Full text of Basic Business News : March 3, 1959 to March 9, 1959

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Published Weekly by the FEDERAL RESERVE BANK of CLEVELAND
March 3, 1959
to
March 9, 1959

REDI3COUNT RATE
BOOSTED

Four Federal Reserve Banks boosted their rediscount
rates to 3% from 2-1/2/o, assuring that the other
eight regional banks would follow. There was no
semi-official explanation of the reasons why, but it was assumed that
the "out of line" character of the rediscount rate quoted since last
November was a major consideration. Whether this action will mean
that interest rates charged business for commercial funds will rise
close to 1957 peaks is up to private lenders. They have the readymade excuse to raise rates; they also a.re confronted with the sobering indication that demand for business money for a long time has
been below par. The small increase recorded for business loans this
week in New York was only the second of this year; for the period
since December 31 conJI1ercial loans a.re down $478 million. (J. of
Comm., 3/6 p .1)

TREASURY SPURS
BOND MARKET STUDY

The Treasury, seeking ways to prevent another
bond market slump such as last summer's, is stepping up and broadening a st udy of the Government
securities market tha:t has been informal so far. The study, being
conducted jointly with the Federal Reserve System, is focused particularly on the reasons for the drop in bond prices last year. Results of the joint study, the Treasury said, will be made public about mid-year. There 1 s little doubt that the summer sag in Government
securities prices, attributed to dumping by speculators jolted Treasury officials. It is apparent the Treasury would like to remove any
questions in the minds of Congressmen that it is making sufficient
effort to see that such a slump doesn't happen again. It is obvious
the Treasury would like to accomplish its aims voluntarily, and not
have to ask for legislation that would set up any sort of Federal
policing of the Government securities market, currently free from
such regulation. (Wall St. J., 3/9 p.2)
Selection of these items does not imply this bank's guaranty of their accuracy,


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nor agreement with the views expressed.

TREASURY OFFERING

The Treasury moved, for the second week in a row,
to tap the money market for an extra $100 million
by increasing the a.mount of its weekly bill offerings. Bids were invited on $1.7 billion of the issues for cash and in exchange for
$1.6 billion coming due March 12. The new bills, bearing that date,
will consist of $1.3 billion of 13-week and $400 million of 26-week
bills. The 13-week issue will mature June 11, and the 26-week bills
will come due September 10. (Wall St. J., 3/6 p.5)
MUNICIPAL BORROWING
HIGHEST SINCE MAY '58

State and municipal long-term financing in
February aggregated $850,565,533, the largest
monthly total since May of 1958, according
to the Daily Bond Buyer. In May of last year, borrowing exceeded
$876 million. The revised total for January was $639,271,641, which
brought the total for the first two months of this year to $1.5 billion, compared with $1.7 billion for the first two months of 1958.
(N.Y. Times, 3/4 p.46)

INSTALMENT DEBT
ROSE IN JANUARY

Consumers boosted their outstanding instalment
debt by a seasonally adjusted $387 million in January, the Federal Reserve Board reported. The increase, reflecting a pickup in sales of cars and other consumer goods,
brought the total of instalment credit outstanding at the end of
January to nearly $33.7 billion. This was a gain of $55 million from
the outstanding amount a year earlier. Extensions of new time payments credit in January mounted to a record $3.8 billion on an adjusted basis. Repayments of old debt during the month of an adjusted
$3.4 billion were at about the same level as in other recent months.
(Wall St. J., 3/5 p.5)
HOUSEHOLD APPLIANCES
SHOW GAIN IN SALES

A major upswing in sales of large household
appliances since the beginning of the year is
making manufacturing plants hum. Producers of
refrigerators, washing machines and other home laundry equipment, and
gas and electric ranges reported (March 6) that they were busily filling increasingly larger orders from stores. At the same time, orders
were pouring into factories from builders of new homes. Virtually
all manufacturers have reported that their volume for the first two
months of the year ran considerably ahead of those in the 1958 period.
(N.Y. Times, 3/7 p.27)

NEW CAR SALES
'59 RATE

Sales of American-built new cars i n the final
third of February climbed to the highest daily
level this year. Dealers delivered an average of
18,615 cars a day in the February 21-28 period. This was a gain of

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21% from the selling r ate of the like per iod a year before, and
brought total volUl'.l'J= for t he month t o 405 ,000 cars --up 26% from Feb uary 1958. (Wall St. J. , 3/9 p. 5)
CONSUMER BUYING
INTENTIONS UP

Consumers are more opt i mistic now than they were a
year ago about their own f inancial positions and
the economy generally--and many more of t hem are
planning to buy houses this year than last. The annual survey of
consumer finances, made by the University of Michigan Survey Research
Center for the Federal Reserve Board, showed a modest increase i n
plans for purchases of cars and a marked increase in house-buying intentions. Of the 2,500 households covered by the survey, 9.3% were
planning to buy a new home this year, as compared with 7.5% l a st year.
More families are also pl anning major improvements and repair s on
their homes--24.6% this year as opposed to 22.1% in 1958 . The average outlay on home improvement s is expected to be less thi s year,
however--$360 vs. $380 last year. More modest increases also showed
up in consumer plans to buy new cars. (J. of CoIDin., 3/6 p.1)
March has good prospects of becoming the steel
industry's best production month in history.
Record tonnages poured last week totaling a
scheduled 2,535,000 tons are likely to be exceeded this week, based
on indications of sharp increases in the Pittsburgh and Chicago districts and a smaller gain in the Youngstown area. Mills in the Chicago district are stepping up operations to· 94.2/,, while Pittsburgh
district furnaces will reach 94.6%. At Youngstown, production is
scheduled at about 91%. The outlook in those three centers, which
make about half the country's steel, promises to boost the national
operating rate above last week ' s scheduled 89 • 5o/o. That would put
the industry on the wa:y to breaking the record 11,048,513 tons of
October 1956. (Wall St. J., 3/9 p.26)
STEEL PRODUCTION

MAY BE HIGHEST EVER

COPPER PRODUCERS RAISE
PRICES TO 9-MONTH HIGH

The nation's three largest producers of
copper announced (March 6) that their prices
would rise 1-1/2¢ a pound on Monday (March
9) to 31-1/2¢. The new price is the highest to be quoted by major
producers since June 19, 1957, when copper was in the midst of a long
price decline that carried quotations from a 1956 high of 46¢ to the
recession low of 25¢ early last year. (N.Y. Times, 3/7 p.27)

MANUFACTURERS' STOCKS

Manufacturers boosted their inventories in
January for the first time since July 1957,
the Department of CoIDinerce reported. At the
end of January, the seasonally adjusted book value of manufacturers'

UP FIRST TIME SINCE '57


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inventories was $49.5 billion, an increase of $300 million over the
previous month. The latest figure, however, was still some $3.4 billion below the like 1957 month. Government economists have been expecting manufactur~rs to start rebuilding inventories. They figured
that once the recession-prompted liquidation that featured 1958 had
halted, manufacturers would quickly start adding to their stocks.
However, apparently reflecting businessmen's caution, the inventory
accumulation held off longer than Government specialists had expected.
Manufacturers' January new orders, a gauge of future production, were
even with the December figure of $28.4 billion. January sales amounted to an adjusted $28.2 billion, a gain of $100 million over December.
(Wall St. J., 3/5 p.3)
RUBBER OurPur BOOMS

The rubber manufacturing industry's production
is booming. This surge comes at a time when
the biggest customer for rubber products--the auto industry--is moving
along at a rate far below its 1955 peak. The rubber industry is turning out products at a rate close to its estimated normal capacity.
Production is running somewhat a.head of sales. Anticipating possible
strikes in April, rubber companies are building inventories, more so
than in any recent year, and this is especially true of tires. The
auto companies have asked the big tire makers to have a 30-day sµpply
available for them in the event of rubber strikes, compared with normal supply of two weeks or less. January shipments of passenger
tires for the replacement, or retail, trade set a record for the
month. They totaled close to 6 million, up 24<1, from 4,837,745 a year
ago. {Byrne. Wall St. J., 3/6 p.20)

TEXTILE BUYING
DECREASES

Textile buying has begun to simmer down from the hot
pace of the last few weeks, but prices are holding
firm and one or two products are still inching higher. The lull doesn't alarm fabric specialists, who interpret it as
the "digestive" period that usually follows an order burst. Wage increases granted to 300,000 Southern mill hands last month prompted a
rash of price hikes on nearly all types of textile products, and this
in turn stirred a rush of orders which will take up much second quarter mill production. (Church. Wall St. J., 3/9 p.11)


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