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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
August 4, 1959
to
August 10, 1959
JULY Auro ourPur
Auto makers maintained a fast production pace in
July though approaching the end of the 1959 model
HIGHEST SINCE '55
run. In all, the five producers built 555,265
cars in July. The total was 73o/o ahead of the year-ago month, and
slightly under the 558,000 cars built this June. It also was the
highest July production since 1955. Output in August and September
will be down sharply because of the model changeover closedowns, with
only Ford and Chevrolet cars being built in quantity this month. The
combined production this month and next probably will do no more than
match July's total. In the first seven months this year, the industry has built 3,839,282 ca.rs, which is up 5Cffo from last year.
(Wall St. J., 8/4 p.3)
STEEL STRIKE SLASHES
SOME RAIL REVENUES
The 25-day-old nationwide steel strike is beginning to hurt some railroads. Leading Eastern roads that haul big amounts of coal, iron
and steel products report their revenues have been slashed 15o/o to 25o/o
by the strike. Although roads in the Midwest have been less affected,
the strike has hurt several big ore carriers. Western lines have
been harmed the least. The strike already has cost the railroad industry well over $120 million in lost revenues. Rail employment has
dropped 38,000 since the strike began in mid-July bringing a payroll
loss of about $4 million a week. Effects of the strike on the rail
industry are reflected in weekly freight carloading figures. Carloadings in the week ended August 1, for example, were 12.6~ below
the 1958 figures, the Association of American Railroads reported.
(Wall St. J., 8/7 p.3)
Se lect ion of these items does not im p ly th is bank 's guara nty of their accuracy,
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nor agreement w ith the views expressed .
STEEL FEARS POSTSTRIKE ORE SHORTAGE
Ore shortages may hamper steel output in the
post-strike period, unless a labor settlement
is achieved within a month. Owing to the short
shipping season on the Great Lakes, steel companies must build up
adequate ore inventories for the winter months prior to the closing
of the lakes in November. The lakes ore fleet is currently tied up
by the strike of the United Steelworkers. Inventories at steel
plants on July 1 were nearly 49 million tons , or about 4 million tons
less than on July 1, 1958. The steel industry has used as much as
138 million tons of .ore in a year, including imports. This means
that if the steel strike continues well into September, insufficient
time will remain to build up inventories of Lake Superior ore before
the end of the shipping season. Peak steel operations will be the
mill's objective in the post-strike period. Steel inventories appear
to be suf'ficient to prevent most steel users from running into shortages prior to the end of this month. (Fish. J. of Comm., 8/5 p.1)
Fa:rm machinery sales in 1959 are running 2C!{o
ahead of the vigorous 1958 pace, a poll of
leading producers showed. Even if business
should slacken in the months ahead, top executives predicted, volume
will reach $1.7 billion in the calendar year--up from $1.5 billion
in 1958 which was the highest total since l95l's $1.9 billion. Industry sources said farmers have plenty of money to spend as a result
of the '2fY1, upswing in their net income during 1958. Though farm
profits at mid-year were 8i behind the 1958 pace, they added, so far
this decline has not affected machinery sales. (Wall St. J., 8/4 p.1)
FARM EQUIPMENT SALES
CONTINUE ' 58 UPSWING
HOUSE UNIT REJECTS
HIGHWAY PLAN
The House Public Works Committee in effect rejected a plan to slow down construction of the
41,00O-mile interstate highway system. The
slowdown had been recommended earlier by the House Ways and Means
Committee as part of a plan to meet the road program's financial
needs. The Public Works group's decision is not binding on the
Ways and Means Committee, but puts considerable pressure on that
group to come up with another proposal to pay for continuing the
construction work at about its present pace. There is growing
sentiment in Congress to approve some increase in the Federal gasoline tax to finance the highway program, despite the Ways and Means
Committee's earlier rejection of this idea. Financing methods
must be approved by the Ways and Means Committee, which was given
the task of finding new money for the special interstate road trust
fund that was created in 1956, when the program was launched. This
fund is expected to incur a deficit of $98o million by July 1, 1961,
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unless it is replenished.
(Wall St. J., 8/7 p.2)
TREASURY FINANCING
The Treasury announced $1.7 billion of new money
borrowing to be raised in the relatively painless way of adding $700 million to issues of bills in coming weeks
and by adding $1 billion to the issue of $3 billion of tax anticipation bills issued last month. The a.mount, which was somewhat less
than would have had to be borrowed if the recent refunding issue had
not been such a success, was about in line with market expectations.
Government bonds had a steady day, with minor upward changes at the
end. The latest new money offering takes care of the Government 1 s
needs until October, when further substantial amounts will be borrowed. The Government's new offerings of course will take another
bite out of the diminishing supply of short-term funds and to that
extent, tend to keep money rates high. (J. of Comm., 8/6 p.1)
FOREIGN HOLDINGS
HIT RECORD
Continued spasmodic earmarking of gold by foreign
banks and international institutions has pushed
the total held in the vaults of the Federal Reserve
Bank of New York to an all-time record of around $9.5 billion. The
gold holdings of foreigners lodged in Reserve bank vaults are only a
portion of the increasingly rich dollar-asset hoards of foreign banks
held in the United States. In addition to the gold in Federal Reserve hands, are $4,126 million of United States Treasury shortterm securities, also a new all-time record for foreign investment
in U.S. Government securities. (J. of Comm., 8/6 p.4)
PENNSYLVANIA BONDS
IN STRONG DEMAND
The Commonwealth of Pennsylvania dominated the
tax-exempt market completely (August 4) as investors scrambled to buy a share of the offering
of $120,000,000. There seemed little doubt that other issues were
neglected as a result of the unusually large interest in the Pennsylvania borrowing. Net interest cost to the State will be 3.40437~.
(Weberman. N.Y. Herald Trib., 8/5 III p.5)
STOCK MARKEr SAGS
Stocks closed a confused week (August 7) with
losses in New York Stock Exchange market values
of almost $3.5 billion on the week and $1.8 billion on the day. As
in earlier sessions, the main influence was the uncertainty generated by the Eisenhower-Khrushchev exchange of visits. Many investors,
alerted by their brokers, seemed to feel that any meeting of minds
would cut defense spending. The heaviest losers once again were
stocks that only owed their growth to arms spending, but were selling
at generous multiples of earnings. (Crane. N.Y. Times, 8/8 III p.21)
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Outstanding consumer instalment debt increased by $452 million in June, a:fter adjustment for seasonal inf'luences. The increase was in line with the advance of the preceding month and pushed
instalment debt to $35.8 billion. The Federal Reserve Board said
both extensions of new instalment credit and repayment of old debts
had continued close to peak rates. During the first half of 1959,
outstanding instalment credit increased by nearly $2.4 billion--close
to the peak °level recorded in the first half of 1955. (N.Y. Times,
8/4 p.34)
JUNE INSTALMENT DEBr
CLIMBED BY $452 MILLION
JUNE U.S. IMPORTS
TOPPED EXPORTS
Americans bought more abroad than they sold in
June, the first month in which this has happened
since 1950. The Department of Commerce's June
import figures showed U.S. traders bought a record $1,369,400,000 of
goods abroad. This compared with connnercial exports of $1,347,600,000
that month. The last time imports have run ahead for a full year was
during the depression years of the mid-Thirties. Noticeably high
imports of petroleum and products, iron ore, aluminum and manufactures, refined and unrefined copper, nickel oxide, tin ores and bars,
and sawmill products led the June rise from May, the Department said.
(Wall St. J., 8/5 p.20)
American manufacturers are stepping up
their spending for plants and equipment
overseas this year, and expect that sales
of their foreign subsidiaries will increase faster both this year
and next than exports from their plants here in the United States.
These are the most important findings of a comprehensive survey by
McGraw-Hill Publishing Company, the first to be made of this kind.
Spendin& for new plants, equipment and property abroad will increase
about 5~ this year to a total of $2,143,600,000, and present plans
call for spending of about the same a.mount in 1960, according to the
survey. (J. of Comm., 8/7 p.1)
U.S. INDUSTRY TO STEP UP
PLANT INVESTMENT ABROAD
LEATHER PRICE RISE WILL
BOOST COST OF SHOES
Another round of shoe price increases,
the second for this year, is in the offing
as a result of a further jump in leather
prices at the semi-annual Leather Show. Leather prices, which had
been firming up steadily under the pressure of advancing hide and
skin prices, were increased an average of about 8~ at the show, with
shoe producers heavy buyers of leather. With no weakening in hide,
skin or leather prices visible in the near future, and with consumer
demand for shoes having run ahead of production, the higher leather
prices will have to be reflected in retail prices to the public
next spring, both tanners and shoe producers agreed. (Morahan. N.Y.
Herald Trib., 8/6 III p.5)
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