
22,385
23,439
25,233
27,130
29,276
31,274
33,300
Total
27,724
29,606
31,384
32,760
33,624
38,609
42,759
49,267
54,301
62,124
62,324
59,195
65,859
69,624
76,922
82,547
85,951
92,244
100,186
101,671
100,234
91.134
85,332
79,312
86,844
92,602
99,803
98,968
103,241
111,908
121,315
129,692
149,879
171,593
200,363
230,843
226,575
238,521
243,520
253,207
272,230
290,403
309,871
325,406
347,876
370,320
385,977
p Preliminary
Sources: Banking and Monetary
Insurance Fact Book,
1956, Annual Report,
Raymond W . , A Study
Statistics, Federal Reserve Bulletin,
1956 Life
Savings and Home Financing Source Book,
Comptroller of the Currency, and G o l d s m i t h ,
oj Savings in the United States.
i
For a discussion of competitive positions a m o n g intermediaries for savings, see " T h e Structure of Banking in the Eighth District: Chains, G r o u p s
and Interindustry C o m p e t i t i o n , " Monthly Review, Federal Reserve B a n k of
St. Louis, October 1956, p p . 117-118.
Page 63
Table II gives a percentage distribution of the total
assets of major financial institutions. In 1910 commercial banks owned 70 per cent of the assets held
by the institutions studied; by 1956 the percentage
had dropped to 55. Life insurance companies, meantime, had increased their percentage of the total from
14 to 25, savings and loan associations had increased
their percentage of the total from 3 to 11, and mutual
savings banks had dropped from 13 per cent of the
total to 9 per cent.
It should be observed, however, that these changes
were not uninterrupted. Actually, within the period
studied the commercial banks held their highest por-
TABLE II
TOTAL ASSETS OF MAJOR FINANCIAL INSTITUTIONS,
PERCENTAGE DISTRIBUTION
End
of
year
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
Commercial
Banks
70
70
70
69
68
71
72
75
75
77
75
71
72
71
70
70
68
67
66
65
62
57
54
51
55
57
58
56
56
58
60
61
65
67
69
70
66
65
64
62
62
62
61
60
58
57
55
Savings and
Life
Loan
Insurance
Companies Associations
14
14
14
14
15
14
13
12
12
11
12
14
13
13
14
14
15
15
16
17
19
22
24
26
25
25
25
26
27
26
25
25
23
22
20
19
21
22
23
24
24
23
24
24
24
25
25
Source: Computed from data in Table I.
Page 64
3
3
3
4
4
4
4
3
4
3
4
5
5
6
6
6
7
8
8
8
9
9
9
9
7
6
6
6
6
5
5
5
4
4
4
4
5
5
5
6
6
7
7
8
9
10
11
Mutual
Savings
Banks
13
13
13
13
13
11
11
10
9
9
9
10
10
10
10
10
10
10
10
10
10
12
13
14
13
12
11
12
11
11
10
9
8
7
7
7
8
8
8
8
8
8
8
8
9
8
9
Total
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
tion of total assets in 1919, a year which marked a
low point for the life insurance companies. On the
other hand, in 1933 commercial banks held only 51
per cent of the assets of these four institutions; in this
same year mutual savings banks were at their high
point with 14 per cent of the total, and life insurance
companies, at 26 per cent, were within one point of
their 1938 high.
By 1945 commercial banks once
again held 70 per cent of the total assets owned by
the four groups. However, this percentage dropped
sharply in 1946 with a sudden decrease in bank-held
debt and continued to fall slowly until 1953.
A 1953-56 drop of 5 percentage points in the commercial bank proportion of total assets has doubtless
been startling to some people. The fall is in large
part the result of a slowing of the growth of the money
supply. It leaves the commercial banking system in
about its position of a generation ago but at least ten
percentage points below the proportion of assets held
during the prosperous years of the late 20's.
A change in the focus of attention from the assets
of major financial institutions to their principal liabilities is enlightening (see Tables III and IV). In
1910 total deposits of commercial banks amounted to
63 per cent of claims against the major financial institutions studied; in 1956 the percentage had dropped
to 52.
Again, variations within the 46-year time span are
instructive. In 1920 total commercial bank deposits
were 71 per cent of claims against the financial institutions studied, the remaining 29 per cent being almost equally divided between mutual savings banks
and life insurance companies. The growth of the nonmonetary intermediaries steadily reduced this percentage to 60 in 1929. The reduction was in demand
deposits, however; time deposits actually increased
in proportion by a substantial amount during the decade of the 1920's. From a low point of 48 per cent
of the total in 1933 commercial banks' total deposits
rose slowly during the depressed 1930's, rising rather
rapidly with the onset of war to a recent high of 64
per cent of the total in the years 1945-47. The trend
has been downward since that year, with a pronounced decline in the most recent three-year period.
The notable recent decline in the commercial banks'
share of total claims against the financial institutions
studied has been on the demand-deposit side, a drop
of 11 percentage points in the postwar years. In the
same period time deposits have remained remarkably
stable as a proportion of total liabilities. In the post-
TABLE III
PRINCIPAL LIABILITIES OF {CLAIMS AGAINST) MAJOR FINANCIAL INSTITUTIONS
(MILLIONS OF DOLLARS)
Commercial Banks
End
of
year*
Demand
Deposits
(adjusted)
Time
Deposits
Total
Deposits
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956**
8,254
8,668
9,156
9,140
10,082
9,828
11,973
13,501
14,843
17,624
19,616
17,113
18,045
19,144
20,898
22,288
21,721
22,730
23,081
22,809
20,967
17,412
15,728
15,035
18,459
22,115
25,483
23,959
25,986
29,793
34,945
38,992
48,922
60,803
66,930
75,851
83,314
87,121
85,520
85,750
92,272
98,234
101,508
102,451
106,650
109,914
105,410
3,636
3,928
4,313
4,606
4,441
5,264
6,088
7,038
7,207
8,522
10,509
10,917
11,592
13,871
15,280
16,570
17,508
18,962
19,761
19,192
19,012
15,366
13,631
11,019
12,213
13,170
14,046
14,779
14,766
15,258
15,777
15,884
16,352
19,224
24,074
30,135
33,808
35,249
35,804
36,146
36,314
37,859
40,666
43,659
46,844
48,359
50,590
11,890
12,596
13,469
13,746
14,523
15,092
18,061
20,539
22,050
26,146
30,125
28,030
29,637
33,015
36,178
38,858
39,229
41,692
42,842
42,001
39,979
32,778
29,359
26,054
30,672
35,285
39,529
38,738
40,752
45,051
50,722
54,876
65,274
80,027
91,004
105,986
117,122
122,370
121,324
121,896
128,586
136,093
142,174
146,110
153,494
158,273
156,000
Life Insurance
Companies
Policy Reserves
less Policy Loans
2,731
2,931
3,107
3,276
3,431
3,619
3,909
4,223
4,590
5,025
5,479
5,845
6,308
6,932
7,616
8,481
9,462
10,494
11,596
12,569
13,424
14,015
14,033
14,308
15,372
16,864
18,389
19,803
21,106
22,579
24,147
26,026
28,114
30,676
33,443
36,705
39,805
42,945
46,101
49,258
52,533
55,957
59,866
63,709
67,776
72,069
76,000
Savings and Loan
Associations
Share Accounts
of Individuals
759
n.a.
n.a.
n.a.
n.a.
1,190
n.a.
n.a.
n.a.
n.a.
1,741
1,965
2,210
2,626
3,153
3,811
4,378
5,027
5,762
6,237
6,296
5,916
5,326
4,750
4,458
4,254
4,194
4,080
4,077
4,118
4,322
4,682
4,941
5,494
6,305
7,365
8,548
9,753
10,964
12,471
13,992
16,107
19,195
22,846
27,334
32,192
37,302
Mutual Savings
Banks
Total Deposits
3,392
3,526
3,687
3,833
3,919
4,044
4,327
4,417
4,533
4,940
5,395
5,642
6,002
6,378
6,820
7,219
7,683
8,265
8,770
8,838
9,424
10,012
9,929
9,488
9,738
9,871
10,056
10,170
10,278
10,523
10,658
10,532
10,641
11,717
13,351
15,385
16,835
17,763
18,405
19,293
20,031
20,915
22,586
24,398
26,359
28,187
30,026
Total
18,772
n.a.
n.a.
n.a.
n.a.
23,945
n.a.
n.a.
n.a.
n.a.
42,740
41,482
44,157
48,951
53,767
58,369
60,752
65,478
68,970
69,645
69,123
62,721
58,647
54,600
60,240
66,274
72,168
72,791
76,213
82,271
89,849
96,116
108,970
127,914
144,103
165,441
182,310
192,831
196,794
202,918
215,142
229,072
243,821
257,063
274,963
290,721
299,328
* June 30 from 1910 through 1922.
** Preliminary or estimated.
n.a. Not available.
Sources: Banking and Monetary Statistics, Federal Reserve Bulletin, Annual Report, Comptroller of the Currency, 1956 Life Insurance Fact Book, Savings and
Home Financing Source Book, 1956, National Association of Mutual Savings Banks Statistical Bulletin, Federal Home Loan Bank Board releases, Savings
and Mortgage Statistics, American Bankers Association, and Goldsmith; Raymond W., A Study of Savings in the United States.
war years deposits of mutual savings banks and policy
reserves less policy loans of life insurance companies
have been quite steady, whereas savings accounts of
individuals with savings and loan associations have
increased rapidly.
As measured in terms of a proportion of principal
liabilities of the major financial institutions studied,
the commercial banking system appears to have held
its own very well indeed. At the end of 1956 demand
deposits as a portion of the total were actually higher
than they were in the late 1920's. Total deposits of
commercial banks at the end of 1956 were eight percentage points below their position in 1929, the fall
in the relative position of time deposits accounting
Page 65
ation or two, have assets exceeding those of some of
the institutions selected for comparison.
Chart II
Growth of Principal Liabilities
of Major Financial Institutions
Over the period studied a reading of the historical
record reveals both increases and decreases in the
relative position of the commercial banks' demand
deposits, but little in the way of a persistent trend in
either direction. This fact, coupled with the relative
stability in the position of time deposits over the last
two decades, has resulted in no sharp change in the
position of the commercial banking system as against
the chief nonmonetary intermediaries. It is not impossible, or even unlikely, that the assets and liabilities
of commercial banks, taken as a percentage of the
total owned and owed by financial institutions, may
once again be restored to their historic highs, particularly in the event of Governmental deficit financing
on a large scale.
Million Dollars
500,000 |
The Responsiveness of
Nonmonetary
Intermediaries to Monetary
Controls
1910
1920
1930
1940
1950
I960
Source: From Table III
for more than the difference. A drop in the proportion of mutual savings banks' deposits was more than
offset by a rise in the proportions of share accounts
with savings and loan associations and cash values
of life insurance policies.
It is apparent that the inclusion of other private
intermediaries in the comparison would reduce the
percentages of assets and principal liabilities accounted for by the commercial banks. Credit unions
and private noninsured pension funds, for example,
have had a remarkable growth in recent years. Credit
unions at the end of World War II had less than $0.5
billion of assets, which by the end of 1956 exceeded
$3 billion. Assets of noninsured pension plans rose
from $2.7 billion at the end of 1945 to more than $16
billion at the end of 1956.5 If present rates of growth
continue private pension funds may, within a gener5 Insured plans administered by insurance companies had more than $12
billion of assets at the end of 1956, so that the assets of all private pension
plans were approaching $28 billion a n d were believed to be growing at the
rate of $2.5 billion to $3 billion a year.
Page 66
But even if intermediaries, old and new, should
continue to grow relative to the banking system,
monetary policy may well remain as effective as it
has even been. In the first place, commercial banks
retain their unique functions of holding most of the
country's money supply on their books and of participating with the central bank in the expansion and
contraction of the money supply. The nonmonetary
intermediaries, on the other hand, are simply the
customers of banks, like any other business firm or
any individual. Like any business or household unit
the intermediaries may create liabilities against themselves, and in some instances, as in the case of savings
and loan shares or deposits with mutual savings
banks, these liabilities may serve as substitutes for
money. But only as substitutes.
The central fact remains that the nonmonetary intermediaries can by no means add to the amount of
money that there is at a moment of time. As the word
"intermediary" implies, they are go-betweens in the
credit-extending process. They receive money, largely
from households, in the form of cash or of checks
drawn on commercial banks; except for till money,
the cash or checks are deposited again in commercial
banks until such time as the funds are lent or "invested."6 In any period of time an intermediary can,
6 T h e present discussion is concerned only with private intermediaries.
T h e same reasoning applies, however, to the Federal financial institutions
such as t h e Federal H o m e Loan Banks, the Federal N a t i o n a l M o r t g a g e Association, the Export-Import Bank, and numerous other go-betweens. They
cannot create money. N e w money results from their l e n d i n g activities only
w h e n expenditures resulting from appropriations to them create a Treasury
deficit a n d the deficit is met by Treasury borrowing from commercial banks
or from the central b a n k .
TABLE IV
PRINCIPAL LIABILITIES OF (CLAIMS AGAINST) MAJOR FINANCIAL INSTITUTIONS
PERCENTAGE DISTRIBUTION
Commercial Banks
End
of
year
1910
1915
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
Demand
Deposits
(adjusted)
Time
Deposits
Total
Deposits
44
19
63
41
46
41
41
39
39
38
36
35
33
33
30
28
27
28
31
33
35
33
34
36
39
41
45
48
46
46
46
45
44
42
43
43
41
40
39
38
35
22
25
26
26
29
28
28
29
29
29
27
28
24
23
20
20
20
20
20
19
19
17
16
15
15
17
18
18
19
18
18
17
17
17
17
17
16
17
63
71
67
67
68
67
66
65
64
62
60
58
52
50
48
51
53
55
53
53
55
56
57
60
63
63
64
64
64
62
60
60
60
58
57
56
54
52
Life Insurance
Companies
Policy Reserves
less Policy Loans
15
15
13
14
14
14
14
15
15
16
17
18
19
22
24
26
26
26
25
27
28
27
27
27
25
24
23
22
22
22
23
24
24
24
25
25
25
25
25
Savings and Loan
Associations
Share Accounts
of Individuals
Mutual Savings
Banks
Total Deposits
Total
4
18
5
4
5
5
5
6
7
7
7
8
9
9
10
9
9
7
6
6
6
5
5
5
5
5
4
5
5
5
5
6
6
7
7
8
9
10
11
13
17
12
14
14
13
13
12
13
13
13
13
14
16
17
17
16
15
14
14
14
13
12
11
10
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
10
10
10
Source: Computed from data in Table III.
of course, lend or invest the receipts of that period
less reserves that it wishes to keep as a bank deposit
for any purpose. In addition, an intermediary may
sell any of its assets previously acquired in order to
make new (and presumably more profitable) loans.
At this point it becomes necessary to pay attention
to the possibility of massive liquidation of the great
volume of assets which the intermediaries hold. If
intermediaries were ordinarily uninhibited in the liquidation of their assets, as was the case of the life
insurance companies with respect to their holdings
of government securities during the six years after
World War II, their lending power would be but little
influenced by central bank restraints. But one of the
objectives of a restrictive monetary policy is to provide such inhibitions.
It is not the purpose of the present article to treat
theoretical questions. Nor is it intended to describe
the full impact of monetary controls on the banking
system and nonmonetary intermediaries. It is appropriate, though, to recall that monetary controls affect
lenders as well as borrowers, and a case can be made
for the assertion that the lender effect is more important than the borrower effect.7
In times of restrictive monetary policy, when interest rates are rising, prices of fixed income securities fall. This is so because securities are valued in
the marketplace on the basis of anticipated returns,
7 For an official Federal Reserve statement see "Influence of Credit and
Monetary Measures on Economic Stability," Federal Reserve Bulletin, March
1953, esp. pp. 221-24. See also, Robert V. Roosa, "Interest Rates and
the Central Bank," in Money, Trade, and Economic Growth, New York:
The MacMillan Company, 1951, pp. 270-295.
Page 67
portfolios continue to rise, lenders are willing and
sometimes eager to take profits and make new loans
before interest rates fall any further. Anticipation of
a continuing fall in rates makes them also more wiling to make advance commitments to lend, particularly in the mortgage market, at current rates of return.
Chart III
Growth of Chief Long-Term Debt Holdings
of Major Financial Institutions
Million Dollars
400,000
TOTAL
100,000
50,000
COMMERCIAL /
BANKS" 7 -*/
_
•**
10,000
_
5,000
1,000
700
1910
1920
1930
1940
The nonbank intermediaries previously discussed,
as well as the commercial banking system, have the
major part of their investments in long-term securities, chiefly debt instruments. 8 As Table V shows,
commercial banks, life insurance companies, savings
and loan associations, and mutual savings banks at
the end of 1956 held in their portfolios about 28 per
cent of total public and private debt outstanding or
approximately 45 per cent of long-term debt outstanding. These percentages have remained almost constant for a decade and a half. Moreover, as Chart III
suggests, the growth of total long-term debt holdings
of these institutions has been rapidly and steadily upward in recent years.
At the end of 1956, 84 per cent of the assets of life
insurance companies consisted of securities of business and industry (almost entirely bonds), mortgages,
state and local bonds, and United States Government
securities. At the same time, mutual savings banks
had invested 82 per cent of their total resources in
mortgages and United States Government securities.
Source; From Table V
TABLE V
capitalization being at current yields including allowance for risk. As prices of fixed income securities,
particularly bonds and mortgages, continue to decline,
losses which sellers must take in the event of liquidation increase. There is no such thing, of course, as an
absolute "lock in," but in times of rising yields lenders
repeatedly demonstrate their reluctance to sell depreciated, low-yielding securities in order to obtain
newly issued higher yielding ones.
Moreover, the major intermediaries have developed
techniques of making forward commitments of funds
to corporate, mortgage and other borrowers. But if
interest rates are rising, nonbank lenders are increasingly hesitant about making advance commitments, particularly if they anticipate further rises in
yields on securities. The effect of rising rates on the
willingness of lenders to make forward commitments
on mortgage loans has been especially notable within
the past two years.
Contrariwise, as interest rates decline, nonbank
lenders in the long-term market find their positions
increasingly liquid. As prices of securities in their
Page 68
RELATIONSHIP OF THE LONG-TERM DEBT HOLDINGS
OF THE FOUR MAJOR FINANCIAL INSTITUTIONS
TO TOTAL DEBT OUTSTANDING, 1930-1956
Long-term debt holdings of
the major financial institutions
as a per cent of
End
of
year
1930
1935
1940
1945
1950
1955
19562
Long-term
debf
holdings 1
41.3
38.8
58.0
122.2
149.2
211.3
221.2
Long-term
debt
outstanding
Total
debt
outstanding
133.9
118.8
140.7
282.5
347.8
467.3
490.0
214.3
200.2
215.8
463.3
566.8
768.5
801.5
Long-term
debt
outstanding
31%
33%
41%
43%
43%
45%
45%
Total debt
outstanding
19%
19%
27%
26%
26%
27%
28%
1 Except for 1930, an adjustment was made for short-term United States
Government securities held by commercial banks. Short-term governments held by other institutions constitute a small part of the totals.
2
1956 data are preliminary or estimated.
Sources: Banking and Monetary Statistics, Federal Reserve Bulletin, Annual
Report, Comptroller of the Currency, Savings and Loan Fact book,
1956, National Association of Mutual Savings Banks Statistical Bulletin, 1956 Life Insurance Fact Book, Reports of Federal Deposit
Insurance Corporation, Survey of Current Business, and Goldsmith,
Raymond W., A Study of Savings in the United States.
8 The expression of "long-term" as used here and in Table V refers
to instruments which had maturities of five years or more at time of issue.
A large percentage of such instruments, particularly those held by commercial banks, at any given time will mature in less than five years.
Savings and loan associations carried 90 per cent of
their assets in the form of mortgages and United
States Government securities, the latter being relatively unimportant. Over the long pull, there has been
a tendency for life insurance companies and mutual
savings banks to keep ever larger portions of their
total assets in long-term debt instruments, whereas
savings and loan associations have kept their longterm debt holdings approximately constant at the 90
per cent figure.
Thus, on the basis of the rather clearly demonstrated historical fact that monetary policy bears on
owners of long-term debt instruments by bringing
about a change in the market value of their assets, it
seems safe to conclude that the nonmonetary intermediaries cannot escape the influence of monetary
management. Of course, these institutions can freely
lend their current receipts; it is simply pointed out
here that during episodes of monetary restriction they
are deterred from shifting out of assets already in
their portfolios. Since current receipts largely represent current savings including debt repayment, loans
from current receipts do not present much of a problem to the central bank.
Monetary
Controls Mean Financial
Controls
For some purposes it is necessary to view the nonmonetary intermediaries as customers of commercial
banks. It is undeniable, though, that particular intermediaries may be competitors of individual commercial banks, both for funds and for loans. Recently,
banks have viewed the competition for funds as the
more serious, but the competition on the lending side
may become of more concern in the future.
Earlier in this article it was argued that, although
many commercial banks have felt the competition of
intermediaries in terms of a diminished rate of increase of time deposits, funds received by the intermediaries are almost at once transferred as demand
deposits to commercial banks. In a previous Monthly
Review the changing nature of the lending competition among banks and nonmonetary intermediaries
was sketched. 9
9 op. cit., pp. 117-120.
Commercial banks in the United States have been
in competition with life insurance companies, fraternal life insurance organizations and property insurance companies from the very beginning. By the
middle of the 19th century mutual savings banks and
savings and loan associations had entered the competition, and mortgage companies were in existence
by the fourth quarter of the 19th century. By 1910
the Postal Savings system, credit unions, small loan
companies, sales finance companies, and local pension
funds were beginning to grow, and investment companies and private pension funds were started by
1925. The rise of the Federal intermediaries, particularly Federal social security funds, began in the 1930's.
It is almost an arithmetic truism that as new intermediaries are introduced and old ones thrive the relative importance of the commercial banks, measured
by the ratio of their assets to the total assets of financial institutions, will decline. It is evident from the
present study, however, that the commercial banking
system has not fared badly; it has great vitality and
in times of rapid money creation gains in relative size.
But even a retrogression in the relative size of the
commercial banking system may not have serious implications for monetary policy. The rapid increase in
the volume of assets of nonmonetary institutions does
not necessarily make them less amenable to a flexible
monetary policy. Indeed, because of the nature of
their assets, it is probably through the nonmonetary
intermediaries as well as the commercial banking
system that monetary policy is made effective. In
short, "tight money" means "tight finance," and "easy
money" means "easy finance."
Anyone interested in economics and finance will
find it rewarding to observe the changing, shifting
nature of competition among financial institutions
over the coming decades. It may even be that fundamental structural change is in the offing. At the moment, though, there is little reason to think that coming changes will weaken central bank controls.
Ross M.
ROBERTSON
Page 69
5^
JDUSINESS CONDITIONS in the Eighth Federal
Reserve District in April remained about the same
as in the first quarter of the year, after allowance
for seasonal movements. While economic activity
was generally high, it was apparently not as great
as a year ago, judging from employment reports.
As a result of the inflation in prices in the past
year, however, dollar measures of economic activity
showed more favorable records.
In the nation economic activity also continued at
a fairly constant pace. Most of the available measures
of physical volume of economic activity showed little
change from fourth quarter 1956 to first quarter 1957
on a seasonally adjusted basis. Total industrial production and employment in nonagricultural establishments remained virtually unchanged. Wage rates,
however, continued to rise and, with the advance in
labor income, total personal income climbed further.
The increase in prices, however, absorbed much of
the gain in income. In the first quarter of 1957 per
capita disposable income was about 3/2 per cent
higher than a year earlier, but when adjusted for
price change it was at about the same level. The
gross national product in the first quarter of 1957
rose about $3 billion from the fourth quarter of
1956, on a seasonally adjusted annual rate basis.
Here, too, the increase largely reflected the advance
in prices and wages. In physical terms there was
very little, if any, increase.
The leveling in business activity in recent months
reflected primarily the shift from inventory accumulation to no net additions to inventories. As a result
of this shift, gross private domestic investment declined $4 billion on a seasonally adjusted annual rate
basis from the last quarter of 1956 to the first quarter
of 1957. The drop offset, in part, the continued increases in personal consumption expenditures, government purchases of goods and services, and net
foreign investment. Consumer expenditures for goods
and services advanced $4 billion. Government purchases of goods and services rose $2/2 billion as Federal outlays for national security purposes and state
and local expenditures continued to advance.
Industry
Industrial production in the Eighth District was
relatively steady in April. Changes were small and,
Page 70
CURRENT CONDITIONS
except for declines in automobiles and lumber, were
largely in keeping with the season. Steel mills in the
St. Louis area operated at or above capacity in the
first two weeks of the month, dropping to near 90
per cent in the last two weeks. While operating
rates averaged the same as in April a year ago, owing
to capacity increases the mills turned out a fraction
more steel this April. Operations at district mills
have exceeded national rates from February on; in
April St. Louis area mills averaged 97 per cent of
capacity versus 91 per cent in the nation.
Automobile production continued its slow decline
as manufacturers sought to avoid inventory problems.
One plant discontinued its second shift April 1, and
another made minor layoffs. The district was little
affected by strikes and Good Friday shut-downs which
reduced output elsewhere in the nation. Preparations
for production of a new make of automobile went
forward at Louisville.
Operations in the lumber industry in the South
sank to the lowest ebb in several years, paralleling
the decline in residential construction. While output
in the southern pine industry rallied slightly from
February to March, a sag in early April brought
operations to the lowest level since 1954. In the
hardwood milling industry the continued decline
brought operations in the first half of April to 75
per cent of capacity, lowest for the month since 1949.
Coal production in the district shared only slightly
in the contra-seasonal rise in national output in
March. In early April output continued to decline
seasonally, lagging behind a year earlier. Crude
petroleum output of some 395,000 barrels per day
has been steady since November, after an almost
continuous climb beginning in 1953.
Livestock slaughter in the St. Louis area dropped
back to the February level in April, after a minor
spurt in March. Slaughter was still slightly above a
year earlier.
Despite the temporary increase in
March, meat packing in the district that month was
below a year earlier, owing largely to variations in
hog marketings.
The number of employees in manufacturing rose
slightly from February to March in Evansville, Louisville, Memphis, St. Louis and Springfield, but did not
change in Little Rock. Contributing to the slight
rise in manufacturing employment were increases in
the food and aircraft industries in St. Louis, food and
motor vehicles in Louisville and refrigerators in
Evansville.
The manufacturing employment situation in district major cities this March compared with a year
earlier varied greatly from city to city. Percentagewise, Evansville and Springfield showed large increases, St. Louis and Memphis had slight gains,
while Louisville and Little Rock had declines.
Labor Markets
Total nonagricultural employment in the district's
six largest labor market areas increased less than 1
per cent from February to March. The percentage
gain was about the same as in the nation. However,
employment in the district areas has generally declined in the past year compared with an advance
nationally. As shown in the table, four district areas
had lower employment levels and considerably higher
unemployment levels this March as compared with
a year ago. The increase in employment in Evansville reflects the improvement from depressed conditions a year ago.
Unemployment declined 10 to 15 per cent from
February to March in Little Rock, Evansville and
Louisville, but remained at the same level in Memphis. However, district area unemployment apparently did not shrink further in April as evidenced by
the volume of insured unemployment. In the four
weeks ended April 20 unemployment insurance claims
rose slightly in the Louisville area and considerably
in the St. Louis and Evansville areas.
DISTRICT EMPLOYMENT AND UNEMPLOYMENT
(Numbers in thousands)
Total
Nonagricultural Employment
Unemployment
Metropolitan March
March Per Cent
March March Per Cent
Area
1956
1957
Change
1957
1956
Change
Evansville. . .
72.5
68.4
5.2
7.6
+ 6.0
—31.6
69.7
71.9
Little Rock. .
—3.1
4.7
3.4
+ 38.2
252.7
—1.6
Louisville. . . 248.6
17.3
14.4
+ 20.1
187.3
—0.6
186.1
Memphis....
12.9
11.1
+ 16.2
—0.1
723.6
St. L o u i s . . . . 722.7
38.3
34.6
+ 10.7
+ 4.0
36.0
34.6
Springfield. .
3.1
3.2
— 3.1
Total
1335.6
1338.5
—0.2
81.5
74.3
+ 9.7
Source: State Employment Security Divisions.
Trade
Department store sales in the Eighth Federal Reserve District in March and the first three weeks of
April were about the same as those of a year earlier.
However, some increase had been expected in this
period because of the later date of Easter this year
than last. In March district sales fell 8 per cent short
of sales in March 1956, after allowance for the difference in the number of trading days. Sales in the first
three weeks of April were about 10 per cent greater
than a year earlier.
New automobile sales in the first part of April
continued at a lower level than a year earlier and
failed to match the early March rate. March sales of
new cars had improved about seasonally from February, but were still less than a year earlier even after
allowance for one more trading day in March 1956.
In the first 10 days of April sales were about 12 per
cent less than a year earlier.
Banking
Further demonstration of the level course of business activity was apparent in the trend of loans at
weekly reporting member banks. Business loans declined about as much as usual and other loans rose
moderately in the four weeks ended April 17. The
changes in business loans by major industry classification varied from the pattern established in the
corresponding weeks of recent years. Loans to commodity dealers, which normally decline at this time,
rose moderately; whereas loans to sales finance companies, which have been rising, declined substantially
in the four weeks, as these firms apparently obtained
financing from nonbank sources.
Investment holdings of the weekly reporting banks
rose in the period primarily as a result of net purchases of the new issues of Treasury certificates of indebtedness and notes.
Total deposits at the weekly reporting district
banks rose more than $90 million in the four weeks
under review. Most of the deposit growth was in
demand accounts of individuals, businesses and other
banks, offset in part by net withdrawals of Government deposits. With the inflow of funds these banks
made reductions in borrowings in the period.
Agriculture
Early spring farming operations over most of the
district were delayed during April by muddy fields.
Corn planting and land preparation for cotton in the
southern part of the district were almost at a standstill in early April. Spring oat seeding was delayed in
Illinois, Indiana and Missouri. Farmers in these states
will probably divert some intended oat acreage to
other crops which can be planted later.
Winter
grains in the district are generally in good to excellent
condition, except in some lowlands.
Prices received by district farmers for cattle, hogs
and eggs rose slightly during the four weeks ending
April 12. The increases were offset, however, by
slightly lower prices received for milk, broilers, corn
and wheat. Prices averaged higher than a year earlier.
Largely as a result of the advance in prices, district
farm income for the first two months of 1957 was
approximately 7 per cent above that of the previous
year. All district states except Missouri showed some
increase.
Page 71
i***1**
7^e
VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
Mar. 1957*
compared with
Feb. 1957 Mar. 1956
Mar.
1957
Industrial Use of Electric Power (Thousands of KWH per working day, selected
industrial firms in 6 district cities). .
n.a.
n.a.
n.a.
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)
-098
— 4
Coal Production Index—8th Dist. ^Seasonally adjusted, 1947-49=100)
89.7 p
— 6
Crude Oil Production—8th Dist. (Daily average in thousands of bbls.)
395.1
+ 3
Freight Interchanges at RRs—St. Louis. (Thousands of cars—25 railroads—Terminal R. R. Assn.)
110.4
— 4
Livestock Slaughter—St. Louis area. (Thousands of head—weekly average)
126.0
— 4
Lumber Production—S. Pine (Average weekly production—thousands of bd. f t . ) . . . .
202.3
— 5
Lumber Production—S. Hardwoods. (Operating rate, per cent of capacity)
81
— 8
* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate, and the coal
production index, show the relative percentage change in production, not the drop in index points or in percents of
capacity.
p Preliminary, n.a. Not available.
BANK DEBITS1
March, 1957
March
compared with
1957
February
March
(In
1957
1956
millions)
e**w
Six Largest Centers:
East St. Louisa—
National Stock Yards,
111
$ 142.9
Evansville, Ind
189.2
Little Rock, Ark
195.0
Louisville, Ky
848.1
Memphis, Tenn
771.4
St. Louis, Mo
2,541.6
Total—Six Largest
Centers
$4,688.2
Other Reporting Centers:
39.1
Alton, 111
Cape Girardeau, Mo.. .
17.5
El Dorado, Ark
31.1
Fort Smith, Ark
54.7
Greenville, Miss
26.9
Hannibal, Mo
11.2
Helena, Ark
8.1
Jackson, Tenn
25.8
Jefferson City, Mo.. . .
76.8
Owensboro, Ky
46.0
Paducah, Ky
28.8
Pine Bluff, Ark
40.7
Quincy, 111
40.2
Sedalia, Mo
15.5
Springfield, Mo
90.0
Texarkana, Ark
19.3
Total—Other
571.7
Centers
Total—22 Centers
$5,259.9
+ 8%
+ 9
+ 10%
±1
+ 17
+ 11
+ 2
+ 11%
+
+ 19%
+ 6
+ 15
+ 7
+ 2
+ 14
-O+ 9
+ 8
— 7
+ 12
+ 9
+ 10
+ 9
+ 14
+ 10
—10%
+ 10
+ 1
— 7
— 2
+ 3
—12
— 8
+ 21
— 1
+ 9%
+
3%
+ 5
+ 3
+ 4
+ 1
+ 5
—10
+11%
+
2%
2%
INDEX OF BANK DEBITS—22 Centers
Seasonally Adjusted (1947-1949=100)
1957
1956
Feb.
Mar.
Mar.
167.2
175.0
163.1
1 Debits to demand deposit accounts'of individuals,
partnerships and corporations and states and political
subdivisions.
Ar^
ti&*
CASH FARM INCOME
Percentage Change
Jan. thru Feb.
Feb.'57
1957
(In thousands Feb.
from
compared with
of dollars)
1957
Feb.'56
1956
1955
Arkansas. . .$ 31,502
+ 3 4 % + 14% + 4 7 %
Illinois
177,803
+ 22
+ 40
+ 18
Indiana
87,600
+ 12
+ 14
+ 7
Kentucky. . . 23,641
+ 10
—27
+ 2
Mississippi. . 37,073
+ 7
+ 17
+ 82
Missouri. . . . 54,693
— 4
+ 7
— 4
Tennessee. . . 25,790
+ 4
+ 15
-07 States. . . .438,102
+ 12
+ 15
+ 17
8th District 1 172,358
+ 16
+ 13
+ 7
Source: State data from USDA preliminary estimates unless otherwise indicated.
1
Estimates for Eighth District revised based on
1954 Census of Agriculture.
OXONSTRUCTION CONTRACTS AWARDED
IN EIGHTH FEDERAL RESERVE DISTRICT *
(Value of contracts in thousands of dollars)
Jan.
1957
Total
$130,255
Residential
65,349
Nonresidential. . 26,315
Public Works
and Utilities. . 38,591
Assets
Apr. 17, 1957
$1,631
859
52
279
467
866
220
25
921
43
$3,706
-8TH DISTRICT
Mar.
Feb.
1957
1957
107
98
125
125
n.a.
134
n.a.
141
Jan.
1957
94
125
123
141
Sales (daily average), unadjusted
Sales (daily average),
seasonally adjusted 3
Stocks, unadjusted 4
Stocks, seasonally adjusted *
3 Daily average 1947-49=100
4 End of Month average 1947-49=100
n.a.for
Not
available.
Digitized
FRASER
Trading days: Mar., 1957—26; Feb., 1957—24; Mar., 1956—27.
http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis
31,746
14,987
Change from
Mar. 20,
1957
$—10
—24
+ 4
+ 5
Change from
Feb. 27,
1957
$ + 26
Mar. 27,
1957
$2,636
Loans 1
Business and Agricultural.
Security
Real Estate
Other (largely consumer). .
U. S. Government Securities.
+ 30
—46
1,794
Other Securities
+ 4
+ 4
491
Loans to Banks
+ 11
Cash Assets
+ 26
+ 22
1,440
Other Assets
-0— 1
74
Total Assets
$ + 61
$6,435
$+ 5
Liabilities and Capital
Demand Deposits of Banks
$ 698
$+46
$ 722
$ + 25
Other Demand Deposits
—39
2,074
+ 44
3,791
Time Deposits
+ 19
595
+
2
1,329
Borrowings and Other Liabilities. . .
—
2
53
—
3
2
84
Total Capital Accounts
+ 2
286
509
+ 1
Total Liabilities and Capital
$3,706
$ + 61
$6,435
$ + 5
1 For weekly reporting banks, loans are adjusted to exclude loans to banks; the total is reported
net; breakdowns are reported gross. For all member banks, loans are reported net and include loans
to banks; breakdown of these loans is not available
Stocks
on Hand
Net Sales
March, 1957
3 mos.'57
compared with
to same
Feb.,'57 Mar.,'56 period '56
16
4%
47
8th F.R. District Total.
+ 20% — 1 1 %
40
—18
Fort Smith Area, Ark. i . .
+29
13
44
—17
— 7
Little Rock Area, A r k . . . .
+ 7
Monthly stocks and
—13
—22
Quincy, 111
+21
stocks-sales ratio data
— 1
Evansville Area, Ind
+40
not available in time
19
—12
— 6
43
Louisville Area, Ky., Ind..
+24
for publication in the
—15
—10
Louisville (City)
+22
Monthly Review. Data
—13
-0Paducah, Ky. i
+35
will be supplied upon
—10
16
54
— 4
St. Louis Area, Mo., 111.. . + 1 9
request.
—12
— 6
St. Louis (City)
+16
— 6
+ 2
Springfield Area, Mo
+27
—10
— 3
17
34
Memphis Area, T e n n . . . .
+19
—11
— 3
All Other Cities 2
+35
1
In order to permit publication of figures for this city (or area), a special sample has been constructed which is not confined exclusively to department stores. Figures for any such nondepartment
stores, however, are not used in computing the district percentage changes or in computing department store indexes.
2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi;
and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of March, 1957, were 2 per cent lower than
on the corresponding date a year ago.
3
$83,612
36,534
32,091
ASSETS AND LIABILITIES OF EIGHTH DISTRICT MEMBER BANKS
(In Millions of Dollars)
Weekly Reporting Banks
All Member Banks
Percentage of Accounts
Stocks- and Notes Receivable
Sales Outstanding Mar. 1, '57,
Ratio collected during Feb.
Excl.
Instal. Instalment
Accounts Accounts
INDEXES O F SALES AND STOCKS-
$116,248
44,533
39,969
* Based upon reports by F. W. Dodge Corporation.
DEPARTMENT STORES
*]nA&
Feb.
1956
Mar.
1956
116
129
141
133
RETAIL FURNITURE STORES
Net Sales
March, 1957
compared with
Feb.'57 M a r / 5 6
+ 1 3 % —• 3%
+12
— 7
+ 5
— 4
+ 2
—14
—31
— 6
+98
+15
8th Dist. Total 1
St. Louis Area
Louisville Area
Memphis Area
Little Rock Area
Springfield Area
* Not shown separately due to insufficient coverage,
but included in Eighth District totals.
1
In addition to the areas shown separately in the
table, the total includes stores in Blytheville, Fort
Smith, Pine Bluff, Arkansas; Owensboro, Kentucky;
Greenwood, Mississippi; and Cape Girardeau, Missouri.
Note: Figures shown are preliminary and subject to
revision.
PERCENTAGE DISTRIBUTION OF
FURNITURE SALES
Cash Sales
Credit Sales
Total Sales
Mar.'57
14%
86
100%
Feb.'57
14%
86
100%
Mar.'56
14%
86
100%
57
Volume X X X I X
Number 9
I ¥ IS
k
aal feppective Pulpwood Production
iipiijEth District States
\XA-
U J J S ^ p O D %&s\ diversity of uses and its markets are expanding. Eiehth
Stty
«
r o t ?
fp^erve District 'Spates are sharing in this expansion.
* - :i S ? ^#
i
*^
xiet state resources can siipgrM a still greater pulpwood output. Imnt^fai fjoreM management will be required, however, especially on the
in wefl^vith other forest enterprises. Bankers
eloping forest resources.
Bank
St. Louis
urvey of Current
j l ^/^rtfjfitfdftM
Conditions—p.
118
Current and Prospective Pulpwood Production
in Eighth District States
Pulpwood has a diversity of uses and its markets
are expanding.
consumed, has more than doubled in use during the
past quarter-century.
A
More versatile and better quality paper and multicolor printing have contributed to this expansion.
The most rapid increase in paper use has occurred
in the shipping and packaging industries. Waxcoated paper containers for milk and frozen foods
are examples of recent trends in the use of pulp
products for merchandising. Bulk materials, such
as sugar, flour, cement and chemical fertilizer, are
now being shipped and stored in paper bags, whereas formerly burlap or cotton bags were used. The
introduction of waterproof paper, practical convenience and better advertising possibilities are given as
some of the reasons for the shift to paper bags.
There has been a large increase in the use of tar
impregnated paper for wrapping pipe and other
items to retard corrosion. The use of sanitary and
tissue paper has also increased rapidly during the
past quarter-century.
VISITOR from abroad is quickly impressed with
the "paper-mindedness" of Americans when he first
buys a Sunday paper or sees the racks of artfully
packaged wares in a supermarket. The casual way
in which an American family uses hundreds of pounds
of paper products each year is in striking contrast to
practices in some countries where customers are expected to bring their own wrapping paper to the
store. "Paper-mindedness" has stimulated a phenomenal increase in the consumption of pulpwood in
this country since the turn of the century. From less
than 2 million cords in 1899, the nation's use of pulpwood grew to 7 million cords in 1930, and to nearly
36 million cords in 1956.
Paper, which requires over half of all wood pulp
PRODUCTION OF PAPER AND PAPERBOARD AND
WOOD PULP IN THE UNITED STATES
Millions of Tons
40
WOOD PULP
J
I
I
1940
Source:
i
I
L
J
I
I
I
L
J
L
1956
United States Department of Commerce, Bureau of the Census,
Facts for Industry, Series M 14A.
The consumption of paperboard has been increasing even more rapidly than that of paper, trebling
during the past twenty-five years. Wooden boxes
have been replaced by shipping cartons made of
paperboard. Such cartons are lighter than wooden
boxes and can be folded for shipment and storage.
Moreover, they are suitable for automatic packaging
machines which are in general use at most manufacturing plants.
Wood pulp products are of increasing importance
in the construction of perforated pulpboard, which
is used as accoustical tile, and the use of pulpboard
for insulating purposes has been growing very rapidly. Saturated felt, another pulp product used in
floors and roofs, also has an expanding market.
Page 111
Estimated United States demand for paper and
board will total 43.8 million tons by 1965, according
to a comprehensive report, Pulp, Paper and Board
Supply-Demand,
recently published by the Committee on Interstate and Foreign Commerce of the
85th Congress. 1 By these estimates, paper grade
wood pulp consumption for 1965 is expected to total
32.3 million tons, and dissolving pulp, used in rayon
and plastics, an additional 1.7 million tons. Total
wood pulp consumption would thus be 34 million
tons, 42 per cent greater than actual consumption in
1956.
Nearly 53 million cords of pulpwood would be
required, 47 per cent more than in 1956. Although
the consumption of waste paper and other fibrous
materials is expected to increase, their rate of increase will probably be somewhat less than that of
pulpwood.
While the consumption of wood pulp for purposes
other than paper, paperboard and building materials
is small relative to total consumption, that going into
rayon and acetate has been growing rapidly.
Much of the expansion in markets for pulpwood
has been made possible by technological advances in
processing. A few years ago spruce and fir were
the only trees that could be economically used. The
development of new processes has made it feasible
to use southern pines, western hemlock, fir, jackpine
and many hardwoods. These new processes opened
up large new producing areas, including the Eighth
1
Pulp, Paper, and Board Supply-Demand, Report of the Committee on
Interstate and Foreign Commerce, 85th Congress, 1st Session, June 17, 1957.
The estimates are based upon stated assumptions regarding growth of population, gross national product and other relevant economic measures.
CONSUMPTION OF PULPWOOD IN THE UNITED STATES
Millions of cords
40
SOFTWOOD
10
J
I
I
1943
Source:
1
I
I
L
J
I
I
L
1956
United States Department of Commerce, Bureau of the Census,
Facts for Industry, Series M 14A,
Page 112
District states. Growth of pulpwood production in
district states and the southeastern United States
began in the 1920 decade and has continued with
increasing tempo in the 1950's.
Eighfh Federal Reserve District States
are sharing in this expansion.
The spectacular increase in pulpwood production
during recent years in Eighth Federal Reserve District States tends to belie the old adage, "Money
doesn't grow on trees." Located astride the dividing line between the Central Hardwood Forest region
and the Southern Forest, district states contain about
one-ninth of the nation's land area and one-sixth of
TABLE 1
TOTAL LAND AREA AND FOREST LAND
IN EIGHTH DISTRICT STATES, 1953
( I N THOUSANDS OF ACRES)
Eighth District
States
Commercial
Total
Forest
Forest
Total
2
Land A r e a 2
Land A r e a 1 Land A r e a
Arkansas
52,675
Illinois
55,935
Indiana
36,205
Kentucky
39,864
Mississippi
47,248
Missouri
69,226
Tennessee
41,797
Total
United States. ..
19,346
3,993
4,103
11,497
16,473
15,177
12,558
19,292
3,938
4,045
11,446
16,440
15,064
12,301
NonCommercial 2
Forest Land
54
55
58
51
33
113
257
342,950
83,147
82,526
621
2,974,726
647,686
484,340
163,346
1 Statistical Abstract of the United States, 1956.
Timber Resource Review, September, 1955.
2
its commercial forest land. When use of southern
pine for pulp began in the 1920's decade the pine
belt portion of the area was opened for production.
By 1940, total production of pulpwood in these states
exceeded a million cords per year (see Table 2).
Output doubled from 1940 to 1952 and continued to
grow through 1956 at the rate of about 250,000 cords
per year. The rate of increase during the sixteenyear period, 1940-1956, was slightly greater than
that of the nation.
More than half of the pulpwood produced in the
district states comes from Mississippi, about 30 per
cent from Arkansas and 10 per cent from Tennessee.
These states contain nearly 60 per cent of the district states' commercial forest land and a considerably greater share of the pine forest. The recent increase in use of hardwoods for pulp has made the
forests of the entire district states area potentially
valuable as a pulpwood source. Production of pulp
from hardwoods is increasing rapidly in Illinois,
TABLE 2
PULPWOOD PRODUCTION, EIGHTH DISTRICT STATES
(THOUSAND CORDS OF ALL PULPWOOD, INCLUDING RESIDUES)
1956 1
Arkansas
Total
Hardwoods
1940
1952
Softwoods
Total
Hardwoods
1,075.2
139.7
935.5
620.2
86.2
533.9
Illinois
80.1
80.0
0.1
45.0
45.0
Indiana
22.0
22.0
0.0
12.0
12.0
....
....
Kentucky
Mississippi
Missouri
Tennessee
Total
Softwoods
53.3
28.3
25.0
30.0
27.9
2.1
2,135.7
938.0
1,197.8
1,867.3
482.3
1,385.0
2.4
1.4
1.0
12.0
8.5
3.5
486
4
4
4
630
4
398.8
153.9
244.8
268.4
153.9
114.5
131
Total
3,767.5
1,363.3
2,404.1
2,854.9
815.8
2,039.0
1,247
United States
35,196 2
6,104
Note:
29,092
25,065
3,657
12,307 5
21,408
Detail will not necessarily add to totals because of rounding.
1 Illinois, Indiana, Kentucky Missouri—Station Note No. 104, Central States Forest Experiment Station, Columbus, Ohio, July, 1957.
Arkansas, Mississippi and Tennessee—1956 Pulpwood Production in the South, Southern Forest Experiment Station, New Orleans, La., August, 1957.
2 Pulp, Paper, and Board Supply Demand, Report of the Committee on Interstate and Foreign Commerce, 85th Congress, 1957.
3 Timber Resource Review, U. S. Department of Agriculture, Forest Service, 1955.
* No records available. Estimated to be an insignificant amount.
8 Report of the Forest Resource Appraisal, The American Forestry Association, 1947.
Indiana and Kentucky. Output almost doubled in
these states during the four years 1952 to 1956. Hardwoods are used almost exclusively in Indiana and Illinois, whereas Kentucky produces pulpwood from both
pine and hardwood.
Although not as large an income producer as cotton, hogs or soybeans in the district, pulpwood has
become an important source of income especially in
the southern district states. The value of pulpwood
delivered to concentration points in Mississippi and
Arkansas in 1955 was estimated at approximately
$50 million. This was approximately 5 per cent as
much as the combined sales of all crops and livestock products in these two largely agricultural states.
In particular counties pulpwood is of much greater
relative importance than in the district as a whole.
In Union County, Arkansas, for example, the value
of pulpwood produced in 1954 was about equal to the
value of all crops and livestock products sold.
Of further importance to the district states'
omy is the influence of pulpwood production
the location of pulp and paper plants. There
13 mills operating in district states in 1956; two
are scheduled for completion in 1957; and at
three more are planned.
econupon
were
more
least
District state resources can support a still greater
pulpwood output.
The soils, climate and topography of district states
are favorable for pulpwood production. Rainfall is
generally adequate the year-around for rapid tree
growth and long warm summers provide an ample
growing season. New seedlings often spring up on
abandoned crop land and in openings where mature
trees have been harvested.
Although the average volume of standing timber
per acre is relatively low in this area, net annual
growth is above the national average (see Table 3).
TABLE 3
GROWTH, CUT AND VOLUME OF GROWING STOCK
PER ACRE OF COMMERCIAL FOREST LAND, 1952.
Net Annual
Growth
(Cubic Feet
Per Acre)
Net Annual
Cut
N e t Volume
Grow ing Stock
Jan. 1, 1953
(Cubic Feet
Per Acre)
(Cut lie Feet
Pe r Acre)
Arkansas
29.7
19.7
Illinois
34.3
9.6
774.5
Indiana
34.4
12.9
751.8
Eighth District States
609.7
Kentucky
31.9
14.2
684.4
Mississippi
43.6
34.7
585.6
Missouri
17.9
5.6
365.3
Tennessee
19.8
20.5
469.1
District State Average. .
29.6
18.6
564.5
United States Average..
29.3
22.2
1,029.1
Source: Basic data from Timber Resource Review, September, 1955.
Page 113
Principal Types of Timber in Eighth District States
J. HE MAP OPPOSITE shows areas characterized by major forest types in the seven
states which include the Eighth Federal Reserve District.
Pine areas, which supply most of the district states pulpwood, are concentrated
in southern district states. Loblolly-shortleaf pine forest predominates in Mississippi,
excepting the Delta and river-bottom areas and the low coastal lands; in Arkansas,
particularly south of the Arkansas River; and in the eastern, Appalachian, sections of
Kentucky and Tennessee.
An area of longleaf-slash pine characterizes the coastal region of Mississippi.
White-red-jack pine forest occurs only in a very small area in eastern Tennessee.
Hardwood forests, which are becoming more important as a source of pulpwood,
are more extensive in these states than softwood types. The oak-hickory forest is typical of most of Missouri, southern Illinois, considerable parts of Indiana both north and
south, the greater portion of Kentucky and the western two-thirds of Tennessee and
most of Northwestern Arkansas.
The second most extensive area of hardwoods is the swamp and bottom-land
forest. This type is found along the principal water courses with its greatest extent
in the Mississippi River Basin, which includes the Bootheel of Missouri and the Arkansas and Mississippi Deltas. A maple-birch-beech forest type covers a considerable portion of southern Indiana.
This map is derived from one entitled Areas Characterized
by Major Forest
Types in the United States prepared by the United States Department of Agriculture, Forest Service, in 1949 and based on a national survey of forest resources. The
Forest Service defines the six types of timber areas shown on the map as follows:
LONGLEAF-SLASH P I N E : Forests in which 25 percent or more of the stand is longleaf or slash pine,
singly or in combination.
LOBLOLLY-SHORTLEAF P I N E : Forests in which
25 percent or more of the stand is loblolly pine, shortleaf pine, or other yellow pines, excepting longleaf or
slash, singly or in combination.
WHITE-RED-JACK P I N E : Forests in which 50 percent or more of the stand is eastern white pine, red
pine or Jack pine, singly or in combination.
MAPLE-BIRCH-BEECH: (northern h a r d w o o d s ) :
Forests in which 50 percent or more of the stand is
sugar maple, yellow birch, beech or basswood, singly
or in combination.
OAK-HICKORY: Forests in which 50 percent or more
of the stand is upland oaks, hickories, yellow poplar,
or gums, singly or in combination, except where longleaf and/or slash pine comprises 25 percent, or where
loblolly, shortleaf, Virginia and/or pitch pine comprises 25 percent, singly or in combination, in which
cases the stands would be classified respectively as
longleaf-slash pine or loblolly-shortleaf pine.
SWAMP AND BOTTOM-LAND FORESTS: Forests
on characteristically moist to wet sites primarily identified by water tupelo, black gum, sweet gum, southern
cypress, ash, oak, pine, elm, cottonwood, and red
maple, making up 50 percent or more of the stand,
singly or in combination, except where longleaf and/or
slash pine comprises 25 percent, or where loblolly
and/or shortleaf pine comprises 25 percent, in which
cases the stands would be classified respectively as
longleaf-slash pine or loblolly-shortleaf pine.
The area not typed may have some timber, usually covering less than 10 per
cent of the land.
Page 114
Map of Principal Types of Timber in Eighth District States
OAK-HICKORY
SWAMPS and BOTTOM-LAND
MAPLE-BIRCH-BEECH
LOBLOLLY-SHORTLEAF PINE
LONGLEAF-SLASH PINE
WHITE-RED-JACK PINE
1
|
Less Than 10% Timber
Page 115
Very favorable growing conditions here have apparently offset the effects of understocking. Furthermore, growth rates in the district states exceed the
rate of cutting by a considerable margin. The annual
net cut was less than two-thirds of net growth in
1953, while for the same year the nation as a whole
cut approximately three-fourths of the growth. The
favorable ratio of growth rates to cutting in the
seven states should permit improvement in the timber stands and provide the base for expanding output
in the future.
Unfortunately, the old growth of sawtimber is
about gone in the area. In 1953 the district states
had only about one-fourteenth of the nation's standing sawtimber and the greater part of that was in
second growth stands. The current era of improvement in forests follows a long period in which timber
resources were drawn down. Lumber production in
the area was at its zenith during the first two decades
of this century, when "Cut and get out" was the policy
of most operators. A large per cent of the timber
that remained after the sawtimber harvests was unmarketable or of low value. Furthermore, inferior
trees were occupying space where high quality trees
could be growing and forest fires often curtailed
natural restocking processes. Another factor in the
drain on timber resources in the past was the lack of
knowledge in erosion control methods which led to
abandonment of eroded farmland and the clearing
of new lands that, in many cases, were not topographically suited to crop production.
Improvements in forest management will be required,
however,...
One of the first major attempts to assure a permanent timber supply in the area was establishment of
the Ouachita National Forest in Arkansas in 1907.
Soon thereafter, a number of lumber companies began
to acquire second growth pine lands in the southern
district states after the old growth had been exhausted. Owners of the larger holdings were showing interest in scientific forest management by the
early thirties. More recently, substantial advances
have been made in the management of timber on
many smaller holdings.
In 1953, according to the Timber Resource Review,
pulp manufacturers were apparently doing the best
job of forest management of all the private ownership
groups in the nation. 2 Almost two-fifths of the total
land area held by pulp manufacturers was in ownerships on which some timber stand improvement work
2
Timber Resource Review, United
Forest Service, 1955, Chapter IX.
Page 116
States Department
of Agriculture,
was being done. By contrast, only about 3 per cent
of the land in farms was in units undergoing improvement. The level of timber management practiced by pulp manufacturers is especially high in the
South. Holdings of lumber manufacturers, other
wood manufacturers and other private investors fall
between these two extremes.
When land holdings were classified in the Timber
Resource Review according to size, the quality of
timber management increased with each larger sizeclassification. For the nation, only 2 per cent of the
area in holdings of less than 100 acres reported any
improvement work, as compared to 45 per cent of
the area in units of 50,000 acres or more.
. . . especially on the smaller landholdings.
Small farm forest properties have long been recognized as the crux of the forest management problem
in the district states and in the nation. Low income
and inability to save or wait for capital to be
replenished have made it difficult for small farmers
to develop their woodlands. Tenants, who frequently moved from place to place, were generally given
wide latitude in their use of timber resources with
unhappy results so far as good forestry practices are
concerned.
Fortunately, the problem of small farms is being
alleviated both in the district and in the nation. Total
number of farms has declined consistently since World
War II. With this decline has gone a persistent
growth in size of farms. The greatest increase in
average size of farms in the district states occurred in
Arkansas and Mississippi where farms were small and
a great concentration of sawtimber exists. These resource changes in agriculture have resulted in more
efficient performance on farms. In turn higher incomes have relieved some of the pressure to clear
land for crops which is better suited for timber.
Similarly, as farm incomes improve, pressure to cut
timber on farm land without leaving a good stock of
growing trees is reduced.
Good forest management pays. According to the
Missouri Conservation Commission, timberlands in
that state could produce five times as much timber
if they were properly managed. 3 Furthermore, in
the case of the small landholders, most of the management work could be done by the owners without
the necessity for cash outlays. The United States
Forest Service has estimated that a moderate level
of management in Mississippi would eventually raise
3 Forest Fires in Missouri, Missouri Conservation Commission, 1951.
Bankers may play an important role in
developing forest resources.
current annual growth in board feet by two-thirds. 4
Such a level of management entails state-wide fire
protection, cutting practices which would maintain
full production capacity on land held by forest-product firms and public agencies, and cutting practices
on the rest of the forest land designed to improve
productivity.
The future prospects of the pulpwood industry are
of special concern to bankers located near forested
lands. Whether pulpwood production in the district
states gains 47 per cent with the estimated national
increase by 1965, or shows no gain, will make a substantial difference in the level of operations of many
banks in the forested areas.
A case study in 1954 points up the increase in returns from an individual farm woodlot that can be
attained by improving forest management practices. 5
Using constant prices for calculating returns, net
gains from the ninety-two-acre woodlot on a farm in
Tippah County, Mississippi, over three decades could
be increased from $3,639 to $15,322 with the installation of a planned forestry program.
Fortunately, the banker is not completely passive
in determining which of these alternatives is to be
experienced. Many forest owners need to be convinced of the importance of good woodland management. Small owners have been especially slow to
adopt practices designed to keep woodlands productive. If bankers can encourage such owners to do a
better job substantial benefits may result.
Pulpwood production fits in well with other
forest enterprises.
Commercial bank lending for planting trees on
unstocked lands is probably out of the question. It
usually takes twelve to twenty years for newly planted trees to reach the thinning stage for pulpwood in
the district states. This is obviously too long to be
an attractive credit business for banks. However,
k credit has many other uses in forest products
inesses. For example, loans to finance the purse of marketable timber or to manufacture forest
ducts are quite common.
Despite its excellent prospects in the district states
pulpwood is not likely to become the only product
marketed from most district forest lands. Good
quality saw logs still sell at a substantial premium
for lumber or veneer compared to the price paid for,
pulpwood. Pulpwood provides a market primarily
for smaller trees which must be thinned out in good
forestry practice. The pulp market also provides an
outlet for slow-growing and cull trees that should be
eliminated from timber stands. Portions of tree
that cannot be used for lumber or higher-price
products may also be used for pulp.
1953 the Federal Reserve Act was amended to
tnit national banks to make real estate loans
red bj^f first liens upon properly managed forest
'ore the amendment timberland was not
to be improved real property which could
fecurity. The change may facilitate forest
t in several ways and reduce the premaexcessive cutting of timber which has
a problem with farm woodlands.
In recent years, wastes from wood-working plan
such as slabs and edgings from sawmills, have
used for making pulp. Sawmills equipped
de-barkers and chippers can sell as a valuable
product waste material that they used to burn. W
residues chipped for pulp in 12 southern stateslfhc
creased from 126,000 cords in 1954 to 659,000 in
or more than 3 per cent of total southern p u ^ T ^ ^ ^ production. The use of wood residues forv|i^lp iias*
been developed further in Arkansas than in^iiny other
southern state, supplying 13 per cent of ; t u "
pulpwood production in 1956.
are just one of many groups helping to
eTjhe capacity of district forests to supply
1 markets for wood products. A greater outulpwood as a result of development efforts
g made will mean not only increased income
rs of timber tracts but will enhance the
for establishing additional pulp and paper
he district. Careful management of forest
esc|ir6e4 should thus yield widespread benefits in
employment and income.
4
Mississippi's Forest Resources and Industries, United States Department
of Agriculture, Forest Service, 1951.
5 "The Covington Farm, A Case Study in Planning and Financing Farm'
Woodlot Production", Monthly Review, Federal Reserve Bank of St, Loujs,
December 1954.
* R-4-
CLIFTON B. LUTTRELL
A.
-t
J.
MEIGS
N
Page 117
^a^i
OF CURRENT CONDITIONS
Released for Publication September 1
WHHILE
THE AMERICAN ECONOMY continued
to give strong evidence of over-all prosperity during
the past few months, a disquiet persists which has not
been dispelled by the most recently available statistics.
After allowing for the significant upward drift in
prices these figures indicate that the economy is
continuing its sidewise movement with most activities changed but slightly when compared with the
recent past. To a public which has been conditioned
by the substantial rate of growth during 1955 and
1956, this loss of forward momentum has been the
subject of some greater impatience and concern than
the current high level of business vitality would seem
to warrant.
No doubt some of the anxiety regarding the nation's
economic future involves the existence of perceptible
soft spots. However, a conjuncture of offsetting
developments has served to maintain prosperity. These
include the rise in consumer outlays for nondurables
and services, the increased levels of government expenditures, and inventory accumulation.
During July the Federal Reserve Board index of
industrial production held steady at the June rate of
144 per cent. Total employment in nonagricultural
establishments was 52.8 million (seasonally adjusted)
in July, virtually unchanged from the revised June
figure. However, increased wage and salary disbursements in the trade and service industries, as well as
in government, were the basis for a slight 0.2 per
cent rise in personal income in July. The level of
unemployment, approximating 4 per cent of the labor
force, was little changed from a year ago. Continued
high levels of employment and income also seemed to
maintain consumers' spending as reflected in a 1 per
cent rise in retail sales. While it is clear that the
growth of general business activity has slowed to a
considerable extent, the continued increases in consumer prices and interest rates indicate that inflationary pressures have not entirely abated. The index of
consumer prices moved up M of 1 per cent during
July and the entire pattern of interest rates advanced
during August. However, even in this area the genPage 118
eral picture was alloyed by sporadic price declines
in individual commodities and some bearishness in
common stock prices.
This general picture of over-all stability is also evident in the Eighth District. Business at large changed
little during August as compared with July. Individual activities are manifesting some differences in
behavior and, although the order of magnitude of
month-to-month changes is modest in most cases, comparisons with last year are sometimes quite revealing.
Steel production in the St. Louis area continued the
decline which began in April of this year. This contraction in output has been interrupted only by the
brief upturn in July which was associated with a return to normal operations after the flood conditions
in June. Currently, steel plants in the St. Louis area
are operating at about 77 per cent of capacity and
production is down a substantial 18 per cent below
last year.
Livestock slaughtering in the St. Louis area was
also lower in August than in July with the bulk of the
decrease coming in hog and sheep processing.
Cross currents were apparent in the business picture, however. Southern pine output was almost 12
per cent higher during August than it was in July,
and was up about 6 per cent when compared with
last year's figures. Freight car interchanges in the
St. Louis area in early August were 18 per cent
above July. Commercial failures in July were down
somewhat from June and considerably below the level
of a year ago. In general, business failures have been
at a somewhat lower rate in 1957 than in 1956.
The major district labor markets, like their national
counterparts, reflected both the overall stability of
business in the aggregate and minor shifts in individual activities. Total nonagricultural employment
evidenced a small seasonal drop, while manufacturing employment was off slightly more than usual in
July. Typically there were some differences among
reporting centers in the district. Unemployment de-
clined from June to July throughout the district, but
was over year ago levels in Louisville, Little Rock and
Memphis.
Loans at Eighth District weekly reporting banks
expanded $50 million (about 3 per cent) during the
four weeks ending August 21, somewhat more than
is usual for. the period. The strength was largely in
business borrowing. Perhaps a third of the increase,
however, was unrelated to the business situation,
arising from the reclassification of certain security
holdings into the category of loans to brokers and
dealers. Loans to commodity dealers rose sharply
in conjunction with the August 16th deadline for
Commodity Credit Corporation cotton payments,
which created large flows of money through district
banks, especially at Memphis. Food and textile manufacturers added to loans, as did public utilities and
to a lesser extent construction contractors. Partially
offsetting these gains were net repayments of loans
by metal manufacturers, trade concerns and sales
finance companies. "Other" (largely consumer) loans
rose moderately in the four-week period.
Some of the changes in security holdings of reporting member banks in the period were associated with
Treasury financing. While certificate holdings increased following the pattern of the Treasury's August
1st refunding, the volume of Treasury notes declined.
Later in the month the Treasury's seasonally depleted
demand deposit balances were replenished by sales
of special 237-day bills, some of which were added to
bill holdings of the banks.
Developments in agriculture were seasonal in nature, with crops continuing to grow well, except for
some areas which received too much rainfall. Cottorj
picking began in the southern part of the district in
the latter part of the month. Because of delayed
spring planting, corn and soybeans are expected to
mature somewhat later than normal. United States
Department of Agriculture production estimates reveal that output of cotton, corn, and soybeans will be
substantially below 1956 volumes both for the nation
and for the Eighth District farms. The regional drop
is considerably more severe. The table below contains the estimates for the major district crops.
PRODUCTION OF SELECTED EIGHTH DISTRICT CROPS
1956 AND AUGUST 1, 1957 ESTIMATES
Cotton
Aug. 1,
1957 Percent
1956 Estimate Change
(Thousands 50-lb. Bales)
Arkansas
1,426
Illinois
—
Indiana
—
Kentucky
—
Mississippi
1,609
Missouri
448
Tennessee
552
Total Eighth Dist. States. . 4,035
Total United States
13,310
1,120
—
—
—
1,340
245
480
3,185
11,897
—21%
—
—
—
—17
—45
—13
—21
—11
Com
Aug. 1,
1957
1956
Estimate
(Thousand Bushels)
18,090
598,672
296,546
84,456
39,150
189,408
55,770
1,282,092
3,451,292
12,788
430,352
226,356
59,318
39,432
127,021
41,804
937,071
3,065,771
Percent
Change
—29%
—28
—24
—30
+ 1
—33
—25
—27
—11
Soybeans
Aug. 1,
1957
Per cent
1956
Estimate Change
(Thousand [ Bushels)
27,162
134,948
52,128
2,992
11,712
39,120
3,960
272,022
455,869
22,402
107,436
49,245
2,466
10,215
31,680
3,400
226,844
428,356
—18%
—20
— 6
—18
—13
—19
—14
—17
— 6
All Hay
Aug. 1,
1957
Per cent
1956
Estimate Change
(Thousand Tons)
949
4,998
2,723
2,431
908
3,523
1,754
17,286
108,708
1,017
4,717
2,662
2,320
952
3,990
1,767
17,425
118,897
+
—
—
—
+
+
+
+
+
7%
6
2
5
5
13
1
1
9
(R?
Page 119
VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
m9 CASH
r
FARM INCOME
"'
BANK DEBITSl
Six Largest Centers:
East St. Louis—
National Stock Yards,
111
Evansville, Ind
Little Rock, Ark
Louisville, Ky
Memphis, Tenn
St. Louis, Mo
Total—Six Largest
Centers
Other Reporting Centers:
Alton, 111
Cape Girardeau, Mo.. .
El Dorado, Ark
Fort Smith, Ark
Greenville, Miss
Hannibal, Mo
Helena, Ark
Jackson, Tenn
Jefferson City, Mo
Owensboro, Ky
Paducah, Ky
Pine Bluff, Ark
Quincy, 111
Sedalia, Mo
Springfield, Mo
Texarkana, Ark
Total—Other
Centers
July 1957*
compared with
June 1957 July 1956
+14%
—11%
—21
—11
—13
—19
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)
Coal Production Index—8th Dist. (Seasonally adjusted, 1947-49=100)
Crude Oil Production—8th Dist. (Daily average in thousands of bbls.)
Freight Interchanges at RRs—St. Louis (Thousands of cars—25 railroads—Terminal R. R. Assn.)
•
•
99.7
+ 3
+ 3
Livestock Slaughter—St. Louis area (Thousands of head—weekly average)
99.3
— 3
+ 1
Lumber Production—S. Pine (Average weekly production—thousands of bd. f t . ) . . . .
201.7
— 3
+ 2
Lumber Production—S. Hardwoods (Operating rate, per cent of capacity)
74
-|-/3
—20
* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwoodrate, and the coal
production index, show the relative percentage change in production, not the drop in index points or in percents of
capacity.
p Preliminary.
Second
a^M*}
July
1957
81
76.7 p
309.5
1957
(In
millions)
$
155.2
198.1
212.9
936.5
767.2
2,559.1
July, 1957
compared with
June
July
1957
1956
+
+
+
+
+
+
12%
10
5
11
8
10
+ 12%
+ 2
+ 7
+ 7
+ 7
+ 10
$4,829.0
+ 10%
+
9%
$
+
+
+
+
+
+
+
+
+
—
—
+
+
+
+
+
+
9%
40.8
18.4
32.8
59.9
27.4
12.2
9.2
25.2
112.7
46.9
30.2
43.0
44.9
16.6
102.0
22.6
2%
12
4
5
7
5
3
10
75
8
3
4
6
7
16
7
+ £
+
+ ?
4
+
+
+
—
+
+
+
+
+
+
+
+
6
13
18
9
26
2
16
27
13
5
6
5
644.8
+ 13%
+10%
Total—22 Centers . . . $5,473.8
+10%
+
$
9%
INDEX OF BANK DEBITS—22 Centers
Seasonally Adjusted (1947-1949=100)
1957
1956
July
June
_July
186.6
162.6
171.1
1 Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political
subdivisions.
1**&
Percentage Change
Jan. thru June
1957
compared with
1955
(In thousands June
of dollars)
1957
Arkansas. . $ 29,774
Illinois. . . . 118,739
Indiana. . . 64,039
Kentucky. . 26,209
Mississippi. 27,100
Missouri. .
81,315
Tennessee.
25.968
7 States . 373,144
8th District 1 169,538
Source: State data from USDA preliminary e»
timates unless otherwise indicated.
^Estimates for Eighth District revised based
Census of Agriculture.
Percentage of Accounts
and Notes Receivable
Outstanding July 1, '57,
Net Sales
collected during June.
7 mos. '57
Excluding
July, 1957
compared with
to same
Instal.
Instalment
June, '57 July, 56 period '56 Accounts
Accounts
-0-%
16%
50%
+ 5%
— 8%
8th F.R. District Total. .
Fort Smith Area, Ark.l. .
— 2
+ 2
— 2
39
Little Rock Area, Ark. . .
+ 3
+ 3
— 2
13
43
uincy, 111
—10
+ 2
— 5
vansville Area, Ind. . . .
—16
— 1
-0Louisville Area, Ky., Ind.
— 6
+ 3
— 1
15
42
— 4
— 2
— 6
Louisville (City)
—
6
+
10
+
6
Paducah, Ky.i
St. Louis Area, Mo., 111. .
—13
+ 7
+ 1
16
59
—11
+ 2
— 3
St. Louis (City)
Springfield Area, Mo. . . .
+ 3
+ 9
+ 4
Memphis Area, Tenn. . .
+ 4
-0— 1
15
35
All Other Cities 2
•. .
— 3
+ 4
— 1
1 In order to permit publication of figures for this city (or area), a special sample has been constructed which is not confined exclusively to department stores. Figures for any such nondepartment
stores, however, are not used in computing the district percentage changes or in computing department
store indexes.
2
Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi;
and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of July 1957, were 5 per cent higher than on
the corresponding date a year ago.
g
3
(Value of contracts in thousands of dollars)
June 1957 May 1957 June 1956
Total
$111,818 $156,559
Residential
45,295
64,841
Nonresidential. .
44,202
49,984
Public Works
and Utilities. . 22,321
41,734
$165,310
53,052
50,826
61,432
* Based upon reports by F. W. Dodge Corporation.
JHTH DISTRICT WEEKLY REPORTING MEMBER BANKS
(In millions of dollars)
Principal Changes
Change
in Commercial and Industrial Loans 2
from
Net Change During
Aug. 2 1 , July 24,
4 Weeks Ended
Assets
1957
1957
Business of Borrower
8-21-57
$ + 50
Loansf
$1,672
Manufacturing and Mining:
+ 34
881
Business and Agricultural.
Food, liquor and tobacco
$+ 9
+ 13
65
Textiles, apparel and leather
+ 5
Security
279
-0Real Estate
Metals and metal products
— 7
473
+ 3
Other (largely consumer).
Petroleum, coal,
841
+ 2
U.S. Gov't. Securities
chemicals and rubber
— 1
223
— 1
Other Securities
Other
+ 1
28
Loans to Banks
+ 11
841
Cash Assets
—26
Trade Concerns:
42
Other Assets
+ 1
Wholesale. . .
— 2
Total Assets
$3,647
$ + 37
Retail
— 2
Liabilities and Capital
Commodity dealers
+30
Sales finance companies
— 3
Demand Deposits of B a n k s . . . $ 662
$+ 6
Public Utilities (including
Other Demand Deposits
2,002
— 3
transportation)
+ 3
Time Deposits
602
+ 2
Construction
+ 1
Borrowings and Other Liab.. .
89
+30
All
Other
+
2
Total Capital Accounts
292
_ + _ 2_
Total Liab. and Capital. . $3,647
$ +~37
Total
$ + 36
1 Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported
gross.
2 Changes in business loans by industry classification from a sample of banks holding roughly 9 0 %
of the total commercial and industrial loans outstanding at Eighth District weekly reporting member
banks.
DEPARTMENT STORES
INDEXES OF SALES AND STOCKS-
STRUCTION CONTRACTS AWARDED
IN EIGHTH FEDERAL RESERVE DISTRICT *
-8TH DISTRICT
July
June
1957
1957
104
116
135
119
n.a.
128
n.a.
139
Sales (daily average), unadjusted
Sales (daily average), seasonally adjusted 3
Stocks, unadjusted *
Stocks, seasonally adjusted 4
Daily average 1947-49=100
Digitized for43 End
FRASER
of Month average 1947-49=100
n.a.
Not available.
http://fraser.stlouisfed.org/
days: July, 1957—26; June, 1957—25; July, 1956—25.
Federal Reserve Bank ofTrading
St. Louis
May
1957
127
127
138
138
July
1956
104
135
128
139
RETAIL FURNITURE STORES
8th Dist. Total 1
St. Louis Area
Louisville Area
Memphis Area
Little Rock Area
Springfield Area
Net Sales
July, 1957
compared with
June, '57 July, '56
+ 7 %
+10%
+18
+18
— 9
— 8
+ 3
—15
+ 4
+ 6
+ 5
+10
1 In addition to the following cities shown separately
in the table, the total includes stores in Blytheville, Fort
Smith, Pine Bluff, Arkansas; Owensboro, Kentucky;
Greenwood, Mississippi; Evansville, Indiana, and Cape
Girardeau, Missouri.
Note: Figures shown are preliminary and subject to
revision.
J a n u a r y 1958
Volume X X X X
Number 1
What's in Store for Farmers in 1958
In order to provide farmers and others with latest information on prospects for agriculture, the United States Department of Agriculture holds an
Annual Outlook Conference in Washington, D. C.
This report is a summary of the outlook for farmers in 1958 as viewed by the
department at the thirty-fifth annual conference held November 18-22, 1957.
i . "'
1958 FARM OUTLOOK IN BRIEF
AS SEEN BY THE UNITED STATES DEPARTMENT OF AGRICULTURE
Prices received by farmers will probably average
about the same as in 1957.
Production expenses are apt to work up, but net
realized income from farming will probably remain
about the same as in 1957.
A slight increase in per capita income of farm people
is in prospect.
The standard of living on farms will probably continue to improve, partially because of increased income
from nonfarm sources.
Farm output is expected to remain high and may
even set a new record, depending on the weather.
Exports of farm products will likely continue high
but will probably be somewhat less than during the
fiscal year ending June 30, 1957.
Carryover of feed grains is expected to increase, but
stocks of wheat and cotton may decline again.
National food consumption will likely remain at a
high level.
Marketing charges may increase and push retail food
prices higher.
Government price supports, Soil Bank payments and
export program costs will probably remain large, but
land in the acreage reserve program is expected to be
reduced.
Farm debts and farm asset values will likely continue
upward.
Specific conditions which are assumed will prevail
during the ensuing year are: (1) the domestic business
situation will continue fairly strong with no substantial
letdown in production, prices or employment; (2) war
will be avoided, and the international situation will not
touch off a burst of inflation; and (3) there will be no
major changes in Governmental programs affecting 1958
farm income.
Federa
Bank
St. Louis
Survey
of Current
Conditions—p.
9
What's in Store for Farmers in 1958
Average farm commodity prices and net realized farm
income are expected to be about the same in 1958
as last year.
HE AVERAGE LEVEL of prices received by
farmers has gone up a little for two successive years.
For the first ten months of 1957 prices averaged about
3 per cent above the same months of 1956. With
domestic demand and exports expected to continue
strong during 1958, no great change from average
prices received in 1957 is expected.
The somewhat higher level of farm output expected in 1958, coupled with the same average
prices, points to a modest increase in gross farm
income. Higher production costs, however, may
cancel out the increase, leaving net realized income
at about the 1957 level. Estimates of realized net
farm income in 1957 are slightly above the $12.1 billion received in 1956 and well above the 1955 total. 1
When the increased aggregate net realized farm income is divided by a reduced number of farms, it
means a greater increase in realized net accruing to
each farm. The number of farms is declining about
2 per cent per year. Moreover, as farm population
is declining at an even faster rate than the number
of farms, there will probably be a somewhat greater
increase during 1958 in average realized net income
per person living on farms.
Average prices paid by farmers for goods and services used in production during the first nine months
of 1957 were 4 per cent higher than in the same
months of 1956. This upturn was attributed to a
general increase in the prices of industrial products
used by farmers and a substantial rise in feeder livestock prices. Machinery, equipment, building and
fencing materials averaged about 4 per cent higher.
Prices of such factory-produced goods are expected
to increase less in 1958 than last year.
Supplies of farm products will be abundant,. . .
Supplies of farm products in 1958 are expected to
exceed the more than adequate supplies of recent
years. Output in 1957 of both crops and livestock
held near the record levels of 1956 (Chart I) and
stocks of feed grain continued to rise. However,
some progress was made in reducing burdensome inventories of wheat, cotton and rice. Prospects for an
overall reduction in carryover at the end of 1958 are
not promising.
CHART I
FARM OUTPUT
% OF 1947-49
120
Livestock & products
Total farm
yf
output
Production costs will probably continue to rise.
Department of Agriculture economists expect
farm costs to continue upward in 1958, although at a
slower rate of increase than occurred during 1957.
1 Realized net farm income in the Eighth District in 1957 was probably
less than in 1956 because of poor weather for planting and harvesting, especially in the southern part of the district. Cash farm receipts in the district
during the first ten months of 1957 were down 11 per cent from the same
months of 1956.
Page 2
100
1947
1950
AGRICULTURE
1953
1956
1959
The nation's farms are expected to set new production records, despite acreage allotments and the
Soil Bank Program. The Soil Bank Program was
credited with reducing crop acreage from 354 million acres in 1955 to 338 million acres in 1957, but
crop production remained at record levels. In 1958
fewer acres are expected to be placed in the acreage
reserve program. The expected increase in crop acres
and the upward trend in yields may again raise total
crop output.
Furthermore, large feed supplies,
coupled with expanding hog and broiler output, point
to increased production of livestock and livestock
products.
. . . reflecting technological advances which
boost output per acre and per animal unit.
Another supply factor, difficult to measure but of
increasing importance during the last quarter century, is the change in farm technology. Today's farm
worker produces on the average as much in one hour
as a farm worker produced in two hours in 1940,
or in three hours in 1910.
CHART II
U. S. INCOME
100
iOISPOSABLE I N C O M E :
;:-t;:;i;:;:t:;:;:;;;i;:;:-:-£:
mmmmm 1950
jg&saa
1955
1945
L
1960
remain high in 1958 (Chart II). Expenditures for
food have gone up at about the same rate as consumer income. However, much of the food expenditure increase has been absorbed by additional services and higher cost of food distribution (Chart III).
. . . but exports may decline slightly .. .
Acreage of cropland used on the nation's farms in
1957 was slightly smaller than in 1940, but total production was 24 per cent greater. Markedly increased
yields have been obtained for the major crops of
wheat, corn, cotton and tobacco.
Production of livestock and livestock products per
breeding unit has also shown equally impressive
gains. The number of milk cows has been the lowest
on record during the past few years, while production of milk has been near record levels. Egg production per laying hen has similarly increased. Total
livestock production in 1957 is estimated at 40 per
cent above 1940; however, the number of breeding
units was up only 8 per cent. These basic trends
are expected to continue in 1958.
Exports of American farm products are expected to
be high in fiscal 1958, but possibly somewhat below
that of the previous fiscal year (Chart IV). In the
1957 year over one-half the production of wheat,
cotton and rice, and one-third the production of soybeans and tobacco was shipped to other countries.
Approximately 40 per cent of 1957 exports can be
traced to various Government programs which involve
CHART III
FARMER'S SHARE AND MARKETING
MARGIN OF RETAIL FOOD DOLLAR*
^ B M a r k e t i n g margin
Farmer's share rW-
Domestic consumption of farm products tvill
remain at high levels,...
Consumer expenditures for food and other farm
products, at record levels throughout 1957, are expected to remain high in 1958 reflecting the increase
in population and disposable income of consumers.
Disposable income of consumers was about 5 per cent
higher in 1957 than a year earlier, and is expected to
1940 1945 1949
'51
'52 '53 '54
'55 '56 '57
, S. DEPARTMENT OF AGRICULTURE
Page 3
CHART IV
CHART V
VALUE AND VOLUME OF EXPORTS
THE BALANCE SHEET OF AGRICULTURE
% OF 1948-50
$ BILL.
CLAIMS
200
^ O t h e r debt
" •
Real estate d ebt
1
J*' "
To*- 1
\m
\
1951-52 52-53 '53-54 '54-55 '55-56 '56-57
N O / N C JUNE
. S.
.
AVERAGE
1940
1940
HI -
/
'•
Wm ~
HP -
.
1945
1950
1955
I960
1952-5
DEPARTHE
barter, charitable donations or sales of surplus commodities for foreign currencies. Also, a portion of
the remaining 60 per cent was financed by the Government through the Commodity Credit Corporation
or other Government agencies. During the past fiscal
year, however, our agricultural exports which sold
for dollars reached $2.8 billion, the second highest
since World War II.
. . . reflecting a reduction in the availability of
dollars of some major importing countries.
One important factor in the outlook for exports this
year is the financial condition of those nations which
pay in dollars for American farm products. Some of
those customers suffered important declines in their
liquid assets last year. Their efforts in the year
ahead to increase gold and dollar holdings may cause
a reduction in purchases from us. If their export markets are inadequate, they will be forced to produce
increasing quantities of farm products at home and
reduce imports from the United States.
The financial outlook for farmers in 1958 is much
the same as last year.
Generally strong net worth positions are expected
to be maintained by many farmers in 1958. Farm
land and most other farm capital items are expected
to continue upward in value. A further rise in debt
is also anticipated, although the increase may be at a
slower rate than in recent years. It was estimated
that owners' equities at the beginning of 1958 would
total $168 billion, or nearly 7 per cent above that of
the previous year. 2 Farm real estate accounted for a
large percentage of this estimated increase (Chart V).
Little change is expected in the amount of financial
assets held by farmers. Cash bank deposits and other
liquid financial assets remain approximately the same
as a year ago.
•2 Net worth positions of farmers in the Cotton Belt portion of the Eighth
District probably deteriorated in 1957. Excessive rainfall reduced the quality
and quantity of the cotton crop and prevented the harvest of a considerable
acreage of soybeans. Farmers in this area probably had a heavy carryover of
debts on January 1, 1958, and equities somewhat below those of the previous
year.
^S^)
Page 4
The Outlook is Varied for Major Eighth District Farm Commodities
. . .
CONDENSED SUMMARY OF 1958 OUTLOOK FOR MAJOR EIGHTH DISTRICT
FARM COMMODITIES AS SEEN BY THE DEPARTMENT OF AGRICULTURE
Prices of finished cattle are expected to average a
little higher than last year.
The supply of feed concentrates has reached a record of 214 million tons for the current feeding season.
High protein feed supplies are expected to equal those
of last year.
Average pork prices may be about the same as last
year during the first half of 1958, but in the second
half are expected to move appreciably lower than in
the second half of the past two years.
Wheat carryover may be less next July 1. Price is
expected to average near the support level.
Milk prices are not expected to change much from
the 1957 average.
Supplies of food fats and oils are up. A carryover
of 50 million bushels of soybeans is expected.
Somewhat higher egg prices are in prospect, but the
outlook for broilers is less optimistic.
Rice carryover may be down in 1958 for the second
successive year.
Large supplies generally dominate the outlook for
all major Eighth District crops.
Supplies of cotton are down from last year and a
further reduction in carryover in 1958 is expected.
Somewhat higher average prices are expected
in 1958 for cattle.
Prices of fed cattle are expected to average a little
higher during the current feeding season than last
year. Until late 1957, cattle producers withheld few
cattle from slaughter. In 1958 the number withheld
for breeding is expected to increase, reducing total
cattle slaughter and beef output. The estimated supply of all kinds of meat in 1958 is about 158 pounds
per person, or 1 pound less than the estimated consumption in 1957. Higher prices were paid for feeder
stock last fall than the previous year, but feed cost
will be lower, and experience has shown that when
cattle prices turn upward the rise generally exceeds
expectations.
Pork prices may decline appreciably during the
second half of the year.
Hog prices may equal 1957 prices during the first
half of the year but are expected to decline after
midyear. Supplies of pork per person during the
first part of the year will be at about the same level
as last year. A larger spring pig crop is anticipated,
which will increase supplies when marketed later in
the season. This increase is expected to be sufficient
to cause a rather sharp decline in prices. 3
3 More recently the Department of Agriculture has estimated that the
spring pig crop will be smaller than was predicted during the Outlook Conference. If the later estimates are borne out, the price decline may not be
so sharp.
Not much change is expected in the price of milk.
Relative stability in milk prices is in prospect again
this year.4 Milk prices changed very little during the
past year except for some seasonal variation and the
April 1 increase in the support level. Fluid milk
prices were up in a few markets as a result of premiums established over minimum levels. The United
States average price for the year was $4.20 per hundred pounds compared to $4.13 in 1956.
Total milk production in 1957 was about 127 billion pounds, or about 1.3 billion pounds more than in
1956. Large supplies of feed concentrates and roughages, plus relatively favorable price relationships,
point to a further increase in milk production in 1958.
Output will probably be up by one to two billion
pounds.
Supplies of milk continue to exceed available outlets at existing prices, pointing to a continued surplus
milk production this year of about 5 billion pounds.
In recent years consumption of non-fat-solids (all milk
solids excluding butterfat) have been around 48
pounds per person compared to 46 pounds in 1950
and 40 pounds during the 1920 and 1930 decades.
Consumption of milkfat, however, has been 27 pounds
per person during the past few years compared to 29
4
The Secretary of Agriculture recently announced a reduction in price
supports for dairy products effective April 1, 1958. Whole milk may go
down V2 cent per quart.
Page 5
pounds in 1950 and 31 to 32 pounds during the 1920
and 1930 decades. At the current consumption rate,
the prospective increase in population next year will
little more than offset the expected increase in production.
Egg prices are expected to be higher,
but the outlook for broilers is less optimistic.
Somewhat higher egg prices are in prospect for
early 1958, according to Department economists. At
the beginning of 1958, there were about 5 per cent
fewer layers than a year ago. Higher production per
bird may partially offset the reduction in layers over
the full year, but during the flush spring laying season egg output will probably be down. This would
result in reduced egg consumption per person, or
fewer eggs for storage, or a combination of the two.
In any case, egg prices received by farmers during
the first half of 1958 are expected to average about
5 cents per dozen higher than the first half of 1957.
Higher egg prices combined with cheaper feed will
provide egg producers with a more favorable situation through the 1958 hatching season.
The outlook for broiler prices is less optimistic.
Production in 1957 was probably about 6 per cent
above the 1,345 million birds produced in 1956. About
the same percentage increase is expected again this
year. Broiler prices will probably average about 19
cents per pound, in view of increased supplies of
poultry but with the slight decline expected in other
meat production per person.
Large supplies dominate outlook for major
Eighth District crops.
Total supplies of feed concentrates have reached
a record of 214 million tons for the current feeding
season. This is 7 per cent above the 200-million-ton
record of last year, and the fourth successive year of
record supplies. All increases in stocks have been
held under Government support programs, "free"
stocks remaining comparatively stable.
Production of feed grains has exceeded consumption plus exports during the past five years by an
average of five million tons, or 4 per cent per year,
and a sixth consecutive increase is expected this year
in the carryover stocks.
Corn has accounted for much of the increase in
feed grain supplies. Despite declining acreage, proPage 6
FEED GRAIN SUPPLY DISAPPEARANCE AND CARRYOVER ESTIMATES
FOR 1956-1957 AND 1957-1958
1956-1957
1957-1958
(millions of tons)
Production
Carryover from previous year
Imports
Total supplies
Total disappearance. . . .
Carryover into following year
130
43
1
174
127
47
140
47
1
188
130
58
duction has exceeded disappearance in each of the
last five years. Although acreage for harvest in 1957
was about 10 per cent less than in 1955, last year's
crop of 3.3 billion bushels was the third largest on
record and about 100 million bushels in excess of 1955
production.
A carryover of 1.4 billion bushels of corn into the
1958-1959 season is expected. This is approximately
100 million bushels in excess of last year's carryover.
Most of the carryover will be under loan or owned
by the Commodity Credit Corporation.
Supplies of other major feed grains, particularly
sorghum grain and barley, increased from 1956 to
1957. The big crop of sorghum grain in 1957 reflects
a record acreage harvested, use of improved varieties
and a favorable growing season. Large quantities of
sorghum grain and barley are being placed under the
price support program, and a large carryover into
next year is expected. Oats are the only feed grain
not in record supply this year.
The level of feed grain prices is expected to continue lower than last year, at least through the winter
and spring. The October 1957 prices were about 12
per cent below October prices of the previous year.
Practically no seasonal price gains were made last
year, and less than normal seasonal increases are
expected this year. Winter and spring corn prices
are expected to average lower than the $1.21 per
bushel average of last winter and spring.
ESTIMATES OF PRODUCTION, SUPPLY AND DISAPPEARANCE
OF WHEAT FOR THE MARKETING YEARS OF 1956-1957
AND 1957-1958
1956-1957
1957-1958
(millions of bushels)
Production
Carryover from previous year
Imports
Total supply
Exports
Domestic consumption
Total disappearance
Carryover into following year
997
1,033
8
927
908
8
2,038
1,843
549
581
1,130
908
400
592
992
851
CHART VI
Hay supplies for the 1957-1958 season are also at
record levels. Good weather for production of hay
and pastures prevailed over most of the nation during
the past summer and fall. Drouth areas were comparatively small and confined largely to the eastern
states and to local areas in the Southwest.
High protein feed supplies have increased steadily
during the past twenty years. Expanded soybean
meal production, which now accounts for over half
the supply of such feeds, is the major factor in the
increase. Total supplies of high protein feed during
the current feeding season are expected to equal
those of last year. Production of soybean meal and
cake may be a little larger than last year's record, but
a reduced output of cottonseed and linseed meal is
expected.
Wheat carryover is expected to be down again next
July 1. The 1957 decline was the first significant reduction since the buildup began in 1952 (Chart VI).
Record exports of 549 million bushels were the main
factor in the decline. The previous export record of
504 million bushels in 1948-1949 was exceeded by
almost 10 per cent.
A large part of the 1956-1957 wheat exports moved
under Government foreign aid programs or by export
subsidies. The cost of all the Government programs
to stabilize wheat prices and incomes was $827 million, or about one-fourth of the total spent on all
commodities for price stabilization purposes.
Increasing yields per acre have been an important
factor in excessive wheat supplies. In 1957, yields
reached a record of 18.7 bushels per seeded acre, 50
per cent above the five-year prewar average.
The average price to farmers for wheat in 1957-1958
is expected again to be near the national support
level.
The carryover of rice on August 1, 1958 is expected to be down about 15 per cent from last year.
On August 1, 1957 carryover totaled 20.1 million
hundredweight compared to the record carryover of
36.6 million hundredweight on August 1, 1956. Record
exports of 37.7 million hundredweight under Government foreign aid programs was the main factor contributing to the sharp carryover decline in 1957.
Under provisions of existing legislation, a crop of
45.0 million hundredweight of rice may be produced
in 1958. Prices of rice for the 1957-1958 marketing
year are expected to average slightly above the support rate of $4.72 with the exception of certain varieties and qualities.
Soybean meal prices are expected to average about
the same as last year. High protein feed prices, particularly soybean meal, have declined more rapidly
during the past two or three years than grains. This
decline has significantly reduced the difference between the price of soybean meal and corn. This
more favorable competitive factor, plus the expected
increase in livestock production, should help maintain soybean meal prices at approximately 1957 levels.
Food fats and oils (primarily soybean, cottonseed,
linseed, and tung oils and lard), like other crops, are
beset by generally larger supplies than a year earlier.
The total supply of food fats in 1957-1958 is expected
to be'about 11.8 billion pounds compared to slightly
less than 11.7 billion pounds last year. An additional
fifty million bushels of soybeans (equivalent to 550
million pounds of oil) are likely to remain on hand
next September 30.
Exports are an increasingly important part of the
market for food fats and oils. Such exports were equal
to 27 per cent of the 1956-1957 domestic production.
Indications are that exports during the current marketing season will be somewhat less than last year. Lower
prices will probably prevail, but exports will be dependent largely on Government programs which enable foreign nations to make purchases with their own
currencies. Exports of fats and oils are estimated at
about 1,100 million pounds for the current marketing
year compared with 1,230 million pounds in 1957.
Supplies of soybeans for 1957-1958 are estimated at
500 million bushels, or 40 million more than last year's
record. Production last year was estimated at 491 million bushels, 8 per cent higher than in 1956. A crush
of about 325 million bushels is anticipated. Exports
may total about ninety million bushels. With seed requirements of thirty-five million bushels, about fifty
Page 7
million bushels would be carried over into the following season. In view of heavy supplies, any seasonal
upswing in price will be limited.
Cottonseed output in 1957 was estimated at nearly
11 per cent less than in 1956, and the lowest since
1950. Prices of cottonseed meal and oil, however, will
probably reflect the large supplies of soybean meal
and oil. No significant rise in cottonseed oil prices is
expected, and cottonseed meal prices may average
somewhat lower than last year.
The total supply of burley tobacco is slightly below
that of last year, and 4 or 5 per cent below the record
high of three years ago. Supply is about 3.5 times
estimated disappearance compared with a high of 3.6
during 1954-1955 and a range of 2.7 to 3.3 for several
years prior to that. Carryover is the third largest on
record. The 1957 burley crop is expected to be 5 per
cent below that of the previous year, and the second
smallest since 1943. The Soil Bank Program, combined
with acreage allotments, brought about a slight reduction in acres. Yields per acre were also down from
the previous year's levels.
Supplies of cotton are down from last year's record
high. On August 1, 1956, cotton producers were faced
with a record carryover of 14.5 million bales which,
added to 1956 production and imports, resulted in
record supplies of 27.6 million bales. But carryover on
August 1, 1957 was down by more than three million
Page 8
bales because of an increase in exports to 7.6 million
bales, the highest since 1932. Domestic consumption
of 8.6 million bales was slightly below the previous
year's level. Much of the increase in exports can be
credited to lower export prices. Domestic and export
prices were the same until the 1956-1957 marketing
season, when export prices on cotton held by the
Commodity Credit Corporation were reduced to
permit the selling of United States-produced cotton
on the world market. It is believed that this reduction affected foreign production, foreign consumption and stocks of cotton.
Carryover on August 1,1958, is expected to be down
another 2.3 million bales. Exports during the current
season are estimated to be about 5.5 million bales, the
difference between foreign production and consumption. This is smaller than exports last year when foreign stocks were built up. Such stocks are expected
to remain fairly stable this year. Domestic mill consumption of cotton is not expected to increase. Consumption per capita has been trending downward
since the end of World War II. Concomitant with this
downward trend has been an upward trend in consumption of man-made fibers. However, no additional
substitution of man-made fibers for cotton was apparent from 1955 to 1957. Use of both types of fibers was
down about 9 per cent over the two years.
CLIFTON B. LUTTRELL
$
*
>
#
(
OF CURRENT CONDITIONS
Released for publication January 5
A,
S 1957 DREW TO A CLOSE, business conditions
were somewhat less sanguine than earlier. The trend
of activity was downward in manufacturing, and
unemployment was rising more than the usual amount.
Yet there were some brighter aspects on the economic
scene. Department store sales picked up more than
seasonally in the first three weeks of December, prospects for home building improved and greater outlays
for defense purposes appeared to be in the offing.
While the old year ended with a declining trend,
economic activity in 1957 averaged higher than in
1956. Gross national product, personal income and
spending were all about 5 per cent higher, according
to the latest available information. But the greater
part of the increase reflected higher prices and the
gain in real terms was nominal. Total employment
and the physical volume of industrial output, for
example, probably exceeded 1956, but by less than
one per cent. With the growth in population, income
available for spending by each person, when adjusted
for higher prices, was actually slightly less than in
1956.
The capital investment boom, which was a major
force in the expansion of economic activity during
1956 and early 1957, apparently reached a peak during the year. According to the survey taken by the
Department of Commerce and the Securities Exchange Commission, planned outlays by business on
new plant and equipment in the first quarter of 1958
are 5 per cent below those of the fourth quarter of
1957. The decline follows the substantial expansion
of plant capacity in recent years. With some manufacturing firms operating at less than desired rates
of capacity, the pressure for additional plant facilities
has been reduced. According to the Commerce-SEC
Survey all major groups of industries intend to reduce
capital outlays in the first quarter of the year more
than is normal for that season. The largest decline,
both relatively and in dollar amount, is anticipated
by manufacturers.
With the weakening of inflationary tendencies and
the declines in new orders received, a more cautious
attitude toward inventories has become apparent.
Business inventories had been augmented moderately
during the first three quarters of 1957, but in October
stocks were reduced substantially. Inventory liquidation probably continued in November and early
December as evidenced by the contraseasonal decline
in bank loans to business.
Another factor in the decline of business activity
has been the reduction in Government spending for
military goods. In the third quarter of 1957, outlays
for national security purposes were slightly less than
in the preceding quarter and military ordering was
substantially reduced. However, following recent developments in the international situation, the rate of
military spending may be increased in the months
ahead. There may also be a shift in emphasis on the
type of weapons, machines and techniques, resulting
in reduced activity for some producers and increases
for others. Shifts in defense needs have already been
felt in the Eighth District in reduced employment at
ordnance and aircraft plants in the St. Louis and
Louisville areas.
The decline in the demand for military and industrial equipment has been felt most severely in the
nation by the metal and metal-fabricating industries.
Largely reflecting the reduction in output of durable
goods, total industrial production declined in October
and November and a further decrease was indicated
in December. In November industrial production,
as measured by the Federal Reserve index, was about
5 per cent less than a year earlier. Weakness was
evident in the automobile industry, and output was
cut back in December as dealers' inventories rose
sharply. Producers were reported to be scheduling
output for the first quarter of 1958 at less than a year
ago, reflecting the slower sales pace of the 1958
models.
The decline in industrial production in the past
year is also apparent in the major metropolitan areas
of the Eighth District. In November, manufacturing
employment in these areas averaged 4 per cent less
than a year ago, with declines occurring in St. Louis,
Page 9
Louisville, Memphis and Evansville. In Little Rock,
however, manufacturing employment was virtually
unchanged from the year-earlier level.
The easing of production apparently continued in
December. Steel ingot production in the St. Louis
area declined substantially from November to December and was about a third less than a year earlier.
Lumber output, livestock slaughter, coal production
and freight carloadings likewise fell below year-earlier
levels. Crude oil production, however, was at about
the same pace.
While manufacturing activity declined, construction activity in the district continued at a high level.
The total value of construction contracts awarded in
the first ten months of the year was 4 per cent larger
than in the corresponding period of 1956. The district gain continued to result entirely from greater
residential construction. Nonresidential, public works
and utilities construction contracts fell below yearearlier levels. Residential construction contracts in the
first ten months of the year totaled $525 million, an
increase of $76 million over the corresponding period
of 1956. The increase was approximately equal to the
value of large-residential projects at military installations and other publicly owned housing included in
contracts awarded in 1957.
Recently, there has been some upturn of private
residential activity in the district. The value of contracts for housing in the district averaged about the
same in the August-October period as in the first
seven months of the year. However, in the three
months ending in October nearly all of the contract
value was for privately owned housing whereas in
the first seven months publicly owned housing constituted about one-fifth of the total.
The outlook for residential construction has been
enhanced by recent developments and the Departments of Labor and Commerce have forecast a 6 per
cent increase in such expenditures in 1958. Greater
availability of mortgage funds and continuing population growth may combine to bring increased residential building in 1958. The recent decline in bond
yields has made mortgages more attractive and the
prospective decline in business capital outlays may
reduce the pressure for investment funds.
The decline in business activity has been reflected
in reduced demands for labor. Nonfarm employment
in the nation, which usually rises between October
and November, dropped by 300,000 and, for the first
time in almost three years, fell below year-ago levels.
Manufacturing jobs, which declined generally during
Page 10
1957, numbered 625,000 below a year ago. The average workweek of factory production workers also
declined and in November was at the lowest level for
that month since 1949. Employment in nonmanufacturing industries also edged downward in November
after about three years of consistent gains (allowing
for seasonal variations). Employment in construction
and transportation was less than a year earlier, but in
other nonmanufacturing industries employment continued above year-ago levels.
As demands for labor were reduced, unemployment
turned upward more than seasonally in November
and early December. In the week ended November
16 there were an estimated 3.2 million unemployed,
5 per cent of the labor force (after seasonal adjustment) and 526,000 more than a year earlier. Insured
unemployment continued to mount more rapidly than
usual in November and early December.
In the St. Louis, Louisville, Memphis and Evansville areas, total nonfarm employment in November
was slightly less than a year earlier. Preliminary indicators in December show unemployment in these
cities was larger than a year earlier. In the four weeks
ending December 21 unemployment insurance claims
rose somewhat in St. Louis and Evansville, in contrast
to declines in the corresponding period last year. In
Memphis the increase was greater than a year ago,
but in Louisville it was substantially less.
With employment leveling off and the average workweek being reduced, personal income declined slightly from August through November. Reflecting this
decline and more cautious attitudes, consumers spent
at a slower pace in the last few months of 1957. Retail
sales, after allowance for seasonal variations, declined
through November from the peak reached in August.
In the first part of December new automobile sales
were less than a year earlier. Department store sales
in both district and nation, however, gained more
than seasonally in the first three weeks of December
and were about the same as a year earlier.
The easing of economic activity has been accompanied by some reduction in the upward pressures on
commodity prices and by actual price declines for
some important commodities. Average wholesale
prices have shown only minor variations since July,
primarily as a result of seasonal movements in prices
of farm products and processed foods. Average industrial commodity prices have shown little change. The
upward pressure on consumer prices has also eased,
and the index of consumer prices showed little change
from August through October. In November the index
increased slightly, reflecting primarily the higher prices
(and lower discounts) on new models of automobiles.
Government officials, however, expected a leveling off
of the index in subsequent months.
Loan demand at district banks was heavier than
usual during December. Total loans (except interbank) at weekly reporting banks in the district rose
$34 million or 2 per cent during the four weeks ended
December 18. Businesses and consumers accounted
for the bulk of the loan expansion. In the business
sector, sales finance companies and commodity dealers added $18 million and $13 million respectively to
their outstanding indebtedness. On the other hand,
manufacturers of textiles, apparel and leather made
larger net repayments of bank loans in the four weeks
than the average net reductions in the like period of
recent years. "Other" (largely consumer) loans rose
$12 million or over 2 per cent. The expansion in these
loans centered in banks at St. Louis, Louisville and
Memphis.
On balance, district banks increased their investment holdings $38 million during the four weeks. The
increase was in all types of United States Government
securities, stemming in large part from net purchases
of the Treasury's new certificates, notes and bonds in
early December.
&^0
Page 11
VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
/#£«-***
Nov.
1957
87
76.2 p
389.2
Nov. 1957*
compared with
Oct. 1957 Nov. 1956
— 4%
—16%
—10
— 8
— 1
— 1
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)
Coal Production Index—8th Dist. (Seasonally adjusted, 1947-49=100)
Crude Oil Production—8th Dist. (Daily average in thousands of bbls.)
Freight Interchanges at RRs—St. Louis (Thousands of cars—25 railroads—Terminal R. R. Assn.)
95.9
— 4
— 7
Livestock Slaughter—St. Louis area (Thousands of head—weekly average)
107.6
—11
—24
Lumber Production—S. Pine (Average weekly production—thousands of Ed. f t . ) . . . .
202.7
— 8
— 3
Lumber Production—S. Hardwoods (Operating rate, per cent of capacity)
71
—12
—20
* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate, and the coal
production index show the relative percentage change in production, not the change in index points or in percents of
capacity.
p—Preliminary.
BANK DEBITS*
East St. Louis—
National Stock Yards,
111
$ 140.4
Evansville, Ind
177.2
Little Rock, Ark
200.3
Louisville, Ky
:.
863.3
Memphis, Tenn
886.3
St. Louis, Mo
2,277.9
Total—Six Largest
Centers
$4,545.4
Nov. 1957
compared with
Oct.
Nov.
1957
1956
—15%
— 5
—13
i—•
Six Largest Centers:
Nov.
1957
(In
millions)
— 8%
-0+ 1
— 2
— 2
— 2
2%
— 8%
Other Reporting Centers:
Alton, 111
$
Cape Girardeau, Mo.. .
El Dorado, Ark
Fort Smith, Ark
Greenville, Miss
Hannibal, Mo
Helena, Ark
Jackson, Tenn
Jefferson City, Mo
Owensboro, Ky
Paducah, Ky.
Pine Bluff, Ark
Quincy, 111
Sedalia, Mo
Springfield, Mo
Texarkana, Ark
Total—Other
Centers
35.9
16.9
27.6
60.4
32.7
11.6
16.2
29.1
92.9
50.9
30.4
58.0
43.1
17.1
89.5
20.3
— 7%
—10
—14
— 4
+ 5
— 8
+ 8
— 7
—16
-0-0—13
—13
— 3
—15
— 6
—
—
+
+
7%
8
2
8
-0+ 10
+ 9
—12
+ 23
+ 2
+ 9
— 5
+ 3
+ 10
— 1
— 4
632.6
— 9%
+
Total—22 Centers. . . $5,178.0
— 8%
— 2%
$
3%
INDEX OF BANK DEBITS—22 Centers
Seasonally Adjusted (1947-1949=100)
1957
1956
Nov.
Oct.
Nov.
166.1
169.2
168.9
1
Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political
subdivisions.
*7*a<fc
EIGHTH DISTRICT WEEKLY REPORTING MEMBER BANKS
(In millions of dollars)
Principal Changes
Change
in Commercial and Industrial Loans 2
from
Net Change During
Dec. 18, Nov. 20,
4 Weeks Ended
Assets
1957
1957
Business of Borrower
12-18-57
Loans*
$1,710
$1,710 $ + 34
Manufacturing and Mining:
Business and Agricultural.
Food, liquor and tobacco
$ —0—
915
+ 23
Security
Textiles, apparel and l e a t h e r . . . .
— 7
48
+
1
Real Estate
Metals and metal products
—0—
279
— 2
Other (largely consumer).
Petroleum, coal,
494
+ 12
U.S. Gov't. Securities. . . .
chemicals and rubber
+ 1
883
+ 40
Other Securities
Other
— 1
225
— 2
Loans to Banks
37
+ 17
Cash Assets
954
+ 29
Trade Concerns:
Other Assets
46
-0Wholesale. . .
— 2
$3,855 $ + 118
Betail
Total Assets
— 1
Liabilities and Capital
Commodity dealers
+13
Sales finance companies
+18
$ 804 $ + 78
Demand Deposits of Banks
Public
Utilities
(including
Other Demand Deposits
2,072
2,072
+ 57
transportation)
+
2
Time Deposits
602
— 2
Construction
— 1
Borrowings and Other Liab.
80
— 15
All
Other
+
1
Total Capital A c c o u n t s . . . .
297
-0Total
$ + 23
Total Liab. and Capital $3,855 $ + 118
1
Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported
gross.
2
Changes in business loans by industry classification from a sample of banks holding roughly 9 0 %
of the total commercial and industrial loans outstanding at Eighth District weekly reporting member
banks.
CASH FARM INCOME
Percentage Change
Jan. thru Oct.
Oct. '57
1957
(In thousands Oct.
from
compared with
of dollars)
1957
Oct. '56
1956
1955
Arkansas. . $100,067 — 2 6 % — 2 5 % — 2 %
I l l i n o i s . . . . 222,496 — 4
+ 3
+ 13
Indiana...
118,210
+ 3
-0Kentucky. .
35,736 — 2
+ 3
Mississippi.
80,985 — 3 3
—29
Missouri. .
115,505 —14
— 4
—18
Tennessee.
61,922 — 1 2
—11
+ 7
7 States. . $734,921 — 1 3
— 5
+ 41
8thDistricti $362,248 — 2 0
—11
+ 1
±1
timates unless otherwise indicated.
1 Estimates for Eighth District revised based on
1954 Census of Agriculture.
DEPARTMENT STORES
Net Sales
CONSTRUCTION CONTRACTS AWARDED
IN EIGHTH FEDERAL RESERVE DISTRICT*
(Value of contracts in thousands of dollars)
Oct.
1957
Total
$102,690
Residential
49,553
Nonresidential. .
36,017
Public Works
and Utilities. .
17,120
Sept.
1957
Oct.
1956
$105,979 $99,574
50,813 38,241
30,355 36,250
24,811
25,083
* Based upon reports by F. W. Dodge Corporation.
INDEXES OF SALES AND STOCKS—8TH DISTRICT
Percentage of Accounts
and Notes Receivable
Outstanding Oct. 3 1 , '57
collected during Nov.
11 mos. '57
Nov. 1957
to same
Instal.
compared with
Oct. '57
Nov. '56 period '56 Accounts
Excluding
Instalment
Accounts
55
16
8th F.R. District Total
+ 9 %
— 7%
1%
41
1
Fort Smith Area, Ark.l
+14
— 4
3
28
Little Rock Area, Ark
+10
-04
Quincy, 111
+ 7
— 6
3
Evansville Area, Ind
+18
—17
3
14
42
Louisville Area, Ky., Ind. . . .
+ 9
—10
6
Louisville (City)
+ 8
—12
4
Paducah, Ky.l
— 2
— 5
1
17
67
St. Louis Area, Mo., Ill
+11
— 5
3
St. Louis (City)
+12
— 8
3
Springfield Area, Mo
+10
+ 1
4
13
36
Memphis Area, Tenn
+ 6
—14
5
All Other Cities 2
— 6
—16
1 In order to permit publication of figures for this city (or area), a special sample
has been constructed which is not confined exclusively to department stores. Figures
for any such nondepartment stores, however, are not used in computing the district
percentage changes or in computing department store indexes.
2
Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes,
Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi; and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of November 1957 were three
per cent less than on the corresponding date a year ago.
fy,*^
M J00*
Nov.
Sept.
Oct.
1957
1957
1957
144
138
Sales (daily average), unadjusted3
163
145
126
Sales (daily average),
seasonally adjusted3. . .135
4
158
169
Stocks, unadjusted
n.a.
151
Stocks, seasonally adjusted 4
n.a.
151
n.a. Not available.
3 Daily average 1947-49 = 100
4
End of Month average 1947-49 = 100
Trading days: November 1957—25; October 1957- -27; November 1956—25.
RETAIL FURNITURE STORES
Net Sales
Nov. 1957
compared with
Oct. '57
Nov. '56
8th Dist. Totali
-0-%
— 3%
St. Louis Area
—0—
—0—
Louisville Area
— 7
— 7
Memphis Area
+41
—11
Little Rock Area
+19
+ 6
Springfield Area
—20
—12
1 In addition to the following cities, shown separately in the table, the total
includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Owensboro,
Kentucky; Greenwood, Mississippi; Evansville, Indiana; and Cape Girardeau,
Missouri.
Note: Figures shown are preliminary and subject to revision.
May 1958
Volume X X X X
Number 5
The Nation's Economic Accounts
C C O U N T I N G , an age-old business discipline, has within recent years
become a tool of great usefulness for analyzing the entire economy.
Some of the purposes and principles of economic accounting, or social
unting, are illustrated in this article by reviewing four major systems of
Onal economic accounts.
The four are: The National Income and
uct Accounts, Input-Output Accounts, Flow of Funds Accounts, and
ational Balance Sheet.
The countless transactions involved in the operation of the national
economy may be summarized in these accounts into a record open to anyone
wanting to know what happened in the economy during a particular period.
As the user becomes familiar with the accounts he will appreciate their
adaptability and the great wealth of information they contain.
t'edera
Bank
St. Louis
Survey o f Current C o n d i t i o n s — p . 6 6
The Nation's Economic Accounts
The
Nation's Economic
of an Age-old
Accounts,
Discipline
Products
"Did they earn their dividend?" This is a question
many an investor has asked himself in recent weeks as he
scanned the published reports of corporations. At the
same time he and countless others have been concerned
about the course of the whole economy in the current
recession. What is declining in the economy? What is
going up? Some answers to these and other crucial questions about the performance of businesses and the economy
are produced through use of one of the oldest logical disciplines, double entry accounting, a powerful tool for
organizing and analyzing economic information.
Accounting in business has been with us a long time.
Merchants and bankers of Genoa were well versed in its
essential principles as early as 1340. And today the average person, whether or not he can remember the difference between a debit and a credit, has some appreciation
of the value of accounting as a guide for business decisionmaking. He knows that a profit and loss statement, for
example, should show him the amounts paid out for labor,
materials, interest, and taxes, how much was set aside for
replacement of the firm's equipment, and the amount left
over as net income for the owners. He might also be
interested in the firm's balance sheet for a view of what
the firm owns, what it owes, what the owners' net interest
amounts to, and how these various items may have
changed from time to time. He probably understands that
the term "double entry" simply means that a given transaction is reflected in the accounts of a firm twice; that a
sale of goods, for instance, is recorded as an increase in a
firm's cash (or in the amount owed to the firm) and also
as a reduction in the stock of goods. The requirement of
a balance, that sometimes elusive goal of the tired bookkeeper or teller, he may remember as an ingenious internal
check for accuracy.
What is not so generally understood is the way accounting methods which have been useful as an aid to business judgment have been extended to analysis of economic
behavior of whole nations. The wider application, called
economic or social accounting, rests upon two assumptions:
(1) All economic events of relevance to an economic unit,
such as a family or business or unit of government, can
be reflected in a set of double entry accounts. 1 (2) The
accounts of economic units can be combined into groups
or national totals to provide figures useful for analysis of
the economic process. 2 In a way this is like considering
individual units of the economy as branches of a few
1
It is not necessary that every economic unit actually keep such a set of
accounts. There are ways of estimating many of the accounting entries that
would have been made if accounting records had been kept.
- Raymond W. Goldsmith, A Study of Sating, in the United States, Princeton University Press, 1955, Volume II, p. 5.
Page 58
very large corporations or "sectors." Thus, just as business
accountants set up accounts for individual corporations,
the social accountant prepares combined income statements or balance sheets for all corporations. Similarly,
combined accounts for all consumers or for all units of
government may be derived.
The underlying logic of applying accounting methods to
a national economy may seem obvious enough but why
this should be done and how it is done are not so clear.
This article therefore reviews briefly some of the major
purposes of social accounting, and four systems of accounts
which are currently or potentially maintained for the
United States economy. Each of the four systems illuminates a particular aspect of the economy, and the four
together provide material for a wide variety of analytical
approaches. The descriptions of the accounts are meant
to illustrate a few major characteristics or principles of
social accounting and hence pass over a host of conceptual and statistical details. For the reader who would like
a more complete description of the accounts, the references listed on page 65 should be helpful.
Social accounting was not invented all at once by some
gifted person. Instead, it has been fashioned slowly over
the years by a long succession of practical men trying to
find answers to serious problems. As far back as 1696 an
early practitioner of "Political Arithmetick" named Gregory King made estimates of national income for England,
France, and Holland partly to appraise their relative
strength for the interminable wars of that era. 3 King applied his rudimentary system of social accounts to questions which have remained of interest to this day: Is the
nation growing in wealth and power? How do some
nations afford a more bountiful life for their people than
do others?
Although much of the pioneering was done long ago,
social accounting has come into widespread use only within
the last thirty years or so. Furthermore, it is now undergoing rapid development the world over. Among the
reasons for the upsurge of interest have been the depression of the thirties, World War II, the striving of underdeveloped nations to accelerate their growth, and the
recurring inflations and recessions of the postwar years.
All of these have raised problems of public policy.
In their efforts to cope with economic problems governments have set up systems of national accounts that can
be used as guides. But more and more businesses and
individuals have found uses for the accounts also. In the
'•l Two Tracts by Gregory King, Reprint of Economic Tracts, Edited by
Jacob H. Hollander, The Johns Hopkins Press, 1936. In a truly remarkable
foreshadowing of today's income and product accounts, King recorded what
he called Yearly Income of the Nation ; Expense of the Nation ; Increase of
Wealth; Rent of Lands; Produce of Trade, Arts and Labor; Ordinary Revenue of the Crown ; and Extraordinary Taxes. Expense (consumption expenditures) he divided into Diet, Apparel, and Incidental Charges. Expenditures
for food he further subdivided into eight major types. He also divided his
income and expense estimates by population to obtain per capita measures,
just as often is done today for making welfare comparisons.
current recession, for instance, businessmen are watching
such national accounting measures as personal income,
consumer expenditures, business purchases of durable
equipment, and changes in business inventories, in order
to decide upon production schedules, sales campaigns, or
construction plans. Public agencies and legislators look
at the same measures in deciding what should be done to
counteract the recession or to ameliorate its effects.
It is apparent that social accounting has been devised
as a tool but one may well ask what it does, or how it
works. To answer these questions, three of its main
functions have been outlined as, ". . . to provide a running,
historical record of the community's economic operations;
to measure the efficiency with which the community's
economy operates; to provide a periodic inventory, i.e., an
indication of the economic position of the community." 4
These are also things business accounts are designed to do
for a firm.
In both areas of use, the individual business or the
community as a whole, accounting arranges a heterogeneous mass of facts according to some logically consistent
scheme so their significance may be more easily comprehended. The countless transactions required for production and distribution of a nation's output are summarized
into a record which can be consulted by anyone wanting
to know what happened in the economy during a particular period. How the items are arranged, what is included,
and what is left out depend largely upon what questions
are expected to be asked by the users of the accounts,
although other considerations such as the difficulty of obtaining certain information are important also. 5
The national economic accounts of the United States
represent such a complicated economy and serve such a
wide variety of purposes that they may seem forbiddingly
complex if viewed in their full detail. However, as the
user becomes familiar with the basic principles of their
construction and with the ways in which various systems
of accounts are related, he will appreciate their adaptability and the great wealth of information they contain.
Four principal systems of accounts discussed in this
article are listed below. They are all systems actually or
potentially maintained by public agencies for the United
States.
1. The National Income and Product Accounts which
provide dollar measures of total national output; the contribution made to the total by business, consumers and
governments, and the incomes they receive; final uses of
the total product; and certain transactions with the rest of
the world. These accounts are the most familiar, and the
longest-established of the four major systems discussed
here.
2. The Input-Output or Inter-Industry Accounts, which
present interrelations among a great many types of productive activity. In effect, these accounts record the sales
•* Raymond W. Goldsmith, "Measuring National Wealth in a System of
Social Accounting," Studies in Income and Wealth, Volume Twelve, National
Bureau of Economic Research, 1950, p. 24.
3
See Stanley J. Sigel, "A Comparison of the Structures of Three Social
Accounting Systems," in Input-Output Analysis: An Appraisal, Studies in *
Income and Wealth, Volume Eighteen, National Bureau of Economic Research, Princeton University Press, 1955.
of each of the activities into which the economy has been
divided to every other one and, conversely, the purchases
of each activity from every other.
3. The Flow of Funds Accounts, which encompass
all transactions in the economy that are made by transfers
of credit or money. A major feature distinguishing them
from the preceding two systems is their emphasis upon
financial transactions.
4. The National Balance Sheet. While work on this
type of accounting statement has not been attempted on
a scale comparable to that devoted to the others, a listing of assets and liabilities for the nation as a whole and
for various groups within it is conceptually possible and
appears likely to be an outgrowth of the other systems
at some time in the future.
The National Income and Product
Accounts
The development of the National Income and Product
Accounts illustrates very well the ways in which changes
of emphasis on problems of pressing public interest influence the structure of a social accounting system. When
the depression of the thirties began, many statistical tools
which would have been useful for measuring its depth
and impact simply were not in existence. To get a better
idea of how serious the economic situation was, the Senate in 1932 passed a resolution requesting the Department
of Commerce to prepare estimates of national income in
cooperation with the National Bureau of Economic Research. The National Bureau, a private research organization with years of experience in studying business cycles,
had developed national income estimates in the course of
its studies. The first report of the Department of Commerce, "National Income 1929-32," was published in 1934
and was followed by others which gradually grew into
the comprehensive set of accounts currently maintained
by the National Income Division of the Department.
Originating as they did during a depression, the early
national income estimates were in large part designed to
indicate changes in the welfare of the people of this
country through measures of the income available for
their support. Interest centered on producing estimates
of the totals for a few major categories of income rather
than upon revealing relationships among them.
The traditional concern of economic accounting had
been to measure the total value of the goods and services
produced in a period which were available to be consumed or added to wealth. This measure was income;
what the people of a country receive for their participation in production after allowance is made for replacement of tools and other capital used up. The annual addition to wealth (or saving) was considered to be one of the
wellsprings of growth from the time of the earliest economic studies. The long concern with measures of total
income and the use of these measures for comparisons of
economic performance over time and from country to
country thus resulted in emphasizing the second of the
social accounting functions mentioned earlier; to measure
the efficiency with which the community's economy operates.
Page 59
In the years following the initial publication of national
income estimates by the Department of Commerce two
things happened which tended to increase the demand
for a comprehensive set of accounts which would supplement the total income measures with additional detail in
order to reveal interrelationships of various segments of
the economy. The first was the natural swing of public
concern toward determining the causes of the depression
and in finding a way out of it. The second was World
War II.
Theories advanced to explain the depression and to
support policies to combat it placed increasing stress upon
relationships among investment, consumption and income,
and government spending as determinants of income and
employment. Therefore, the demand for measures of these
pivotal activities became more pressing. To determine
public policy it was necessary to estimate the effectiveness
of alternative plans for construction projects, relief payments, changes in tax rates, lending programs and other
measures. In connection with all of these efforts there was
a need for more information about the sources of consumers' incomes and how the incomes were used.
When this country entered World War II it became
evident that two new problems had to be faced. One was
to determine how large a war effort the nation's economy
could provide. The second was whether there would be
an inflation with the people and their government trying
to buy more goods than could be produced. The income
and product accounts were expanded to help answer both
questions 0 . It is interesting to note that Gregory King
used his accounts to answer similar questions in the 1690's
when he estimated how long England could sustain herself in war and indicated which activities must be restrained or augmented in order to meet the strain.
To meet the needs of war planning, data were developed on total current production of the economy and
(i
For a good account of the war expansion of income and product accounting, see Milton Gilbert and George Jaszi, "National Product and Income
Statistics as an Aid in Economic Problems," Dun's Review, February, 1944.
Reprinted in Readings in the Theory of Income Distribution. The Blakiston
Company, 1946, pp. 44-57.
the shares of it which flowed to consumers, the government and to business (for new facilities and for replacement of equipment wearing out). The new over-all measure of total output was called Gross National Product,
and the entire set of accounts could be summarized in a
table like the one for 1956 shown below. On the right
hand side are four major uses of the total product and on
the other side are measures of the payments made to
factors of production, other charges and an allowance for
the value of the capital used up during the period in
producing the total output.
By 1947 the national income and product accounts had
assumed substantially their present form, although refinements have been made since then. In these accounts the
economy is divided into four major sectors: individuals,
businesses, government (Federal, state and local), and
foreign. The expenditures and receipts of the sectors are
recorded in such a way that the portions of total national
output produced and used by each sector can be identified and relationships among the sectors can be clearly
discerned. The accounts focus upon flows of currently
produced goods and services.
The Survey of Current Business is the principal outlet
for the published work of the National Income Division
relating to the national income and product accounts.
Gross national product and other elements of the accounts
appear quarterly in the February, May, August and November issues. The greatest amount of detail is provided
annually in the National Income Number which customarily appears in July. Special supplements provide revised
estimates for all of the years covered by the accounts and
a detailed description of conceptual and statistical foundations. The most recent of these supplements was published in 1954 and another one is now in preparation.
One of the best ways to gain an appreciation of the
usefulness of the income and product accounts is to use
them for tracing through an episode such as the current
recession. In the third quarter of 1957 the total gross
national product was at a seasonally adjusted annual rate
NATIONAL INCOME AND PRODUCT ACCOUNTS, 1956 1
(Millions of dollars)
Compensation of employees
241,372
Wages and salaries
227,237
Supplements
14,135
Income of unincorporated enterprises and inventory valuation
adjustment
39,617
Rental income of persons
10,322
Corporate profits and inventory valuation adjustment
40,449
Corporate profits tax liability
21,959
Dividends
11,874
Undistributed profits
9,175
Inventory valuation adjustment
—2,559
Net interest
11,860
Capital consumption allowances
34,266
Other charges against gross national product 2
36,800
CHARGES AGAINST GROSS NATIONAL PRODUCT
414,686
Source:
Personal consumption expenditures
Durable goods
Nondurable goods
Services
Gross private domestic investment
New construction
Producers' durable equipment
Change in business inventories
267,160
33,948
133,337
99,875
65,923
33,276
28,093
4,554
Net foreign investment
Government purchases of goods and services
Federal
National security
Other
Less: Government sales
State and local
GROSS NATIONAL PRODUCT
1,376
80,227
47,199
42,405
5,192
398
33,028
414,686
Surrey of Current Business, July, 1957.
1 Arrangement of items has been altered from the Survey of Current Business presentation.
1! Indirect business tax and nontax liability, business transfer payments, statistical discrepancy, and adjustment for subsidies and current surplus of
Government enterprises.
Page 60
of $440 billion. 7 In the first quarter of this year total
output was at a $424 billion rate, $16 billion lower. What
had happened between the two quarters? Looking at the
four principal uses of the product one can see that gross
private domestic investment had declined by $13 billion.
Within investment, the larger part of the drop was
accounted for by a turnaround from accumulating business inventories at a $3 billion rate in the third quarter to
liquidating at a $7.5 billion rate in the first quarter of this
year. Purchases of producers' durable equipment were
nearly $3 billion lower. Changes in the other major uses
of the total product can be similarly traced. How consumers have been affected is of immediate interest and for
some indications of this one can turn to estimates of personal income. Here it can b e seen that the drop of personal
income was $4.6 billion, much less than the decline in
total gross national product. A decline of nearly $7 billion in wages and salaries had been partially offset by a
rise in unemployment compensation payments and other
types of income. Total spending of consumers was only
$2.6 billion lower, with a decline of $3.5 billion in purchases of durable goods and a $1 billion decline in nondurable goods buying partly compensated for by an
increase of nearly $2 billion in spending for services.
Even a cursory inspection of the accounts such as this
reveals much more about the nature of this recession than
was apparent about declines such as the one in 1929 even
after several years of study. With the data presented in
the accounts themselves and other information such as
business anticipations, the Federal Budget and construction contract awards, for example, public agencies and
businesses can make analyses of many sorts in deciding
how to react to the recession.
The national income and product accounts of the United
States have widened in objective from the original one
of supplying a measure of total income, or a sort of
speedometer, for die economy, to one of accounting for
changes in several broad types of activity, production,
consumption, saving and investment. Consistent measures
of these activities within die over-all totals are extremely
useful for analyzing behavior of the economy and its
major parts.
Input-Output
Accounts
Input-output accounts also focus upon flows of goods
and services measured in dollar terms and in a sense can
be considered an extension of the income and product
accounts. In the income and product system, interest
centers on final products. Therefore, the value of intermediate products is excluded. To use an illustration from
National Income, 1954, die production of bread involves
production of wheat, milling of flour, and baking, but for
adding up the national product the income and product
accounts count only the full value of die bread, as the
end product, and omit the value of the goods handed on
from one stage of production to the next in order to
prevent double counting. This is appropriate for many
types of analysis, but there are other interesting prob7
All dollar estimates in this illustration will be expressed in seasonally
adjusted annual rates. Third quarter 1957 estimates are those of the Department of Commerce. First quarter 1958 estimates are preliminary estimates by
the Council of Economic Advisers.
lems in which it would be desirable to know what happens
at each stage of production and the flows of goods between
the stages as well as to know what the final output is. To
supply detail on the intermediate stages is the essential
contribution of a set of input-output accounts.
In construction of the basic accounting statement or
table, such as the sample on the next page, the economy is
divided into a number of economic activities or industries,
defined by the nature of their "outputs" or products. The
values of goods and services supplied by each industry to
every other industry during a particular period are recorded and those sold to "final" users are shown as well.
By consulting the table, one can find how much of the
inputs of an industry were drawn from each of the
others in the period as well as the value of services
"purchased" from the basic factors of production. In
other words, if one had a sufficiently detailed input-output
table he could ascertain from it what materials and services the bread baking industry used in a period and from
what industries they were purchased. He could also tell
to whom the bread was sold. An input-output table, in
addition to producing measures of final output of the
economy as the income and product accounts do, reveals
the volumes of raw materials and semifinished goods and
the levels of activity of each industry stage that were
required.
Problems of war mobilization and demobilization have
been primary reasons for government participation in
input-output accounting in die past, although a wide range
of other uses has been suggested by other institutions and
people concerned with development of the system. The
first government-sponsored input-output table for this
country was constructed for the year 1939 and was applied
to the problem of estimating postwar employment. 8 A
larger scale effort based on data for 1947 was conducted
by the Bureau of Labor Statistics and cooperating agencies
in connection with mobilization planning but was discontinued in 1953.
Although preparation of national input-output accounts
for public use is no longer the responsibility of any government agency, there is at least a possibility that some
day work will be resumed. A recent review of the national economic accounts, by the National Bureau of
Economic Research at the request of the Bureau of the
Budget, recommended that an abbreviated table be constructed with 1954 census data and that a more detailed
table be prepared utilizing data from die 1958 censuses.
It was argued in the report that input-output work should
be considered an important aspect of the national accounting system because of its potential value to business and
government as a source of information for policy determination, and because of what it might contribute to
improvement of other national accounts, notably die income and product accounts. 9
8 This had been preceded by the work of W. W. Leontief who constructed
input-output tables for the United States economy for 1919, and 1929, published in his book The Structure of the American Economy, 1919-1939, Oxford University Press, 1951.
9 The National Economic Accounts of the United States Review, Appraisal,
and Recommendations by the National Accounts Review Committee of the
National Bureau of Economic Research, Reprinted from Hearings before a
subcommittee of the Joint Economic Committee, Eighty-fifth Congress, October 29 and 30, 1957, General Series 64, National Bureau of Economic Research, Inc.
Page 61
Interindustry Flow of Goods and Services by Industry of Origin and Destination
<n
(In millions of dollars)
FINAL DEMAND
42
43
44
45
46
47
48
49
50
r
<X^\*X\\cX^
>
;V\ «\%VV\°*X °X*X*X*X%> x °>
X «/\ A XX* X X /'X X s
\ o,\ X %\
x\°A
v
\
X
-
V*X \
\ ft* X
34
-2
-2 0 -
1
#
251
4
16
1
4
26
173
222
85
7
1
960
152
-
^1 -_ "
392
13
269
575 1,303
-
-
~
- - - -212 -5 0 3 -170 3183
3,997
3
-
56
342
30
2
- 25
-
X
ft* x
\
X
\
'
~s* X
x
X x \ 92 1,008
\ 1,876
\ v5.69 \ 21 9,785
X
9
7
15
12
*
17
- -145
- 13 321
547
4,084
XW-'VA XV\ \
X
X X X
v \
116
-
29
- *
-135 - 1 2 0
*
78
- - 2,2342 62
27
_^__ 7 198
1' -
X 'jtt X
851
250
865
134 3,469
45
580
150
444
199
836
12
-
1,030
-
608
77
1,528
217
61
214
174
78
44
919
301
170
35
154
-6 3 5 #3 0 5
72
812
- -47
- 21
1
-
585
1,181
350
14
2
5 2,330
198
57
170
30
42
_!:
_
- - 1
-5 3 6
-7 3 - 7
-
-
69
12
74 2,176 1,4 10 _ 4 7 0 ,
_
-7 3
_
728
3
101
193
14
52
59
156
186
- 21
1
36
569
- 89
-
22,141
1,485
1,469
9,987
67
1,459
344
1,491
5,078
37,636
2,663
9,838
13,321
6,002
2,892
7,899
6,447
i afiii IA/\*O
_ 7,856
2,403
- 1
- - - 1 2 ,-0 7 5
- 5,464
- 15,709
154
- 22
- - 1,325
1,313
-831 3,458
-216 31,308
128
30
44,263
13,385
2,944
2,233
24,71 1
13,270
28,704
4,887
9,275
63,685
847 50,058
218 2,116 2 2 0 , 4 7 4
1,801 4,254 11,492
14,003 1,044 7,951 9,199 1,456
1—•
28,855 5,097 14,301 13,385 2,944 2 , 2 3 3 24,711 13,270 2 8 7 0 4 4 , 8 0 2 17,320 51,060 33,514 191,625 7 6 9 , 2 4 8
-
Source:
T)
Division of Interindustry Economics, U. S. Bureau of Labor Statistics, and W. D.
Evans and Marvin Hoffenberg, "The Interindustry Relations Study for 1947," The
Review of Economics and Statistics, Vol. XXXIV, No. 2, May 1952.
HIS BASIC input-output accounting statement for the United States has
been condensed by removal of much of the central portion of the table,
as indicated by the lines. However, enough of the table has been preserved to
illustrate principles of construction. By reading across each row one can see
how the output of the producing industry named at the left was distributed to
each of the purchasing industries named across the top. If one reads down
the columns he can find what each of the industries named at the top purchased
from the industries listed on the left.
Industry number 1, Agriculture and Fisheries, for example, can be seen
by reading across to have sold $10,856 million of outputs to the Agriculture
and Fisheries group. This reflects the feed and seed and other items produced
in agriculture for agricultural use. Output valued at $15,048 million was sold
to Industry 2, Food and Kindred Products. Tobacco Manufacturers and Textile
Mill Products purchased $783 million and $2,079 million of Agriculture and
-
Fisheries outputs, respectively. On the right at the top are five types of final
demand, "Industries" 46, 47, 48, 49 and 50, which together absorbed $12,659
million of Agriculture and Fisheries outputs. The difference between these
final uses and the Total Gross Output in the last column to the right is a
measure of the value of agricultural output that was used as inputs by agriculture and the other producing industries.
By reading down the first column, it can be seen that Agriculture and
Fisheries used as inputs during the year $10,856 million of its own product,
$2,378 million in products of the Food and Kindred Products, and so on. The
purchase of $19,166 million in labor services from households is recorded at the
bottom of the column. Total Gross Outlays of the Agriculture and Fisheries
sector, or the sum of all its inputs, amounted to $44,263 million. This is the
same as the Total Gross Output of the sector.
Morris A. Copeland had demonstrated its feasibility, the
staff of the Board of Governors began to develop a system
of accounts which could be maintained on a regular basis.
Annual accounts for the years 1939-1953 were first published in 1955 with a comprehensive explanation of concepts and methods. The system has been modified substantially since 1955 in the light of experience in maintaining and using the accounts. As flow of funds accounting may be considered to be still at a relatively early
stage in its development, additional improvements can be
expected.
Flow of Funds Accounts
The flow of funds accounts provide still another view
of the economic process. As we have seen, the national
income and product accounts and the input-output accounts focus on flows of goods and services, measured
in money terms. The flow of funds accounts add to
the picture of the economy by recording flows of money
and other financial instruments, as well as these "real"
flows. Despite the availability of the other accounts and
the many other statistical resources of the economy, there
was not available until a comparatively short time ago
". . . a sweeping organization of data that would demonstrate the primary fact that, in a market economy, the
flow of credit and money affects all activities and, in turn,
all activities affect the flow of credit and money." 10
A principal objective of the flow of funds system, as
compared to the other systems of accounts, is to reveal
influences of monetary and other financial variables upon
behavior of the economy. This objective is the source of
several differences between the flow of funds accounts and
the national income and product system. For one, the
number of full sectors into which the economy is divided
is larger in the flow of funds accounts, partly because in a
system recording financial flows, it is important to separate financial institutions from nonfinancial businesses.
Secondly, a general rule of the flow of funds system is that
Soon after World War II, the Federal Reserve System
joined in studies leading to the development of a national
accounting system which would incorporate flows of credit
and money. In 1948, after exploratory work of Professor
10 Ralph A. Young, "The Federal Reserve Flow of Funds Accounts,"
address delivered at Eleventh Annual Meeting of the Board of Governors of
the International Monetary Fund, September 25, 1956.
SUMMARY OF FLOW-OF-FUNDS ACCOUNTS FOR 1956
S= SOURCES OF FUNDS, U= USES OF FUNDS
[Annual flows, in billions of dollars]
Business
Sector
Consumer
Corporate
Transaction
category
S
U
S
U
Noncorporate
S
Financial institutions
Government
Farm
S
U
Federal
S
U
Banking
St. and loc.
S
U
U
S
S
U
U
S
All
sectors
the world
Other
investors
Insurance
U
S
U
S
.6
2.6
2.7
.3
U
NONFINANCIAL
A
B
J
Payroll
225.4 3.3
Receipts from and payments on investment... 71.1 20.4
31.4 27.5
3.2 45.8
30.8 80.7
17.4
20.3
135.5
35.3
2.3
1.0
1.4
6.2
11.4 24.9 20.6 46.8
1.0 14.2
1.3
19.4
1.7 13.8
.4
10.1
14.7
14.4
1.4 4.7
.7
3.6 26.6
.4 42.0
7.7
1.1 72.5
.2 36.1
.4 2.7
2.9 7.0
• 2.8 .1 11.2
-.3
-.5
5.4
7.3
3.2
10.0
46.9
30.7
• 2.8
.2
1.2
30.8 33.8
.1 2.9
.4
* 7.1.1 7.5
179.2 622.7 397.7 221.6 147.3 30.7 12.7 6.8
362.1 356.9 636.5 649.9 246.4 248.8 32.8 33.5 90.6 31.1 49.5 52.0
Total
9.7
3.2
-.2
3.7
2.3
1.7
3.8
1.8
.1
.1
-.6
.7
7.2
1.2
3.2
3.3
•
-4.6
.1
W
.3
Total
13.3
.5
Y
Grand total
Z
Memoranda:
GNP identifiable in J
.3
-.1
3.1
1.0
6.5 - 1 . 6
1.4
-.3
.7
.3
.4
375.9
.2
•
18.8
14.9
.1
375.9
.1
.2
4.2
1.0
1.0
9.0
7.9 39.1 30.8
.1
2.5
6.4
5.6
2.3
1.5
.1
2.8
•
•
225.4
122.4
103.3
102.7
34.5
225.4
122.4
103.7
102.4
144.0
19.0 20.5
34.5
915.3
104.1
35.3
805.8
4.5
2.8
6.3
4.5
15.3 16.8 22.2 23.5 1,503.6 1,503.7
.2
-.3
2.9
.1
.3
.6
3.4
• .1
*-5.7
.4
3.3
40.0
8.1
2.1
-.3
4.7
-3.8
-3.8
.2
.3 - . 3
4.0
1.4
.7
.4
.5
.1
*
*
•
3.4
•
46.8
.1
.2
1.9
.3
.2
6.1
6.8
.3
8.2
.2
.4
.5
5.6
.3
7.1
22.4
*
2.0
6.3
.1
.5
6.9
22.4
14.2
.1
.4
.2
-.1
.2
.3
.6
-1.3
15.2 15.2 39.5 39.5
32.0
*
.2
4.5
.5
*
•
.4
.9
1.0
.1
.3
-1.0
.3
-1.5
.9
4.7
3.7
4.8
.4
.2
1.4
•
1.8
3.8
*
651.5 651.5 249.3 249.3 33.5 33.5 84.9 84.9 52.9 52.9
250.9
4.2
3.5
-1.9
*
*
•
.8
*
.1
.2
.3
-6.0
5.5
Other
•
2.4
3.3
2.8 4.8
.7
.3 34.2 21.3
1.1
1.0
.4
.3
83.5
FINANCIAL*
V
8.0
1.8
3.8
-6.0
3.4
8.9
14.8
3.2
1.9
4.9
-.3
•
2.1
i.i
5.6
3.8
3.6
1.6
46.6
1.2
3.8
-6.4
3.4
8.9
14.8
3.2
7.0
4.8
.1
5.6
2.3
49.1
-2.1
.7
.5
25.8 25.8
1,550.8
1,550.8
.6
1.4
6.6
400.1
6.3
.1
*1 Less than $50 million.
For the consumer sector, acquisitions of new fixed capital consist of purchases of new
durable goods of $33.1 billion and purchases of new houses of $13.8 billion.
Source: Reproduced from Federal Reserve Bulletin, October 1957.
2 Financial sources of funds represent net changes in liabilities; financial uses of funds, net
changes in financial assets.
NOTE.—For description of sectors and transaction categories, see FEDERAL RESERVE BULLE-
TIN, April 1957, pp. 386-91.
Page 63
all transactions engaged in by a particular sector are
recorded in a single sector account with a few exceptions.
The flow of funds sectors are defined as nearly as possible as groups of decision-making units. Therefore, all
of a sector's transactions are kept together in order to display as much of the economic behavior of that group as
can be measured and in order to highlight interrelations
among all the kinds of transactions of a given group. In
the income and product system, the accounts are defined
largely, but not wholly, in terms of certain major activities
such as consuming and investing. Therefore, some transactions of a given economic unit are recorded in one
account while other transactions of the same institution are
recorded in a different account. A family's purchases of
food, for example, would be recorded in the personal
account, while its purchase of a new house would be
recorded in the savings and investment account as part
of business investment. In the flow of funds system, by
comparison, both purchases would be recorded in the consumer sector account.
The basic statement of the flow of funds system is the
summary table on page 63. Although this particular
form will be superseded as the result of revisions now
being made, it is close enough to the new form to serve
as an illustration. As can be seen from the table, for
each sector, such as consumers or corporate business,
there is a record of all receipts or sources of funds
and of all outlays or uses of funds.
The financial transactions are of special interest, since
they are the most significant addition of the flow of funds
system to national economic accounting. Consumers, for
instance, can be seen to have increased their mortgage
debt by $9.7 billion and their consumer credit $3.2 billion
during the year (sources of funds). On the other hand,
they increased their holdings of time deposits, federal
obligations, state and local obligations, corporate securities, mortgages, savings and loan shares, and credit union
shares (uses of funds). The increase in their financial
assets was $5.5 billion greater than the increase in their
debts. This may be of significance in two ways. First,
the improvement in consumers' financial condition affects
their ability and maybe their willingness to buy goods and
services, an example of the relationship of transactions
within a sector. And second, consumers were net lenders
of $5.5 billion to other sectors of the economy. The table
indicates whom they borrowed from and whom they lent
to and the forms of these financial flows. Other interesting implications of consumer behavior can be discerned
when the accounts for 1956 are compared with those of
other years.
The same kind of tracing through of flows can be done
for the other sectors. For example, corporations can be
seen to have been net borrowers from the other sectors
of the economy in 1956. They increased their securities
outstanding by $7.2 billion. That is to say, the amount of
money they obtained by issuing new stocks and bonds was
$7.2 billion greater than the amount they paid back to
holders of their securities during the year. They increased
their borrowing from banks by $3.3 billion. They also
reduced their holdings of government obligations by $4.6
billion, as indicated by the negative entry. We can examine this financing pattern in terms of corporations' net
current receipts and their capital expenditures on the one
hand, and in terms of the purchasers of the securities and
the impact on the financial markets on the other.
Page 64
The flow of funds accounts have been published by the
Board of Governors in Flow of Funds in the United States,
1939-1953, published in 1955, and the Federal Reserve
Bulletin for April and October, 1957 for more recent years.
Additional detail in mimeographed form for the more
recent years has been furnished upon request. The
Flow of Funds report provides also a detailed explanation
of the structure of the accounts, the sources and treatment
of data, and the ways in which the accounts differ from
other accounting systems. The tables have been prepared
only on an annual basis up to now, but a quarterly presentation is being developed. Substantial changes in
organization of the accounts will be made when the
quarterly reports are initiated. The changes have the
general purpose of increasing the usefulness of the accounts by incorporating some items not included earlier,
by regrouping items, and by making the system more
manageable for the user. Because one of the areas of
greatest usefulness of the flow of funds accounts will
probably be in the analysis of relatively short-run fluctuations of business activity, the publication of quarterly
reports will be a great step forward.
The National Balance Sheet
A national balance sheet would be a logical part of
the nation's economic accounts, although one is not yet
available. This would carry out the third function of
accounting mentioned at the beginning; to provide a
periodic inventory. From the very beginnings of organized inquiry into economic processes, changes in the
wealth of institutions, individuals, or whole societies have
been of great interest. Until 1922, the United States
Census prepared decennial estimates of national wealth in
some detail. Saving was recognized very early as a
requirement for the growth of total output in an economy;
hence the stress upon measuring the flow of product into
investment in the national income and product accounts.
More recently changes in holdings of wealth in real or
financial forms have been stressed as a major influence on
the behavior of consumers and businesses. For example,
consumers' financial condition and the size of their stock
of durable goods are matters of keen interest to manufacturers.
Both the national income and product accounts and the
flow of funds accounts now contribute measures of flows
into and out of the various forms in which wealth can be
held. The flow of funds accounts also present statements
of certain financial assets and liabilities held by the various sectors. Other balance sheet data are compiled by
the Department of Agriculture, the Securities and Exchange Commission, the Federal Trade Commission, and
by several private institutions. Perhaps the final step of
consolidating all of these and filling the gaps to produce
regular estimates of the assets and liabilities by sectors
of the economy will one day be assumed as a public
responsibility like the other social accounts. The National
Bureau review of the national accounts referred to earlier
recommended that, ". . . as part of a long-range program
of improvement and expansion of national accounts the
development of comprehensive and consistent national and
sectoral balance sheets on a regular periodic (if possible
annual) basis should be taken in hand as soon as feasible." 11
n The National Economic Accounts of the United States, Hearings before
the Subcommittee on Economic Statistics of the Joint Economic Committee,
Eighty-fifth Congress, October 29 and 30, 1957, p. 256.
Social Accounting, Still
Unfolding
National economic accounting has developed in response to needs of governments, businesses, and individuals. These needs have changed through time and,
no doubt, will continue to change. Facing the accountants have been two basic questions:
What kinds of activities do we want to measure?
How can we measure them and relate each of the parts
to the whole?
These questions, as we have seen, admit of many
answers, so various systems of accounts have been developed, of which four have been reviewed here. Others
could have been included, notably the international
balance of payments accounts which record economic
interrelationships of nations and the accounting systems
being developed for regions within countries. The fact
that there are several systems rather than one has some
disadvantages, and if it were now possible to start anew
perhaps the nation's economic accounts would be somewhat different. However, similar criticisms can be made
of any social institution. The form of any institution is
the composite result of thousands of small decisions made
through its lifetime, not all of which can be ideal for the
conditions of some later time.
Each of the principal accounting systems focuses upon
some major aspect of the economic process, some major
grouping of kinds of activities, believed to be of special
relevance for understanding the behavior of the economy.
Having these different aspects or windows through which
the economy can be viewed may actually be of great benefit, for one of the great advantages of accounting is that
it screens out the irrelevant. For a particular problem,
one set of accounts may contain much less irrelevant information than another, making it more convenient to use.
But what is irrelevant for one problem may be vitally
needed for another.
The agencies charged with responsibility for the nation's
accounts have gone remarkably far in making the accounts
adaptable to many different uses. They have been generous with detail so that the user may sometimes recombine
items from the accounts to suit his own analytical techniques and concepts. Bridges between the accounts are
provided in the technical supplements so that the user who
wishes to may translate concepts and data from one set
of accounts to those of another. And as the accounts
continue to develop, it is likely that they may converge
at more and more points in order to increase the ease witb
which the various systems may be employed on the same
problems.
Accounting is a discipline. To apply it one has to learn
it as one learns mathematics or reading. And the more
widely economic accounting is understood, the more useful it will be. For one of the greatest avenues toward
improvement of the nation's economic accounts, as it has
been all along, is the experience of the users.
A. J. MEIGS
SOME SUGGESTED REFERENCES
INPUT-OUTPUT ACCOUNTS
SOCIAL ACCOUNTING
Stone, Richard. Definition and Measurement of the National Income
and Related Totals. Appendix to MEASUREMENT OF NATIONAL
INCOME AND THE CONSTRUCTION OF SOCIAL ACCOUNTS. Studies
and Reports on Statistical
Geneva, 1947.
Methods
No. 7, United
Nations,
Stone, Richard. T H E ROLE OF MEASUREMENT IN ECONOMICS. Cam-
bridge University Press, 1951.
PROBLEMS I N T H E INTERNATIONAL COMPARISON OF ECONOMIC
ACCOUNTS, STUDIES I N INCOME AND W E A L T H , Volume Twenty.
National Bureau of Economic Research.
Press, 1957.
THE
Princeton
University
NATIONAL ECONOMIC ACCOUNTS OF THE UNITED STATES.
Hearings before the Subcommittee on Economic Statistics of the
Joint Economic Committee. Eighty-fifth Congress, October 29 and
30, 1957.
Evans, W . Duane, and Hoffenberg,
Relations
Study
Marvin.
The
Interindustry
for 1947. T H E REVIEW OF ECONOMICS AND
STATISTICS, Volume Thirty-four, No. 2. May 1952.
Leontief, W. W. THE STRUCTURE OF THE AMERICAN ECONOMY,
1919-1939- Oxford University Press, 1951.
I N P U T - O U T P U T ANALYSIS:
A N APPRAISAL.
STUDIES I N INCOME
AND WEALTH, Volume Eighteen. National Bureau of Economic
Research, Princeton University Press, 1955.
FLOW OF FUNDS ACCOUNTS
Copeland, Morris A. A STUDY OF M O N E Y FLOWS I N T H E UNITED
STATES. National Bureau of Economic Research, 1952.
FLOW OF FUNDS I N THE UNITED STATES, 1939-1953.
Board of
Governors of the Federal Reserve System, 1955.
Summary Flow-of-Funds
Accounts 1950-55. FEDERAL RESERVE BUL-
LETIN, April 1957.
INCOME A N D PRODUCT ACCOUNTS
NATIONAL INCOME, 1954 EDITION. A SUPPLEMENT TO THE SUR-
VEY OF CURRENT BUSINESS. United States Department of Commerce. Government Printing Office, Washington, 1954.
NATIONAL INCOME, 1958 EDITION. (In press)
STUDIES IN INCOME AND W E A L T H , Volume Twenty-two. National
Bureau of Economic Research, Princeton University Press.
(In press)
N A T I O N A L BALANCE SHEET
Goldsmith, Raymond W .
A STUDY OF SAVING I N THE UNITED
STATES. Princeton University Press, Volume II, 1955.
STUDIES IN INCOME AND WEALTH, Volume Twelve, National Bureau
of Economic Research, 1950.
T H E NATIONAL ECONOMIC ACCOUNTS.
(See reference listed above
under social accounting.)
Page 65
5^
OF CURRENT CONDITIONS
Business activity continued to decline in the early months of 1958 both nationally and in
the district. Gross national product was smaller in the first quarter. Latest data indicate
that industrial production both in the nation and the district was down. Civilian employment in April rose about seasonally and unemployment declined only slightly.
In the Nation . . .
Gross national product shrank about 2 per cent between
the fourth quarter of 1957 and the first quarter of 1958 on
a seasonally adjusted basis, reflecting the general decline
of economic activity since last fall.
Business inventories were further reduced in the first three
months of this year at an annual rate of $7.5 billion compared to the liquidation rate of $2.7 billion in the fourth
quarter of 1957.
Total government expenditures rose in the first quarter of
1958. State and local governments increased spending for
goods and services. In addition, payments of unemployment benefits and other transfer payments increased.
The nation's consumers had less income to spend during
the first quarter of 1958 than during the previous quarter.
Total personal income has declined each month since last
August. The seasonally adjusted annual rate of personal
income in March at $341.4 billion was $2.2 billion less
than January but $1.2 billion greater than March 1957.
Expenditures for personal consumption declined $1.4 billion and $1.5 billion less went into savings. Spending
increased for services and nondurable goods but decreased
$2.9 billion for durable goods.
Farm income increased in early 1958 despite declining
activity in other sectors of the economy. Sales of farm
commodities, according to preliminary data, were $4.85
billion in the first two months of this year compared to
$4.59 billion in January and February of 1957. Realized
net income to farm operators in the first quarter of 1958
was estimated at the seasonally adjusted annual rate of
$13.0 billion, compared with $11.5 billion in the fourth
quarter of last year.
Labor income (wages and salaries) of $241.0 billion in
March was $3.9 billion less than in January and $4.0 billion under the March level of last year. A balancing factor
has been the increase in unemployment compensation and
other transfer payments, such as old age pensions. Average
weekly earnings of factory workers in March were down
from January, although average hourly earnings were the
same. Weekly earnings were less the first quarter this year
than in either the last quarter of 1957 or the same quarter
a year ago largely because of the shortened work week.
Page 66
Total civilian employment rose about seasonally between
March and April, but April employment was 2 per cent,
or 1.4 million less than a year ago.
Total unemployment at 5.1 million changed little between
March and April, but on a seasonally adjusted basis it
increased 8 per cent. Seven and one-half per cent of the
labor force was unemployed this year (seasonally adjusted
basis) compared to 4.0 per cent last April.
Output of the nation's factories and mines declined again
in March. The industrial production index fell for the
seventh consecutive month with only the foods, beverages
and tobacco group (and probably lumber and products)
showing any increase in output since the end of 1957.
Steel production in March fell for the sixth consecutive
month but the February to March weekly average decline
of 34 thousand net tons or 2 per cent was the smallest
decline of any month since October 1957. Steel mills operated at 48 per cent of capacity in early April, compared to
52.9 per cent in early March and 90.5 per cent in early
April 1957.
Crude oil production from January 1 through April 5,
1958, was about 11 per cent less than for the same period
last year. Both crude oil and gasoline stocks were substantially higher in early April than last year levels, but in
recent weeks gasoline stocks have declined.
Bituminous coal production changed little between February and March. But output in March was 26 per cent
under that of a year earlier.
First quarter car and truck production was 29 per cent less
this year than in the first quarter of 1957. Output in the
four weeks ending April 28 was 39 per cent below that
in the comparable period of a year ago.
Inventories, sales and new orders of manufacturing industries dropped from January to February. February inventories were about the same as a year ago, but orders and
sales were considerably less this year. However, inventories
were rising in early 1957 but have been declining in recent
months.
The seasonally adjusted rate of private construction expenditures in March was down slightly from February and the
same as in March of last year. Private nonfarm housing
starts in March (seasonally adjusted) dropped slightly from
the previous month but were under starts of last year by
9 per cent or 8,000 units. Applications for FHA commitments increased by 4,400 (21 per cent) from February to
March and requests for VA appraisals rose 3,100 (58 per
cent).
Total retail sales dropped 5 per cent from January to March
on a seasonally adjusted basis and March sales were 2 per
cent under those of a year ago. Department store sales,
seasonally adjusted, were about the same in March as in
January, but were 5 per cent under March 1957 sales.
Consumer prices in March were 3.7 per cent higher than a
year ago. Food prices increased as prices of farm commodities rose. Cost of medical care and recreation also rose.
Wholesale prices of industrial products were about the
same as in recent months.
The seasonally adjusted privately held demand deposits
and currency of the country rose in March and probably
again in April, primarily as a result of a considerable increase in commercial bank holdings of investments. Time
deposits, likewise, have been rising rapidly, partly because
funds formerly invested in short-term Governments were
seeking more profitable outlets with the decline in yields
on these and other marketable securities.
Required reserves were reduced in March and again in
April enabling member banks to create more credit. Also,
discount rates were marked down one per cent in the period
to a level of 1.75 per cent, and open market operations were
conducted so as to foster an easy tone in the money market.
Business loans expanded less than 1 per cent at weekly
reporting banks in leading cities during March and the first
half of April compared to a 4 per cent increase in the corresponding period last year. The lack of strength reflected
in large measure a trimming of business inventories. Repayments of real estate and consumer credit were greater
than new extensions. On the other hand, loans to purchase or carry securities increased.
In the District . . .
Nonfarm employment in the district's large metropolitan
areas did not change much between February and March.
A slight increase occurred in St. Louis, Memphis, Little
Rock and Evansville, with no change in Louisville. Manufacturing employment was the same in Memphis and
Evansville. A small decrease occurred in St. Louis and
Louisville while Little Rock showed a small increase.
Unemployment in the district's large metropolitan areas
was still rather high in March. As a per cent of the total
labor force, unemployment amounted to 6.0 in Little Rock,
7.4 in Memphis, 8.5 in St. Louis, 9.5 in Louisville and 10.8
in Evansville. Two small labor market areas, Greenville,
Mississippi, and Flat River-DeSoto-Festus, Missouri, were
recently added to the list of surplus labor areas. The
Greenville area produces building materials and the Missouri region produces lead, cement and glass products.
Construction picked up seasonally. The number of construction workers increased between February and March
by 10 per cent or more in St. Louis, Little Rock and Memphis with smaller increases in Evansville and Louisville.
District construction contract awards in the first two months
of 1958 were down 15 per cent from awards in the same
months last year. Nonresidential awards were up 33 per
cent, but contracts awarded for public works and utilities
were down 20 per cent, and residential awards were down
41 per cent.
Southern pine production increased considerably in March
and early April from the January and February levels.
Furthermore, production during the first quarter of 1958
was about one per cent greater than the same quarter of
1957. Southern hardwood mills were operating at the
same capacity in March as in the two previous months but
first quarter operations this year were only at 69 per cent
of capacitv compared to 83 per cent in the first quarter
of 1957.
April meat processing activity in the St. Louis area declined
13 per cent from the March level and was 15 per cent less
than in April 1957.
Illinois coal mines produced seven per cent less coal in
March than in February and less than in the same month
last year.
Crude oil production in the first quarter averaged about
one per cent less than in the fourth quarter of 1957 and
about two per cent less than in the first three months
of 1957.
St. Louis area steel mills operated at 61 per cent of capacity in April compared to an average of 76 per cent in the
first quarter of 1958, 79.3 in the last quarter of 1957 and
96.7 in the first quarter of 1957. These operations have
exceeded the national average in recent months.
Motor vehicle and appliance production in the district was
cut further in March and April as plants closed at various
periods and more layoffs occurred. Manhours were also
reduced during March and April in district plants which
produce tires, auto frames, carburetors, head lights and
other auto supplies. Production cuts in appliances and
plumbing equipment particularly affected the Louisville
area, and although a new refrigerator was scheduled for
production in May at Evansville, it was not expected to
require additional workers.
Commercial and industrial concerns paid off $16 million
of indebtedness at district weekly reporting member banks
during the seven weeks ending April 16, despite large borrowing by some firms to meet income taxes. Normally
business loans contract much less sharply at this time.
Repayments reflected refinancing in the capital markets,
primarily by public utilities, and inventory contraction.
Investment holdings of the reporting banks rose substantially ($104 million or 9 per cent) during the seven
weeks ended April 16. Deposits moved up abruptly as a
result of both the movements of funds into the area and
the large net purchase of securities.
District department store sales from January 1 through
April 19 were down five per cent from the same period
in 1957.
District weather conditions for farming vary from good or
excellent in the North to poor in the Southern States.
Field work increased in Missouri during the last half of
April and farm work in Illinois was well advanced for the
season. But, rain and somewhat colder than normal weather have retarded cotton planting in Tennessee, Arkansas
and Mississippi.
District farm commodity sales were down 5 per cent in the
first two months of 1958 compared to the first two months
of 1957. Crop sales were down in all district states, but
livestock sales were up. Prices of major district farm commodities continued upward in the four weeks ending
April 11 and on April 11 averaged almost ten per cent
above their level of the previous year.
Page 67
1U
il JliAOW
fttw*"****
BANK DEBITS1
Six Largest Centers:
March
1958
(In
millions)
East St. Louis—
National Stock Yards,
111
$ 141.8
Evansville, Ind
167.7
Little Rock, Ark
207.6
Louisville, Ky
842.3
Memphis, Tenn.
762.3
St. Louis, Mo
2,420.4
March 1958
compared with
February March
1958_
1957
+14%
+ 6
+11
+ 5
+ 4
+16
— 1%
—11
+ 7
— 1
— 1
— 5
$4,542.1
+11%
— 3 %
Alton, 111
$ 40.6
Cape Girardeau, Mo.. .
16.6
El Dorado, Ark
28.4
Fort Smith, Ark
55.6
Greenville, Miss
26.2
Hannibal, Mo
11.9
Helena, Ark
9.6
Jackson, Tenn
24.8
Jefferson City, Mo
142.7
Owensboro, Ky
46.7
Paducah, Ky
28.4
Pine Bluff, Ark
44.5
Quincy, 111
40.6
Sedalia, Mo
15.7
Springfield, Mo
93.2
Texarkana, Ark
_
19.3
+13%
+16
+ 7
+ 8
— 3
+15
+11
+ 4
+69
+ 1
+ 5
+11
+ 8
+ 1
+ 5
+ 5
+ 4%
— 5
— 9
+ 2
— 3
+ 7
+19
—4
+86
+ 1
— 1
+ 9
+ 1
+ 1
+ 4
-0-
Total—Six Largest
Centers
Other Reporting Centers:
Total—Other
Centers
Mar.
1958
78
82.3 p
383.6
Mar. 1958*
compared with
Feb. 1958
Mar. 1957
—- 1 %
—20%
+ 1
— 8
— 2
— 3
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)
Coal Production Index—8th Dist. (Seasonally adjusted, 1947-49=100)
Crude Oil Production—8th Dist. (Daily average in thousands of bbls.)
Freight Interchanges RRs—St. Louis (Thousands of cars—25 railroads—Terminal R. R. Assn.)
92.7
+ 6
—16
Livestock Slaughter—St. Louis area (Thousands of head—weekly average)
89.8
-j- 2
—29
Lumber Production—S. Pine (Average weekly production—thousands of bd. ft.) . . . .
215.9
+ 8
+ 7
Lumber Production—S. Hardwoods (Operating rate, per cent of capacity)
69
—0—
—15
* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate and the coal
production index show the relative percentage change in production, not the change in index points or in percents of
capacity.
p—Preliminary.
Second
*2>4J*k/W
VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
$ 644.8
+16%
+13%
Total—22 Centers. . . $5,186.9
+11%
— 1%
INDEX OF BANK DEBITS—22 Centers
Seasonally Adjusted (1947-1949=100)
1958
1957
March February March
163.2
167.4
165.5
1 Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political
subdivisions.
7**4>*
EIGHTH DISTRICT WEEKLY REPORTING MEMBER BANKS
(In millions of dollars)
Principal Changes
Change
in Commercial and Industrial Loans 2
from
Net Change During
Apr. 16 Mar. 19
4 Weeks Ended
Assets
1958
1958
Business of Borrower
4-16-58
Loansf
$1,596
Manufacturing and Mining:
Business and Agricultural.
Food, liquor and tobacco. . .
%— 3
Security
Textiles, apparel and leather.
+ 2
Real Estate
Metals and metal products. .
-0Other (largely consumer).
Petroleum, coal,
U.S. Gov't. Securities. . . .
chemicals and r u b b e r . . . .
Other Securities
Other
+
Loans to Banks
Cash Assets
Trade Concerns:
Other Assets
Wholesale. . .
Retail
Total Assets
$3,886 $ + 156
Liabilities and Capital
Commodity dealers
—
Sales finance companies
—
Demand Deposits of B a n k s . . . $ 774 $ +
Public Utilities (including
Other Demand Deposits
2,100
+
transportation)
—
Time Deposits
643
+
Construction
+
Borrowings and Other Liab.. .
66
+
All Other
+
Total Capital Accounts
303
Total Liab. and Capital.
$3,886 $ + 156
Total
B— 5
1 Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported
gross.
~ Changes in business loans by industry classification from a sample of banks holding roughly 9 0 %
of the total commercial and industrial loans outstanding at Eighth District weekly reporting member
banks.
e^^
A**"
CASH FARM INCOME
Percentage Change
Jan. thru Feb.
Feb. '58 "
1958
(In thousands
Feb.
from
compared with
of dollars)
1958
Feb.'57p 1957
1956
Arkansas
$ 25,705 — 1 8 % — 1 6 % — 3 2 %
Illinois
168,437 — 5
— 5
+ 8
Indiana
82,584 — 6
— 4
+ 4
Kentucky
21,751 — 8
—18
—14
Mississippi. . . .
25,172 —32
—13
—35
Missouri
64,863 + 1 9
+15
+ 8
Tennessee. . . .
22,552 — 1 3
— 8
—17
7 States
411,064 — 6
— 5
— 5
8th District! . 160,144 — 7
— 6
—13
Source: State data from USDA preliminary estimates unless otherwise indicated.
1
Estimates for Eighth District revised based on
1954 Census of Agriculture.
p—Preliminary.
DEPARTMENT STORES
Net Sales
Mar. 1958
3 mos. '58
compared with
to same
Feb. '58 Mar. '57 period '57
(Value of contracts in thousands of dollars)
Mar.
1958
Total
$121,504
Residential... 40,823
Nonresidential
54,854
Public Works
and Utilities 25,827
Feb.
1958
Mar.
1957
$110,324
31,487
52,926
$134,068
44,496
53,811
25,911
35,761
* Based upon reports by F. W. Dodge Corporation.
INDEXES OF SALES AND STOCKS—8TH DISTRICT
Percentage of Accounts
and Notes Receivable
OutstandingFeb.28,'58.
collected during March.
Instl.
Accounts
Excluding
Instalment
Accounts
13%
39%
— 4%
— 1%
8th F.R. District Total
+31'
40
Fort Smith Area, Ark.l
+33
— 6
— 5
29
Little Rock Area, Ark
+17
+ 4
+ 1
Quincy, 111
+32
+ 12
+ 4
Evansville Area, Ind
+33
—20
—19
20
Louisville Area, Ky., Ind. . . . + 3 7
47
— 1
— 4
Louisville (City)
+34
— 4
— 7
Paducah, Ky.i
+45
— 3
— 5
11
St. Louis Area, Mo., Ill
+29
36
-0, . o
St. Louis (City)
+28
— 4
— 6
Springfield Area, Mo
+43
— 8
— 9
13
36
Memphis Area, Tenn
+39
+ 2
— 6
All Other Cities 2
+38
—13
—11
1
In order to permit publication of figures for this city (or area), a special sample
has been constructed which is not confined exclusively to department stores. Figures
for any such nondepartment stores, however, are not used in computing the district
percentage changes or in computing department store indexes.
2
Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes,
Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi; and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of March, 1958, were 17
per cent lower than on the corresponding date a year ago.
CONSTRUCTION CONTRACTS AWARDED
IN EIGHTH FEDERAL RESERVE DISTRICT*
Mar.
Feb.
Jan.
1958
1958
1958
Sales (daily average), unadjusted3
117
96
100
Sales (daily average), seasonally adjusted3. . .134
125
132
Stocks, unadjusted 4
n.a.
138
127
Stocks, seasonally adjusted 4
n.a.
142
143
n.a. Not available.
3 Daily average 1947-49 = 100
4
End of Month average 1 9 4 7 - 4 9 = 1 0 0
Trading days: Mar., 1958—26; Feb., 1958—24; Mar., 1957—26.
Mar.
1957
117
135
154
148
RETAIL FURNITURE STORES
Net Sales
Mar. 1958
compared with
Feb. 58
Mar. '57
8th Dist. Totali
+ 18%
—11%
St. Louis Area
+26
— 7
Louisville Area
+15
—13
Memphis Area
— 1
— 5
Little Rock Area
—32
—14
Springfield Area
+56
—24
1 In addition to the following cities, shown separately in the table, the total
includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Owensboro,
Kentucky; Greenwood, Mississippi; Evansville, Indiana; and Cape Girardeau,
Missouri.
Note: Figures shown are preliminary and subject to revision.
@FedFRASER