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A review by the Federal Reserve Bank o f Chicago Business Conditions 1 9 6 4 December Contents The trend of business 3 For want of a coin . . . 6 Turnover of savings deposits declines 9 Perspective on farm income in the Seventh District 14 BUSINESS CONDITIONS is published monthly by the Federal Reserve Bank of Chicago. George W . Cloos was primarily responsible for the article "The Trend of Business," Dorothy M. Nichols for "For W ant of a Coin . . ." and Charlotte H. Scott for "Turnover of Savings Deposits Declines." Subscriptions to Business Conditions are available to the public without charge. For information concerning bulk mailings, address inquiries to the Federal Reserve Bank of Chicago, Box 834, Chicago, Illinois 60690. Articles may be reprinted provided source is credited. An Economic Fact Book of the Seventh Federal Reserve District has recently been published. In this 48-page booklet have been assembled considerable data describing some of the major Economic Fact Book: economic features of the Seventh District states. Copies may be obtained by writing to the Research Depart ment of this Bank. Economic Growth and Monetary Stability: A booklet containing speeches on this subject given at Basle, Switzerland, on November 9, 1964 under auspices of the Per Jacobsson Foundation is available free on request to: The Per Jacobsson Foundation, International Monetary Fund Building, Washington, D. C., 20431. Business Conditions, December 1964 THE Trend A _ss1964 draws to a close it appears likely that the momentum of the business expansion will carry output, employment and income to new high ground in the early months of next year. At present, therefore, attention centers on the degree to which margins of unused resources of manpower, facilities and raw materials have been narrowed. The holiday season is also the time for forecasts of economic activity in the year ahead. These projections commonly call for a slowing in the rate of economic advance, or N o n fe rro u s m etals lead rise in sensitive prices while most wholesale prices show little change per cent, 1957-59*100 OF BUSINESS even a leveling or decline, in the second half of 1965. Paradoxically, the reasoning behind such expectations is based to a large extent on excessive demands being placed upon cer tain types of productive capacity at present. There is widespread concern that current inventory building, particularly of steel prod ucts, will give way to inventory liquidation some time in the spring or summer of 1965. In addition, it is argued that recent evidence of upward pressure upon some prices will help to set the stage for a business decline. Upward price pressures are stronger now than at any time in the past six years. At the end of October the Department of La bor’s spot commodity price index (industrial and agricultural raw materials that trade on organized markets) was 7 per cent above the level of a year earlier, mainly because of sizable increases for most nonferrous metals and steel scrap. Higher prices were an nounced in October and Novem ber for a variety of commodities including metal products, electri cal apparatus, chemicals and paper. There is some indication that since last summer the aver age of all industrial wholesale prices has been tilted upward for the first time since 1958. Prices for most commodities have not changed appreciably, Federal Reserve Bank of Chicago and in some lines declines have predominated. Do recent devel opments foreshadow a price up surge similar to that experienced in the 1946-47, 1950-53 or 195557 periods? The evidence is in conclusive, but there are excellent reasons to believe this is not the case. Increase in Chicago area want ads suggest further employment growth per cent, 1957-59=100 per cent, 1957-59*100 Focus on ste e l 4 In the spring of 1962 and again in 1963 measures of busi ness activity were first stimulated and then retarded by accumula tions of steel inventories followed by liquidations. Each time the cause was apprehension that labor-management negotiations in the industry would result in a deadlock lead ing to work stoppage and each time agree ments were reached without a strike. These successful negotiations raised hopes, now proved groundless, that the next labor con tract talks could be conducted without wide spread stockpiling by customers. Some steel users had begun to take steps to build inven tories in early September. Under their con tract the steel workers can serve notice in January that negotiations are to be reopened and a strike could be called on May 1. Apprehension over a possible steel strike has been aroused, in part, by the unexpected strikes at General Motors and Ford over local plant issues. Steel output reached an annual rate of 137 million tons in November with current esti mates of the rate of steel “chew up” not ex ceeding 115-120 million tons. A large por tion of current production clearly is being added to stockpiles. The industry apparently could still boost steel ingot output appreciably; unofficial estimates place present annual - 95 capacity at 165 million tons or more. Finish ing capacity to produce the types and quali ties of steel required by customers, especially sheet and plates, however, is being taxed to the limit. In addition, transportation facili ties are said to be hampering expansion of output. Steel scrap prices have risen from $25 to about $40 per ton in the past year. Finally, steel producers in the Chicago area have encountered shortages of suitable labor, both skilled and unskilled, that have caused them to send recruiters as far as Pennsylvania and northern Minnesota. If labor-management negotiation teams make substantial progress toward agreement in the weeks ahead, prospects for continued economic stability will be improved. If not, inventory building will continue and the ulti mate reaction—strike or no strike—will be adverse. In v e n to ry building Preliminary reports indicate very little in ventory building by manufacturing and trade Business Conditions, December 1964 firms in the third quarter. Subsequent revi sions in the data may or may not change this picture appreciably. Nevertheless, there can be little doubt that inventory building accel erated in the fourth quarter, not only for steel but other commodities as well. With the dollar value of business inven tories less than 1.5 times monthly sales, in ventory-sales ratios were at a very low level at the end of September. The overall stocksales ratio was at a record low for any Sep tember in the series that dates back to 1955. If an imminent business recession was feared, low inventories would be comforting. At present, however, larger stocks would pro vide a desirable cushion against a general ad vance in prices. M e asu rin g c a p a c ity Until recently it was assumed that the price level could be kept in check if unused capacity of manpower and facilities re mained at or above certain levels. Widely accepted, although highly arbitrary, values for these “limits” were 4 per cent of unem ployment as a percentage of the labor force and 10 per cent of manufacturing capacity. Unemployment rates and unused manu facturing capacity present difficult problems of measurement, both conceptually and sta tistically. Attempts at measurement, never theless, are made by both public and private bodies. In October, the seasonally adjusted national unemployment rate remained at 5.2 per cent and unused manufacturing capacity was believed to amount to about 12 per cent. Despite these margins of unused capacity, overall, in manpower and facilities, average prices are being nudged upward. For many specific products and for particular types of workers, margins of unused capacity are vir tually nonexistent as, for example, the situa tion in steel. Many other cases can be cited. The aluminum industry has ample finishing capacity but a tight supply of primary metal. For machine tools, order backlogs have in creased rapidly because of shortages of skilled metal workers. The last time similar conditions existed in the machine tool indus try was 1957. The adequacy of the basic labor supply varies substantially by regions and by indus try as well as by types of skill. In each of the five states of the Seventh Federal Reserve District, estimated unemployment rates are far below the national average. In this region only one center—South Bend—of a total of 23 major labor market areas reports a “sub stantial labor surplus” with unemployment in excess of 6 per cent. In contrast, 31 of 150 centers nationally have a labor-surplus. In spite of shortages and rising prices in some sectors, the fact remains that the nation is not taxing its resources to the extent noted in earlier periods of general price inflation. Unfilled order backlogs of manufacturers of durable goods rose in each of the first nine months of 1964. At the end of September backlogs amounted to 2.7 times shipments for the month compared with a ratio of 2.6 a year earlier. Nevertheless, unfilled orders remained well below the average for most years prior to 1962. A recent survey by McGraw-Hill indicates that business firms plan to spend about 5 per cent more for new plant and equipment in 1965 than in the current year, with relatively much larger gains for chemicals, autos and paper. Last year a similar survey showed plans to increase such expenditures about 4 per cent from 1963 to 1964; the actual gain apparently will amount to about 13 per cent. Capital outlays, quite probably, will rise more than 5 per cent in 1965 as firms under take projects not now planned, but it is note worthy that larger increases are not contem- 5 Federal Reserve Bank of Chicago plated at present. Significantly, business firms reporting to McGraw-Hill do not ex pect substantial price changes next year, either for the products they sell or those they purchase. Prices for both classes of goods, however, are expected to increase— 3 per cent for goods purchased and 1 per cent for goods sold. Evaluations of the inflationary potential must consider also lines such as motor ve hicles which have contributed heavily to the recent business expansion, but which are not generally expected to show substantial fur ther gains in 1965. The picture in construc tion also suggests caution as to the strength of general business next year. In the third quarter, construction contracts reported by F. W. Dodge were only slightly above last year for the nation and were somewhat lower for the Midwest. With the business outlook consisting of a more or less normal mixture of strengths and weaknesses and with no obviously unbal anced situation having yet developed, the prospects, overall, would appear to fit best in the “favorable” category. For want of a coin . . . 6 T ^ id you notice how it pleased the clerk when you gave her exact change in payment for your purchase? In this busy pre-holiday period, when the need for coins to facilitate retail transactions is at its peak, the short supply of nickels, dimes and other coins is a cause of considerable frustration and delay to banks, businesses and shoppers. The short age continues despite record production of new coins and a rapid increase in the total amount of coin “in circulation.” Until about two years ago the processes by which the public’s need for coins was satis fied were taken more or less for granted. Merchants who accumulated more coin than they needed for current operations deposited it with their banks and could count on quick replenishment by their banks when supplies were depleted. Member commercial banks (and through them nonmember banks), in turn, shipped excess coin to their Federal Reserve Banks and could anticipate prompt delivery of coin ordered from the Reserve Banks. The ready mobility of existing coin through the Federal Reserve facilities made Coin "in circulation" growing rapidly billion dollars Business Conditions, December 1964 it possible for the public to obtain R e tu rn -flo w to Reserve Bank coins in the amounts and denomi has shrunk to a trickle nations needed without holding individual inventories in anticipa million dollars tion of future needs. During the past two years, however, the Reserve Banks have been unable to fill all member bank orders for coin, mainly be cause their own major source of supply—the return flow from the public through the commercial banks—has largely dried up. The resulting necessity to ration coins, quite naturally, has had the effect of further curtailing the flowback. Why are coins in short supply? All coins are manufactured in U. S. Government mints and dis tributed by the Treasury through the Federal Reserve Banks. Yearto -y e a r grow th is p rovided through new production while short-run changes in demand nor mally are reflected in variations 1956 1957 1958 1959 I960 1961 1962 1963 1964 in the amounts held in the Treas ury and Reserve Banks. As the accompanying chart shows, the growth in the dollar amount of coin in circu these means, more widespread use of vending lation has accelerated in the last few years. machines, parking meters and the like has The total outstanding since 1961 has risen increased the need for coins and possibly also 25 per cent and has increased from 10 per reduced their turnover. cent to 12 per cent as a proportion of all Production of coins has increased greatly. currency in circulation. All coin except that The number of coins minted was 4.3 billion held in the Treasury and the Federal Reserve in fiscal 1964 compared with 3.1 billion in Banks is by definition “in circulation.” There 1961. Receipts from the mint of new coin at is no way to measure the extent to which the Reserve Bank in Chicago have risen coins are effectively removed from day-tosharply over the past two years. Except for the decline since late 1962 in flow-back of day use by diversion into private collections coins from circulation, there probably would or by hoarding for speculative or other pur have been no need to ration coin shipments poses. In addition to the immobilization of to member banks during the past two years. some portion of the total coin supply through 7 Federal Reserve Bank of Chicago 8 The g reatest d e clines in coin receipts at this Bank have been in quarters and dimes. This reflects the fact that these coins ac count for the bulk of the dollar volume of all coins outstanding. In relative terms, how ever, reduction in the flow-back from com m ercial banks has been at least as sharp for other denomina tions. By the third quarter of this year, the mint was the ma jor source of receipts in all denominations as the return flow from the banks had slowed to a trickle. Receipts from the mint have risen for all de nominations except silver dollars. Despite stepped-up production of new coin and plans for ex panding capacity of m inting fa c ilitie s, newly minted coins are not yet flowing into circulation in suf ficient quantities to satisfy all transaction needs, in addition to the demands of col lectors and specula tors. U ndoubtedly, many coins are being accumulated in antici- Sh ip m e n ts from the mint now the major source of Reserve Bank supplies of coin million dollors million dollars 10 10 silver dollars quarters coin received at Chicago office from: 5 25 other Federal Reserve Banks U.S. mint dimes 10 _ Business Conditions, December 1964 pation of a further rise in the price of silver that would make them more valuable as metal than as money. However, nearly all of the newly minted half-dollars, which carry the profile of the late President Kennedy, apparently have “disappeared” as mementos and thus have not increased the availability of half-dollars for transaction purposes. Nearly one-third of the dollar amount of all coins received by this Bank from the mint in 1964 were Kennedy halves. Boosting supply is the most obvious and often the only action to resolve shortage situ ations. The Treasury’s present plans call for the production of 8 billion coins in fiscal 1965—nearly double last year’s record pro duction. Once the public is convinced that supplies are likely to be adequate to meet all demands, existing private stocks of coins will probably return to circulation and the current “shortage” would quickly be converted into a “surplus.” Whether the larger production of coin in the months ahead will be adequate to cause this development remains to be seen. Turnover of savings deposits declines T h e rapid climb in commercial bank sav ings deposits in recent years has rekindled interest in the patterns of use of these funds. Attractive interest rates offered for savings deposits and the wider adoption of the prac tice of computing interest from date of de posit to date of withdrawal apparently have caused many holders of bank accounts to shift a part of their funds from demand or checking deposits to savings deposits. Does this mean that savings deposits now more than in earlier years are being used as a sub stitute for checking accounts or currency? Have savings deposits become increasingly sensitive to changes in interest rates and are they shifted among banks or between banks and other financial institutions in response to differences in interest rates? Either develop ment would result in greater “activity” in savings accounts. Bank managers must be concerned with the rate of activity of savings deposits be cause of its implications for bank operating costs and policies relating to the allocation of bank funds, especially between short- and long-term loans and investments. Activity of savings deposits is commonly measured in terms of “turnover.” For exam ple, if withdrawals from an account during a year are equal to the average balance in the account, it has a turnover of one (see box on page 10). Turnover may change either be cause withdrawals rise or fall while the aver age balance remains stable—as withdrawals are offset by new deposits—or because the average balance changes while withdrawals remain at the same level. Some information is available on the turnover of savings de posits during the Twenties and Thirties and during recent years for commercial banks in 9 Federal Reserve Bank of Chicago M e a su rin g sa v in g s deposit turnover Monthly turnover rates were calculated by dividing withdrawals for each month by the average of balances at the end of the current and preceding month. Annual turnover rates were computed by dividing withdrawals during the year by the average of end-of-month bal ances within the year. Throughout this article savings deposits refer to individuals’ combined holdings of “passbook” savings accounts and time certificates of de posit (C D s). Turnover rates for the two com ponents of savings deposits are shown below. Savings deposits represent more than 85 per cent of total time deposits of individuals and businesses at banks in the District’s urban areas. Consequently, the turnover of savings deposits urban areas in the Seventh Federal Reserve District. Turnover of savings deposits at the Dis trict’s urban area banks has varied with shifts 10 and that of total time and savings deposits have tended to resemble one another closely. The increased ownership of time deposits by corpo rations since 1961, however, has made the turn over of the aggregate more stable and higher than in earlier years. Time deposits' an n u a l rate of turnover Personal deposits Time CDs Total Passbook 1959 1960 1961 1962 1963 .519 .501 .500 .529 .480 .534 .437 .934 .384 .410 .520 .498 .517 .521 .475 Corporate deposits Total time deposits 1.164 .548 1.491 .788 .839 .548 .522 .588 .554 .521 in the level of general business activity. Dur ing the 1957-58 recession turnover slowed. During the 1960-61 recession turnover re mained stable at a somewhat lower level than in late 1959. Interest rates on savings deposits tend to remain unchanged D is trib u tio n of savings deposit turnover during business reces sions while rates of re rates by size of bank, 1963 turn on Government Annual rate of turnover Number securities and many .60 and Under of other financial assets over .30-.40 .40-.50 .50-.60 Total deposits* banks Total .30 (million dollars) (per cent of banks) decline. Such a devel opment tends to re 14 21 45 15 Under 10 86 100 5 duce withdrawals from 17 30 29 10-20 115 100 3 23 savings to acquire 11 27 5 20 37 20-50 135 100 other assets. At the 11 11 50-100 63 3 32 43 100 same time, individuals 4 22 22 20 100 or more 46 100 33 experiencing, or ex All banks 100 4 445 23 pecting, a decrease in income may curtail *lncluding demand deposits Business Conditions, December 1964 their use of savings deposits to finance pur chases—especially of durable goods. Savings, consequently, have been used less intensively in recessions, similar to demand deposit use. The 1962 peak in savings deposit turnover in Iowa, Michigan and Wisconsin arose largely from transfers of funds within indi vidual banks from passbook savings accounts to time certificates of deposit. In these states, in contrast with Illinois and Indiana, many banks early in 1962 began to offer again a variety of rates on time accounts. Transfers within a bank presumably were related more to the changes in the interest rate schedules than to changes in income of the account holders. Turnover of savings deposits at Seventh District banks was lower in 1963 than in any other recent year for which information is available—that is, since 1956. This was the situation generally in each of the five District states and for most of the metropolitan Sa v in g s d e p o sits: account size and turnover Urban area Average size Turnover of account 1963 January 31, 1957 1956 Illinois Bloomington Champaign-Urbana Chicago Danville Decatur Peoria Quad Cities Rockford Springfield 906 581 1,195 873 536 817 982 986 900 .45 .77 .49 .62 .82 .52 .55 .56 .47 .38 .51 .41 .40 .54 .62 .38 .44 .33 n.a. 939 n.a. 957 n.a. .44 n.a. .49 .41 .49 .52 .33 .49 .38 .48 .42 .44 .51 .45 .34 .39 .56 .48 n.a. .58 .38 .41 .55 .33 .42 .58 .36 .44 .31 Indiana Anderson Fort W ayne Gary-Hammond Indianapolis Lafayette Muncie South Bend Terre Haute 867 950 1,088 Iowa Burlington Cedar Rapids Clinton Council Bluffs Des Moines Dubuque Marshalltown Mason City 937 870 783 n.a. 632 1,079 n.a. 542 n.o. not available. 668 .67 Urban area Average size Turnover of account January 31, 1957 1956 1963 Iowa Muscatine Ottumwa Sioux City Waterloo 1,098 718 915 418 .40 .47 .40 .67 .30 .34 .31 .46 Michigan Adrian Ann Arbor Battle Creek Bay City Detroit Flint Grand Rapids Jackson Kalamazoo Lansing Muskegan Port Huron Saginaw 890 n.a. 876 975 1,027 951 1,022 680 595 891 850 946 809 .63 n.a. .56 .54 .69 .61 .64 .59 .58 .55 .57 .57 .53 .45 .45 .46 .58 .57 .69 .48 .92 .73 .49 .40 .42 Wisconsin Appleton Green Bay Kenosha Madison Manitowoc Milwaukee Oshkosh Racine Sheboygan n.a. 1,021 1,058 669 772 917 821 805 822 n.a. .49 .52 .64 .63 .63 .51 .57 .49 .39 .43 .42 .43 .44 .46 .34 .49 .37 .68 Federal Reserve Bank of Chicago areas (see table on page 11). Savings dep o sit turnover thus has de clined in the expan sion since the 196061 recession. This is in contrast with rising turnover following the 1957-58 recessio n . Turnover of demand deposits rose during both periods of rising business activity. Ra te s o f turnover of savings deposits and other assets compared times per year times per year O th e r a s s e ts 12 Although the annu al rate of turnover of savings deposits in the District’s urban areas, on balance, remained steady for some time at around 0.50 — or about once in two years—the rate of de mand deposit turnover for these centers has steadily risen. Exclud ing the five m ajor cities — Chicago, De troit, Milwaukee, In dianapolis and Des Moines—the rise has been from 21.9 times per year in 1959 to 26.5 in 1963 and 26.8 in mid-1964. Any funds that have been trans ferred from demand to savings accounts have evidently represented for the greater part “idle” balances. It is of interest to note also that savings deposits at commercial banks turn over at about the same rate as credit union shares. The turnover rates of other “near-moneys”— mutual savings bank deposits, savings and loan shares and U. S. savings bonds—are lower. This suggests that both savings de posits and credit union shares have a some what larger “active” component than other near-moneys. Furthermore, it appears that the turnover rates of all these near-moneys, except savings bonds, have remained at the same low levels for many years. A b o v e - a v e r a g e tu rn o v e r in M ichigan The turnover of savings deposits at com- Business Conditions, December 1964 mercial banks in Michigan’s urban areas dur ing the 1959-63 period was consistently higher than in the other four District states. In part this is because school districts in Michigan have traditionally used savings ac counts to hold funds and these deposits usu ally do not remain unused for long periods. One factor which appears to be important in influencing savings deposit turnover in the areas outside of Michigan is account size. As is evident in the table on page 11, in the six areas (excluding Detroit and Grand Rapids) where the average size of savings accounts in January 1957 was more than $1,000, the T u rn o v e r of savings deposits is lower now while savings are higher as a share of total deposits turnover per cent 1956 turnover rates were between 0.33 and 0.52; in five areas where the average size of accounts was lower—less than $600—the range of the turnover rates was from 0.67 to 0.82. Information for more recent years is not available. The average size of savings accounts at banks has undoubtedly increased since 1956, reflecting rising personal incomes. This is in dicated by the information from several sources, including the Survey Research Cen ter of the University of Michigan. According to the Center’s studies, the proportion of spending units in the United States with $2,000 or more in savings accounts (includ ing accounts at banks, credit unions and sav ings and loan associations) has risen from 8 per cent in 1947-49 to 21 per cent in 1963. On the other hand, the proportion of spend ing units with checking accounts of $2,000 or more has declined slightly, and on the interview date in 1963, only 4 per cent of spending units had checking accounts of $2,000 or more. Growth in account size ap pears to be one of the main reasons for the decline in savings deposit turnover. Effect on b a n k e x p e n s e s A comparison of average size of account with size of bank for the District’s urban area banks at the end of 1956 indicates that the two are related. Hence, in the table on page 10, the association of high turnover with small banks can be explained partly on the ground that the average size of savings ac counts tends to be small at the smaller banks. The proportion of banks with turnover rates of 0.50 and over decreases with increasing bank size except for the largest groups— banks with total deposits of 100 million dol lars or more. Three-fifths of the large Sev enth District banks with high turnover rates are located in Michigan. 13 Federal Reserve Bank of Chicago In a given bank, a high turnover rate often means a considerable amount of bookkeep ing in the processing of deposit inflows and withdrawals and higher operating expenses. The average costs of handling deposits and withdrawals have been estimated for five large banks in 1960 as follows: $0.42 for each deposit and $0.45 for each withdrawal.1 The higher turnover rates at the smaller banks imply that savings deposit operations may be relatively more costly at these banks. This could be one reason why smaller banks have generally been less aggressive in raising the rates they pay on such funds. About 20 per cent of the banks in the Dis trict’s urban areas have an annual turnover of savings deposits of 0.60 or more. Over threefourths of the banks had turnover rates be tween 0.30 and 0.60. ^llan R. Drebin, “Savings Accounts and Com mercial Bank Earnings,” Bureau of Business Re search, Graduate School of Business Administra tion, the University of Michigan, Ann Arbor, 1963. Perspective on farm income in the Seventh District ^ / t o r e than one-fifth of all farm products sold by United States farmers is produced in the five states of the Seventh Federal Reserve District—22 per cent during 1963.1 The story, as in previous years, is largely one of livestock. Of the 8 billion dollars of farmers’ sales in these states—Illinois, Indiana, Iowa, Michigan and Wisconsin—somewhat more than 5 billion was livestock or livestock prod ucts such as milk and eggs, and somewhat less than 3 billion was crops. For the nation as a whole, farmers’ sales of livestock also exceed their sales of crops but by a much smaller margin than in the Dis trict. Only in Illinois, among the District states, are sales of crops approximately equal to sales of livestock. 14 The data in this article are taken largely from U. S. Department of Agriculture, Farm Incom e, State E stim ates, 1949-1963, August 1964. Crops, of course, are more important than is indicated by the data on farm income. Most of the crops grown on Midwest farms are fed to livestock produced on the same farms. The full value of the com and other feed crops is Sales o f farm commodities—1963 Rank in nation Iowa Illinois Indiana Wisconsin Michigi 2 4 8 11 All livestock 1 3 10 6 17 All crops 5 3 8 34 18 Cattle 1 6 14 12 24 Hogs 1 2 3 9 15 Dairy products 8 9 11 1 6 Corn 2 1 3 13 10 Soybeans 2 25 14 3 1 18 3 Turkeys 9 6 17 Total sales 19 Business Conditions, December 1964 Fa rm e rs1 sales by kind of commodity cattle cattle hogs dairy poultry products ana hogs corn soybeons wheat veafruits all other etawes and dairy poultry corn soybeans wheat veg- fruits products and etables and eggs nuts all other much greater, therefore, than the market sales of such crops. The District is not a homogeneous area; each state has its own predominant types of agriculture that farmers have found through the years to be most profitable. These are determined largely by nature—that is, soil and climate—but are modified by availability of markets and in many instances the specific skills, likes and dislikes of individual farmers. Several commodities are combined in some of the sales figures presented in the accom panying charts. Dairy products, for example, include wholesale milk—which dominates the figure in each of the District states—and such other products as farmers’ sales of milk at retail and butterfat. The “poultry and egg” sales are similarly dominated in each state by sales of eggs although turkeys, broilers and “other chickens” are important in some areas. Sales of many different vegetable crops are relatively important in Michigan. Dry beans are of greatest importance by far, accounting for 6 per cent of total sales of farm commodi ties in that state, but potatoes, onions, toma toes and cucumbers each account for about 1 to 2 per cent of all sales. In Wisconsin the most important vegetables are potatoes, green peas and sweet corn in that order. Tomatoes are the most important vegetable crop in Indiana while sweet corn leads in Illinois. Fruits are important in Michigan, with apples accounting for about 3 per cent of total sales. Cherries, grapes, strawberries and peaches are of lesser importance, ranging from 0.6 per cent to 1.2 per cent of total farmers’ sales in that state in 1963. Apples are also the most important fruit in each of the other District states except Wisconsin where cranberries have a small lead. Farmers’ sales of crops and livestock represent neither their gross nor their net 15 Federal Reserve Bank of Chicago farm income. On a per farm basis, sales ranged from around $7,000 in Michigan to $15,000 in Iowa and Illinois. In addition, farmers received Government payments and realized some value from commodities pro duced and consumed on the farm as well as from living in the farm dwelling. This “other income” ranged from an average of about $1,300 per farm in Wisconsin to $1,700 in Iowa and when combined with receipts from sales of commodities provided average gross income per farm of about $8,500 in Michi gan and $17,000 in Illinois. After deduction of farm production ex penses, the resulting realized net income per farm ranged from an average of about $2,500 in Michigan to $4,860 in Illinois. Even this figure is not a measure of the total personal income per farm since it excludes any income realized from sources other than farming. While information on the amount of such in come is not available for individual states, it Income per farm, 1963 Realized gross farm income Production expenses Realized net farm income $16,794 $12,221 $4,573 16,869 12,008 4,861 Indiana Wisconsin 11,597 9,874 7,907 6,899 2,975 Michigan 8,541 6,062 2,479 11,682 8,178 3,504 Iowa Illinois United States 16 3,690 Livestock, a major source of farm income in District states, 1963 million dollars 0 1,000 2,000 3,000 is estimated to account for about one-third of the total net income of persons living on farms in the United States. The relative amount of income of the farm population from nonfarm sources tends to be greater in the areas of low farm income. Inasmuch as sales of livestock and live stock products are of such importance in the District states, prices for these commodities strongly influence the level of farm income. As a result of the depressed livestock prices during most of 1964, net farm income in the District probably has been down somewhat more than in the nation as a whole. The prospect of both improved livestock and grain prices during the coming year, how ever, indicates higher income levels in 1965. In d e x f o r th e y e a r 1 9 6 4 Month Pages August December May 7-10 14-16 7-10 August November December February September June 11-16 2-16 6-9 2-5 2-9 8-11 A g ricu ltu re a n d fa rm fin a n ce Beef supply to rise fu rth er........................................ Perspective on farm income in the Seventh District . . Trends in agriculture................................................. B a n k in g an d m o n e ta ry po licy CDs as a money market instrument............................ Fifty years of the Chicago “Fed” .............................. For want of a coin....................................................... Negotiable time certificates of deposit—one year later Regulation Q : ceiling or umbrella?............................ Trends in banking and finance.................................. Trends in banking and finance— District operating ratios in 1963 ............................ April 3-7 C o n su m er cre d it an d savin g s $50 billion on the instalment p la n .............................. Slowing in savings deposit growth and turnover? . . . . Turnover of savings deposits declines....................... April June December 7-11 12-16 9-14 Economic conditions, general Downturn in homebuilding?...................................... October 1963—third year of expansion.................................. January The resurgence of corporate profits........................... April The state of the economy—the problems before us . . March The trend of business................................................. August The trend of business................................................. October The trend of business................................................. December The trend of business— a new look atthe Sixties . . . February The trend of business—inflationary forces still in ch ec k ..................... . ................................... May 13-16 2-16 11-16 2-9 2-7 2-4 3-6 5-8 2-7 Em p lo ym en t The trend of business—output growth leads employment g a in s ........................................ Why unemployment amidst unfilled jo b s?................. June July 2-8 2-16 In te rn a tio n a l econom ic co nd itio n s Capital markets—United States and E u ro p e........... Gold in the world’s monetary machinery................. “International developments and monetary policy” . . Regional economic integration.................................. September March October May 9-16 9-16 5-12 11-16
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