Full text of Basic Business News : June 24, 1958 to June 30, 1958

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

0
0
0
0

basic
business

C'

0
0
0

!NEWS(
0

0

0

0

~

Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
,--,;.E_:_________,. June 24, 1958
to
June 30, 1958

~

0

•

0

0
0

The Government's consumer price index registered
a 0.1% rise in May, although average food prices
remained unchanged for the first time since last
November, the Department of Labor reported. The Department attributed the increase over April--the smallest rise this year--to higher
hospitalization insurance premiums, and used car and gasoline price
boosts. These and other urban living cost factors brought the index
to a record 123.6% of the 1947-49 average, 3.3% higher than a year
earlier. The Department estimated that 850,000 workers will get automatic wage boosts as a result of the latest index increase. Most of
them--750,000 in the steel, aluminum and can-making industries--will
get an increase of 4¢ an hour. (Wall St. J., 6/25 p.7)
.

MA.Y'S PRICE INDEX
AT RECORD LEVEL

ECONOMISTS ASK
PRICE STABILITY

A group of economists argued price stability will
have to become a basic objective of Government
policy if the long-term threat of inflation is to
be licked. The way to do this, most of them argued, is to amend the
Employment Act of 1946 to make stabilization of the price level a
goal along with full employment and production. As another means of
coping with future inflationary pressures, the economists suggested
better coordination among Government fiscal and monetary agencies,
and some called for a national commission to oversee wage and price
policy. Their comments were released by Chairman Byrd of the Senate
Finance Committee in the fifth group of replies to questionnaires on
the long-range economic outlook. (Wall St. J., 6/25 p.11)
STEEL PRICE RISE
TO BE DELAYED

Barring last minute and unexpected price action,
steel producers will start absorbing one of their
costliest post-war wage boosts tomorrow--reluctantly. How long the industry will hold back from the price increases
that all steel makers insist they need apparently depends on United
States Steel Corporation. No. 1 producer and price leader, U.S. Steel
Selection of these items does not imply this bank's guaranty of their accuracy,


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

nor ag eement with the views expressed.

is sitting tight pending "clarification" of competitive and economic
factors, and other big steel companies won't move, they say, until
u.s. Steel does. The cost increases that steel companies face tomorrow come from the third instalment of wage boosts and improved
fringe benefits in the three-year labor contracts signed in August
1956. They're estimated by various companies at 20¢ to 25¢ an hour,
exclusive of a 5-cent-an-hour cost-of-living wage increase that went
into effect last January and was absorbed without a price advance.
(Lally. Wall St. J., 6/30 p.3)
DEFICIT ABOVE $10 BILLION
PREDICTED FOR FISCAL '59

Budget experts say zooming Federal spending and slumping revenue will produce a
deficit of over $10 billion for the new
1959 fiscal year. This would be on top of a deficit still estimated
at about $3 billion for the year ending today. A deficit of over
$10 billion would be the biggest deficit the country's ever had when
it wasn't actually engaged in military fighting, and would be larger
even than the deficits during the Korean War, when the peak deficit
was $9.5 billion. (Wall St. J., 6/30 p.2)
The 3% Federal excise tax on freight transportation will be repealed effective August 1. This
was assured when it was agreed to by Senate-House
tax conferees. The Senate immediately approved the conference agreement and the House is expected to do the same, sending the tax measure to the White House. The conferees, however, decided to continue
the present 10% tax on passenger transportation. The freight tax repeal is an amendment to a basic Administration bill continuing for
another year the present 52% corporate tax and present excise rates
on autos, auto parts, cigarets and liquor. The decision actually repeals not only the 3% tax on freight transportation but also the 4cents-a-ton tax on hauling coal and the 4-1/2% tax on transportation
of oil by pipelines. Repeal of these three taxes would cost the
Treasury about $485 million a year. (Wall St. J., 6/27 p.3)
The House of Representatives accepted repeal of
the 3% Federal tax on freight transportation and sent to the White
House a one-year extension of all other corporation and excise taxes.
(Baker. N.Y. Times, 6/28 p.18)

REPEAL 3% TAX ON
FREIGHT SHIPMENTS

Standard Oil Company of California put off its
proposed $150 million of 25-year sinking fund
debentures "due to market conditions." The
big offering--representing a large part of all new corporate debt
securities slated to come into a congested bond market this week-had be~4 down for public distribution on June 25. No new sale date
was set for the issue, but a spokesman for the underwriters said the

CALIFORNIA STANDARD
PUTS OFF ISSUE SALE


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

registration statement covering it will remain on file with the Securities and Exchange Commission. California Standard wanted the debenture money to pay $50 million bank loans and for general corporate
purposes. The postponement by the big oil unit came at a time when
bond prices had been declining and underwriters were faced with heavy
losses on other debt securities placed on their shelves in recent
weeks. (Wall St. J., 6/24 p.17)
Construction contracts in May rose to a monthly
record of $3.4 billion, F.W. Dodge Corporation said.
The May total slightly exceeded the previous high
set in May 1957. Responsible for much of the increase in building
activity last month were higher housing contract awards and a sharp
rise in publicly financed projects ranging from highways to hospitals.
But major types of privately financed buildings, such as commercial
and industrial structures and utilities, fell in May. May contracts
brought the dollar volume for the first five months of 1958 to
$13 billion, or 5% below the similar period last year. Residential
building contracts last month rose 4% from a year earlier to $1.3 billion. The number of dwelling units put under contract rose 2% over
May last year to 104,048, the highest monthly total in two years.
Continuing a year-long trend, manufacturing buildings fell 32%, and
for the first five months of this year, were 38% below the similar
period of 1957. (Wall St. J., 6/30 p.7)

BUILDING AWARDS
SET MAY RECORD

U.S. STEEL'S CAPITAL
SPENDING PROGRAM

U.S. Steel Corporation's program of capital expend.itures currently totals more than one billion dollars, the highest point in its history,
it was disclosed by Roger M. Blough, chairman. This record sum is
about $400 million more than the $640 million in authorized projects
for additions to, and replacement of, facilities reported by UoS. Steel
as of March 31, 1958. Since the end of World War II and up to the end
of 1957, "Big Steel" has spent about $3.5 billion in its program of expansion and replacement of old facilities. The additional capital expenditures were revealed by Mr. Blough on June 24, in announcing that
the corporation's directors had authorized the borrowing of $300 million through a public offering of 25-year sinking fund debentureso
The new offering--ranking as one of the largest underwritten debt
issues for an industrial company in history--will be "Big Steel's"
first public financing since 1954. (Wall St. J., 6/26 p.22)
Manufacturers' shipments of passenger car tires
for the replacement trade rose 8% in May, from a
year ago, reaching a new record for the month.
Coming on top of a record April, shipments for May pushed the industry's five-month total this year a slender 1% ahead of the like 1957

REPLACEMENT TIRE
SALES ROSE IN MAY


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis

period. Sales last month reinforce the belief of tire makers that
another record high in replacement passenger tire shipments will be
attained in 1958. This rebound also is helping major rubber firms
absorb some of the beating they're taking from their biggest individual customers, the automobile companies. (Wall St. J., 6/26 p.22)
The Department of Agriculture reported that
farm prices declined about 3-l/'Z1/o in the month
ended June 15. The decline ended a six-month
rise, but prices were 5% above the levels of a year earlier. The
downturn largely reflected declines in prices for vegetables, wheat,
cattle and potatoes. Much of the decline reflected a seasonal increase in supplies of some commodities, particularly vegetables.
Prices of these products had climbed to abnormally high levels after
severe freezes in the South had greatly reduced late winter supplies.
(N.Y. Times, 6/28 p.21)

FARM PRICES FALL
ENDING 6-MONTH RISE

FARM BLOC BILL
BURIED BY HOUSE

A coalition of Republicans and big-city Democrats
dealt the House farm bloc a severe defeat and gave
the Administration a victory. The new coalition
was behind a 214-171 vote by which the House of Representatives peremptorily rejected a catch-all farm bill that contained "sweeteners"
for most major crops. The vote ·came on the question of taking up
the bill, before debate had even begun. (N.Y. Times, 6/27 p.1)
CASH WHEAT
LOWEST SINCE

Cash wheat broke on June 27 to the lowest level
since the OPA days of 1946 at the important
Kansas City terminal as the threat of a record
winter wheat crop hangs over the market. No. 2 ordinary hard wheat,
. an important flour milling grade, was quoted at $1.85-1/2 a bushel.
A year earlier it was $2.21-1/4. The price of flour also has been
affected. A common type of bakery flour is now selling at $5.32 a
hundred-pound sack. That is 71¢ under a month earlier and compares
with $6.14 a year earlier. (Wall St. J., 6/25 p.18)
1

46

CDrTON YARN
PICTURE BRIGHTENS

Indications that the cotton yarn market, whose
volume approaches $1 billion annually, is beginning to shake off its recession, or at least is
on the threshold of a revival, are becoming more evident. Positive
signs in this direction include an improvement in sales backlogs, a
slight widening in manufacturing margins, and a more apparent stabilizing of price structures. Negatively, however, inventories in spinners' hands have mounted substantially compared to last year and are
acting to prevent any real price strengthening. The most significant
factor behind the improved side of the picture in the cotton yarn
market is the thriving children's wear industry, which anticipates
an0ther record-breaking sales year. (Lee. J. of Comm., 6/26 p.1)


https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis