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Monthly Review I F E D E R Volume X X X I AL R E S E R V E B A N K OF S T . SEPTE M BER , 1949 L O U I S Number 9 Construction Activity in the Eighth District Throughout the nation countless new buildings stand as tangible evidence of what the nation’s construction industry has achieved during the past three and one-half years. Some of these structures represent the postwar realization of building pro grams conceived during the war but postponed be cause of wartime limitations on materials and man power. In other cases they represent the fulfill ment of plans based on requirements that devel oped since the war. In the aggregate nearly $54 billion have been spent since the beginning of 1946 for the materials and labor required to trans form these blueprints into physical realities. These expenditures contributed greatly to the inflationary pressure generated during most of this period. At the same time, of course, they helped to lift the nation’s economy to the highest level ever attained. In whatever light one may be disposed to regard the construction dollars spent during the three-year period of rising economic activity, the important consideration now is the likely relationship between construction expendi tures and the trend in economic activity in the future. In some respects, the outlook for the future can be brought into sharper focus by an appraisal of recent trends in construction expenditures. Last year was a record year for the industry with total expenditures amounting to $26.8 billion*. Expendi tures for new construction totaled $18.8 billion * A ctually, total construction expenditures were considerably m ore than $26.8 billion. T his figure does n ot include construction expendi tures fo r crude petroleum and natural (gas drilling, estimated at $1 billion in 1948; outlays for m ajor additions and alterations to resi dential buildings, plus som e other expenditures logically classifiable as “ con struction” outlays, estimated at $2.3 billion last yea r; and e x penditures for tourist courts and cabins, privately-financed dorm itories, park and playground construction, outlays b y the A tom ic E nergy C om mission and several other types o f expenditures. while maintenance and repair outlays amounted to $8.0 billion. Expenditures reached that level after increasing at an unprecedented rate for three years. Outlays for new construction in 1946 were more than twice as large as in 1945. The following year they were three times as large and by 1948 they were almost four times the 1945 expenditures. Throughout this period private funds accounted for most of the new construction expenditures. About 78 per cent of the aggregate outlays from 1946 through 1948 came from private and 22 per cent from public sources. This distribution is the same as it was during the building boom of the 1920’s. Last year privately-financed construction was valued at $14.6 billion; in 1947 it amounted to $11.2 billion. Expenditures increased in most major categories in 1948 but there were exceptions, the principal one being industrial construction, which was off 18 per cent during the year. About one-half of the private expenditures in 1948 were for new residential construction which was valued at $7.2 billion as against $5.3 billion in 1947. Expenditures did not increase at the same rate in all classes of construction. As a result, some categories were relatively more important last year than they were in 1947. Am ong these were resi dential building, religious and educational struc tures, electric light and power and telephone facilities. In other words, there was a shift in the use of private construction funds which in general resulted in proportionately smaller expenditures for industrial construction and relatively larger outlays for residential and some other types of building. Commercial work in 1948 was unchanged in volume, relative to the total, but again accounted for a smaller proportion than in 1946. Chart I PUBLIC EXPENDITURES FOR NEW CONSTRUCTION PER CENT OF TOTAL, 1946 THROUGH JUNE 1949 Per Cent 30r Per Cent 30 20 10 1946 (947 19 4 8 1949 SOURCE: Based On Estimates By U. S. Depts. Commerce And Labor The Shift from Private to Public Expenditures As noted earlier, private funds have accounted for most of the expenditures for new construction since the end of the war, averaging about 78 per cent of the total from 1946 through 1948. In terms of actual expenditures, of course, both private and public outlays increased rapidly during this period. The rate of increase has been slightly less in the private sector, however, than in public outlays. As a result, private funds last year accounted for fractionally less than 78 per cent of the total as against 78 per cent in 1947 and almost 79 per cent in 1946. This shift in relative importance has continued so far in 1949 as indicated in Chart I. In the first six months the total value of new construction put in place is some 3 per cent larger than it was through June last year. But the increase is due to larger public outlays which are up some 36 per cent. Private expenditures are actually 6 per cent less than they were in this period last year. As shown Page 126 in Chart II, this reflects declines in residential, industrial and commercial expenditures that more than offset increased outlays for churches, schools and other institutions, public utilities and rail roads. It is important that so far this year increased public expenditures for construction have more than made up for the declines in important seg ments of private expenditures. In general the de clines in private spending for commercial and indus trial construction were not unanticipated, since the urgent backlog in these categories was fairly well exhausted by the close of 1948. In addition some decreases were expected elsewhere in the private sector. The question at the close of 1948 w as: how much of these anticipated decreases will be absorbed by increased public outlays? As noted, larger public expenditures have enabled total construction volume to remain above last year’s level so far in 1949. Consequently, the broad economic impact of the decline in private outlays has been considerably less than otherwise would have been the case. As a result, construction expen ditures have continued to represent a major bolster ing factor in the economy during a period of decline in the level of operations in factories and mines. It should be noted that the bulk of public con struction expenditures represent state and local proj ects. Last year 78 per cent of all public outlays for new construction came from state and local govern ments and only 22 per cent from Federal sources. Similarly most of the increase in aggregate new construction expenditures by government in the past three and a half years has been for non-Federal activity. The reason is clear. Most local govern ments emerged from W orld W ar II with a substan tial backlog of projects that were postponed during the war. Streets and highways were needed; in many instances expanded local populations called for enlarged sewage and water supply systems; new public administration buildings were needed. In brief, the expansion in public construction since the war does not represent “ make-work” programs. Rather, it has resulted from many of the same fundamental forces that pushed private building to its postwar heights. The residential picture, to a certain extent, is similar to that in the heavier construction field. Part of the decline in residential volume in the first half of the year reflects the fact that housing pres sure is less urgent than it was. That is not to say that a demand for housing no longer exists. Nor does it have any implications with respect to the Chart II PRIVATE EXPEN D ITU RES FOR NEW CONSTRUCTION PERCENTAGE DISTRIBUTION IN SELECTED Nonresidential Expenditures - Less For Industrial, Commercial • More For Util* ities And Miscellaneous. Through June A Smaller Proportion For Residential - A Larger Share For NonResidential. 100 (% Of Total Private Expenditures ) 1920 1929 1935 1939 1946 1947 1948 1st 6 MONTHS •1948 1949 R E S ID E N T IA L I— I NONRESIDENTIAL SOURCE: Based on U.S. Depts. Commerce and Labor Data PERIODS Nonresidential) ioor 1920 1929 l* 3 S 1939 1946 1947 1948 1st 6 1948 MONTHS 1949 IN D U S T R IA L l " ' |OTHER U T IL IT IE S C O M M E R C IA L E D ITELEPHONE a I TELEGRAPH I— R A ILR O A D S I FARM Page 127 adequacy of housing—as it exists or as it might be— relative to various income levels. It is obvious that there is still a large potential demand that can be expected to become active under a more favorable level of construction costs. In addition, many fam ilies continue to live “ doubled up.” Nevertheless the 3 million new nonfarm dwelling units put under construction in the past three and one-half years, plus the additional units made available through conversions of existing housing and the use of temporary facilities, have somewhat reduced the urgent demand for residential construction. W ith the easing in demand came a decline in construction costs. So far the downward movement has not been spectacular (averaging perhaps 5 to 10 per cent) although some estimates of the extent of the drop range as high as 25 per cent in isolated parts of the country. In St. Louis, estimates of Roy Wenzlick and Company indicate a decline of some 2 per cent in the cost of constructing a stand ard 6-room frame house during the past five months. In general lower costs reflect some decrease in materials prices, particularly lumber, increased labor productivity and in many cases lower profit margins for builders. Improvements in the quality of materials, in effect, also have resulted in some further reductions in costs. In addition, the fact that skilled labor is more readily available has tended to eliminate the need for premium and over time payments which were prevalent a year ago. P O S T W A R V O L U M E IN T H E E IG H T H D IS T R IC T In this district as in the nation as a whole, con struction work contracted for by public agencies accounts for slightly more of the total this year than last— at least in a sizable portion of the district for which data are available.* Contracts awarded for publicly financed projects represented 38 per cent of the total awarded in the St. Louis territory as defined by F. W . Dodge Corporation in the first six months. In the same period last year the public portion was 35 per cent, as it was for the full years 1947 and 1948. The proportion increased markedly from the first to the second quarters of 1949— from 31 per cent to 41 per cent. Other changes peculiar to the construction pat tern of the district as a whole, as well as of its component areas and major cities, deserve special attention. Construction activity in this district reached “ boom” proportions during the past three years as it did in the nation as a whole. Statistics are not available on the dollar value of materials and labor * F . W . D od g e reports are available fo r m ost o f the E ighth D istrict. T he only areas for w hich estimates are n ot available are western K en tu cky outside o f Louisville, southern Indiana outside o f Evansville, northern Mississippi and a small p ortion o f the district part o f M issouri. Page 128 actually put into construction projects. The best one can do is to look at district trends in terms of the value of construction contracts and building permits awarded in the area. In the three and one-half years to mid-1949 ap proximately $1.9 billion of construction contracts have been awarded in the Eighth District, according to F. W . Dodge Corporation reports. Nonresiden tial contracts totaled $1.3 billion, residential con tracts $600 million. Almost one-third of the total, in terms of value, was let last year when volume climbed 8 per cent to $625 million for the second best year on record. Three-fourths of the $44 million increase in 1948 as compared with 1947 was in residential contracts, which were 20 per cent larger in value, amounting to $200 million. Non residential awards last year were estimated at $425 million— a little more than 2 per cent larger than in 1947. A break in this run of steady prosperity came in the fourth quarter last year. Reaching a peak in the third quarter, as in 1947, awards fell 30 per cent in value or almost twice as much, percent agewise, as during the same period of 1947. The downward trend continued into the first three months of this year and, again, at almost twice the rate of a year earlier. In each case residential as well as nonresidential awards dropped more sharply than they did in 1947 and early 1948. (In 1947 the value of residential contracts awarded increased 18 per cent in the fourth quarter when the late-season building program was in full sway.) Following the first quarter of 1949 things began to pick up somewhat. From the first to the second quarter both residential and nonresidential awards increased much more, percentagewise, than they did last year. In the case of housing contracts, the increase in the second quarter was sufficient to lift the six-months total in this category to a level 2 per cent ahead of the first half of 1948. Non residential awards through June totaled 7 per cent less than a year earlier, although the value of these contracts in the second quarter was 13 per cent larger than in the same period last year. But these increases were not enough to better last year’s mark. Total volume for the first six months was less than in the first half of 1948—$283 million as compared with $295 million through June a year ago. The principal reason for the year-to year decline in the first six months is that manufacturing awards were barely one-third as large in dollar value as in the first half of 1948. On the other hand, the sharp increase in the total value of awards since the seasonally low months early this year reflects in creases in commitments in all categories of con- Chart III VALU E OF C O N S T R U C T IO N CONTRACTS AWARDED PER CENT CHANGE SIX MONTHS 19 48 TO S IX MONTHS Per Cent Decrease too SO 60 40 1949 Per Cent Increase 20 40 SO 80 8th JOO D IS T R IC T LOUISVILLE ST. LOUIS CITY AND COUNTY E. ST LOUIS AND MADISON COUNTY MEMPHIS EVANSVILLE LITTLE m SO U R CE : RESIDENTIAL ROCK NONRESIDENTIAL B e u 4 On F. W. Dodgt Corp. Reports struction except hospitals and institutions and the public utilities field. The increased flow of contracts in the second quarter was general throughout the district, inso far as the total value of awards is concerned. In East St. Louis and Little Rock, volume showed virtually no change between the first and second quarters, but in all other parts of the district increases were sizable. In St. Louis city and county combined, an increase in residential con tracts offset a decline in nonresidential awards. Similarly, the decrease from the first half of 1948 reflected declines over a large part of this district — the major exceptions being southern Illinois (outside of East St. Louis), Louisville and Arkansas excluding Little Rock. T R E N D S IN D IS T R IC T A R E A S As suggested, the major trends in construction activity contracted for have been fairly applicable to most parts of the district. Some differences are apparent among the various portions of the region, however, as indicated in Chart III. For example, between the first half of 1948 and the first half of 1949 the rate of increase in both residential and nonresidential volume tended to be larger in nonurban than in urban centers. Similarly the seasonal upswing in nonresidential projects so far this year appears to be a little stronger in the nonurban than in the urban areas. This is in contrast to the trend so far in residential construction, which is stronger in the cities than in the nonurban areas of the dis trict. Eastern Missouri— In this part of the district the $72 million of contracts awarded in the first half of the year was about $2 million less than in the same months of 1948. The decline was largely in the area outside St. Louis city and county. Nonresi dential awards were off 11 per cent in St. Louis city and county (from $21 million to $18.6 million) and 32 per cent in the area outside this center. Decreases were principally in the manufacturing field, although public works and utilities volume, combined, in the nonurban part of eastern Missouri also was less than a year ago. Residential contracts in St. Louis city and county and in the remainder of eastern Missouri were valued higher than in the first half of 1948. In St. Louis city and county, volume increased 8 per cent— from $28.7 million to $30.9 million— while in the remainder of eastern Missouri it jumped from $2.8 million to $7.9 million. These increases were not reflected in corresponding rates of gain in the number of dwelling units contracted for. In St. Louis city and county, new units totaled 2,771 in the first half of 1949—the same as in the first half of 1948— and 21,200 since the beginning of 1946. In the remainder of eastern Missouri the number was up only 7 per cent. One and two family units account for more of the total this year than last in each case. From the first to second quarters this year there was a substantial increase in residential contracts, particularly outside of St. Louis city and county, both in terms of value and on a physical basis. Nonresidential volume also increased outside this urban area in the second quarter but declined in the St. Louis area. Manufacturing contracts in St. Louis city and county were off 38 per cent from the first quarter—the same rate by which these awards declined in the first half year relative to the first six months of 1948. Contracts for com mercial construction were cut in half in the second quarter but in the first six months totaled 30 per cent larger than in the same period last year. Southern Illinois— Largely as a result of sub stantial gains in nonresidential contracts in the second quarter in this area, except in East St. Louis, the total value of awards in southern Illinois showed an increase from the first to second quarter and a gain over the first six months of 1948. Residential contracts also increased in value— from the first half Page 129 of 1948 and between the first and second quarters of 1949. The gain in nonresidential dollar volume relative to the first six months of 1948 (from $56 million to $62 million) reflected increases in awards for utili ties and public works construction plus a larger volume of commercial construction awards in the area outside of East St. Louis. The increase from the first to second quarter resulted from a larger volume of manufacturing awards in Madison County and a fairly general increase in commercial and pub lic utilities and public works awards. Residential contracts increased in each of the southern Illinois areas in the second quarter and in the first six months were larger in value than in the same period last year except in East St. Louis. Western Tennessee—A substantial decline in residential contracts during the first half of 1948 largely explains the 30 per cent year-to-year de crease in the total value of awards in this portion of the district so far in 1949. In Memphis, residen tial dollar volume, totaling $12.1 million through June, was off 44 per cent and in the remainder of western Tennessee was off 7 per cent from a year ago. The number of dwelling units contracted for in Memphis dropped from 3,200 in the first half of 1948 to 1,800 this year bringing the three and a half year total to 16,300. Residential volume rose sharply in the second quarter, however, but re mained 37 per cent below last year in terms of value and 32 per cent below in terms of dwelling units. In the nonresidential field, Memphis is one of the few areas in the district where the value of contracts for manufacturing construction in the first half year was larger than it was a year ago. However, total nonresidential contracts were off from $11.6 million to $10.4 million. Commercial construction awards in Memphis were only onethird as large in value as in the first half of 1948 but public works and utilities work was up 12 per cent. Arkansas— A smaller volume of most types of construction except that in the public works and utilities category has been contracted for this year as compared with the first half of 1948 in the state as a whole. In Little Rock awards in this category and for manufacturing plants were larger than a year ago, but total nonresidential awards totaling $5.1 million were off about 65 per cent. Housing contracts in Little Rock also dropped sharply, totaling $2.5 million, or about 55 per cent less than last year. The decline was slightly smaller in terms of dwelling units, since the number dropped from 695 last year to 295 in the first half of 1949. As in most parts of the Eighth District, resi Page 130 dential volume picked up considerably in Little Rock in the second quarter but continued below last year in terms of units and dollar volume. The value of nonresidential awards, however, declined further in the second quarter despite an increase in manufacturing and commercial building awards. In the remainder of Arkansas residential con tracts through June were 30 per cent larger in value than in the first half of 1948, and total nonresi dential awards were up 21 per cent because of a larger volume of public works and utilities con tracts. Bath major categories also showed an in crease in the second quarter, with sizable gains reported in manufacturing and public works and utilities contracts. Louisville— The data covering the district portion of Kentucky are limited to those for Louisville. In that city residential contracts through June a.mounting to $7.2 million were up 20 per cent in value from a year ago and the number of dwelling units contracted for increased from 678 to 873. In the second quarter housing awards were larger than they were in the comparable period of 1948. Non residential contracts valued at $8.8 million also to taled larger than in the first half of 1948 with the increase concentrated in manufacturing and com mercial construction. The value of nonresidential commitments rose 20 per cent in the second quarter when increases in commercial and public works and utilities contracts more than compensated for a re duction in manufacturing awards. Evansville— Although substantially more work was contracted for in the second quarter than in the first, construction awards valued at $5.5 million for the first half year totaled only about one-fourth of the dollar volume during the same months last year. Residential volume through June estimated at $2 million was about one-half what it was last year in the first six months, while nonresidential awards were valued at $3.5 million, or about one-fifth of last year’s. Declines occurred in all major cate gories of non-housing awards. In the second quar ter of 1949 residential contracts increased sub stantially but did not reach the level of the same period last year. Nonresidential awards also in creased, reflecting a pickup in commercial and miscellaneous types of work. TH E FUTURE The trends in construction in recent months are likely to continue during the remainder of the year. In the nonresidential field the available evi dence indicates that industrial construction will represent a smaller proportion of total activity this year than last, for reasons suggested earlier. Com mercial construction volume during the remainder of the year is not likely to show appreciable fluc tuations from current levels. In the non-housing field, most indicators suggest that public construc tion expenditures will continue to become relatively more important as public buildings, highways and streets, sewers and water supply plants and the like come under construction. A survey of firms active in the nonresidential field in the St. Louis area reveals the general belief that private nonresidential construction, par ticularly industrial and commercial, has passed its peak. Construction other than industrial and com mercial at the present time provides considerable volume for 'many of these contractors but the concensus is that the over-all backlog is relatively small and few major jobs are pending. Basically, the problem of residential construction is one of marketing. The need for housing remains one of the major problems of many people, despite the fact that it may be a less urgent need now than a year ago. There is a demand for low and moder ately priced housing, and while’ construction of higher priced houses continues, there is evidence that many builders already are shifting to less ex pensive units. But it is apparent, too, that even more emphasis needs to be placed on construction in the low and moderate price range. The Housing A ct of 1949 which provides for Fed eral aid to local communities for new low-income housing, represents one approach to this problem. However, housing facilities constructed under the provisions of this act are not expected to become available until some time in 1950. A considerable amount of time will be required in most communi ties to initiate and complete the necessary prelimi nary steps required by the act. Measurement of the need for housing in a specific area is difficult. It is a function of population growth and migration; of the rate at which new families are created; of income and savings; and other factors— all related to the supply of dwelling units available. Nationally the Housing and Home Finance Agency estimates a need for 6 million additional nonfarm units by 1960 to keep pace with increasing family requirements for “ adequate” housing. In addition the agency estimates that some 8.5 million nonfarm units will need to be replaced or rehabilitated. If these calculations are applied to the Eighth District, an additional 700,000 nonfarm units would be needed in this area by 1960. Official estimates of the number of units constructed in past years in the district are not available. If the annual average cost per dwelling unit as estimated by the BLS on a national basis is applied to the value of residential contracts awarded in the district since 1940, an estimate of some 180,000 dwelling units constructed is obtained. During the same period, the population of the district has increased by about 370,000. Permits for approximately 74,000 new housing units were granted in the major metro politan areas of the Eighth District from 1941 through 1948, according to R oy Wenzlick and Company. The number of permits granted reached a peak in St. Iouis in 1941, in Evansville in 1943 and in Little Rock, Louisville and Memphis in 1947. In proportion to their 1940 population, Mem phis and Little Rock have had the largest increases in dwelling units since 1941, followed fairly closely by Evansville, while St. Louis and Louisville lag far behind. Memphis has had twice as many new dwelling units in proportion to its 1940 population as has Louisville. Estimates such as these are more significant with respect to the district’s long-term needs than to its current requirements. Part of these im mediate needs will be met this year if the trend in construction contracts through June is a reliable indicator of construction activity. Residential vol ume will be an important factor in holding construc tion activity in this area during the remainder of the year at a level perhaps not so high as a year ago but considerably higher than in previous peace time years. Gertrude Krausnick Canning Weldon A. Stein Page 131 Survey of Current Conditions Neither the direction nor force of the basic factors influencing the nation’s economy showed a major change during the past month. A balance sheet listing the basic elements of strength and weakness would have essentially the same com position now as a month ago. In a few scattered instances signs of an upturn have developed in recent weeks. For the most part, however, these indicators provide little more basis for unbridled optimism than earlier data provided for deep pessi mism about the remainder of the year. Fundamentally, the most significant develop ment in recent weeks is the report that retailers, manufacturers and wholesalers are buying to re build depleted inventories. The downward adjust ment in stocks during the first six months was largely responsible for the decrease in gross national expenditures from an annual rate of $270 billion in the fourth quarter of 1948 to $256 billion in the second quarter of 1949. Recently there has been a noticeable increase in new orders received for (among other things) lumber, paper, textiles, steel and some nonferrous metals. In the case of steel, of course, part of the increase in orders is due to the possibility of a shut-down in the steel industry if present contract negotiations should fail to produce a solution acceptable to both bar gaining sides. Increased orders also may be based on the expectation of buyers that a satisfactory con tract settlement will result in steel prices as high or higher in the fourth quarter than at present and that such a settlement necessarily would include a wage increase that would prevent any reduction in steel prices. In addition to the revival o f inventory buying other signs of an upturn have developed in some ____________ PRICES___________________ ___ W H OLESALE PRICES IN TH E UNITED STATES Bureau of Labor Statistics July, ’49 comp, with (1926==100) July, *49June, *49 July, *48 June, 49 July, ’48 All Commodities...... 153.4 154.4 168.6 — 0.6% — 9.0% Farm Products.... 165.8 168.5 194.9 — 1.6 — 14.9 Foods ................. 161.3 162.4 188.3 — 0.7 — 14.3 Other ................. 145.0 145.5 151.1 — 0.3 — 4.0 R E T A IL FOOD PRICES Bureau of Labor Statistics July 15,June 15, July 15,July 15, 49 comp, with (1935-39=sl00) 1949 1949 1948 June 15, *49 July 15, *48 U . S. (51 cities)-201.7 204.3 216.8 — 1.3% — 7.0% St. Louis........... 206.8 212.8 224.2 — 2.8 — 7.8 Little R ock....... 196.8 204.2 213.4 — 3.6 — 7.8 Louisville _____189.4 194.1 206.8 — 2.4 — 8.4 Memphis ______217.1 215.3 229.8 + 0.8 — 5.5 Page 132 lines. Sensitive commodity prices, particularly of industrial raw materials, trended upward during July and the first half of August. It should be noted, however, that while price increases of this sort may reflect a firming in demand, they may also have undesirable effects later. If higher raw materials prices raise the prices of finished goods, or perhaps delay reductions where they are needed, some of the advantages of the downward adjust ment experienced so far this year will have been dissipated. One of the deterrents to the building of houses, for example, is the high level of con struction costs—and one of the hopeful signs in recent months was the decline in lumber prices. Recently some of these turned up again, according to trade reports. A renewal of the advance in lum ber prices may well cause more hesitation on the part of potential builders who have been priced out of the market at current levels. It is too early to evaluate the upturn in business loans that occurred early in August. Some seasonal climb can be expected. Whether this will prove to be a more than normal increase remains to be seen. If the trend toward inventory replacement by busi ness firms continues, it is reasonable to anticipate a revival of business loans to finance such opera tions. But the trend in mid-August is far from clear in either respect. Basically, the economy continues to reflect a high level of employment and income and a broad base of liquid asset holdings by individuals. All these things enable consumers to continue spending on a level not much different from that of a year ago. In addition, expenditures for producers’ durables as well as total outlays for construction' are larger than was generally anticipated at the beginning of the year. These elements of strength, however, existed in the first half of 1949 and have shown little change in volume that would have contributed to an upturn in business activity in the recent past. In general, if one anticipated a major decline in the last half of 1949, the strength exhibited so far, plus the recent increases in some commodity prices, in business loans, in electric power production and in inventory buying, may come as a pleasant sur prise. But if one’s outlook was somewhat less pes simistic, the seasonal increases that have developed and the upturn in these indicators merely tend to support one’s earlier convictions. EMPLOYMENT An increase in nonagricultural employment na tionally more than offset a slight drop in agricul tural employment between June and July, according to U. S. Bureau of the Census estimates. As a result, total employment increased for the sixth consecu tive month. The month-to-month increases this year have not been so large as in 1948, however, and total employment remains below the year ago level. Nonagricultural employment in the nation in creased slightly between June and July for the second consecutive monthly gain. Nonfarm em ployment was still considerably below the year ago level, but was higher than in July of any other year. Most o f the small increase during the month represented the employment of teen-agers who secured jobs in primarily seasonal activities. Agricultural employment declined seasonally in July but was still about 5 per cent higher than a year ago. So far this year farm employment has been consistently higher than it was last year, suggesting the possibility that more people are returning to the farm as opportunities in non agricultural pursuits become fewer. The number of unemployed workers also in creased between June and July because of an in crease in the size of the labor force. Totaling almost twice as many as in July last year, the number of persons unemployed was larger than in any month since January, 1942. Unlike the preceding month, when the unemployment increase was concentrated primarily in the group of school-age youngsters, the July increase consisted mostly of persons 25 years of age and over. During the past year the increase in unemployment was proportionately greater among men than women and greater among veterans than nonveterans. One of the best indicators of the change in unemployment is the change in the volume of unemployment compensation claims. In the seven district states the number of unemployment com pensation claims filed during the first three weeks of July was 96 per cent higher than in the com parable period of last year. In the United States as a whole the increase amounted to 97 per cent. Missouri and Arkansas had considerably lower percentage increases than the United States aver age. In Mississippi and Tennessee the increase was slightly less than the national average. In Illinois it was slightly higher, while in Indiana and Kentucky the increase was considerably higher than that in the country as a whole. The Bureau of Employment Security classifies the nation’s major labor market areas according to their relative labor surplus. The five classifications range from a “ tight or balanced labor supply” to a “very substantial labor surplus.” The shift in the labor market is indicated by the fact that in May, 1949 two-thirds of the areas in the country were classed as moderate and substantial labor surplus areas, whereas last November three-fourths of the areas were classed as areas of tight or balanced supply and slight labor surplus. In this district, Evansville and Louisville in May were rated as having a substantial labor surplus with 7 to 12 per cent of their labor force unem ployed. St. Louis, Memphis and Little Rock were classified as moderate labor surplus areas with 5 to 7 per cent of their labor force unemployed. Last November all the district areas except Mem phis had only a slight labor surplus, while Memphis had a balanced labor supply. By January, 1949 all areas except Memphis had a moderate surplus, while Memphis had a slight surplus. Employment in the St. Louis area has remained relatively stable since April. Normally a general increase occurs during this period, but this year seasonal increases were offset by declines. Non agricultural employment has been below the year ago level for the past four months, but averages higher in 1949 than in any other year except 1948. The first increase in total manufacturing em ployment in St. Louis this year occurred between June and July principally as the result of increases in the food, textiles and apparel, and leather indus tries. Most of the manufacturing industries had about the same employment in July as in June, and no industry had a large decline. Decreases in the trade and service industries offset the small manufacturing increase so that total nonagricul tural employment remained about the same be tween June and July. Employment in St. Louis in July was about 14,000 below the year ago level because of a decrease in manufacturing; nonmanufacturing re mained stable. About 70 per cent of the decrease in manufacturing occurred in the durable goods WHOLESALING Line o f Comm odities Data furnished by Bureau o f Census, U . S. D ept, o f C om m erce* D rugs and Chemicals.......... Groceries ................................ Hardware ............................... T o b a cco and its Products.. Miscellaneous ........................ **T otal A ll Lines................. N e t Sales July, 1949 com pared with July, 1948 June, 1949 — 2% — 4% — 24 — 10 — 14 — 8 — 11 — 8 _ 4 — 7 — 36 — 24 — 18% — 11% Stocks July 31, 1949 com pared with July 3 1 ,1 94 8 — % — 31 — 6 + S — 2 — 8 — 18% * Preliminary. #* Includes certain items n ot listed above- Page 133 transportation phis and Pine Bluff. In Little Rock and Louisville substantial increases were registered, whereas in St. Louis consumption remained unchanged. Industrial activity in the district during July held at about the June level, if the shorter work month and seasonal factors are taken into account. Activity remained at a level lower than that of a year ago. Manufacturing was at about the same level as in June. Output of basic steel increased slightly but lumber production declined. Coal pro duction decreased considerably in July, but crude oil production was relatively unchanged during the month. On-site construction activity was approxi mately the same as in June. Electric power consumed by industries in the district’s major industrial centers in July was 2 per cent higher than in June and 4 per cent above yearago levels. Considerable increases over June in Louisville, Little Rock and Evansville offset a one per cent decline in consumption in St. Louis and substantial declines in Memphis and Pine Bluff. On a daily average basis, consumption was 12 per cent larger than in June. Compared with a year ago, consumption decreased in Evansville, Mem- Manufacturing—Total manufacturing operations in July apparently were about the same as in June, but if the shorter work month is considered several industries showed increased activity. Included in these were the brewing, chemical, food, rubber, stone, clay and glass and transportation equip ment industries. The production of machinery, whiskey, and meat packing operations indicated decreases, whereas operations in the automobile, electrical products, iron and steel, and metals and metal products industries held about the same. field, with all industries except equipment showing a decline. IN D U S T R Y CONSTRUCTION B U I L D I N G P E R M IT S M onth o f July N ew C onstruction (C ost in N um ber C ost thousands) 1949 1948 1949 1948 Evansville ........ ..... 60 78 $ 255 $ 298 L ittle R ock ....... ..... 57 75 287 538 L ouisville ........... ..... 142 176 2,107 951 M em phis ........... .....1,373 874 3,464 3,452 St. L ou is.............. ..... 231 324 1,048 1,565 July Totals ... ....1,863 1,527 $7,161 $6,804 June T otals..... .....1,955 1,448 $7,225 $6,847 Repairs, etc. Num ber Cost 1949 1948 1949 1948 108 109 $ 86 $ 97 229 235 152 433 57 88 47 87 294 196 149 181 270 320 275 600 958 948 $ 709 $1,398 911 986 $1,212 $1,016 INDUSTRY C O N S U M P T IO N O P E L E C T R IC IT Y N o. o f July, June, (K .W .H . Custom - 1949 1949 in th o u s .) ers* K .W .H . K .W .H . Evansville .... 40 8,753 8,290 L ittle R ock .. 35 5,596 5,142 Louisville .... 80 68,441 61,814 M em phis ...... 31 3,347 4,875 Pine B lu ff .... 26 4,672 6,023 St. L ou is......139 80,369 81,484 Totals ......351 171,178 167,628 •Selected industrial custom ers. R — R evised. » July, 1948 K .W .H . 10,557 4,711 59,500 R 4,400 5,375 80,134 R 164,677 R July, 1949 com pared with June,’49 July,*48 + 5.6 % — 17.1% + 8.8 + 1 8 .8 + 1 0 .7 + 1 5 .0 — 31.3 — 23.9 — 22.4 — 13.1 — 1.4 + 0.3 + 2 .1 % + 3 .9 % L O A D S I N T E R C H A N G E D F O R 25 R A I L R O A D S A T ST. L O U I S F irst N ine D ays J u ly ^ 4 9 June, *49 July, ’ 48 A u g ., ’ 49 A u g ., '48 7 m os. ’ 49 7 mos. ’ 48 102*544 103,244 117,760 29,801 34,228 732,699 "842,675 S ou rce: Term inal R ailroad A ssociation o f St. Louis CRUDE O IL P R O D U C T IO N — D A IL Y A V E R A G E ( I n thousands o f bbls.) J uly, 1949 June, 1949 July, 1948 A rkansas ...... 72.6 76.4 81.8 Illin ois .......... 178.6 176.5 170.7 Indiana .......... 26.9 25.0 20.7 K en tu cky ...... 23.3 23.9 23.9 T otal .......... 301.4 301.8 297.1 Page 134 July, 1949 com pared with June, 1949 July, 1948 — 5% — 11% + 1 + 5 + 8 +30 — 3 — 3 - 0 -% + 1% Steel— In July operations of the basic steel in dustry in the St. Louis area were scheduled at 64 per cent of capacity. This was four points above last month’s rate but a point lower than that of a year ago. There are some indications of an improvement in market conditions, apparently re flecting an increase in inventory buying. Lumber— Production of basic lumber in July was slightly lower than in June and .considerably below year ago levels. Trade reports indicate that while the lumber market has shown marked improvement in recent weeks many dealers are still reluctant to buy in advance. Demand for southern pine has in creased in some areas and some pickup in orders from furniture factories has strengthened the hard wood market. Reporting southern hardwood pro ducers operated in July at 62 per cent of capacity— two points below last month and 35 points lower than in July, 1948. Southern pine production in July was 3 per cent lower than in June and 14 per cent below year ago levels. Meat Packing— Meat packing operations in the St. Louis area in July, reaching a low for the year, were 13 per cent below the June level and 6 per cent below that of a year ago. However, on a daily average basis the month-to-month drop was only 6 per cent. In July, 355,000 animals were slaughtered under Federal inspection, compared with 409,000 in June and 379,000 in July, *1948. Slaughter of all animals except hogs was higher than in June but, since hog killings usually account for about half of all slaughter, the decrease in this category offset other increases. Whiskey— By July 31, 15 of Kentucky’s 63 dis tilleries were in operation. Eight less than a month ago, ten fewer than a year ago, this was the lowest number since grain allocations in the winter of 1947-48. Whiskey production in Kentucky in June totaled only 4.3 million tax gallons, the lowest since January, 1948. This was one-third less than in May and 41 per cent less than in June, 1948. U. S. pro duction in June fell 28 per cent below that of May and was about half that of a year ago. Shoes— Shoe production in the district in June, according to preliminary estimates, totaled 7.1 million pairs. This was a gain of 24 per cent over May output but a drop of 10 per cent from a year ago. United States output was 12 per cent above May and 2 per cent above June, 1948. During the first six months of 1949 44 million pairs of shoes were produced in the district, about 12 per cent less than the SO million pair output in the same period last year. Oil and Coal— Daily average output of crude oil in July was about the same as in June and slightly higher than a year ago. July output averaged 301,000 barrels per day compared with 297,000 barrels per day in June. Production in Illinois and Indiana was larger than in the previous month or in the comparable month of a year ago. H ow ever, on both a month-to-month and a year-to-year basis, output in Arkansas and Kentucky decreased. Coal production in the district states in July dropped 19 per cent below the three-year low point reached in June. Output was 43 per cent less than in July, 1948. United States production, off slightly more than in the dstrict, was 24 per cent lower than in June and 46 per cent below year ago levels. The drop in coal production was due, in the first part of the month, to the annual vacation period, whereas during the rest of the month the three-day work week was in force. Production in all states was off compared with the previous month and with a year ago. The monthly declines ranged from 15 per cent in Illinois to 25 per cent in western Kentucky. TRADE In July consumers’ expenditures for goods de clined 11 per cent from June and 8 per cent from July, 1948 on a national basis, according to pre liminary reports of the U. S. Bureau of the Census. Preliminary data from 13 major lines of trade indicated that only motor vehicle dealers made higher sales (plus 15 per cent) than in the same month last year. Declines ranged from 3 per cent at drug stores and 6 per cent at food stores to 17 per cent at apparel stores and 27 per cent at lumber and building materials dealers. Department store sales nationally also declined in July and were smaller than in July, 1948, both on an unadjusted and an adjusted basis. Only in the Richmond Federal Reserve District, where dollar sales were 4 per cent greater than in July last year, were sales larger than a year ago. In the other dis tricts, declines in dollar volume ranged from 7 per TRADE D E PA RTM EN T STORES S tock Stocks T urnover cm H and 7 m os. *49 to same July 3 1 /4 9 Jan. 1, to July, 1949 J uly 31, period com p, with com pared with 1948 July 31,*48 1949 1948‘ J an e,*49 J u ly,*48 2.21 5% — 10 % 2.21 — 12% 8th F .R . D istrict........— 13 % 2.09 — 25 2.27 + 2 F t. Smith, A rk ........ .— 11 — 2 2.36 — 8 2.31 — 3 — 12 L ittle R o ck , A rk .....— 7 2.03 + 3 1.90 — 5 uincy, IU.................— 10 — 3 2.07 —12 — 21 1,98 vansvitle, Ind.........— 10 — 17 2.47 — 8 2.40 — 4 Louisville, K y .......... .— 13 — 12 2.21 — 11 2.19 — 7 St. Louis A r e a 1 ......— 16 — 13 2.22 — 11 2.20 — 7 — 14 St. Louis, M o ...... .— 17 — 4 E. St. L ouis, 111...— 4 — 6 1.88 2i00 — 7 —IS Springfield, M o ........ .— 5 — 13 2.18 2.30 — 4 — 1 — 9 Memphis, T enn.........— 11 1.78 1.78 —12 — 4 A ll other cities*........— 5 — 9 * E l D orado, Fayetteville, Pine B lu ff, A r k .: H arrisburg, M t. V ernon , 111.: N ew A lbany, V incennes, I n d .; D anville, H opkinsville, M ayfield, Paducah, K y .: Chillicothe, M o .; Greenville, M is s .: and Jackson, Tenn. l Includes St. L ou is, M o .; A lto n , Belleville, and E ast St. L outs, IllO utstanding orders o f reporting stores at the end o f J uly, 1949, were 26 per cent less than on the corresponding date a year ago. Percentage o f accounts and notes receivable outstanding July 1, 1949, collected during July, b y citie s: Instalm ent E x . Inst. Instalm ent E x . Inst. A ccou n ts A ccou n ts A ccou n ts A ccou n ts 6 1% Q u in cy ............ 2 2 % 4 6% F ort Smith.............. cd St. L ou is........ 21 53 47 L ittle R o ck .... 18 O ther cities...... 17 57 46 Louisville ........ 22 8th F . R . D ist. 21 49 41 M em phis .......... 23 N et Sales g IN D E X E S OF DEPARTM ENT STORE SALES 8th Federal R eserve D istrict July, 1949 Sales (daily average), unadjusted®..................... 253 Sales (daily a vera ge), seasonally adjusted 2.... 324 Stocks, unadjusted® ................. .............................. 277 S tocks, seasonally adjusted 3......... ....... ........... 267 2 D aily A verage 1935-39=100. 3 E nd o f M onth A verage 1935-39=100. S P E C IA L T Y AND June, 1949 283 314 280 280 STOCKS M a y, 1949 328 335 296 296 July, 1948 277 355 305 293 STORES Stocks on H and N et Sales Stock T urnover 7 m os. ’ 49 Jan. 1, to July, 1949 to same July 31,’ 49 July 31, com pared with period com p, with 1948 June,’49 J uly,’ 48 1948 July 31,’48 1949 1.62 — 1% =~2& — 6% 1.56 M en’ s F urnish in gs— 24% 2.56 2.53 — 15 — 2 — 2 B oots and S h oes..— 27 Percentage o f accounts and notes receivable outstanding July 1, 1949, collected during J u ly : M en’ s Furnishings................. 47% B oots and Shoes................... 42, T rading d a y s: July, 1949— 25; June, 1949—26; July, 1948—26. R E T A IL F U R N IT U R E STORES* Inventories N e t Sales July, 1949 R atio o f July, 1949 com pared with Collections com pared with June,’ 49 J uly,*48 July,’ 49 July,*48 June,’ 49 July,*48 23% 26% — 4% 8th D ist. T otal 1 — 18% — 11% — 11% 33 — 11 30 — 4 — 14 St. L ouis A r e a 2 — 22 33 30 — 4 — 11 — 13 St. L o u i s ........ — 22 18 17 — 18 — 5 — 10 Louisville A rea 3 — 7 16 17 — 18 — 5 — 10 Louisville ......— 4 22 — 9 15 — 5 — 24 M em phis — ........ — 10 24 19 -0 + 9 + 2 L ittle R o c k ........- 0 1 I n addition to follow in g cities, includes stores in B lytheville, F o rt Smith and Pine B lu ff, A rk a n sas; H opkinsville, O w ensboro, K e n tu ck y ; Greenville, Greenwood, M ississippi; H annibal and Springfield, M issou ri; and Evansville, Indiana. 2 Includes St. L ou is, M issouri, and A lto n , Illinois. 8 Includes Louisville, K en tu cky, and N ew A lb a n y, Indiana. * 39 stores reporting. PE R C E N T A G E D IS T R IB U T IO N O F F U R N IT U R E July, *49 Cash Sales ........................................... 13% Credit Sales ......................................... 87 T otal Sales ........................... ............ 100% June, *49 13% 87 100% SALES July, ’ 48 16% 84 100% Page 135 BANKING PRIN C IPAL ASSETS AND LIAB ILITIES FE D ER AL RESERVE BANK OF ST. LOUIS Change from Aug. 17, July 20, Aug. 18, (In thousands of dollars) 1949 1949 1948 $ ____ $----$----Industrial advances under Sec. 13b 4,968 — 8,052 — 12,022 Other advances and rediscounts.... 984,969 — 13,403 — 169,990 U. S. Securities —---- -------- -------Total earning assets............................. .$ 989,937 $— 21,455 $•—182,012 Total reserves..... .... .............. ..................•$ 742,297 $— 27,612 $ + 71,401 96,854 658,921 — 36,722 Total deposits ......... .................................. 4,295 13,652 F. R. notes in circulation............. . 1,069,011 $ Industrial commitments under Sec. 13b~$ PRIN C IPAL ASSETS AND LIA B ILITIE S W E E K L Y REPORTING MEMBER BANKS EIG H TH FEDERAL RESERVE DISTRICT (In Thousands of Dollars) 34 Banks Reporting Change from ___ Assets Aug. 17, *49 July 20, ’49 Aug. 18,’48 Gross commercial, industrial and a g r ic u lt u r a l loans and open market paper ...»—......................$ 449,585 11,946 $— 98,131 Gross loans to brokers and dealers in securities .................................. — 847 6,174 1,453 Gross loans to others to purchase and carry securities ..................... 20,609 437 — 9,135 Gross real estate loans..................... 172,433 6,058 + 20,555 + 8,229 Gross loans to banks...................... 11,244 10,599 Gross other loans (largely con 6,469 + 7,723 sumer credit loans)...................... 205,252 $— 3,648 $— 71,606 ,.$ 865,297 — 2 Less reserve for losses.... 9,133 + 1,880 $ _ 3,646 Net total loans ...................... 856,164 $— 73,486 Treasury bills ........................... 82,158 + 23,435 + 45,804 + 33,604 .. 230,598 + 93,138 + 1,436 40,873 — 53,366 U. S. bonds and guaranteed obliga' .. 776,305 + 3,140 + 79,057 157,874 + 5,945 + 12,228 $+176,861 ..'$1,287,808 $ + 67,560 Cash assets . — 12,824 .. 730,962 + 6,679 Other assets 25,739 + 1,451 — 201 ..$2,900,673 $ + 52,541 $+109,853 Liabilities Demand deposits of U. S. Government deposits.. Borrowings ...... Other liabilities .’.$1,466,043 574,696 39,043 .. 135,498 ..$2,215,280 .. 486,867 1,500 17,706 .. 179,320 $+ + + + $+ — — + + 20,223 13,789 21,523 4,149 59,684' 362 7,925 321 823 $+ + — + $+ + — + + 60,557 26,562 3,398 12,717 96,438 12,508 6,290 847 6,350 Total liabilities and capital ac 1$2,900,673 $ + 52,541 $+109,853 Demand deposits, adjusted*.............$1,399,285 $ + 19,559 $ + 82,988 * Other than interbank and government demand deposits, less cash items on hand or in process of collection. DEBITS TO DEPOSIT ACCOUNTS (In thousands of dollars) July, 1949 June, 1949 July, 1948 July,’49 comp, with June,’49 July,*48 SI Dorado, Ark.... $ 23,355 $ 22,256 $ 23,034 + 5% + 1% Fort Smith. Ark... 35,781 39,409 38,437 — 9 — 7 Helena, Ark. ....... 5,544 5,639 —10 6,160 — 2 Little Rock, Ark... 108,795 117,955 118,553 — 8 — 8 Pine Bluff, Ark.... 24,093 23,325 22,053 + 3 + 9 Texarkana, Ark.*.. 9,786 10,294 - 09,775 — 5 Alton, I1L ---------21,647 24,677 — 15 25,446 —12 E.St.t.-Nat.S.Y.,Ill. 105,403 108,570 —11 118,550 — 3 uincy, I1L ......... 27,398 28,353 — 7 29,331 — 3 vansville, Ind..... 118,525 116,921 — 6 125,916 + 1 Louisville, Ky....... 441,402 530,383 502,501 — 17 —12 Owensboro, K y ..... 26,299 29,136 27,397 — 10 — 4 Paducah. Ky.....---12,483 16,046 14,319 —22 — 13 Greenville, Miss.... 15,771 16,050 15,092 — 2 + 4 Cape Girardeau, Mo. 11,184 11,132 11,060 - 0 + 1 Hannibal, Mo...... . 7,420 8,020 7,451 — 7 -0 Jefferson City, Mo. 52,087 34,619 45,071 + 50 + 16 St. Louis, Mo....... 1,393,771 1,478,267 1,499,144 — 6 — 7 Sedalia, Mo............ 9,004 10,374 10,465 — 13 — 14 Springfield, Mo..... 51,207 53,419 59,309 — 4 — 14 ackson, Tenn....... 15,439 16,254 16,406 — 5 — 6 lemphts, Tenn..... 399,077 435,705 397,847 — 8 -0 Totals ...............$2,915,471 $3,136,804 $3,123,31* — 7% — 7% * These figures are for Texarkana, Arkansas only, Total debits for banks in Texarkana, Texas-Arkansas, including banks in the Eleventh District, amounted to $23,291. g J Page 136 cent in Atlanta and Dallas to 12 per cent in Cleve land and Chicago. In the St. Louis district, sales were off 12 per cent on a year-to-year basis. Cumu lative sales since January 1, both in the United States and in the Eighth District, are 6 per cent less than in the comparable period last year. Prelim inary figures indicate the rate of decline will be con tinued in August. Seasonally adjusted daily average sales in the district in July were 324 per cent of the 1935-39 average as compared to 355 per cent last year and 320 per cent in July, 1947. In the first seven months of 1949 the adjusted volume— while less than in the comparable months of 1948— was higher than in the same period in 1947. Last year, November was the only month in which adjusted sales were less than in the comparable month of 1947. In St. Louis stores reporting sales data by de partments, only four upstairs departments showed larger sales in July than were reported a year a g o : umbrella sales volume, men’s furnishings and hats gained 7 per cent, housewares were up 8 per cent, and television sales jumped 149 per cent. Less than half the basement store divisions showed increased volume relative to that in July, 1948. The largest increase was in men’s clothing which was up 18 per cent, while the largest decline from a year ago was in women’s and misses’ coats and suits which were off 18 per cent. The dollar value of inventories held by reporting district stores on July 31 was 3 per cent less than on June 30, and 10 per cent less than on July 31, 1948. Outstanding orders at the end of the month were 22 per cent larger than at the close of June but were down 26 per cent from July 31, 1948. B A N K IN G The major development in banking during the past month was the announcement on August 5 by the Board of Governors of the Federal Reserve System that reserve requirements on both demand and time deposits would be reduced in a series of steps between August 1 and September 1, 1949. The total reduction announced was 2 per cent on demand deposits and 1 per cent on time deposits at both reserve city and nonreserve city member banks. In the Eighth District the reduction will amount to about $70 million, divided about equally between reserve city and nonreserve city banks. Loan behavior at the weekly reporting member banks in the district over the past few weeks makes it difficult to determine whether or not the usual seasonal upturn is taking place. Loans turned up in July, then fell off again in early August. For the past two weeks through August 24 they were NEW MEMBER BANK On July 28, 1949 the Comptroller of the Cur rency issued a certificate authorizing the Citizens National Bank of Walnut Ridge, Walnut Ridge, Arkansas to commence business. It therefore be came a member of the Federal Reserve System on that date. The bank has a capital of $50,000 and surplus of $25,000. Its officers are R. S. Rainwater, President; W . E. Spikes, V ice President; J. J. Sharum, Vice President; W m . A, Schneeberg, Cashier; Sloan Rainwater, Jr., Assistant Cashier. This brings the total of member banks in the Eighth Federal Reserve District to 496. again increasing but on that date, August 24, total loans were off $17 million from the July 27 level. Most of the decline was in loans to banks. Business loans, however, were off $6 million in the period and “ other” loans, mainly consumer loans, were off $8 million. Real estate loans increased by $6 million. The failure of business loans to show the strong seasonal upturn that has characterized these periods in the past left them $97 million below the level of the comparable date a year earlier. Real estate loans were up $22 million for the year and “ other” loans up $9 million. Most of the funds released by the reserve require ment decreases of June 30 (when the System’s tem porary powers expired) and the August action ap parently flowed into investments in Govrenment securities. As of August 24, Government security holdings of the weekly reporting member banks in this district were $67 million larger than on July 27 and $117 million larger than on June 29. The increase was concentrated' mainly in Treasury bills and certificates. AGRICULTURE The second largest total crop on record is ex pected to be produced this year, despite yields lower than anticipated for small grains, and un favorable weather for cotton. 'Production is esti mated to be 30 per cent above the 1923-32 average. The cotton crop on August 1 was estimated at 14.8 million bales— practically the same as last year’s crop. Unfavorable weather and heavy boll weevil infestation, particularly in central and south ern states, have held down the size of the crop, despite a 14 per cent increase in acreage. Mis sissippi is one of the states hardest hit by unfavor able crop conditions: the estimated 1.6 million bale crop is nearly a third smaller than that of 1948. The 1.7 million bale crop for Arkansas is 17 per cent less than in 1948. Reductions forecast for Tennessee and Missouri are 3 and 6 per cent less, respectively, than a year ago. In contrast to the reductions in district states the cotton crop in Texas will be 4.5 million bales, 40 per cent larger than the 1948 crop. In California a crop of 1.3 million bales is indicated; this will be the first year in which the cotton crop will exceed one million bales. A record supply of feed grain is in prospect for the 1949-50 feeding season. The August 1 fore cast for a 3.54 billion bushel corn crop, if real ized, would result in feed supplies 15 per cent larger than the record supply for the preceding season. About 800 million bushels will be carried over from the 1948 crop, making another record. Of this amount, 533 million bushels were placed under government loan, nearly all of which is expected to revert to government ownership. This is ex pected to cause a serious shortage of storage space, the lack of which will depress corn prices consider ably below loan levels. Crop production in Illinois is expected to equal that of 1948, generally considered the best on rec ord. The ,corn yield, estimated at 61 bushels per acre, was the same as in 1948. W inter wheat yield was 24.5 bushels per acre, higher than in any previous year. Soybean yield was set at 24 bushels per acre, only one-half bushel less than the record yield of 1939. Prices received by farmers continued to edge downward during July. By mid-July the index of prices received was 249 (1910-14=100), 17 per cent lower than a year earlier, with the prospect for further declines during the remainder o f the year. Prices paid by farmers stood at an index of 244, a decline of only one point. A s a result the parity ratio was 102, the lowest since March, 1942. Farm income during the first seven months o f 1949 was estimated at $14 billion, 9 per cent less than in the same period of 1948. AGRICULTURE RECEIPTS AND SHIPMENTS A T NATION AL Receipts July, 1949 compared with July, July, 1949 Jane, *49 July,’ 48 1949 Cattle and 38,686 calves ..... + 1% — 3% —20 +20 88,547 +23 + 5 30,548 Totals ..........386,458 — 8% + 9% 157,781 STOCK YARDS Shipments July, 1949 compared with June, *49 July, *48 — 1% + 13 + 34 — 5% +23 +79 + 12% +22% Page 137 Index of Coal Production in the Eighth Federal Reserve District In order to facilitate the measurement and inter pretation of changes in the volume of coal produced in the Eighth District states, the Federal Reserve Bank of St. Louis is introducing a new index of coal production in this area. Based on monthly estimates of the number of tons produced in mines whose output amounts to more than 1,000 tons annually, the index has been carried back to 1924. The basic data are obtained from reports published regularly by the Bureau of Mines, U. S. Department of Interior. Both the unadjusted and adjusted indexes for the latest month will appear in the Monthly Review in the future. In computing the district index the statistical techniques used by the Board of Governors in the preparation of their national index of coal produc tion were followed closely. W here regional differ ences occurred, the method was adapted to local conditions. Monthly production figures are divided by the number of working days in a month to arrive at daily average output. Allowance was made for a 6 day work week with six annual holidays treated as non working days—January 1, May 30, July 4, Labor Day, Thanksgiving and December 25. The index was then adjusted for seasonal variation, using a technique similar to that used by this bank to smooth other indexes. The results are shown in the chart below. For those who are interested, the complete adjusted and unadjusted series are avail able upon request to the Research Department of this bank. INDEX OF COAL PRODUCTION EIGHTH FED ER A L R E S E R V E DISTRICT 1924 Per Cent 240 2 00 - 1948 National Summary of Business Conditions BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Industrial production declined further in July but increased in the early part of August. Prices of basic commodities advanced, while the average of all wholesale commodity prices showed little change. Department store sales declined in July and early August. Construction activity continued at a high level. Industrial production The Board's seasonally adjusted index of indus trial production declined in July to 162 per cent of the 1935-39 average. This compares with 169 in June and with 186 in July 1948. The July decline reflected in part the effects of plant-wide vacations, mainly in nondurable lines, which are not currently allowed for in the Board's index. According to pre liminary indications, industrial production in August may be close to the June rate. Activity in durable goods industries showed a further substantial decline in July, mainly because of another sharp cut in steel output, a further decline in activity in machinery industries, and a reduction in lumber output. In August, steel pro duction has been scheduled at about 83 per cent of capacity as compared with the actual rates of 71 per cent in July and 82 per cent in June. While refinery output of most nonferrous metals was reduced further in July, shipments to fabricators advanced. Automobile production in July and dur ing most of August has been at an exceptionally high level, exceeding earlier record rates reached in 1929. Am ong nondurable goods activity was reduced at cotton textile, paper, and paperboard mills during July, but appears to have increased in August. Deliveries of rayon to textile mills showed a large further gain in July, and petroleum refining activity increased slightly. Minerals output was reduced considerably further in July, reflecting substantially curtailed operations at coal mines, and smaller volume of output of crude petroleum and metals. In the early part of August coal production increased somewhat. Employment Employment in nonagricultural establishments in July was slightly below the level of the preceding two months, after allowance for the usual seasonal changes, and 1.6 million below the high level of July, 1948. Construction Value of construction contracts awarded in July, according to the F. W . Dodge Corporation, was the same as in June and slightly below the value in July 1948. Further increases in awards for public con struction from June to July offset declines in private building awards. The number of new housing units started in July, as estimated by the Bureau of Labor Statistics, was 96,000, compared with 100,000 in June and 95,000 in July 1948. Distribution Value of department store sales declined slightly in July, after allowance for usual seasonal changes. The Board’s adjusted index is estimated at 280 per cent of the 1935-39 average, as compared with 285 in June and 311 in July 1948. Owing in part to the effects of exceptionally hot weather, sales during the first two weeks of August showed much less than the usual seasonal rise, but in the third week sales rose considerably. Rail shipments of most classes of freight declined further in July and continued in August substan tially below the levels of other recent years. Grain shipments in July, however, were the largest on record. Commodity prices Prices of basic commodities advanced from the early part of July to mid-August. The principal increases over this period were for cottonseed oil, cocoa, and numerous industrial materials including nonferrous metals, steel scrap, and cotton cloth. Prices of agricultural products generally declined and prices of worsted fabrics and some other finished manufactured goods were reduced over this period. The average level of consumers’ prices decreased .6 per cent in July as a result mainly of a reduction in food prices and further slight declines in apparel and housefurnishings. Agriculture Total crop production, according to the August 1 official forecast, is expected to be 5 per cent below last year’s record volume but above any earlier year. The wheat harvest was indicated to be 12 per cent smaller, mainly because of crop deteriora tion in June and July, while fractionally smaller corn and cotton crops were forecast. Marketings of meat animals in July and August have been substantially above the reduced level of last year. Page 139 Bank Credit On August 5 the Board of Governors announced a schedule of reductions in member bank reserve requirements extending through September 1 which will release a total of approximately 1.8 billion dol lars of member bank reserves. During the first three weeks of August, banks used a large part of the funds released to purchase short-term Govern ment securities from the Federal Reserve, continu ing a trend noted in July. Excess reserves of member banks also increased. Business loans at member banks in leading cities increased slightly in the first half of August. This rise followed a moderate decline in July which brought the total contraction in business loans since the first of the year to nearly 2.7 billion dollars. Treasury deposits at banks increased substan tially in August, reflecting large sales of savings notes and additions to weekly offerings of Treasury bills. Other deposits, which had increased in July, declined somewhat in the first half of August. Security Markets Prices of Treasury bonds moved within a narrow range in the first three weeks of August. On August 22 the Treasury announced the offering of 1% per cent one-year certificates to refund the 2 per cent bonds called for September 15. Prices of corporate bonds advanced further while prices of common stocks fluctuated within a narrow range.
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