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-..;.;...bo;:_ _ _ _ _ _ _ ____,
Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
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December 31, 1957
to
January 6, 1958
The Defense Department's step-up of activity,
in response to Russian military and scientific advances, made its first showing in industry in a steady flow of orders during Novemb e r 1957, a Department
of Commerce report indicated. While orders held even with the pre~ ceding month, the value of manufacturers' invent ories took its first
~ significant drop since mid-1957 and manufacturers' sales continued
~ the decline in evidence since August. The Department said whole~~ /salers' sales for November 1957 were down la{o fr om ~ ~ e preceding
· month and off 8% from November 1956. For the firs t t ime in 1957,
cumulative sales fell below a year earlier. Manufacturers' orders
for November 1957 totaled $26.2 billion on a seasonally-adjusted
(Wall St. J., 1/6 p.8)
MANUFACTURERS' ORDERS
STABILIZED IN NOVEMBER
INSTALMENT DEBT
ROSE IN NOVEMBER
Consumers stepped up their instalment debt by
$ 92 million in November 1957, an increase from the
previous month's rate but far short of the rise a
year earlier, the Federal Reserve Board ~eported. The latest increase
brought total instalment credit to about $33.6 b illion at t he end of
November. Total consumer credit reached $43.5 billion in November,
an increase of $256 million from the previous month and almost $2.7
billion higher than a year earlier. (Wall St. J., 1/6 p.4)
NO TAX INCREASES
""1 IN RECORD BUDGET
President Eisenhower has given tentative approval
to a record peacetime budget. He hopes, however,
- to keep Federal expenditures below income .and to
provide a "slight surplus" in the fiscal year 1959 without changing
the present tax levels. It has been reported in Washington that the
new budget will call for Federal outlays, in the year beginning next
July 1, of $73.5 billion to $74 billion. This would mean the country's
~ largest peacetime budget, and would call for the highest spending
J
~
Se lection of th ese itenis does not imply this bank 's guaranty of their accuracy,
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nor agreement with the vie ws expressed .
since 1953, when the Korean War, at its height, produced a budget of
$74.2 billion. (Walz. N. Y. Times, 1/1 p.1)
The Treasury will tap the money market for some
extra needed cash later this month--without
squeezing its narrow margin under the debt ceiling.
The Department will make a $750 million public offering of Federal
National Mortgage Association short-term notes on January 20. Some
$570 million will be used to pay off that amount of Fannie Mae notes
falling due, and the remaining $180 million will go to the Treasury
to further reduce the FNMA indebtedness to the Department. Borrowings technically made by Fannie Mae are not subject to the $275 billion debt ceiling. On December 30, the Treasury had less than
$250 million headway under the debt limit. (Wall St. J., 1/6 p.16)
TREASURY PLANS TO
RAISE EXTRA CASH
Municipal bond dealers will get plenty of action
during January with the visible supply of offerings
during the next 30 days totaling $566 million.
That's the highest for any 30-day period since May 1954, according
to the Daily Bond Buyer. Prices on tax-exempt bonds generally remaine d unaltered over the past two weeks. With dealers and investors
both taking time out for a holiday break, the market has been dormant
since the week before Christmas. Today, the Dow-Jones municipal yield
index turns in a 2.98/fo mark for the third straight Monday. The index,
which records the average return on 20 representative 20-year bonds,
held firm over the past week despite isolated reports of price trimming by some bond dealers. (Wall St. J., 1/6 p.22)
MUNICIPAL BOND
SUPPLY HIGH
CORPORATE BORROWINGS
SET PEAK IN 1957
Wall Street syndicates in 1957 underwrote a
record $9 billion in public offerings of new
corporate and foreign securities, fully 2&;o
more than the $7.1 billion registered in 1956--the previous record
year. All but a fraction of the offerings were for the accounts of
domestic corporations. During much of the year, the new issue market
for corporate securities was plagued with the congestion of too many
issues coming at once, with the Federal Reserve's tight money policy,
and with temporary imbalances, in which the demand for funds exceeded
the available supply. As a result, institutional investors during
1957 were able to buy the best grade bonds and debentures at the
highest yields in two decades and a half. (N. Y. Herald Trib., 1/2
III. p.24)
MONEY MARKET
At this season of the year, coming monetary events cast
their shadows before. Hand-to-hand currency is due
to return from circulation in heavy volume. Commercial banks will
have their loans repaid, and this process may be a far larger than
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seasonal one in view of the downturn in the national economy, which
clearly deserves to be called a "durables recession." The automatic
effect will be a sharp increase in monetary availables. The Federal
Reserve may counter this by liquidating some of its open market holdings of Treasury securities, but it can hardly fail to leave some
slack. The official banking statistics suggest that the current official aim is a balance between borrowings at the discount window and
the aggregate of excess reserves. This would put the monetary machine
in neutral , so to speak. (Wanders. Amer. Bkr., 12/31 p.2)
INVENTORIES, CAPITAL SPENDING
KEYS TO '5 8 BUSINESS
The First National City Bank of New
York, in its monthly letter on economic conditions, singled out two factors it said "will have much to do with the trend of the next few
months and with determining how soon the economy is ready to rally
and start a recovery." One is: "the promptness with which business
concerns adjust their inventories." The other: "the speed of the
decline in plant and equipment spending. The amount and timing of
fiscal and monetary measures to counteract recess~.onary trends are
also vital but unknown elements in the 1958 outlook." The appraisal
continued: "One thing is certain: 1958 will be a highly competitive
year. More than ever before, management's interest will be centered
on cutting costs, improving efficiency and turning out products designed and priced to attract the customer ••• The prospect of an accelerated defense program and the possibility of moderate but continued expansion in public works, home building and some other types of
construction encourage belief that the second half-year may see an
end to the recession." (Wall St. J., 1/2 p.8)
RAIL CARLOADINGS
EXPECTED TO FALL
Railroad freight traffic, during the fi rst quarter
of the new year, will lag 3.EY,i behind the level of
the corresponding 1957 period, according to an
Association of American Railroads forecast. The shippers' first quarter prophesy foresees an extension of the carloadings slump which
persisted throughout most of 1957. With all but the last week's figures in, the AAR reports loadings last year trailed 1956 levels by
6.1%. A large part of the slack accumulated during the fourth quarter
when volume through the last week fell 13.3i below 1956 totals. According to the shippers, loadings of key commodities may dip to
6,266,087 cars in the next three months from 6,515,997 cars during
the like span last year. (Wall St. J., 1/2 p.18)
TEXTILE MILLS
END POOR YEAR
uncertainty.
Cloth-mill executives tomorrow night close their
account books on one of the poorest textile years of
the postwar era--and head into a year filled with
The textile story of 1957 could well be titled, "the
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upturn that never came." Hope is clouded by disappointing Christmas
retail sales of coats, suits, dresses and other textile wares, which
may well make the store men continue buying only hand-to-mouth, at
least in early 1958. The cloth makers also cite worries over what
may come out of current negotiations between the State Department
and the Japanese Government on 1958 quotas for Japanese cotton-goods
shipments into the U.S., and over what price -support policy Congress
will decree next year for raw cotton . (Church. Wall St. J., 12/31
p.7)
Rubber manufacturers rang up their biggest dollar sales
in history during 1957 and further gains are seen for
1958. Ross R. Ormsby, president of the Rubber Manufacturers Association, said, "It now appears fairly certain that in
1957 the rubber manufacturing industry surpassed in dollar sales the
record $6.2 billion registered in 1956." In the U.S. during 1957,
man-made rubber increased its share of the market to more than 6 3%,
compared with 61% in 1956. Mr. Ormsby forecast total consumption of
new rubber in the U.S. in 1958 at 1,525,000 long tons, second highest
on record, exceeded slightly by the 1,530,000 tons used in 1955.
(Wall St. J., 1/2 p.7)
1958 RUBBER
OUTLOOK GOOD
The Department of Agriculture reported that prices paid
by farmers for goods, services, taxes and interest rose
to a new high in mid-December. Higher prices of feeder
livestock, trucks and tractors, officials said, were responsible for
boosting the index of prices paid to a record 299/o of the 1910-14
average. The Department's index of prices received by farmers showed
no change in the month ended December 15. This barome ter stood at
24,z;/, of the base period, the same as a month earlier, but 3% above a
year ago. The mid-December level was the highest for the month since
1953, although it was 2{o below this year's high of 248/fo in mid-August.
(Wall St. J., 12/31 p.10)
FARM COSTS
UP SLIGHTLY
White Motor Company announced it is increasing
truck production at its Cleveland plant by
about 2a1i, effective January 6, according to
J.E. Adams, vice president. Workers are being called back to meet
the requirements of the increased schedules. Mr. Adams said a big
increase in orders received during November and December made this
·move necessary, adding that the present order backlog at White is the
largest since last March. (Wall St. J., 12/31 p.3)
WHITE MOTOR CO. TO
INCREASE PRODUCTION
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