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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
January 14, 1958
to
January 20, 1958
Industrial production, a key reflector of
how business is doing, dropped for the
fourth straight month in December, the Federal Reserve Board reported. The seasonally~adjusted December index
stood at 13&fo of its 1947-49 average, three points, or 2jo, below November and 11 points, or 7%, below the record high of 147 in December
of 1956. For the full year of 1957, however, industrial production
averaged 14 3", the same as for 1956. (Wall St. J., 1/16 p. 7)
INDUSTRIAL PRODUCTION
DOWN AGAIN IN DECEMBER
Unemployment in the United States rose to an
estimated total of 3,374,000 in mid-December.
This was the highest total for any December since
1949, according to a report by the Departments of Commerce and Labor.
The seasonally-adjusted rate of unemployment--5-2%--was the highest
in three years. This meant that one of every twenty persons in the
labor force was looking for a job. Unemployment rose by 186,000 between mid-November and mid-December, contrary to the normal seasonal
pattern. Cutbacks in manufacturing and construction were blamed.
Civilian employment actually declined much more than unemployment
rose. The decline was about 447,000. The difference in figures is
reconciled by the fact that many persons withdrew from the labor
force. If they are not working or seeking work they are not counted.
Despite this, civilian employment in the nation remained close to
the levels of a year ago. (N. Y. Times, 1/15 p.1)
NATION'S JOBLESS
UP TO 3.3 MILLION
The value of business inventories dropped for the
second straight month in November. The Department
of Commerce reported the book value of manufacturing and trade inventories at the end of November was down $200 million below the end of October,· on a seasonally-adjusted basis, to a
total of $90.9 billion. The October drop which preceded it wa~ the
INVENTORIES FELL
IN NOVEMBER
Selection of these items does not imply this bank's guaranty of their accuracy,
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Federal Reserve Bank of St. Louis
nor agreement with the views expressed.
first in nearly three years and crune after a succession of moderate
increases for the first 10 months of 1957. (Wall St. J., 1/14 p.16)
$74 BILLION BUDGET
IS PEACETIME HIGH
President Eisenhower sent Congress a $73.9 billion fiscal 1959 spending budget that he said
"adequately" meets the Government's responsibil1.ties in a "time of growing danger." He called for increasing Federal spending by $1.1 billion to a new peacetime peak, predicted
that an upturn in business activity will raise tax collections to a
record high, and forecast that the Government will register a small
budget surplus. The budget is the progrrun that the President has
put forward to carry out his State-of-the-Union message declaration
that the United States must throw "every asset" into the cold war
struggle against world communism. He proposed a $1.5 billion increase
in national security spending, a slight reduction in civilian programs, and maintenance of present Federal tax rates. Congressional
acceptance of the President's $73.9 billion budget would lift Govern·ment spending to its highest point since the Korean War year of fiscal 1953, when outlays totaled $74.3 billion. The country's biggest
budget amounted to $98.4 billion and was posted in the World War II
fiscal year of 1945. (Slevin. N. Y. Herald Trib., 1/14 p.1)
DEBT - CEI LING
RISE ASKED
Secretary of the Treasury, Robert B. Anderson, has
asked Congress to vote a $5 billion temporary increase ·
in the public-debt ceiling. He urged that the debt
limit be raised to $280 billion from $275 billion. He recommended
that the in~rease remain in effect from the date the bill is signed
until June 30, 1959. Identical bills to carry out Mr. Anderson's
recommendations were introduced in the House by Rep. Mills and Rep.
Daniel A. Reed. The present ceiling forced the Treasury to adopt
costly and inefficient debt management methods. It has had to make
frequent and upsetting trips to the money market to borrow small
sums because the debt ceiling prevented it from borrowing large
amounts in one package. (Slevin. N. Y. Herald Trib., 1/15 p.1)
The House Ways and Means Committee approved a temporary increase of $5 billion in the $275 billion ceiling on the
national debt. (Mooney. N. Y. Times, 1/18 p.1)
MARGIN REQUIREMENTS
CUT TO 5CJI,
The Federal Reserve Board cut stock margin requirements from 7CJ1, to 5CJ1,, effective January 15.
The reduced requirements, the Board said, apply
to both purchases and short sales. The change means that a buyer
now only has to put up 50¢ in cash on each $1 of the purchase price
of the stock, and can borrow the rest. The margins were raised from
5a1, to 6a1, in January 1955. They went to the present 7afo level
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Federal Reserve Bank of St. Louis
April 23, 1955. The move, of course, would have the effect of pepping up the outlook of any company preparing to put out a new stock
issue. It would also serve, some experts believe, to broaden demand
for stock in a market that has just gone through a long decline.
(Wall St. J., 1/16 p~3)
This week the market in Government securities has
seen profit-taking and has reacted from the highs.
The fact that the request was made of Congress to
increase the debt limit by $5 billion, and also the testimony of
Under Secretary Baird before a congressional committee, brought out
some selling on Tuesday. Wednesday, selling continued until late in
the afternoon, when prices began to stiffen. Thursday, the long bonds
again were lower. The market had been discounting that the Federal
Reserve Banks might lower their discount rates, and hopes had been
expressed that Thursday might see an announcement. In view of the
change in margin requirements, hopes for a reduction in the discount
rate lessened. (Amer. Bkr., 1/17 p.4)
PROFIT-TAKING
BREAKS OUT
STOCK MARKET
The stock market paid little heed to a rash of dramatic
economic developments last week. Prices, in general,
held within a narrow range and ended with moderate gains. The Federal
Reserve Board's surprise reduction of margin requirements on stock
purchases provided only a temporary--and minor--stimulant. Had there
not been further evidence of the general business decline, the news
from Washington might have generated a more pronounced spurt in the
prices of securities. With misgivings over the near-term business
outlook so prominent, however, the best the stock market could manage
was a modest rise that barely erased the preceding week's loss.
(N. Y. Times, 1/19 III p.1)
American Telephone & Telegraph Co. shareholders
approved a plan to sell $718 million of convertible debentures. The massive issue, which will be
the biggest private securities offering in U.S. corporate history,
will be used to help finance the Bell System's expansion -program,
expected to total $2.25 billion this year. A.T. & T. direGtors announced the debentures will bear interest at 4-l/4i and will mature
in 15 years. They will be offered for subscription at face amount
to shareholders of record January 24 in the ratio of $100 worth of
debentures for each nine shares of stock they own. (Wall St. J.,
1/16 p.3)
A.T. & T. HOLDERS
VOTE DEBENTURES
HOUSING STARTS
Private housing starts in 1957 totaled 989,700, dropping below the million mark for the first time since
1949, the Department of Labor reported. Private housing starts during
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Federal Reserve Bank of St. Louis
December dropped to 60,800, the lowest since April 1956, and nearly
5,000 below November. Total starts in December were 62,000, down
from 78,000 in November. This decline is a little more than usual
for the time of year. (Wall St. J., 1/15 p.6)
RETAIL TRADE
The Department of Commerce announced that December
1957 retail store sales totaled $19.7 billion, bringing sales for the full year 1957 to a record of more than $199.8 billion, 5% above sales for the year 1956. December 1957 sales, after
adjustment for seasonal factors and trading day differences, were 1%
above November of t his year and 2{o above December a year ago.
(J. of Comm., 1/14 p.4)
PERSONAL INCOME
OFF IN DECEMBER
Another of the Government's key economic indicators
--personal income--fell for the fourth straight
month in December. The Department of Commerce reported that personal income in December was at a seasonally-adjusted
annual rate of $343 billion, down $2.5 billion from the preceding
month and a full $4 billion below the August 1957 high. The total
for the full year of 1957 was $343 billion, or 5% above 1956. The
drop in December from the preceding month was the sharpest fall personal income has taken since it started sliding in September. The
1957 gain from 1956 in personal income represented a gain in money
income and in purchasing power as well, since the relative advance
topped the rise in consumer prices. Compared with 1956, wages and
salaries were up $11.5 billion in 1957. (Wall St. J., 1/17 p.6)
The American Iron & Steel Institute announced
that it had adopted a new procedure to be used
in releasing weekly steel production figures.
The estimated percentage of tons produced based on capacity as of
January 1, 1958, will no longer be issued, Benjamin F. Fairless,
president of the institute, stated. Instead, the weekly report will
emphasize the tonnage produced and the index of production, based on
the 1947-1949 period. (Casazza. J. of Comm., 1/14 p.3)
WEEKLY STEEL REPORT
TO STRESS TONNAGE
The Central Banking Council decided to lower the West
German bank rate from 4% to 3-1/2%, effective January
17. This was the fourth successive reduction by the
Federal bank following a series of increases up to May 19, 1956,
when the rate was fixed at 5-1/'Z{o. The last previous cut was from
4-1/2% to 4% September 19. Banking sources said that the action had
been expected for some time because of an abundance in the West German money market and three successive declines in the Treasury bill
rate. (N. Y. Times, 1/17 p.31)
GERMAN BANK
RATE SLASHED
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