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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
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March 19, 1957
to
March 25, 1957
PRICES AT RECORD
FOR SIXTH MONTH
Consumer prices rose 0.4% last month, the Bureau
of Labor Statistics has reported. The rise put the
consumer price index at another high, 118.7. Average consumer prices for the years 1947-49 are 100 on the index. It
was the sixth consecutive monthly increase in the index and the sharpest rise since October. The February index left the "cost of living"
3.&fo higher than a year ago. The rise in the index brought automatic
pay rises to about 135,000 workers, mostly in the aircraft industry.
The typical increase was 2¢ an hour. (Dale. N.Y. Times, 3/23 p.1)
STEEL PRODUCTION
Steel production, which dropped to a low for the
year last week, is expected to slide again this
week. Output last week declined to a scheduled 93.5% from 93.&;o the
week before, but from preliminary estimates, a sharper drop is indicated for this week. Reduced demand, plant alterations, and labor troubles are combining to slow operations. Biggest factor in the drop is
the sluggish pace of automotive steel buying which has softened the
market for cold rolled sheets and other light flat rolled steel products. A check with car makers shows two of the auto industry's three
leading producers have no plans to step up their steel buying in the
next two to three months. (Wall St. J., 3/25 p.l; p.3)
The Department of Agriculture has reported that in
1957 farmers may plant the smallest acreage of crops
since World War I. Production can be expected to
exceed post-World War I levels, however, because of technological progress in crop production. The Department said a survey based on farmers' planting plans as of March..l, indicated about 277 million acres
for 16 major spring crops. This would be about 2 million acres less
than was planted to the same crops last year. The reductions in
FORECAST CUTS IN
FARM PLANTINGS
Selection of these items does not imply this bank's guaranty of their accuracy,
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nor agreement with the views expressed .
plantings will take place under crop control and a new soil bank program--both designed to help reduce production until price-depressing
surpluses are reduced. (N. Y. Times, 3/19 p.47)
Business borrowing to meet March 15 tax payments
dropped sharply this year, according to figures
issued by the Federal Reserve Bank of New York.
the two-week tax payment period, net borrowings from the larger
York City banks were about 2oi below the year ago level. The total
the two weeks was $599 million, compared with $753 million in 1956.
Y. Times, 3/22 p.30)
MARCH 15 TAX LOANS
SHARPLY LOWER IN '57
For
New
for
(N.
The nation's known reserves of crude oil and
natural gas liquids were at a record high of
36,337 million barrels at the close of last
year, according to the American Petroleum Institute. This was 886 million barrels above the 35,451 million figure on December 31, 1955.
The increases in known reserves were made in the face of record output.
Production of crude oil and natural gas liquids last year amounted to
2.9 billion barrels, 158 million above the record set in 1955. Natural
gas output was 10,908,790 million cubic feet, up 790,000 million.
This was the largest gain reported for any year. (N.Y. Times, 3/21 p.43)
RESERVES OF OIL AND GAS
RISE TO NEW HIGHS
Between February 15 and March 15, the aggregate
short interest on the New York Stock Exchange rose
to the highest mid-month point it has touched since
September 1955, the Exchange has reported. It jumped from 2,815,519
to 3,002,510 shares. A short interest arises when speculators sell
borrowed stock in the hope of being able to replace it at a lower
price. (N. Y. Times, 3/21 p.47)
SHORT INTERESTS
AT 18-MONTH HIGH
LAKES CARGO RACE
SHAPING UP
The greatest scramble for ocean cargo in Great
Lakes shipping history is forecast by ship line officials, once the St. Lawrence canals are opened to
traffic from overseas ports within the next few weeks. This view is
based on the fact that at least five new lines will vie with old established Great Lakes-overseas shipping firms this season for a slice
of what all agree could be the busiest cargo year in the history of
the trades. By the middle of April, the first of a greatly increased
fleet of British, European, and Scandinavian midget-sized cargo ships
will push their bows westward to reopen the Great Lakes link with the
ports across the seas. Another factor which could change the inlandoverseas shipping picture will be the entry of several U.S. flag
ships, should the lines get approval in time from the Federal Maritime
Board. A modest estimate is that more than 400 sailings to and from
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the Great Lakes will be made before the end of the eight-month season.
(Mantrap. J. of Comm., 3/22 p.1)
Several of the nation's major cement producers are
boosting prices for the second quarter. Most of the
price increases a.re 15 cents~ barrel, effective
April 1, at plants in the Eastern U.S. Price rises - at mills in the
East are the first since last October when similar boosts were put in
effect. On January--J., most Western U.S. producers raised prices.
One official said the latest eastern rises are in an effort "to catch
up" with other parts of the country. (Wall St. J., 3/21 p.8)
CEMENT PRICES
RAISED IN EAST
The Federal Reserve Board has published its longawaited staff study on consumer instalment credit.
The study had been requested by the President's Council of Economic Advisers, and was carried out under the direction of
Ralph A. Young, director of the Federal Reserve Board's Division of
Statistics. The six-volume study reaches no ~onclusion on whether the
Government should have stand-by powers to regulate down payments and
maturities in peacetime. But, after studying the staff report, the
Reserve Board itself is expected to make a recommendation. The study
seemed unlikely to make a decision any easier. It did, however, make
clear the intricacy and variety of the arguments on both sides. Majority Congressional opinion traditionally has opposed regulation of
consumer credit in peacetime. Inasmuch as the study presented as many
arguments against as for such regulation, it is unlikely to create
much change in Congressional sentiment.
The first volume of the study represents the staff's assessment
of all the aspe~ts of consumer credit. The second volume, a supplement to the first, contains six special studies on individual aspects
of the question, including the first survey by the Census Bureau on the
debt status of a large number of households. The third and fourth
volumes comprise a series of papers presented by academic specialists,
mainly economists. They were selected to represent both the pros and
cons of stand-by regulatory authority. The fifth volume is a special
survey of opinions of people in the trade itself, of whom the great
majority opposed stand-by controls. The last volume, not yet published, will be a spe~ial survey of the automobile market based on interviews with dealers.
On the key question of whether instalment credit contributes to
boom-and-bust in the economy, the report says that "other factors have
been of greater importance". When changes in over-all business activity are closely related to changes in the consumer durable goods
sector, "instalment credit can be regarded as an important contributory factor". In the future, easing of this credit will likely exert .
CONSUMER CREDIT
STUDY RELEASED
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"wider influence on economic activity than in most earlier cycl e s ",
and in boom times will exert less stimulus. But, the report adds ,
the "danger of progressive or spiraling deflation of consumer cre dit
is less currently than it was in 1929".
The report concludes that consumer credit is definitely responsive in some degree to general credit restraint. But it leaves open
the question of whether this response is "sufficient". Consumer
credit, as a whole, is likely to con4 inue to grow, the staff estimated,
but at a rate considerably slower than the average lo% a year during
the period since it began in 1920. (Dale. N. Y. Times, 3/20 p.1)
The velocity of demand deposits-~the rate at which
bank customers use their checking accounts--increased
in February by 4.4% in New York and 2fo in the rest
of the nation, it was announced by -the Federal Reserve Bank of New
York. Outside New York, check writers were busier than they had been
in twenty-four years. The bank's index shows that velocity in 343
reporting centers, excluding New York, rose to 146<;> of the 1947-49 average in February, highest since July 1933. (N. Y. Times, 3/21 p.44)
CHECK TURNOVER
GAINS SPEED
TREASURY SHORT-TERM
BORROWING COST DOWN
The Treasury's short-term borrowing costs
dropped to 3.041%, the lowest level since midNovember. Last week's issue of 91-day bills
drew a rate of 3.23&{o, compared with 2.422fo in the like 1956 week .
A declining bill rate is generally interpreted to indicate an easing
of money market conditions. One reason for this week's rate decline
may be that the Treasury offered only $1.6 billion of new bills f or
cash and in exchange for a like amount of maturing bills. In the
previous seven weeks, the Treasury had been raising new money through
its weekly bill offerings by putting out enlarged issues. (Wall St.
J., 3/19 p.2)
TREASURY OFFERS
SECURITIES
·To replenish its rapidly-dwindling supply of re a dy
cash, the Treasury (re~ently) offered investors
$2,250 million of 3-3/8% certificates dated February 15, 1957, and due February 14, 1958; also, $750 million of 3-1 /2%
notes dated February 15, 1957, and due May 15, 1960. Though report s
are incomplete, the Treasury received roughly $7 billion of subscr iptions for the certificates and $6 billion of subscriptions for the
notes. (Wall St. J., 3/21 p.18)
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