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nr/f men initials □ E&mi jc^v- VwC X ^ _____ K ■•■ ■ □ Rtancit . .. .. . .., \ x Andsr- ■ i Aj-<--A L r:Pt^f KKe,arsckasr 9-MC: .1 BRA, 'M j£LL~J. □ , '."aaasKEg tt/AA _____________ ___________________ FEDERAL RESERVE BANK OF PHILADELPHIA MARCH 1, 1946 Changes in Relative Importance of Currency and Bank Deposits The spectacular expansion in our total money supply during the war has been accompanied by a shift in the relative importance of the two types of money—currency and demand deposits —which are included in the total. The fact that our combined means of payment has increased 250 per cent since June 1939 quite naturally overshadows in importance and general interest a more gradual change which has occurred in the ratio of currency to deposits. Changes in this ratio, however, reflect changes in the coun try’s monetary habits which are important to the commercial banking system. It is the purpose of this study to analyze the following aspects of the relationship between the two types of money: 1. Long-term shifts in the proportion between currency and demand deposits. 2. The influence of war on the currency-deposit ratio. 3. The effect of changes in public preference for currency on the total volume of money. 4. The probability of a return flow of currency in the post-war period, and • 5. The significance of currency outside banks to the com mercial banking system. When, for purposes of brevity, the term cur rency is used in the following pages without further qualification, it will refer to currency in circulation outside banks. The most appro priate measure of the deposit element in our money supply, on the other hand, is the total of adjusted demand deposits and government de posits, and the term deposits alone will be used in referring to this total. This eliminates inter bank deposits, which are not really part of our money supply; and bank float, which involves duplication of deposits while checks are in process of collection. Time deposits not subject to check are omitted, since they cannot of them selves be used as money; although, like certain other non-monetary but liquid assets, they may be converted into money with little delay. Fluctuations in the Currency-Deposit Ratio Over Half a Century Annual changes in the ratio between currency and demand deposits between 1892 and 1945 are shown in Chart I. The relative importance of currency and check money varies to some ex tent with the business cycle, but has undergone long-run changes of even greater magnitude. For more than two decades preceding 1914, the downward trend in this ratio persisted with only short-lived interruptions. Whereas in 1893 almost a third of our total means of payment consisted of paper money and coin, in 1914 this type of money provided only one dollar out of every seven in the total. Page 23 / i 7 CHART I RATIO OF CURRENCY OUTSIDE BANKS TO ADJUSTED DEMAND AND GOVERNMENT DEPOSITS (JUNE DATA'1892 TO 1945 ANd'dEC. 1945) PER CENT I I I I I I I I I I I I I I I I I I l I This reflected a progressive change in public preference as between the two media of pay ments. Expanding banking facilities, bank com petition for deposit accounts, and greater public familiarity with the advantages of checking deposits, all contributed to this trend. A rela tively rigid currency supply also stimulated our increasing dependence on deposit money with its far greater elasticity, although our inelastic currency also produced frequent cyclical fluctu ations in the ratio. When the outflow of cur rency so reduced bank reserves as to force liquidation of bank assets, it often destroyed public confidence in bank solvency and the resulting scramble for currency produced set backs in the use of deposit money. But such set backs only temporarily interrupted the growing importance of checks as a means of payment. Page 24 I l I l l i I i l l i i .1.1,1 I 1 . . I I ] The proportion of currency to deposits rose rapidly following our declaration of war early in 1917, but did not reach its peak until more than two years after the war had ended. The ratio declined sharply after 1920, with the trend in monetary preference reacting to influences similar to those of the pre-war period, and by 1930 had again returned to 1914 levels. Estab lishment of the Federal Reserve System, how ever, had provided a more elastic currency and it was assumed that this, together with elastic bank reserves, would eliminate bank crises. The System did increase the efficiency of the check ing mechanism and prevented currency out flow from undermining bank reserves at the peak of credit expansion in 1929. The spectacular rise in the proportion of cur rency during the early 1930’s may be omitted in considering trends in the ratio of currency to deposits, since it was dominated by the progres sive collapse of our banking system. Panicky withdrawals of cash pushed currency outside banks to a new high of over $6% billion on March 4,1933, while bank deposits were shrink ing under the dual impact of cash outflow and liquidation of bank assets, and it became neces sary to close all banks temporarily. Many banks were unable to reopen in 1933, sending the volume of deposits still lower, although cur rency in circulation stayed at a relatively high level. By 1936 public confidence in the safety of bank deposits had been largely restored, but the ratio of currency to deposits was still much higher than in the 1920’s. Currency preference remained high through the years preceding our entry into World War II and there was little evidence of a sustained trend toward greater use of check money such as had characterized our economy in earlier years. Lack of adequate banking facilities in some communities, increasing practice of imposing service charges on checking accounts, low inter est paid on time deposits, and perhaps some remaining fear as to the safety of bank deposits —all contributed to the persistently high ratio of currency to deposits prior to the war. Per haps of equal importance was the influence which gold inflow and high excess reserves, scarcity of opportunities for making good loans, and resulting low interest rates had on the atti tude of banks toward deposits. The net result of these influences was that many people who under earlier conditions would have carried checking accounts as a matter of course, avoided the use of demand deposits. Furthermore, many depositors used checks less freely than in the past and thus required larger amounts of cur rency for day-to-day transactions. War Influences Our entry into the war introduced new influ ences which further increased the ratio of cur rency to demand deposits. By December 1945 it had reached the highest level since 1900, except for the short interval of banking panic in 1932 and 1933. Currency outside banks was almost 4% times as large in December 1945 as in June 1939, representing an increase of $20% billion. Many influences contributed to the increased use of currency during the war. Among the most important have been: (1) the large num ber of people, including war workers and men in service, removed from localities where they had established banking connections; (2) the use of cash in black market transactions and for pur poses of tax evasion; (3) rising prices and in creased spending where payments are least likely to be made by check, as indicated by the expanding volume of retail trade; and (4) the increased proportion of our money supply in possession of those not accustomed to using banks, and its progressive accumulation in hold ings of idle money as a result of rapidly expand ing payrolls and limited supplies of available consumers’ goods. It is impossible to evaluate accurately the quantitative effect of the individual influences, although some evidence is available as to their relative importance. The population shifts associated with war industry probably had their greatest effect early in the war, since workers previously accustomed to using bank deposits might be expected to use banking facilities again after becoming well established in their new localities. Although the influence of black market operations on currency outstanding is difficult to determine, in April 1944 G. L. Bach of the research staff of the Board of Governors of the Federal Reserve System, in an analysis of currency uses makes the following statement: “. . . it seems unlikely that the total currency outstanding specifically attributable to black market use could approach a billion dollars.” Some idea of the effect which accumulation of idle money holdings had on currency demand, as compared with the effect of spending or transactions requirements, may be obtained from a study of Chart II which shows consumers’ expenditures, salaries and wages, and currency as percentages of 1935-1939 averages. Before the war, the three curves followed closely simi lar patterns. Consumers’ expenditures provide a fairly good indicator of the transactions de mand for currency, and through the summer of 1941 this influence apparently provided the principal explanation of currency expansion. Since then, however, the wide disparity between salaries and wages and consumers’ expendi tures, together with the much more rapid in crease in currency, suggests that currency de mand has stemmed more from its accumulation for holding purposes than from spending needs. Page 25 Comparisons between World War I and and World War II CHART n CURRENCY, SALARIES AND WAGES, AND CONSUMERS’ EXPENDITURES Chart III shows the behavior of currency and demand deposits from 1914 through 1945. Dol lar amounts are plotted on a ratio scale so that vertical distances represent comparable percent age changes. This chart shows not only that the dollar amount of currency created in World War II was many times as large, but also that the percentage increase was much greater than in World War I. It is again evident that cur rency provided a higher proportion of our total money supply during World War II. CURRENCY OUTSIDEBANKS '^SALARIES AND WAGES 'CONSUMERS’ EXPENDITURES 1935 1937 1939 1941 1943 1945 Other evidence of the rapid accumulation of idle stocks of currency by individuals is to be found in estimates of liquid asset holdings pub lished by the Board of Governors and in the in crease of currency outstanding per capita. Ac cording to the Federal Reserve figures, personal holdings of currency increased $16.9 billion, or 402 per cent in the six years ending December 1945; while personal demand deposits increased only 195 per cent. Currency outside banks in creased per capita during the same period from approximately $44 to $192 or 336 per cent. On the other hand, Federal Reserve estimates show that increased holdings by business of all types have absorbed only $3.3 billion, or 16 per cent of total currency expansion since December 1939. Unincorporated businesses, in which it is often impossible to distinguish cash held for business purposes from that held by the owners as individuals, accounts for over 90 per cent of business’ share in this increase. During the same period, business corporations increased currency holdings by only $300 million, while their demand deposits were expanding $17,500 million. All factors considered, it seems cer tain that most of our greatly expanded currency is held by individuals and that such holdings have resulted more from accumulation of idle funds than from increased needs for meeting current expenditures during the war. Page 26 The rise in commodity prices was much greater from July 1914 through 1919 than from August 1939 to the end of 1945. This is partic ularly true when we compare consumer prices, which rose about 90 per cent in the first period and only 31 per cent in the latter period. Al though data on consumers’ expenditures are not available for the First World War, the rapid rise in prices combined with absence of ration ing of consumers’ goods would indicate that such expenditures must have increased proporCHART ID DEPOSIT MONEY AND CURRENCY OUTSIDE BANKS BILLIONS I IOO r June and pec data, DEMAND DEPOSITS ADJUSTED AND GOVERNMENT DEPOSITS CURRENCY OUTSIDE BANKS tionately more than during the recent war. With relatively less currency expansion and greater increase in the type of transactions for which currency was needed, it is reasonable to assume that a far greater part of currency ex pansion during World War I could be explained by transaction needs than was the case in World War II. Another influence which may have been sig nificant in the greater increase of currency rel ative to demand deposits in World War II than in 1914-1919, is the fact that both demand and time deposits were more attractive to small de positors in the earlier period. Small minimum balance requirements, or complete lack of such requirements in many parts of the country, and the absence of service charges on individual checking accounts, enabled even those with relatively small money holdings to enjoy the advantages of a checking deposit without cost. It also is probable that interest of 31/2 <>r 4 per cent, commonly paid on time deposits at that time, provided a stronger inducement not to hoard cash than do present rates which typically range from 0 to 1 y% per cent. With deposit insurance fully protecting all small deposits in 95 per cent of our commercial banks, and with the generally strong position of banks throughout the country, the safety of bank deposits is greater today than in the earlier period. Lack of confidence in banks is not the explanation of the fact that currency outside banks is now 6 y2 times as large per capita as it was in June 1919. In view of the evidence that individual holdings of idle funds account for the greater part of currency expansion since 1939, it is not improbable that the cost of check ing accounts has been an important contribut ing factor to the much higher ratio of currency to deposits characteristic of the recent war period. Effect of Currency Demand on the Total Volume of Money Both currency and checking deposits are ef fective means of payment. The proportion of each in our total money supply is determined by the preference of the public, since banks accept currency when offered for deposit and must pay out cash to depositors on demand. The public cannot determine, however, the effect which changes in currency preference will have on the total supply of money. As long as the banking system possesses large excess reserves, an inflow or outflow of currency involves merely an exchange of one type of money for another, with the total probably remaining unchanged. The same is true if the Federal Reserve Banks offset the effect of such currency movements on member bank reserves by decreasing or increas ing Federal Reserve credit. In the absence of a central banking system prior to 1914, withdrawals of currency reduced member bank reserves and forced a secondary contraction in bank deposits unless reserves were in excess of current needs. On the other hand, currency deposited with commercial banks increased reserves and permitted further deposit expansion, unless offset by other influ ences such as an outflow of gold. The inelasticity of the currency supply at that time produced wide fluctuations in bank credit as it flowed into or out of the banking system. This was particularly true when, near a cyclical peak in deposit expansion, public withdrawals of cash left many banks with de ficient reserves, sometimes resulting in a bank ing panic. Even seasonal fluctuations in the need for hand-to-hand currency were likely to produce disturbances in the money market un less banks possessed substantial excess re serves. One of the objectives in creating the Federal Reserve System was to provide a sufficiently elastic currency to prevent fluctuating public demand from producing wide secondary expan sion or contraction in deposit credit. Currency elasticity increased greatly with the issuance of Federal Reserve notes. Seasonal fluctuations in currency demand no longer created any disturb ances, and only in times of general loss of confi dence in banks, such as preceded the banking collapse of 1933, was the outflow of currency able to force a secondary contraction of bank deposits. Since 1933, changes in legal provisions sur rounding Federal Reserve note issue and the greatly broadened powers under which Federal Reserve Banks can lend to member banks, par ticularly when the enormous commercial bank holdings of Government securities are consid ered, have made it possible to meet almost any conceivable demand of the public to convert de posits into currency without forcing member bank reserves below legal requirements. Page 21 After our entry into World War II, the Fed tual peak of money in circulation was not eral Reserve System assumed the broad respon reached until two years after the Armistice was sibility of maintaining member bank reserves at signed, and the yearly average of money in cir such a level that no shortage of bank credit culation in 1919, 1920, and 1921 was substan would threaten the successful financing of the tially greater than in the last year of the war. war or disturb the market for Government se The rise in commodity prices during the war curities. For successful attainment of these ob was much greater than in World War II, and jectives it was imperative that currency with they continued to rise for more than a year and drawals should not be allowed to decrease bank a half after the war was over. Currency de reserves, and the System has completely offset clined only after belated measures were adopted the influence of such withdrawals by expanding to combat rising prices, with resulting liquida Federal Reserve Bank credit through purchase tion of bank credit, falling prices, and general of Government securities. economic depression during 1921 and 1922. Currency contraction at that time was both pre Out of an increase of approximately $23 bil ceded and exceeded by sharp contraction of lion dollars in Federal Reserve credit since the bank deposits. beginning of 1941, about $19^ billion dollars Behavior of currency after 1918 could be has been needed to offset currency withdrawals. Because of large excess reserves at that date it cited, with perhaps more reason, as evidence has been necessary to increase member bank re that we can expect a continued expansion for serves less than $2 billion, even in the face of some time to come. Actually conditions in our the enormous wartime deposit expansion. It is banking system, and the nature of our recent obvious that currency expansion has been by currency expansion, are so different that the far the most important factor in determining the earlier period is not reliable as a precedent. Bank deposits are unlikely to decline in the near scale of open market operations. future because of the lack of private short-term The Federal Reserve System has prevented credit in bank portfolios and the predominance this unprecedented expansion in currency from of Government security holdings. Furthermore, causing a decrease in bank reserves or in the currency expansion in World War I was domi total volume of money. By reversing the proc nated primarily by transaction needs, whereas ess it also can absorb such excess reserves as the recent expansion has been influenced more may result from any return flow of currency. It by accumulation of idle currency holdings. is possible, therefore, for the Federal Reserve All of the factors which have produced a authorities to prevent mere shifts in public pref higher ratio of currency to deposits will not end erence as between currency and deposit money from producing undesired changes in the total with the war. Some shifts in population during economic readjustment and the discharge of money supply. service men may first tend to increase and later to decrease currency in circulation, but the net Probability of a Return Flow of effect should be small. The black market shows Currency in the Near Future little sign of abatement, and if previously cited As currency in circulation mounted to new opinions as to the amount of currency employed peaks during the war, increasing interest devel for this purpose are correct, its complete aboli oped in the possibility of a return flow of cur tion would decrease total currency demand rela rency after the war was over. Those who be tively little. lieve that the return flow will be very large seem to be influenced strongly by two considera Certain factors seem to indicate that a larger tions. First, is the decline in circulating cur proportion of national income is going to those rency which occurred after the last war; and less likely to use deposits than was true follow second, is the assumption that all or most of the ing the last war. For some time the percentage influences which were responsible for currency of income payments going into salaries and expansion since 1940 would be terminated by wages has been increasing, and present wage the end of the war. rates show a definite tendency to rise. Income taxes are graduated much more steeply than in The example of the First World War has the 1920’s and it does not seem likely that the sometimes been cited very carelessly. The ac practice will be abandoned soon. Unemploy Page 28 ment insurance benefits, along with discharge pay and other benefits to ex-service men, pro vide some income during transitional unemploy ment. And finally, any attempt to use compen satory fiscal policy as a means of economic con trol, would tend to draw off excess purchasing power more freely from the higher income brackets during periods of high national income and to pump additional funds into the lower consumer brackets during depression. If along with these factors we consider the in fluence of higher service charges on checking accounts, and lower interest paid on savings accounts, in encouraging the use of currency in preference to bank deposits, it seems reasonable to expect the ratio of currency to deposits to remain at higher levels than in 1914 or during the 1920’s. Another common assumption that sometimes is overstressed as a reason for expecting a con traction of currency in the near future is that, as goods—particularly consumers’ durables— become available, present currency “holdings” will be spent and thus removed from circula tion. Although such spending channels money into the hands of business concerns which will deposit it with banks, it should not be assumed that this money will remain with business. Actually, the more rapidly consumers spend, the more rapidly will income payments to individ uals rise. In times of active demand for their products cash funds do not remain long with business. For-the most part they are paid out rapidly for wages or other costs, and even prof its are distributed in dividends or invested in expanding the business. The same total money supply remains in the hands of the public and whether it will be kept as currency or in bank deposits will depend on the preference of the holders. If no greater proportion finds its way into the possession of those accustomed to using bank deposits, there will be little decline in cur rency demand. if business retains larger cash funds, although this amount may be surprisingly small. It is also quite possible that in the end no net reduc tion will result. The magnitude of any return flow of currency that may develop will depend principally on the behavior of price levels, employment, and money incomes. The possibility of an upswing in prices is such that currency may not contract at all or that it may continue to increase over the next year or two. The rate of currency expansion slowed up during 1945, but that in itself does not forecast an immediate decline. A substantial decrease of $591 million occurred during Janu ary 1946. This amounted to a decline of only 2.1 per cent, however, whereas in the five years preceding Pearl Harbor the average seasonal decline in currency was 2.8 per cent during the month of January, although currency increased annually throughout this period. It would be premature to assume that the January decline marked a beginning of cur rency contraction, as long as currency decreased relatively less than the seasonal reaction in pre war days. Importance to Banking of Increased Use of Deposit Credit Commercial banking as we know it would not exist without widespread use of bank obliga tions—in earlier times bank notes, but today bank checks—for the purpose of making mone tary payments. Loans and investments are the source of bank earnings, but without deposits there would be practically nothing for banks to lend or invest. For this reason deposits make bank earnings possible. Except for savings accounts, the business of commercial banking depends not only on the public depositing a large part of its temporarily idle funds, but on general use of checks as a means of payment. While developments of re cent years have left the country with a danger ous excess of money of all kinds, the long-run If the desire to convert currency into goods position of commercial banking will be strength continues, the rate at which it circulates will ened in proportion to the extent which the com rise, probably with serious inflationary results munity prefers deposit money to currency and on price levels. Under such pressure, prices coin. Although business has always relied more may rise to levels where the currency needs for heavily on check payments, if checks were used transactions purposes will be such that the pub only in payments between business concerns and lic does not wish to reduce cash holdings fur individuals used currency entirely, we probably ther. It is quite possible that spending may would not need all of our present banking result in less currency and more bank deposits facilities. Page 29 A low ratio of currency to demand deposits is important, therefore, to commercial banks. It indicates broader familiarity with and reliance on the banking system. There could be no more effective means of strengthening the public relations of banking than through broadening the use of their deposit facilities by an ever larger segment of the community. tion was much smaller for both the very small banks and for banks with deposits of over $50 million. In the Third District the ratio was only 3.1 per cent for all members—considerably lower than for any other Federal Reserve Dis trict, except New York. Undoubtedly, this gross figure would be reduced substantially if it were possible to deduct all additional costs resulting from the administration of service charges. While it is true that in the final analysis pub lic choice rather than the preference of bank In view of the much higher profits of banks ers determines the relative proportions of cur in recent years, it might be well for banks to rency and deposit money, the policy pursued by re-evaluate the usefulness of service charges or banks may influence the public’s decisions to a at least the schedules that are now in force. very important extent. Convenience in opening Important considerations in such evaluation in checking deposits, size of minimum balances re clude the effect of service charges on the use of quired, cost of using a checking account, and the deposit credit, including loss of accounts which attitude of banks in their contacts with depos might earn more for the bank than their addi itors certainly affect the decisions of many tional cost; the costs of service charge adminis people. tration; and effects on public relations, includ ing those with the great mass of people who are Banks perform valuable services for depos not now using bank facilities of any kind, as itors and should not be expected to perform well as present customers. Amounts spent by them at a loss. Service charges were intro banks on publicity may not be as productive, duced widely during the 1930’s when bank in many cases, as equal amounts involved in earnings were low and losses and write-offs lowering service charges. heavy. They sometimes appeared to be a nec essary innovation if banks were to cover their The present high ratio of currency to deposits costs, a large amount of which were directly is largely the result of idle money holdings, yet connected with service to depositors, and at the it also reflects the influence of service charges same time be able to improve their capital posi on the use of checks as a means of payment. tion and provide a return on stockholders’ in The Federal Reserve System has taken care of vestments. the problem of an elastic currency so success fully that changes in currency demand of them There is sometimes a tendency to overesti selves no longer need affect member bank re mate the importance of service charges as a serves or produce wide variations in our total source of income to banks. During the year money supply, but the importance of commer 1944, gross receipts from service charges by all cial banks as credit agencies depends on the ex member banks in the United States provided tent to which the community is willing to use only 4.6 per cent of total earnings. The propor “bank money.” Recent Developments in Department Store Activity In a recent article we stressed the close rela totaled only 25 per cent of pre-war volume and tionship that exists in a “normal” market be housewares increased one-third as supplies of tween department store sales and the level of merchandise increased. Sales of women’s and income. During the two decades prior to the children’s hosiery, and domestics such as muslins war it would have been possible to predict with and sheetings, on the other hand, declined 4 and amazing accuracy the volume of sales from in 5 per cent, respectively, as supply shortages come data. During the war, however, consumer restricted consumer buying. purchases failed to keep pace with the rapid rise in income because available supplies of Very large purchases of women’s and chil goods for civilian consumption declined in favor dren’s apparel and piece goods featured activ of the demands for war. This wartime lag in ity during 1942, 1943, and 1944, but last year purchases permitted consumers to amass large increases were more evenly divided among major volumes of savings which along with their ac departments as shown in Table 1. Sales of cumulating demands creates a favorable cli men’s and boys’ wear and home furnishings mate for large purchases in post-war markets rose more than total store sales for the first when goods are again available. time in the four-year period. Large increases occurred soon after V-J Day with sales of men’s This reservoir of spending power is already suits and coats up 60 per cent in October and exerting a strong influence on retail sales. De 34 per cent in November. In the face of this spite declines in disposable incomes of individ demand, stocks of men’s winter suits have vir uals during the past six months, sales at depart tually disappeared from the counters. With ment stores continue steadily upward. The men’s furnishings already in short supply, sales return of service men to civilian life stimulated could not respond adequately to the post-V-J sales of men’s clothing and the reappearance of Day demand but for the past three months have some war shortage items also contributed to been running between 10 and 20 per cent over the previous year. recent business expansion. Although many favorable forces are at work in the current market there also are some retard ing influences, the most important being declines in the supply of some goods available for sale. These shortages have been growing more serious in recent months. Record Sales Activity Department stores in the Third Federal Re serve district enjoyed a new record volume of business last year totaling $427 million, an in crease of $40 million over the previous year and $185 million greater than in 1939, the last pre-war year. This increase, of course, reflects price changes as well as physical volume of sales. Sales during recent weeks of this year continue at a rate well above last year, with no indication of a slackening in the near future. Demand for all types of goods continues strong with all but two of the 34 larger depart ments of stores in this district showing increases in sales during the past year. Sales of major household appliances almost doubled but still Table 1 ANNUAL INCREASES IN SALES OF MAJOR DEPARTMENTS OF DEPARTMENT STORES IN THE THIRD FEDERAL RESERVE DISTRICT Percentage Total............................................ . Main store—total................... Women’s apparel and accessories. . . Men’s and boys’ wear........................ Home furnishings................................... Small wares.................................. Miscellaneous.......................... Basement—total...................................... 1945 from 1944 1944 from 1943 + 9 +10 + 9 +11 +12 + 2 +10 +12 + 6 + 9 + 9 +11 + 7 + 3 +25 +12 +13 +10 change in sales 1943 from 1942 1942* from 1941* +20 +16 + 8 + 4 +35 +12 +10 * Nine months—Data for February, March, and May 1941 are not available. Inventories The current problem of supplies overshad ows all other recent developments in depart ment store activity. Since June of last year in ventories have continued to decline in response to increasing demand in excess of production. The need for more stocks is obvious and the scramble for available supplies is the chief prob lem of harassed buyers. Page 31 Increased production appears to be the chief solution to the problem but here, too, are im pediments, some unavoidable and some avoid able. Reconversion of war industries to peace time production takes time. In many instances overworked machinery and equipment have outlived their usefulness and cannot be replaced until the producers of the machines can them selves reconvert and retool. The low inven tories at retail stores in many cases are the result of raw material shortages at the manu facturing plants which are confronted by inade quate supplies of skilled labor and delays in production arising from labor-management disputes. Statements in the press seem to indicate that some producers, particularly of textiles and clothing, are withholding goods from the market in the hope that price increases will be forth coming. According to these reports men’s shirts and suits are piling up in manufacturers’ ware houses instead of moving into retail channels and manufacturers say that they cannot realize a fair profit under existing terms of O.P.A.’s Maximum Average Price Regulation. The annual report of department store sales and stocks by departments in this district indi cates the specific types of goods that are in shortest supply. Eleven of the 34 principal de partments showed declines in stocks last year ranging from 66 per cent in men’s coats and suits to one per cent in women’s and children’s shoes (Chart I). These departments normally account for one-fourth of total sales. Men’s apparel departments are most affected by shortages as evidenced by the appearance of every one of the men’s apparel departments in this group, and in every case the declines in in ventories have occurred for three consecutive years. With about 300,000 returned veterans in this district adding to the demand for available goods and with prospects for an equal number returning within the next six months there is little hope for early relief. Piece goods, corsets and brassieres, hosiery, and domestics also showed declines for three consecutive years but the shortages in supplies did not seriously affect the dollar volume of sales until this past year. Improvements in inventories have occurred in many departments. The outstanding exam ple is the housefurnishing group; stocks in creased in every department except domestics after declines in the previous two years. Use of Credit As sales increased during the war, ■ credit buying played a diminishing role in consumer transactions. Instalment purchases which ac counted for 10 per cent of total business in 1941 dropped to only 5 per cent in 1945 and charge account sales decreased from 49 to 40 per cent. Cash buying increased $112 million and ac counted for 90 per cent of the total rise in busi ness over this same period (Chart II). chart CHART X DECLINES IN DEPARTMENT STORE INVENTORIES DURING 1945 THIRD FEDERAL RESERVE DISTRICT THIRD FEDERAL RESERVE DISTRICT men's coats and suits n DEPARTMENT STORE SALES BY TYPE OF TRANSACTION MILLIONS I 400 MILLIONS % 400 ‘ CHARGE ACCOUNT women’s ano chlor en's hosiery INSTALMENT MEN’S APPAREL (BASEMENT) MEN’S FURNISHINGS DOMESTICS'SHEETINGS, ETC MEN'S AND BOYS' SHOES *;♦*♦*< V*v ■ • *>*♦*♦*« . v*v >V»V V.v w; | . WOMEN’S ANO CHLORENlS SHOES v.v V*V 50 25 PER CENT DECREASE Page 32 1941 1942 1943 1944 1945 Expanding consumer income was a major enced the largest wartime gains may suffer the factor in the diminishing use of credit but Reg greatest post-war adjustments. ulation W also had an effect as evidenced by the fact that a large part of the shift had oc The ability of new industrial plants in the curred by the end of 1942. The disappearance West and South to survive in a competitive from the market of many consumer durable peacetime economy will keynote future activ goods which are normally sold on an instalment ity in those areas. The future of agricultural basis was probably the largest single factor con prices will strongly influence developments in tributing to the decline in instalment activity. the South and Middle West. Increased agri cultural prices accounted for about five-sixths Regional Differences in Sales of the wartime increase in farm income. De clines in military payments and Federal civilian Substantial differences occurring in depart payrolls will influence the relative gains due to ment store sales expansion in various sections these factors which were so important in the of the country during the war period are closely South and Southeast. allied with differences in growth of productive activity and income- A review of the forces behind trade expansion during this period casts Regional Developments in the Third District some light on future sales prospects. State in Just as the war had different degrees of effect come payments, published by the U. S. Depart ment of Commerce, make possible the compari on activity in major divisions of the country, son between department store sales and income the same was true in smaller areas. Depart payments from 1940 to 1944 shown in Table 2. ment store sales in six cities in this district show wide differences in trade activity from one met ropolitan center to another- Table 3 shows Table 2 changes in sales of department stores for these CHANGES IN DEPARTMENT STORE SALES AND INCOME cities from 1939 through 1945. Over-all in IN THE- 12 FEDERAL RESERVE DISTRICTS, 1940-1944 creases range from 106 per cent in York to 70 per cent in Philadelphia. These changes reflect participation of the local areas in wartime Per cent increase 1940-1944 activities. United States.................................................. Boston..................................... New York..................................................... Philadelphia.............................................. Cleveland...................................................... Richmond........................................ Atlanta.......................................................... Chicago............................................ St. Louis............................ Minneapolis................................................. Kansas City................................................. Dallas........................... .. San Francisco.............................................. Department store sales Income payments to individuals 63 50 42 51 60 78 98 52 68 51 86 110 89 95 73 67 75 Index—1935-1939 =100 Per cent change 1939 1940 1941 1942 1943 1944 1945 1939 to 1945 105 139 92 80 110 128 138 Wartime increases were greatest in the At lanta, Dallas, and San Francisco districts and smallest in Boston, New York, Philadelphia, and Minneapolis. Stimulus of war was largely re sponsible for regional differences in rates of growth. Granting of war contracts, location of training camps, etc., were not distributed re gionally in relation to past economic impor tance; decisions were made for strategic rea sons and as a result a large part of wartime expansion went to the South and Far West. It is very likely that many of the wartime gains will prove temporary and that regional read justments will take place—areas that experi Table 3 INDEXES OF DEPARTMENT STORE SALES IN SIX CITIES District—total......... Lancaster................ Philadelphia........... Reading................... Trenton.................... Wilkes-Barre.......... York......................... 104 104 101 103 108 103 104 in 107 108 112 1 19 103 110 129 129 124 134 138 121 129 143 151 140 153 151 132 153 151 165 147 166 175 147 171 167 178 158 178 190 178 194 184 190 172 187 220 209 213 + 76 b 84 b 70 b 81 bl03 bl03 +106 Before the war, composition of industry va ried considerably among these areas. A com parison of the three primary sources of income —manufacturing, agriculture, and mining—is shown in Table 4 for the counties in which the six cities are located. Although manufacturing activity predominated in five of these counties, the types of industry are notably dissimilar. Berks county is prominent for its textiles and machinery, Trenton and York for their metals industries, and Philadelphia and Lancaster for greater diversification. Luzerne county, pre dominantly a mining center, has considerable Page 33 textile manufacturing. Agricultural activity is of greatest relative importance in Lancaster, York, and Berks counties in that order. Mercer county in New Jersey enjoyed the greatest manufacturing gains. Long recognized as a metal products center, plants in that area received war supply contracts valued at more than one billion dollars. Including aircraft, which accounted for 81 per cent of the total, contracts were eight times greater than total manufacturing output in 1989. York county ranked second in relative gains in war contracts which were valued at three and one-half times pre-war production. York and Trenton vied for greatest increase in department store sales throughout the war period and gains from 1939 to 1945 were 106 per cent in York and 103 in Trenton. Value of war supply contracts was one and one-half to two times the pre-war volume of manufacturing production in Berks, Lancaster, Luzerne, and Philadelphia countiesTable 4 PRE-WAR IMPORTANCE OF PRIMARY INDUSTRIES IN SIX COUNTIES OF THE THIRD FEDERAL RESERVE DISTRICT Phila Berks delphia Mercer Luzerne York 100 100 100 100 100 100 72 27 1 100 89 10 1 95 5 (a) 31 2 67 84 15 1 Manufacturing (value Agricultural output......... Mineral production.......... (a) Less than 0.5 per cent. a Philadelphia, which accounts for approxi mately 55 per cent of total department store activity in the Third Federal Reserve District, showed the least relative gain despite a rise of $90 million in annual sales over the war period. The city, in addition to being the largest mar keting center in the district, is noted for the wide diversity of its manufacturing industries. Two and one-half billion dollars in war supply contracts of all types were awarded local indus try, almost double total manufacturing output in 1939. The diversity of industrial activity lends stability to local economy and industries that enjoy post-war expansion are expected to absorb a large part of post-war declines that may occur in other industries. Prospects Per cent of total—1939 Primary Industries Lan caster sylvania Department of Labor and Industry av erage weekly earnings of anthracite miners in creased from $30.26 in 1939 to $63.04 in 1944. Average earnings in November 1945 were re ported at $64.44, a decline of two dollars since V-J Day. The fact that almost the entire rise in earnings occurred after 1942 is reflected in the lag in Wilkes-Barre department store sales ex pansion in the early war years and the rapid growth after that time- In appraising future retail trade activity it is necessary to analyze consumer demand in re lation to the supply of goods. The volume of consumer demand depends upon ability and willingness of individuals to satisfy their wants. Supply of goods depends upon the ability and performance of industry, business, and labor in producing commodities and channeling them to purchasers. Post-war prices of agricultural commodities will influence trade activity in the Lancaster, York, and Reading areas where agriculture is Ability to buy is determined first by what an important part of the basic economy. Fu happens to current incomes and second by the ture prices of coal will be important in the magnitude of reserve spending power in the Wilkes-Barre area because two-thirds of the form of savings. With curtailment of war pro primary output of Luzerne county is anthracite. duction a decline in income was inevitable. In Although physical production remained vir some industries there was a period of inactivity tually unchanged, the value of output increased and reduced employment while war plants re 54 per cent from 1939 through 1944 and aver converted to peacetime production; work stop age sales realization rose from $3.85 per ton to pages arising from labor-management disputes $5.91 over this same period according to re have the same effect. Earnings of workers also ports by the U. S. Bureau of Mines. Increases were reduced through the elimination or cur in labor costs are reflected in this value increase. tailment of overtime work and the shift from As the wartime supply of labor dwindled in high wage war jobs to lower wage civilian jobs. this area, overtime was required to maintain On the other hand, increases in basic wage and production. According to reports of the Penn salary rates have tended to offset declines in Page 34 income, and the physical aspects of retooling industry were completed much more rapidly than originally expected. Actually, declines in incomes have not been nearly so great as pre dicted a few months ago. Incomes of individ uals last year were almost $4 billion greater than were estimated in September and totaled $160.7 billion, $4 billion above the peak, a year earlier. At the close of last year, liquid asset holdings of individuals were estimated at $145 billion, more than triple the amount held in December 1939, and consumer debt had been reduced sub stantially. Geographical differences in income changes will occur, and prospects in each area depend upon the effect of the end of hostilities on basic income-producing activities. With respect to supply, American ingenuity was amply demonstrated in producing for war, and that same ingenuity is essential now to pro duce adequately for peace. In view of the tre mendous pressure of demand, immediate pro duction is indispensable to the maintenance of a healthy economy. At the end of hostilities some decline in pro duction was unavoidable. Reconversion of plants, shortages of materials, labor, etc., were problems that require time to solve. Delays in output due to wage and price controversies are in a somewhat different category, they are avoidable, and should be resolved as quickly and equitably as possible. Such delays have only a detrimental effect on our immediate eco nomic future. They create unemployment and loss of income, and at the same time withhold goods from consumers, thus creating additional inflationary pressure. The net effect of run away prices is the absorption of consumers’ dol lars without a proportionate increase in produc tion and jobs. BUSINESS STATISTICS Employment and Income Production Philadelphia Federal Reserve District Indexes: 1923-5=100 in Pennsylvania Not adjusted Adjusted for seasonal variation Per cent change Jan. Dec. Jan. Jan. 1946 1946 1945 1945 from Industry, Trade and Service Jan. Dec. 1946 1945 1945 Employment Indexes: 1932=100 Month Year ago ago INDUSTRIAL PRODUCTION... MANUFACTURING........................ Durable goods............................... .. Consumers’ goods......................... Metal products................................ Textile products... ......................... Transportation equipment........... Food products.................................. Tobacco and products................... Building materials........................... Chemicals and products............... Leather and products.................... Paper and printing......................... Individual lines Pig iron.............................................. Steel... . ............................................. Iron castings..................................... Steel castings.................................... Electrical apparatus....................... Motor vehicles................................ Automobile parts and bodies.... Locomotives and cars.................... Shipbuilding..................................... Silk manufactures........................... Woolen and worsteds..................... Cotton products............................... Carpets and rugs............................. Hosiery............................................... Underwear......................................... Cement............................................... Brick................................................... Lumber and products.................... Bread and bakery products......... Slaughtering, meat packing.......... Sugar refining................................... Canning and preserving................ Cigars................................................. Paper and wood pulp..................... Printing and publishing................ Shoes........................ .#...................... Leather, goat and kid.................... Explosives.........;.............................. Paints and varnishes............... Petroleum products........................ Coke, by-product............................ COAL MINING................................. Anthracite......................................... Bituminous........................................ CRUDE OIL....................................... ELECTRIC POWER..................... Sales, total........;............................... Sales to industries........................... BUILDING CONTRACTS TOTAL AWARDSf.......................... Residential!...................................... Nonresidentialf.............................. Public works and utilities!.......... 106p 107p 128p 89p 126 63p 230p 119p 104p 44p 147p 66p 114 107 109 131 92 133r 65 233 r 138 144 219 92 180 64 529 120 120 125 39 150 72 104 38 171 94 97 90 96 85 92 202 55 104 69 -----p 77 64p 46 63p 91 r llOr 75 125 196r 55 109 69 no 1 2 2 - 2 - 5 - 3 81 159p 104p 94 118 87p 47p 72 106 195 155p 74 72 87 316 405 415 297 68 68 112 32 81 -26 +12 - 2 — 8 + 3 100 - 1 -13 +13 -26 + 3 - 1 - 5 0 137 85 228 287 75 131 106 112 97 90 143 160 160r 125 103 90 r 85 114 99 101 125 46 67 68 209 97 104 208r 202 159 166 62 62 59 60 85 78 309 327 394 431 399 444 326 358 48 116 50 -23 - -1 --171 79 81 69 62 r 42 43 59 59 r 66 65 71 . .133 139r 140 65p 54 34 55 50r 51 25 24r 34 111 - 25 6 51 26 8 -1 --171 + 4 + 3 -13 + 2 + 5 + 9 - 6 - 2 +19 +22 + 2 + 2 + 3 + 4 - 9 0 +49 + 3 -39 * Unadjusted for seasonal variation. ! 3-month moving daily average centered at 3rd month. -10 88 -30 0 -60 -30 -27 94 77 97 190 48 103 67 -35 -63 - 5 + 3 + 9 + 7 - 7 - 4 +21 + 9 + 3^ 0* -10 121 64p 231p 118p 85p 37p 143p 69p 113 -20 -— 31 - 104p 104 105p 106 -41 - 2 -30 - 2 -56 - 1 0 +16 -14 -29 +18 78 64p 47 61p 7 69 2 5 131 46p +94 + 7 51 -25 23 - 3* 125 +15 119 -43 56 - 1 158p + 1 85p +10 93 +19 118 -30 89p -30 49p -66 72 95 + 2 - 3 193 - 7 155p +19 75 72 + 2 +12 99 - 3 304 - 6 429 - 7 427 -17 288 + + + - 8 +165 +712 +126 + 89 75 39 126 64 127 r 64 237 r 119 90 36 148 67 111 137r 142 173 66 533 117 86 33 167 97 97 r 80 r 83 62 r 65 45 r 43 58 58 68 69 137 137 24 44 47 49 24r 31 124 129 105 120 99 59 162 154 85 90 91 r 85 99 115 86 127 71 50 67 209 93 94 207 r 199 154 166 63 62 60 59 89 90 290 314 422 457 411 458 310 347 75 31 121 98 Factory employment Factory payrolls Debits Dec. 1945 Jan. 1945 Dec. 1945 Jan. 1945 Dec. 1945 Jan. 1945 Dec. 1945 Jan. 1945 Dec. 1945 Jan. 1945 Allentown........... Altoona................ Harrisburg.......... Johnstown........... Lancaster............ Philadelphia.... Reading............... Scranton.............. + + + + + + + 2 2 I 2 2 1 3 0 -19 - 4 -15 + 3 -16 -20 - 5 -22 - 9 - 3 - 5 -24 0 +1 - 1 0 Wilkes-Barre___ Williamsport... . Wilmington........ York..................... + + + 1 2 2 3 -24 -13 -38 - 9 + + -41 — 47 - 8 +332 -31 + 48 -40 - 33 -16 +138 -32 - 24 -10 + 26 -23 + 19 — 73 -40 +193 -22 + 60 -45 - 44 -21 +163 +854 +261 +753 +186 +922 +700 +634 +382 +657 +384 -52 -52 -50 -54 -55 -48 -51 -54 -61 -52 +17 +38 +26 +24 +16 +15 +25 +31 +30 +27 +965 +109 -54 -55 +24 +17 -10 - 8 - 3 - 6 + 7 -13 - 2 - 3 -41 - 5 - 3 - 3 - 4 - 1 +26 +n + 8 +19 0 +11 +17 +26 +21 - 2 +22 +14 2 1 4 2 * Area not restricted to the corporate limits of cities given here. Page 36 - 4 -13 - 1 0 + 2 -14 + 2 0 + 1. + 2 + 5 + 6 278 370 363 134 236 252 167 195 174 216 203 206 + S +36 +12 +U +10 + 3 + 5 - 2 - 2 - 7 + 9 - 3 +1 0 - 9 + 2 0 + 5 + 4 -15 -24 + 7 -31 - 3 - 3 -11 -20 -15 -23 -16 K37 Payrolls* Per cent Per cent Jan. change from Jan. change from 1946 1946 index Dec. Jan. index Dec. Jan. 1945 1945 1945 1945 Indexes: 1923-5 =100 rOTAL..................................... Iron, steel and products.... Nonferrous metal products. Transportation equipment.. Textiles and clothing........... Textiles................................. Clothing................................ Food products....................... Stone, clay and glass............ Lumber products.................. Chemicals and products.... Leather and products.......... Printing................................. Others: Cigars and tobacco............. Rubber tires, goods............ Musical instruments.......... 100 102 179 106 77 72 94 120 79 48 111 80 116 112 +1 + 2 0 0 + 2 + 2 + 2 0 0 + 3 + 2 + 4 + 2 +1 -13 -18 -16 -30 - 1 +1 - 6 - 4 - 4 - 5 — 4 + 12 +16 +20 151 180 350 165 127 121 157 197 118 76 194 138 189 176 + + + + 2 4 4 4 2 1 6 0 4 4 1 7 4 5 -24 -34 -24 -43 + 5 + 7 - 2 + 2 - 3 - 9 - 9 +19 +24 +30 47 131 110 + 2 + 1 + 2 - 3 -13 +21 73 303 173 0 + 3 + 1 + 1 - 9 +26 t- * Figures from 2769 plants. Hours and Wages Factory workers Averages January, 1946 and per cent change from year ago Retail sales - 2 +1 0 Employment* p—Preliminary. r—Revised. Building permits value 123 155 77 37 79 138 105 129 114 112 101 97 Manufacturing 28 5 55 34 Local Business Conditions* Percentage change— January 1946 from month and year ago GENERAL INDEX............ Manufacturing...................... Bituminous coal mining. . . Building and construction... Quar. and nonmet. mining. Crude petroleum prod......... Public utilities....................... Retail trade............................ Wholesale trade.................... Hotels...................................... Laundries................................ Dyeing and cleaning.*........ 90r 103r 135 77 70 120 242 190r 270 66 44 107 130 69 103 Payrolls Per cent Per cent Jan. change from Jan. change from 1946 1946 index Dec. Jan. index Dec. Jan. 1945 1945 1945 1945 TOTAL............................. Iron, steel and prods... Nonfer. metal prods.. . Transportation equip.. Textiles and clothing. . Textiles........................ Clothing....................... Food products............... Stone, clay and glass... Lumber products......... Chemicals and prods... Leather and products.. Paper and printing... . Printing........................ Others: Rubber tires, goods. . Musical instruments. Weekly working time* Hourly earnings* Weekly earnings! Aver age Ch’ge Aver Ch’ge Aver Ch’ge hours age age 39.7 38.7 40.6 40.8 38.5 39.5 35.8 44.3 38.7 43.4 41.1 41.5 43.7 41.1 -11 $1,045 - 4 $41.42 -16 1.106 - 4 42.86 -11 1.029 0 41.77 -13 1.191 - 8 48.54 .862 + 8 33.21 - 3 - 3 .883 + 9 34.96 - 3 .798 + 4 29.16 + 2 .847 + 4 37.91 - 3 .962 + 4 36.93 +1 .782 - 2 33.68 -10 1.149 + 6 47.13 - 1 .824 + 6 34.32 - 1 1.010 + 8 44.25 - 2 1.193 +10 49.14 38.5 45.6 45.3 - 9 + 2 + 6 * Figures from 2624 plants. .732 +14 1.124 + 3 .908 - 2 28.22 51.29 41.09 ! Figures from 2769 plants. -15 -19 -11 -20 + 5 + 6 + 3 + 6 0 0 - 5 + 6 + 7 + 8 + 4 + 5 + 4 Distribution and Prices Adjusted for seasonal variation Per cent change Per cent change Jan. 1946 from Jan. 1946 from Wholesale trade Unadjusted for seasonal variation Month ago Year ago Sales Total of all lines...................... Drugs...................................... Dry goods.............................. Groceries................................ Hardware............................... Jewelry................................... Paper.......... ............................ +13 +17 +70 +23 + 7 -40 + 9 +14 +19 +11 +31 +45 +15 +16 Inventories Total of all lines..................... Dry goods.............................. Groceries................................ Hardware............................... Paper...................................... + 5 +15 + 1 +21 + 2 +16 +35 +18 +10 - 9 Indexes: 1935-1939=100 Jan. Dec. Jan. 1946 1945 1945 RETAIL TRADE Sales Department stores—District..................................... Philadelphia............................ Women’s apparel........................................................... Men’s apparel................................................................. Shoe................................................................................... Inventories Department stores—District..................................... Philadelphia............................ Women’s apparel........................................................... Shoe................................................................................... Source: U. S. Department of Commerce. 205p 190 204 156 179p 184 167 181 176 188 Basic commodities (Aug. 1939-100).... Wholesale (1926=100)............... Farm........................... Food........................... Other.......................... Living costs (1935-1939 =100) United States............ Philadelphia.............. Food......................... Clothing................... Fuels......................... Housefurnishings... Other........................ Percent chan ?e from Jan. 1946 Month Year Aug. 1939 ago ago 187 0 + 2 + 87 107 130 107 101 0 -1 -1 0 + + + + 2 3 2 2 + 43 +113 + 60 + 26 130 129 139 150 115 148 121 0 0 0 0 +1 0 0 + + + + + + 2 2 3 4 5 4 0 + + + + + + + 32 31 49 51 19 47 20 Source: U. S. Bureau of Labor Statistics. FREIGHT-CAR LOADINGS Total................................................................................... Merchandise and miscellaneous................................ Merchandise—l.c.l......................................................... Coal................................................................................. .. Ore..................................................................................... Coke.................................................................................. Forest products.............................................................. Grain and products....................................................... Livestock.......................................................................... MISCELLANEOUS Life insurance sales......................................................... Business liquidations Check payments............................................................... * Computed from unadjusted data. Jan. Dec. Jan. 1946 1945 1945 Month Year ago ago 172 r 167 r 174 130 152 + n + + — 14 13 11 5 33* 145p 146 138r - 1 144 145r 129r - 1 193 175 r 183 + n 64p 55 74 + 17 + Prices Not adjusted + + + + + + 20 14 17 20 18 42* + 5 + 12 + 6 - 13 7* + 22* 158p 150 177 163 140p 115 104 85 154 132 136 85 138 87 no 104 155 134 175 143 118 + 22 i.98 +500* +200* 9 +864* +126* 11 + 3 + 4 204 206 200 p—Preliminary. + + + + - 116 130 164 118 121 164 1 5 n 7 3 35 43 22 6 - 8 - 18 132r 132 r 151 133 119 126p 124 120 r 128 124r 115r 169 172 r 159 56p 49 64 123 118 81 129 90 169 73 128 143 121 112 90 328 303 297 323 224 118 112 126 127 80 130 50 188 95 118 166 28 18 126 85 151 136 80 139 45 183 62 133 154 + 48 166 155r 112 + + - 19 33 33 11 33 1 1 240 3 5 196 r—Revised. BANKING STATISTICS MEMBER BANK RESERVES AND RELATED FACTORS Reporting member banks (Millions $) Feb. 20, 1946 Changes in— Four weeks Assets Commerical loans.................. $ 254 +$10 Loans to brokers, etc............. 38 - 6 Other loans to carry secur... . 80 - 5 34 + i 1 Other loans............................ 146 + 4 One year +$ 31 + 4 + 65 + 1 + 35 Total loans........................... $ 553 +$ 4 +$136 Government securities......... $2072 Obligations fully guar’teed.. Other securities..................... 207 -$10 +$262 - 54 + 2 + 36 Total investments....... ',,. $2279 -$ 8 +$244 Total loans & investments.. $2832 Reserve with F. R. Bank.... 420 Cash in vault......................... 32 Balances with other banks... 79 Other assets—net.................. 47 -$ 4 - 11 + 3 - 12 + 3 +$380 + 14 + 4 + 3 4 Liabilities Demand deposits, adjusted.. $1774 —$40 +$ 26 Time deposits........................ 227 + i + 33 U. S. Government deposits.. 734 + 14 + 261 Interbank deposits................ 383 - 12 + 50 Borrowings............................ 15 + 14 + 7 Other liabilities...................... 21 + i + 4 Capital account..................... 256 + i + 16 Changes Changes in weeks ended— in four Jan. 30 Feb. 6 Feb. 13 Feb. 20 weeks Third Federal Reserve District (Millions of dollars) Sources of funds: Reserve Bank credit extended in district......................... Commercial transfers (chiefly interdistrict)..................... Treasury operations............................................................. -10 + 4 + 9 + 9 - 5 — 4 + 3 Uses of funds: Member bank reserve deposits........................................... Other Federal Reserve accounts........................................ Total..................................................................................... Member bank reserves (Daily averages; dollar figures in millions) Re Held quired Ex cess Phila. banks 1945: Feb. 1-15.. $392 1946: Jan. 1-15.. 423 Jan. 16-31.. 423 Feb. 1-15.. 415 $380 411 411 408 $12 12 12 7 Country banks 1945: Feb. 1-15.. $301 1946: Jan. 1-15.. 379 Jan. 16-31. . 372 Feb. 1-15.. 370 $251 297 297 298 $50 82 75 72 Ratio of excess to re quired - 2 + 4 + 1 + 3 Federal Reserve Bank of Phila. (Dollar figures in millions) + 4 - 3 - 1 +21 - 7 -17 +21 -22 -12 +41 -30 -24 - 3 -13 -13 + 8 -11 + 2 -15 +12 -25 - 3 -13 -13 Changes in— Feb. 20, 1946 Disc, and advances.. $ 20 2 3% U. S. securities......... 1615 3 Total....................... $1636 3 Fed. Res. notes........ 1615 2 Member bk. deposits 765 U. S. general account 82 20% Foreign deposits.. . . 64 28 3 Gold ctf. reserves. . . 879 25 Reserve ratio........... 34.8% 24 Four weeks +$15 + 12 +$27 + 1 - 25 + 53 - 2 - 4 - .5% One year +$ 8 1 + 354 b$362 - 156 - 81 - 40 - 46 - 2 - 133 - 9.2% Page 37
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