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basic business " 0 0 0 /NEWS! 0 0 0 0 0 o. - - - - - - ~ ..0 Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND 0 March 18 , 1958 0 to March 24, 1958 Commercial banks ' r eser v2 requirements again were reduced one - half percentage point by the Federal Reserve Board. It was the second such step in a month aimed at reverping the business slump. The move will free some $490 million of reserves which member banks are re qu ired to keep on hand against demand depo sits. Theoretically, this could mean a $3 b illion expansion in credit supplies . Bankers said they had an ticipated the step, particularly in view of the financing the Treasury is expected to undertake next month to raise $3 billion to $5 b illion "new money ." (Wall St. J., 3/19 p.1) BANK RESERVES CUT AGAIN INDUSTRIAL OUTPUT DOWN IN FEBRUARY Industrial production dropped 3 points in February , the Federal Reserve Board has reported . The product ion index, using average output in the 1947-49 period as 100, was 130 in February after seasonal adjustment . The peak was 147 in December of 1956 . It was 146 in February a year ago and 145 in August, when t he index began its sharp decline. The drop since August has been 15 points or 10 . 3%-- as much as t he entire de clines in the 1953-54 and 1948-49 recessions. Because this inQex is the b est measure of the broad industrial sector of the economy, any further decline in it would make this the worst of the postwar recessions . It already is the worst in terms of unemployment. The February figures also confirmed that the decline in output has been steeper in this recession than in 1953 - 54 . (Dale , Jr. N.Y. Times, 3/18 p . 1) Consumer prices edged upward again in February to still another high , the Bureau of Labor Statistics has reported . Food prices again led the way, ac counting for most of the increase of O. 'Z1/o . The consumer price i ndex , using average prices in 1947 - 49 as 100 , was 122 .5, compared with CONSUMER PRICES AGAIN AT RECORD Selection of these items does not im ply this bank 's guaranty af their accuracy, https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis nor ag re ement with the views expressed . 122.3 in January. The February increase of O.,z;/a brought the index to a leve l of 3. ,z;/a higher than February a year ago and 7% above the l evel of March 1956, when the current "creeping inflation" began . Sinc e Mar ch 1956, the index h as risen in ev e ry month but three , and in two of those it merely he l d s t eady. The con sumer price index measures change s i n a fi xed "mar ket bas ket" of goods and services usually bought by ur ban fami lies of moderat e incomes. (Dale , Jr. N.Y. Times , 3/22 p . 1) Outstanding loans t o bus iness by the seventeen l arger New York City banks rose $354 million in the week ended Wedne s day, the Fede r a l Reserve Bank of New York r ep ort ed . This compared with an increas e of $376 million in t he like week a y ear ago. The i ncreas e refle cted borrowi ngs to meet Fede r a l t ax payments due March 17. In the t wo weeks ending l ast Wedne s day, b orrowings were $468 mill ion , compare d wit h $599 million a year ago . (N.Y. Times , 3/21 p . 31) BUSINESS LOANS UP $354 MILLION NEW CAPITAL ISSUES I N SHARP RISE Act i vit y i n t he new c ap it al market i s rising again. The backlog of new i ssue s of cor porat e bonds and preferred s t oc ks slated for offe ring rose t o beyond $ 2 b i llion i n the week ended March 21 for the f ir s t time in months , according to the Investment Dealers Digest . While the de bt securities of private corporations and local gove r nments still play a domi nant role , major of ferings of convertible preferred and common stock are appearing with more frequency . ( N.Y. Times , 3/22 p . 23 ) The British b ank rate , which was raised s i x months ago to the unusually high level of 7% , was cut to 6% on March 20 . The Bank of England ' s announc ement said speculative pressure against the pound s t erl i ng had ceased , and there no longer was any justification for t he exc ept i onally high level of short - term interest rates i n Britain . The bank said inflationar y pressures were moderat i ng . But it cautioned t hat the reduction i n the rate did not imply any general relaxat ion in the Government ' s monetary policy. (Ronan . N.Y. Ti mes , 3/ 21 p . 31 ) BRI TAIN LOWERS BANK RATE TO 6% Short i nterest on the New York Stock Exchange rose 539 , 400 shares in the month ended March 14 t o the highe st level since September 11 , 1931, the Exc hange reported . The short i nterest on March 14 totaled 4 , 460 , 660 shares compared wi th 3 , 921 , 260 on February 14 . On September 11 , 1931 , the t otal was 4 , 480 , 400 shares . While short interest indicates a pessimistic attitude upon the part of those who have sold short , it SHORT INTEREST HITS 27 - YEAR TOP https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis also is viewed as a cushion under the market as the short sellers eventua lly must buy. (J. of Comm., 3/20 p.3) The auto industry's new car inventories continued to mount last month de spite sharp production cutbacks. The stock of u nsold new cars stood at 869,771 units on March 1, up f rom 779,103 on February 1. The highest inventory ever recorded by the indu stry was 903,789 cars on March 1, 1956. The auto makers are sharply reducing their production target f or 1958 , Ward 's Automotive Reports says. Now in prospe ct f or the year, is an output of 4.7 million units aga inst earlier e stimates of 5.3 million. "Not since 1952 has the production outlook for cars with in the United State s far ed so poorly . New life inj e ct e d into ret a i l s a les could e r a s e some of t he gloom; but the mount a inou s auto stockp ile may already have t aken i ts t oll ." ( N.Y. Ti me s , 3/18 p .41) AUTO INVENTORIES NEAR RECORD HIGH The consensus las t week was t hat March s t e el order volume wou l d do we ll if it mat ched t he daily av erage i n February . But there were s till tho se who, t aki ng a loo k at weekl y produ ction tot als , fe lt that Apr il busines s mi ght be a t rifle better . The patt ern of steel activit y is not uni form . Some areas are doing better than the average for the nation . Other loc alities are much harder hit than the output rate would indi cate . Hardest hit last week were steel companies that depended large ly on auto and automotive parts makers . When orders do come in from car makers , they are often canceled, cut back, postponed , changed and perhap s reinstated . But in the last few weeks , the gloom in De tro it has h i t all s t eel cent ers where automotive sheet s , strip and bars are produced . ( N.Y. Ti mes , 3/24 p . 35 ) STEEL INDUSTRY STILL AUTO-POOR '' BOTTOMING '' TREND SHOWS UP I N COPPER Signs of a bottoming out in copper were point ed up by industry sources on both sides of the At lantic . In the United States , custom smelters raised their prices by 1/2¢ to 23 - 1/2¢ a pound , their first price h i ke since November£ . Domestic dealers followed suit by raising their price for copper scrap by 3/8¢. On the London exchange , spot copper advan~ed by the equivalent of . 68 of a cent while copper for f orward delivery moved up by . 56 of a cent . Dealers said the advance would have taken place even without the additional influence of the 1% re duction in the British bank rate . (Regan . J . of Cormn . , 3/21 p . 1) A recovery in the textile industry , considered already overdue because the textile slump started well ahead of most industries, is likely to be de layed somewhat longer . Most textile executives believe demand is at DELAYED TEXTILE UPTURN LIKELY https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis ebb tide, with prices now just about as low as they will go. Inventories throughout the industry are down to reasonably low levels. Retail stocks for the most part are quite low, some observers believe unwisely low. (Wyss. J. of Comm., 3/19 p.1) NICKEL COMPANY CUTS OUTPUT The recession has caught up with nickel, one of the metals in shortest supply during the Korean War and the years following. The largest producer, the International Nickel Company of Canada, announced that it was curtailing production because free world output "is substantially in excess of total market demand." Inca's nickel production is being cut ab out 10%, or about 2.5 million pounds a month . Last year, the company delivered more than 290 million pounds of nickel. The last nickel cutback by Inca, in 1949, lasted only a couple of months. Then defense needs soared in the Korean War, strategic stockpiling was pressed, and the metal was caref ully rationed to industry. By last fal l, with major expansion programs by nickel producers well advanced , supplies began catching up and demand contracted as general business slowed. (N.Y. Times, 3/18 p.41) CATTLE AND HOG PRICES CLIMB The price of top grade slaughter steers shot up to $39 a hundred pounds at Chicago on March 19, the highest since April 1952. The hog market just about kept pace with the market for cattle. Butcher hogs reached a $22.35 top, the highest since last August 12. The recent upsurge in prices hog farmers, cattle feeders and ranchers have enjoyed stems almost wholly from reduced marketings of live animals. This has meant a cut in meat production and higher prices for fresh meats at wholesale and retail. (Wall St. J., 3/20 p.18) Crop plantings for harvest this year seemed likely to drop slightly below last ye ar 's low level, a ccording to a report of the Department of Agriculture. The indicated acreage--based on a survey of farmers ' planting intentions as of March 1--would be the smallest total in more than forty years. Considerable land will be held from production under crop control measures and under the soil bank program, offering sub sidy payments to farme rs for reducing plantings of surplus crops. The farmers' plans indicated that the total acreage planted to all crops this year would be about 333 million a cres, down l million from last year. (N.Y. Times, 3/19 p.45) CROP ACREAGE AT 40-YEAR LOW https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis
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