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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
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,--~:------~---ยท August 13, 1957
to
August 19, 1957
JULY PLANT OUTPUT HELD STEADY
Industrial production in July remained at the June
seasonally-adjusted level, the Federal Reserve
Board reported. Last month's rate was eight points
higher than the year-earlier pace. American industries produced at a
seasonally-adjusted rate of 144% of the 1947-49 average in July.
This was one point above the rate in both April and May, and 3 points
below the high reached last December. (Wall St. J., 8/19 p.9)
EMPLOYMENT HITS
ALL-TIME HIGH
The nation's employment rose to an all-time high
of 67.2 million for July, the Departments of Commerce and Labor announced. The increase of 700,000
workers over the June total was attributed mainly to the continued
hiring of young people in summer jobs and a slight increase in farm
work source. This monthly rise in the labor total was described as
"one of the largest on record for this time of year". Unemployment
for the month was 3 million, a drop of 300,000, caused by the employment of students and graduates who had been listed as job seekers on
the previous month's record. (J. of Comrn., 8/13 p.1)
The Department of Commerce reported that gross
national product hit an annual rate of $434
billion in the second quarter of this year, over
$5 billion higher than in the first quarter. Nearly all of the increase in GNP '' seems to have been associated with increases in
prices", the Department of Commerce said.
Personal income in July rose by $700 million to reach the
seasonally-adjusted annual rate of $345.5 billion. (J. of Comm.,
8/16 p.2)
GNP AT PEAK;
PERSONAL INCOME UP
Selection of these items does not imply this bank's guaranty of their accuracy,
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nor agreement with the views expressed.
RESERVE CHIEF URGES
MONETARY RESTRAINT
Testifying before the Senate Finance Committee,
the Federal Reserve Board's Chairman, William
McChesney Martin, Jr., said that the United
States can halt inflation, but he warned that breaking the price
spiral will require the continued use of monetary restraint and the
achievement of a bigger budget surplus than the Federal Government
now has in sight. Inflation is the most critical economic problem
facing the country, Mr. Martin told the Committee. He evinced little
patience and scant respect, either for those who contend that inflation must go hand in hand with full employment, or for those who
contend that creeping inflation is a good thing. Mr. Martin vigorously defended Federal Reserve credit curbs, called for a larger
budget surplus, and sternly warned of the menace of inflation, in
his initial appearance before a committee whose members include some
of the Senate's sharpest critics of tight money. The group is
investigating the financial condition of the United States. Mr. Martin
urged that Congress strengthen the Government's will to halt inflation 11 by declaring resolutely--so that all the world will know-that stabilization of the cost of living is a primary aim of Federal
economic policy". Mr. Martin made it plain that he believes the
United States has not yet taken sufficiently rigorous steps to halt
the inflationary advance that has boosted living costs 5% in the
last eighteen months. (Slevin. N. Y. Herald Trib., 8/14 II p.2)
The Senate Finance Committee expects
this week, possibly today, to recess
its current investigation of Governmental monetary policy until later this year. The hearings will resume, probably with Mr. Martin still on the witness stand, at some
time this fall. (Wall St. J., 8/19 p.22)
HEARINGS ON MONETARY
POLICY TO RECESS UNTIL FALL
Directors of the Federal Reserve Bank of New York
have taken no action to increase the discount
rate. Failure to raise the rate put New York in
company with Reserve Banks in Cleveland, Richmond and St. Louis,
which also have failed, so far, to take part in the discount rate rise.
(N. Y. Times, 8/16 p.24)
The Federal Reserve Bank of Richmond has advanced
the discount rate from 3% to 3-1/2!1/o, effective Monday. (N. Y. Times,
8/17 p .20)
NEW YORK KEEPS
3% DISCOUNT RATE
The Treasury's short-term borrowing cost rose to
3.498%--the highest rate since the bank holiday
period of 1933. The increase was attributed to
the rising cost of money generally, as reflected in the past week by
TREASURY BILL RATE
AT 24-YEAR HIGH
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increases in commercial banks' "prime" rate , and the Federal Reserve
System's discount rate. The Treasury iu also offering an additional
$1.8 billion of 237-day bills on Wednesday, which creates more demand
for short-term money . (Wall St. J., 8/13 p.17)
The Treasury's latest trip to the money market
cost the Government a whopping 4.173% interest rate on $1.8 billion
of 237-day bills. (Wall St. J., 8/16 p.3)
The midsummer lag in the public market for new capital is ended. Investment banking syndicates are
getting ready to take commitments in new issues of
corporate and local government bonds ranking in volume with any period of the year. Meantime, the backlog of new issues of securities
is rising again, both on the corporate and local government fronts .
In the corporate field, issues of bonds and preferred stocks awaiting
marketing total $2.2 billion, ac cording to the Investment Dealers
Digest. (N. Y. Times, 8/17 p.19)
CAPITAL MARKET
ENDS SUMMER DIP
The Bank of France today raised its discount
rate from 4% to 5% while the black market rate
for the dollar rose to 436 francs, the fiveyear peak it reached Monday. While some observers felt that the
action taken falls short of the goal in some respects, it was being
praised for at least bringing the official value of the franc closer
to reality and of putting French products on a more competitive basis
on the international market. (de Lyrot. N.Y. Herald Trib., 8/13 p.2)
BANK OF FRANCE
RAISES DISCOUNT RATE
STEEL MAKERS
AWAIT UPTURN
Steel industry officials are still waiting for the
strong upturn in the volume of new orders. Some slight
improvement has occurred but the real "push" has not
appeared. Seasonal influences, including repairs and vacations, still
were ruling the market late last week. The same outlook is promised
for this week but a few optimistic factors were building up. Auto
makers appeared to be holding up orders until the last moment. Contrary to the trend in light plate and flat rolled steel procurement,
which is fairly easy at present, heavy plate deliveries in many cases
are becoming extended. (N. Y. Times, 8/19 p.26)
JULY HOUSING
STARTS ABOVE JUNE
The annual rate of new housing starts picked up
in July to match May's level, but actual starts
were the lowest for the month since 1951. The
Department of Labor reported builders began work on new homes at a
seasonally-adjusted annual rate of 980,000 units in July, up from
June's 970,000 rate but lower than the 1,070,000 level a year earlier.
The gain brought the rate to the same level attained in May, which
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was the highest for the year. Although starts went up on a seasonally-adjusted basis, the actual number of public and private units on
which work was begun in July slipped to 96,000, from 97,000 the month
before and 101,100 a year earlier. (Wall St. J., 8/19 p.9)
GLASS PRICES
CUT BY MAKERS
Three glass makers reduced prices by 5% to 16% on
heavy sheet glass for large windows in homes and office buildings and on thin glass, used for picture
framing. Trade sources said reductions were designed to meet competition from imported glass of the two types. No changes were made
in prices of single and double-strength window glass, big volume products of the flat glass industry, for which demand has slackened as
a result of the decline in home building. (Wall St. J., 8/14 p.1)
Combined shipments of iron ore, coal and grain over the
Great Lakes this year to August 1 totaled 79 million
net tons, the Lake Carriers Association has reported.
This was more than 10 million tons ahead of the movement for the same
period last year and has been exceeded only in the record tonnage
year of 1953. Oliver T. Burnham, associate vice president and secretary, said the July ore shipment of 14 million gross tons was the
second highest tonnage for the month in history. (Cleve. Plain
Dealer, 8/14 p.16)
GREAT LAKES
SHIPPING UP
With 104 shopping days left before Christmas, investors are wondering if Santa Claus will be kind
to the department stores this year. According to
the Federal Reserve Board, department store sales for the year so far
are only 2{o higher than they were last year . If 1957 is to close
with a record better than this, the lag will have to be made up in
the Christmas quarter. The holiday season normally accounts for 25%
to 3Cf/o of the year's business. (Tompkins. N. Y. Times, 8/18 III p.1)
STORES LOOK
EAGERLY TO YULE
Transportation cost increases pose knotty problems
for manufacturing firms. They are casting about
for ways to ease the impact of higher freight
rates which railroads will start charging August 26. The search for
alternate channels of shipment is complicated by prospects that trucking lines may raise their rates, too. Manufacturers of items in
toughly competitive fields figure they can't pass along much, if any,
of the higher costs. Some concerns feel the consumer price effects
of transportation rate boosts may be delayed until fall or next year.
An example is the auto industry, in which, trade sources say, the
higher freight tariffs will boost retail prices--but not while dealers are getting rid of 1957 models. (Wall St. J., 8/15 p.1)
IMPACT OF HIKE
IN FREIGHT RATES
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