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THE BUSINESS REVIEW FEDERAL RESERVE BANK OF PHILADELPHIA IplilSCl! . : ■ •*** AUGUST, 1948 - ---- Bank Loans and Earnings Mid-year reports show . . . —loans still going up but not as fast —earnings boosted by rising loans Prospects are for . . . —more loan expansion —higher earnings and expenses Continuing need . . . —a cautious lending policy Report on Inventories First quarter bulge is flattening out . . . —but the situation bears close watching LOAN TRENDS- WAR AND POST WAR MEMBER BANKS THIRD FEDERAL RESERVE DISTRICT MILLIONS I 600 1500 1400 1300 1200 ■TOTAL 1100 800 COMMERCIAL & INDUSTRIAL REAL ESTATE (NON FARM) CONSUMER SECURITY- 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948* *GROSS LOANS, INCLUDING RESERVES.__________________________________________________________________________________ __ Page 84 EARNINGS AND EXPENSES: POSTWAR MEMBER BANKS THIRD FEDERAL RESERVE DISTRICT MILLIONS $ TOTAL EARNINGS TOTAL EARNINGS ROSE FURTHER DURING THE FIRST HALF OF 1948 AS INCREASING RETURNS FROM LOANS MORE THAN OFFSET DECLINING EARNINGS FROM INVESTMENTS. OTHER INVESTMENTS LOANS EARNINGS rrn ii il I I II II I NET EARNINGS 50 RECOVERIES LOSSES AND NET EARNINGS INCREASED DESPITE RISING EXPENSES. mm I || || | BUT LOSSES AND CHARGE-OFFS (INCLUDING ADJUSTMENTS FOR RESERVES FOR LOSSES ON BAD DEBTS) SUBSTANTIALLY EXCEEDED RECOVERIES AND PROFITS ON SALES OF SECURITIES WITH THE RESULT THAT... -50 NET PROFITS ...NET PROFITS ROSE ONLY SLIGHTLY. DIVIDENDS WERE WELL SUSTAINED. ADDED TO CAPITAL DIVIDENDS HALF HALF HALF HALF 1945 1946 1947 1948 Page 85 BANK LOANS and EARNINGS T the end of the war few bankers would have is concerned, is revealed more accurately by a predicted that for every $10,000 in loans they preliminary tabulation which has been made of would have almost $19,000 three years later. Yet the loans of all member banks in this area. that has been the experience of the average mem It is clear, first of all, that total loans rose less rap ber bank in the Third Federal Reserve District. In 1945, indeed, it was a question whether loans would expand very much at all. And many observers were concerned that the banking sys tem might not return to its traditional function of supplying the community’s credit needs. To day many observers, bankers among them, are concerned about the inflationary effects of bank lending. idly than in any comparable period in the last two and one-half years. But it is also clear that the trend in all the major types of loans was still up ward. Commercial and industrial loans showed the most noticeable slackening in rate of growth. Their increase during the first half of the year was the least of the three major types of loans and stood out in sharp contrast to their exceptionally rapid expansion up until that time. Seasonal influences were undoubtedly responsible in part for the slow growth. Yet even compared with like periods in previous years the rise was small. For one reason, other methods of financing, such as the issuance of new securities, tended to di minish the use of bank loans. This is partly borne out by the fact that the business loans of the largest banks in the district, those banks which customarily deal with concerns more able to obtain funds from sources other than banks, actually declined. In general, the smaller the bank the more rapid the increase—a tendency in evidence ever since the war. The need for restraint in the granting of private credit by commercial banks has been apparent for some time. The fact that our labor force, our factories, and our farms are being virtually fully utilized means that an expansion of bank credit tends to increase spending power and prices rather than production. This fact became par ticularly clear in the latter part of 1947. A rapid upsurge in bank lending was pushing the national total of bank loans above the previous record peak established in 1929. At that time the bank supervisory authorities issued a joint statement urging cautious lending policies. Somewhat later the American Bankers Association inaugurated an intensive campaign to induce bankers to screen their loans carefully. The Federal Reserve Non-farm real-estate loans also have experi and the Treasury intensified their policy of put enced a slowing down in rate of growth, although ting pressure on bank reserves so as to discourage the increase in the first half of this year was by any further rapid expansion of bank lending. no means negligible. While demand for homes generally continued strong, there were some evi dences that it was tapering off. Many of the urgent needs had been met, sales of old homes Results of Restraining Efforts seemed to be slower, G.I. loan activity declined, and constantly rising prices undoubtedly forced Throughout the first half of this year state many potential buyers out of the market. At the ments frequently were made to the effect that same time, there were increasing evidences of the upward trend of loans had been halted and tightening credit terms, such as the requirement reversed. They were only partly right. They of larger down payments. These developments usually were based on the observation that busi apparently affected the larger banks more than ness loans of weekly reporting banks in selected the smaller ones, for the expansion tended to be large centers of the United States had declined. more rapid in the smaller institutions. Apparently they overlooked the fact that the data for this selected group of member banks in the Consumer loans rose more rapidly, percentage large cities did not reflect the trend of the country wise, than any of the other major types of loans. banks and that the real estate and “other” (in And they rose more rapidly at the smaller banks cluding consumer) loans of even these weekly than the larger, probably in part because many reporting banks continued their upward trend. small banks had only recently entered the con sumer lending field. The expansion was particu The record for the first half of the year, at larly marked in automobile and other retail sales least as far as the Third Federal Reserve District paper, and in repair and modernization loans. Page 86 Farm loans continued to rise, partly for produc latter half of last year. Business loans of the tion purposes and partly because of the advance weekly reporting banks apparently have begun to in farm mortgages spurred by rising real-estate turn upward once again. prices. Loans to purchase securities were the only type which declined, and this was a continuation of the general trend in evidence since 1945. Loan Trends & Earnings Thanks to the rising volume of loans and in some cases higher loan rates, the growing earn ings from loans more than offset the declining returns from Government securities. In addition, Philadelphia banks enjoyed a considerable in crease in earnings from miscellaneous sources, so their total earnings rose relatively more than those of country banks. Expenses continued to mount, but not as rap idly as they had been. Net earnings, therefore, rose more than in any comparable period in the last two years. Losses and charge-offs, however, substantially exceeded recoveries and profits on sales of securi ties. A considerable proportion of these chargeoffs probably reflects the transition to the new method of setting up reserves for bad debts. But it is quite possible that losses on loans are be ginning to increase; moreover, a number of banks experienced a depreciation in their security port folios as prices of bonds declined. Despite the larger losses and charge-offs, net profits increased over the second half of last year. But net profits in that period were temporarily low; in comparison with the first half of 1947, net profits this year are off substantially. Yet, dividends have been increased. Loan Demand Most of the forces on the demand side will act to expand bank lending activity. Fixed capital needs are likely to require more credit. Although some industries have almost completed their plans for expansion of plant and machinery, indications are that capital expendi tures will be maintained at a high level during the rest of the year, particularly as prices of steel and other materials rise. A large part of these expenditures, of course, will be Ananced intern ally as in the past, especially if proAts remain high and corporations continue conservative divi dend policies. And depreciation reserves, al though in many cases now inadequate in relation to higher replacement costs, will still continue to Anance a large part of capital expenditures. Nevertheless, business will seek a substantial volume of funds from outside sources and bank loans will undoubtedly remain a signiAcant source of capital Anancing. Working capital Anancing is also likely to in volve a substantial demand for bank loans. Al though there may no longer be much need for credit because physical inventories are unbal anced or inadequate, the mere fact that prices are apt to rise further will tend to boost the dollar volume of inventories and the use of bank Ananc ing. To the extent that soft spots in various lines become severe enough to cause slow-moving in ventories, bank credit may be needed temporarily. Receivables are likely to increase further, and as wages rise business concerns will have to meet larger pay rolls. Consumer sales credit seems destined to in PROSPECTS FOR SECOND HALF crease as the Aow of automobiles and other dur The fact that total loans experienced a rapid upsurge in the second half of 1947 does not neces sarily mean, of course, that the same thing will happen this year. Nevertheless, it is quite likely that history will repeat. Seasonal borrowing usually tends to expand loan volume in the latter part of the year. And the business situation thus far has been quite similar to 1947. There was the same uncertainty in the early months, and there are many indications of the same inflation ary forces which Anally emerged dominant in the able consumers’ goods expands, and the deple tion of liquid assets owned by many individuals will tend to stimulate instalment buying. As more and more people are squeezed by rising prices they will also need credit to meet Anancial emergencies. Mortgage lending alone seems to involve some doubt about the immediate future. And even in this case it is not mainly a problem of demand but of supply. The demand for homes is strong, despite high real-estate prices and building costs. Page 87 not now excessive but could become so if sales fell off suddenly. Receivables collections are slowing up. A drop in real-estate values and in Any tendency for lending activity to slacken, comes could seriously threaten the mortgage therefore, will arise principally from difficulties market. For the first time since the war the in supplying credit. financial position of consumers generally has be come weaker. There has been some talk about banks reach ing their legal limits in mortgage lending. While These are all factors calling for conservative this situation is undoubtedly true in a number banking. A careful appraisal of risks such as of individual cases, it does not yet appear wide these not only protects banks against loss and spread enough to cause a significant slackening keeps borrowers out of trouble, but helps to re in mortgage lending. strain the inflationary expansion of bank loans. Loan Supply Restraints on the supply of credit, rather, seem to come mainly from two other sources: 1. Restrictive policies of the Federal Reserve and the Federal Government. To the extent that the Reserve System can maintain pressure on bank reserves it will tend to restrain the over-all expansion of loans. This will be difficult to do in view of the System’s re sponsibilities for maintaining an orderly Govern ment security market. However, the recent leg islation permitting further increases in reserve requirements is intended to enable the System to offset whatever increases in reserves arise from its support operations. Bank examiners can do much to prevent over-lending in individual instances, and anti-inflationary policies of the Government in loan and guarantee activities could help materially. However, the recent hous ing legislation is likely to ease rather than tighten the supply of mortgage credit. While banks are responsible for the quality of their assets, they also face the problem of mak ing a profit. If, as seems likely, the loan volume rises further during the remainder of the year, earnings from loans will continue to increase. On the other hand, interest from Government securities will probably decline further, despite the recent rise in short-term rates, as a result of any retirements the Treasury chooses to make, and as banks sell their Governments to get re serves to make loans. All in all, it seems quite possible that total earnings will rise as larger returns from loans more than offset declining returns from Governments. In part, this will reflect a genuine concern about the inflationary consequences of bank lending, and in part it will stem from a growing recognition of the need at this time for con servative banking. Whatever the motive, the important point is that conservative banking practices today not only serve the best interests of the banks but also the community at large. Even now there are “good” loans on the books which will turn out to be “bad” when the going gets rough. As inflation progresses, more and more weak spots will develop. Break-even points are higher, making many businesses vulnerable to a decline in output. With such a rapid growth of plant and equipment, it is inevitable that some concerns have over-expanded. Inventories are The battle against inflation is not easy. Nor is there any single solution to the many problems which inflation has imposed upon the banks. Yet the one thing banks themselves can do to solve both these problems, benefiting themselves as well as the community at large, is to continue the cautious lending policies which have long been their tradition. Page 88 v *■ But the “squeeze” resulting from a faster rise in expenses than earnings may become even greater. As banks feel this squeeze they may tend to raise their loan rates. The Treasury's recent announcement of an increase in the rate on short-term securities should also result in slightly higher rates on bank loans. This develop ment in itself may have the beneficial result of restricting the supply of credit. Banks no longer seem so enthusiastic, for example, about 4 per cent mortgages or term loans at very low interest rates. On the other hand, the search for higher earnings may lead to the assumption of greater risks. This way out of the squeeze is deceptively simple, but it is likely to involve greater losses to the banks, and financial difficulties of borrowers in the future. 2. Restraint initiated by the banks themselves. > , . REFORT ON INVENTORIES Inventories have received as much—perhaps offset the rapid accumulation of civilian goods more attention than any other single aspect of stocks during the latter part of 1945, with the the post-war business scene. Several factors are result that there appeared to be a slight net de responsible. First is the recognition by individual cline in physical, non-farm inventories for the firms and by bankers of the importance of inven six months ending December 1945. What ac tory policy and the need for inventory planning cumulation did occur was largely confined to the and control. Second is the general awareness of nondurable goods lines. Inventory accumulation the role of inventories in business cycles and of picked up speed during 1946, however. The total the similarities between this period and that pre for the year (adjusting for price increases during ceding the 1921 slump. Third is the publication the year) was $5 billion, nearly 20 per cent of all of comprehensive inventory data and the pub private domestic investment. In the first quarter licity given the problem by the Department of of 1947 the seasonally adjusted rate increased to Commerce and other agencies. $6.8 billion a year. This rate, which also is ad justed for price changes during the period, is, of Recently, however, it has seemed that many course, lower than the rate of change in book have become accustomed to new record levels value of inventories. It includes relatively minor of inventory values month after month. Possibly changes in stocks held by construction, service there is some feeling that the cry of “wolf” has industries, mining, and other non-manufacturing, been raised falsely and that the repeated warn non-trade companies. ings have been unnecessary. The fact that the In the second and third quarters of 1947 a rate of inventory accumulation in the first quar ter of 1948 was reported to be one of the highest dramatic development took place. Non-farm in on record did not cause nearly the concern which ventory accumulation fell to almost zero. Con it might have occasioned in the tense business tinued, though slower, increases in physical climate of the previous year. At the end of May stocks of durables and manufacturers’ inven the book value of manufacturers’, wholesalers’, tories in general were offset by declines in trade and retailers’ inventories was well in excess of inventories, especially nondurables. What had $50 billion compared with a total of about $40 happened was not that stocks had suddenly billion at the end of 1946 and about $20 billion "caught up” with sales, but that businessmen, at the end of 1939. There is no reason for the particularly retailers, on the basis of bearish ex business community to relax its vigilance on in pectations which developed during the first quar ter, had cut orders and had made every effort ventories. to clear out “ersatz” goods. They did not wait to curtail buying abruptly or for Inventories are a matter of concern from the for consumers to rise sharply, as usually occurs after the viewpoint of the economy as a whole in several stocks a boom has passed, though a pile-up was ways. If stocks accumulate to a point where peak of in a few soft goods and luxury lines. To businessmen find them excessive, new orders are aevident large extent they anticipated trouble on the sharply curtailed and a spiral of liquidation may basis of early symptoms and acted accordingly. be started. Regardless of the level of inventories, Undoubtedly, the availability of inventory sta however, the rate at which stocks are being ac tistics which called attention to the rapidity of cumulated or liquidated is also very important. the prior accumulation was influential in the Investment in additional inventory during a boom decision. intensifies inflationary pressures. A leveling off in inventory volume, even before stocks appear The recession did not materialize. During the excessive, means that business has ceased that summer of 1947, sales reached new peaks and type of investment expenditure and has, there fore, withdrawn a stimulant to business activity. business optimism returned. As stocks were drawn upon, new orders rose; but, taking season al factors into account, deliveries could not be prompt enough to prevent a small amount of un intentional inventory reduction in the third quar What The Record Shows ter. One significant thing about the cessation of inventory accumulation over part of 1947 was The record of inventory accumulation since the that it did not signal the start of a decline in war reveals a changing situation. Liquidation business activity, as many observers had ex of munitions inventories at the end of the war pected. Plant and equipment expenditures, net Page 89 exports, and consumer expenditures took up what slack there might otherwise have been. In fact, to a large extent, the 1947 decline in inven tory accumulation was of the type that might be considered a result of active demand, rather than the type of intentional liquidation associ ated with a business slow-down. The inventory decline might not have occurred at all had other business activity not increased. Non-farm inventory accumulation was re sumed in the fourth quarter of 1947 at a rate of over $4 billion a year, and continued at a high rate in the first quarter of 1948. As far as manu facturing inventories are concerned, inventory accumulation during this period was different from previous post-war movements. Manufac turers’ inventories are composed of three seg ments—purchased materials (which are raw ma terials and component parts purchased from others); goods in process of production; and fin ished goods ready for shipment. As the accom panying chart shows, the leveling off of sales at the end of 1947 was combined with an increase CHART I MANUFACTURERS'SALES AND INVENTORIES BY STAGES OF FABRICATION* BILLIONS S LOG SCALE I8 SALES (NOT ADJUSTED FOR WORKING DAYS) GOODS IN PROCESS 1946 194 7 948 ^ SALES ARE AVERAGE FOR MONTH. BEGINNING OF MONTH. Source: U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce. Page 90 The trends shown in the chart are not adjusted for price changes. The Department of Commerce, which is responsible for the collection of these inventory statistics, cautions that prices may change in varying degrees and at different times among the various categories, making possible some distortion. Over a short period this is probably not a serious defect, however. Recent Developments In contrast with previous periods of accumula tion, when goods in process and purchased ma terials increased and manufacturers were trying hard to build up working stocks, the first quarter spurt in finished goods holdings, especially in nondurable lines, may represent the first unin tentional accumulation of stocks in the post-war period. As such, it was obviously not of serious proportions; nevertheless, it might have sug gested a significant change in the business scene. Currently, finished goods stocks are over 30 per cent of total manufacturing inventories. By pre war standards that is a low proportion; but it has increased from 26 per cent at the end of 1946, indicating better balance and less need for addi tional restocking. Within the last year the book value of manu facturers’ inventories has increased $3 billion— over 11 per cent, as compared with a 10 per cent gain in sales. The amount of change varies among industries. The value of durable goods stocks rose 8 per cent compared with a 5 per cent increase in sales. In the textile-leather-ap parel group of industries, stocks rose 20 per cent and sales rose 10 per cent. PURCHASED MATERIALS INVENTORIES ARE AS OF in purchased materials stocks. As goods moved into the production process during the first quar ter a sharp increase in stocks of finished goods occurred. Goods in process, closely reflecting the rate of production, could not increase greatly. Purchased materials stocks declined, indicating renewed caution in buying for future production. A sharp increase in the book value of trade inventories during the first quarter of 1948 also lends support to the possibility that inventory accumulation at that time was in large measure unintentional. At the end of March, retail in ventories were over $14 billion and had increased, on a seasonally adjusted basis, by about 8 per cent since the beginning of the year. This was a larger increase than took place in the first quarter of 1947, when the inventory situation caused great concern. This year, as in 1947, large accumulations of goods among retailers of the building materials and hardware group made for relatively larger increases in stocks held by durable than by nondurable goods stores. Most of the increase in nondurables was in ap parel and general merchandise stores. Inven tories of wholesalers also increased substantially. the corresponding month in 1941 or 1947. Recent monthly ratios of stocks plus outstanding orders to sales have been somewhat higher than in 1941 because of the longer average period required to fill orders at the present time, but they are much lower than in 1946 and show little change from last year. To a greater extent than in manufacturing, inventories of wholesalers and retailers have in creased more rapidly than sales within the past year, and if the rapid inventory accumulation of the first quarter had continued, it might have caused a serious cut-back in new orders. The record for April and May shows, however, that stocks of wholesalers and retailers have actually declined and that moderate gains in the book value of manufacturers’ inventories are mainly in purchased materials and goods in process. Preliminary estimates foresee a much lower rate of inventory accumulation in the second quarter as a whole. Buyers have not made drastic cuts in new orders but they have been cautious. The Department of Commerce index of manufac turers’ new orders edged downward in April and May, although the only large drop appears to have taken place in some types of machinery. New orders by department stores are running somewhat ahead of the 1947 level. The ratio of stocks to sales in manufacturing is also below that of pre-war years. There is evidence, however, based on experience since 1926, that the stock-sales ratio in manufac turing declines as sales increase. This is to be expected because a higher and uninterrupted production rate and boom conditions make for relatively smaller stocks of finished goods and more efficient use of inventories in general. Even with this adjustment, present inventories are no larger than historical relationships indicate they should be. Another standard sometimes used is the re lationship of total inventories to the level of gross national product. Inventories appear to be higher in relation to national product this year than last, but are still somewhat below the 1939 ratio. No Set Rule First quarter inventory experience was not unsettling. A high level of consumer spending and the start of the rearmament program quickly Extreme caution is necessary in using any relieved the pile-up, and generally rising prices fixed standard as a measure of inventory ade for non-farm commodities minimized any feeling quacy, and the events of the first quarter empha of vulnerability. It will tend, however, to rein size this. The stock-sales ratios most often force restrictive inventory policies on the part used have many serious shortcomings. Mechan of individual firms and may serve to prevent ically applied, they may give rise to a false sense speculative stock piling which might otherwise of security. First of all, past records show that be encouraged by rising prices. the stock-sales ratio is low when the top of the inventory cycle is reached. It does not become obviously excessive until it is too late to do any thing about it. Clearly, there must be other Are Inventories Too High? factors to watch. Maintenance of 1939 or some other period’s relationships is not a magic pro The answer to this question obviously depends tector. on the standard of judgment that is adopted. It is clear that inventories must be related to sales; Secondly, the appropriate ratio may be ex and the usual procedure compares the current pected to vary over a period of time, with changes stocks-to-sales ratio with that prevailing at some in technology, trade practices, transportation, previous period which is thought to be “normal.” and other factors. It is obvious from Chart II that the long-term trend of the retail stockBy this standard—which may or may not be sales ratio has been downward. The 1939 ratio appropriate—inventories are not high. The is not necessarily a suitable standard for 1948! accompanying chart of retail stocks and sales In manufacturing, the composition of output is shows that although the stock-sales ratio has very significant. Greater importance of the risen within the past year, it is still below that transportation equipment industry now than be of the pre-war years. For department stores in fore the war, for instance, would be expected to the Third Federal Reserve District at the end of bring about some increase in the durable goods June, the stock-sales ratio was lower than for inventory-sales ratio. Page 91 CHART H RETAIL STOCKS, SALES, AND STOCK-SALES RATIOS BILLIONS S LOG SCALE 30 -------- BILL IONS LOG SCALE - 20 STOCKS-!-/ 7*V i i i i i .1 i i i r RATIO ■i l.i i t .l.i.i .i. RATIO STOCK-SALES RATIO 1,1 I 1 1 1,1 1.1,1,1 1. 1.1. ,1 I I .1.1JJ l .1 1,1,1, 1930 1935 ANNUAL DATA 1947 1948 US. DEPARTMENT OF COMMERCE, OFFICE OF BUSINESS ECONOMICS. A word of warning is in order on inventory statistics now in use. In spite of great care exercised in the collection of data and in the un avoidable process of estimation, recent revisions of Department of Commerce figures emphasize the necessity for taking into account the possi bility of a considerable margin of error. For pur poses of observing short-term trends, such error is probably not of great significance; but in mak ing comparisons over periods of several years, the statistics are less reliable. In applying the statistics to his own firm, the individual businessman has all these difficulties and more. The general inventory situation must be a part of his calculations, but the aggregate ratios that describe it are not sufficient to ana lyze his own position. Mr. Moses Abramovitz, in a study of the role of inventories in business cycles recently published by the National Bureau of Economic Research, has clearly pointed out that for purposes of inventory analysis there are many categories of stocks and that each behaves in its own way. The national statistics now available are broken down by broad industrial lines and are extremely helpful, but they are not yet adequate for every situation. 1 Data are end of month average for the year or quarter. 8 Data are monthly average for the year or quarter. The inventory-sales ratio refers to the current level of sales, whereas what we really should be concerned with is prospective sales—and pro spective prices. Retailers must make an estimate of consumer purchases, taking into consideration income prospects and the potential demand for particular items. In a recent study, Mr. L. Jay Atkinson, of the Department of Commerce, made estimates of the existing backlogs of various con sumer durables and of the varying periods of time in which they would be filled. The backlog de mand for vacuum cleaners, for instance, is prac tically filled. Automobiles will probably be the last to catch up. A sharp eye must be kept on new orders figures. In 1937, although some materials appeared to be in short supply and inventories did not appear large with respect to production until the fall, new orders had begun to decline in the spring, making a sharp readjustment inevitable. Over all new orders figures now available are not con clusive, but they do not yet show a significant decline. Page 92 It would be misleading for the individual firm to use its own inventory position in a previous period as a standard without considering sur rounding circumstances. Businessmen gener ally try to maintain the minimum stocks con sistent with uninterrupted production or sales requirements. But, while there might be little disagreement with this principle, it is doubtless subject to wide differences in interpretation. Pro duction and sales estimates, price trends, the structure of the market, all must be taken into consideration. There is great leeway in buying practice. Many businessmen and bankers are fully aware that inventory policy is not subject to text-book fomiularization. Every firm must make a thor ough analysis of its own situation and must con stantly review the forecasts and assumptions on which it is based. It must examine carefully the habits created during nine years of rising prices. Further large-scale accumulation of inventories during the next six months might be a sign that that job had not been done. BUSINESS STATISTICS Production Philadelphia Federal Reserve District Adjusted for Seasonal Variation Not Adjusted Production Workers in Pennsylvania Factories Per cent change Indexes: 1923-25 = 100 June May June 1943 1948 1947 INDUSTRIAL PRODUCTION MANUFACTURING.............. Durable Goods....................... Consumers’ Goods................ Metal products.................... Textile products.................. Transportation equipment Food products....................... Tobacco and products.... Building materials.............. Chemicals and products, . Leather and products......... Paper and printing............. Individual Lines Pig Iron.................................. Steel....................................... Iron castings......................... Steel castings....................... Electrical apparatus........... Motor vehicles..................... Automobile parts & bodies Locomotives and cars.... Shipbuilding......................... Silk and rayon..................... Woolens and worsteds.... Cotton products.................. Carpets and rugs.................. Hosiery.................................. Underwear........................... Cement.................................. Brick....................................... Lumber and products... Bread & bakery products. Slaughtering, meat pack.. Sugar refining.................... Canning and preserving. . Cigars.................................... Paper and wood pulp......... Printing and publishing. . Shoes....................................... Leather, goat and kid.... Explosives........................... Paints and varnishes......... Petroleum products........... Coke, by-product................ COAL MINING Anthracite............................ Bituminous............................ CRUDE OIL................................ ELECTRIC P’W’R—OUTPUT Sales, total............................ Sales, to industries.............. BUILDING CONTRACTS TOTAL AWARDS-)-........... Residential+....................... Nonresidenlial-)-................ Public works & utilities-l-. lllp 113p 118p 107p 137 77p 123p 134p 112 114 122 106 142 78 123 128 118 no 50p 51 183p 177 92p 97 119 117 June 1948 from Month 1 Year ago 1 ago 1948 from June May June 1948 1948 1947 6 mos. 1947 109 111 118r 102 140 68r 132r 138 102 46 171r 92 119 — — — + — — 1 i 3 1 3 1 0 + 4 — 7 — 2 + 3 — 6 +1 + 2 + 2 + 2 + 3 0 + 5 + 5 + 2 — 2 + 1 +15 + 8 — 7 + 2 — 3 — 4 + 8 0 + 8 +12 + 7 + 8 — 1 + 8 — 1 — 1 — 96 84p 37p 112p 83 128 77p 57 29 — 114 85 226p 111 101 122 lOOp 84p 106 116 250p 184p 72 66 120 280 514 518 354 94r 114r 83 108 216r 25r 106r 61 — 94 85 38 112 79 131 79 56r 31r — 128 67 203 119 100 120 95 99 102r lllr 247 164 78 73 120 277 507 508 372 115 115 86 82 207 41r 131r 55 — 85 70r 42 92r 64 123 67 56 28 — 116 63 248 102 95 124 91 94 106 109 233r 164 74 69 +18 — 1 +12 —14 — 8 + 7 + 4 — 6 — 2 + 2 — 2 — 4 0 + 5 — 2 — 1 + 2 — 7 + 1* —11 +27 278 464 465 330 — 7 +1 + 1 + 5 —15 + 3 + 5 + 1 +12 — 8 —10 + i + i + i + 2 — 5 — 3 — 2 + 9 +14 — 3 —35 —16 + 4 + 6 + 13 + 19 —12 +22 +30 + 5 +15 + 1 + 5 + 4* — 1 +35 — 9 + 9 + 6 — 2 +10 —11 0 + 7 + 7 +12 — 2 — 4 + 8 + 1 +11 +11 + 7 252 145 319 417 243 144 306 370 157 80 165 378 + 4| + 1 1 + 4| +13 | +60 | +59 +80 1 +30 +93 + 76 +10 | +71 112 113 93 93 200 27 no 57 in +n •Unadjusted for seasonal variation. -f3-month moving daily average centered at 3rd month. 0 + 3 — 2 0 — 1 —33 — 6 — 5 +22 + 5 +12 —16 +26 + 15 + 7 +23 + 2 + 6 — 2* + 8 — 8 — 7 + 2 + 8 — 2 + 5 +n +23 + 7 + 8 + 2 — 1 + 5 —13 0 + 9 +10 + 9 1 llOpj 110 lllp| 111 138 I 75p| 125p| 119p| 119 I 55p] 184p[ 90p| 117 I 106 115 92 97 200 33 110 59 II I I I I I I | —I 91 80p, 35p 108p 81 128 93p 59 30 116 109 91 162p 120 100 121 I 95p| 85p| 106 1 118 I 250ol 184p| 70 I 66 I 106 291 489 503 358 107r 109 141 75 129 117 115 53 180 88 118 141 65r 135r 98r 120r 86 112 199r 32r lllr 59 110 122 110 51 172r 91 118 117 85 85 207 50r 131r 56 91 80 37 81 68r 40 110 88r 79 62 132r 123 89 81 59 58 29r 29 114r 112 128 111 82 67 153 178 116 110 100 94 122 123 86 I 86 90 95 103r 106 117r 111 247 234r 171 164 77 72 73 69 98 108 288 289 472 441 487 451 379 334 257 233 | 160 154 I 152 I 85 325 I 321 I 169 397 I 259 | 359 p Preliminary, r Revised. Local Business Conditions* Percentage change— June 1948 from month and year ago Allentown......... Altoona.............. Harrisburg......... Johnstown......... Lancaster........... Philadelphia. . . Reading.............. Factory employment May 1948 — i 0 + 2 + 2 + 2 — 1 + 1 0 Trenton.............. 0 Wilkes-Barre. . 0 Williamsport... — 1 Wilmington.... York.................. + 2 Factory pay rolls June 1947 — 4 — 3 +1 +1 +32 — 1 + 4 + 3 May 1948 — 4 +1 +1 — 3 + 3 — 1 + 4 + 1 + + + — — 2 0 0 + 1 4 3 5 1 June 1947 + 3 + 7 + 12 + 8 +60 + 5 +23 + 17 — +18 + 10 +12 + 8 Building permits value Retail sales May June May June 1947 1948 1947 1948 — 59 — 10 —12 1 +42 — 12 + 37 — 1 + 9 — 75 — 76 — 3 1 +21 0 | +28 + 45 +241 — 38 — 59 — 6 1 +17 — 53 + 4 — 4 | +13 + 24 + 6 —10 | +15 + 33 — 55 — 3 1 +16 +715 +811 — 2 1 +22 + 127 — 50 + 2 + 17 ** +541 1 — — 0 1 +28 + 30 +230 — 45 + 18 — 9 +14 Debits May June 1948 1947 — 6 +30 + 6 + 15 +10 +22 + a +25 — 5 + 10 + 13 + 17 + 4 + 5 +18 +20 + 6 +27 +17 +25 + 6 1 +20 +45 +50 + 17 +20 Summary Estimates—June 1948 Weekly Weekly man-hours pay rolls worked Ail manufacturing ......... 1,097,000 $55,099,000 43.500.000 Durable goods industriei 622,400 33.968.000 24.810.000 Nondurable goods industries ....................... 474,600 21.131.000 18.689.000 Employ ment Changes in Major Industry Groups Pay rolls Employment Per cent June change 1948 from In dex May June 1948 1947 All manufacturing........... 128 0 0 Durable goods industries. 154 0 — 1 Nondurable goods industries........................... 105 +1 + 3 Food....................................... 123 +2 0 Tobacco.................................. 98 +3 0 Textiles.................................. 86 0 + 13 Apparel.................................. 94 +1 + 1 Lumber.................................. 95 +1 + 7 Furniture and lumber products.............................. 95 —1 — 3 Paper....................................... 119 0 0 Printing and publishing. . . 136 0 0 Chemicals.............................. 119 +1 — 1 Petroleum and coal products.............................. 157 +3 + 6 Rubber..................................... 147 +3 —11 Leather.................................. 89 +2 — 6 Stone, clay and glass......... 135 0 — 2 Iron and steel....................... 139 0 — 1 Nonferrous metals.............. 142 —1 — 8 Machinery (excl. elect.).. 211 +1 + 4 Electrical machinery......... 224 0 — 2 Transportation equip. (excl. auto)....................... 217 —1 + 7 Automobiles and equipment......................... 147 —2 —22 Other manufacturing......... 130 —3 — 6 Indexes (1939 average = 100) Per cent June change 1948 from In June dex May 1948 1947 286 0 + 7 323 —1 + 3 242 251 215 220 238 215 +2 +4 +3 +1 —1 +5 +13 + 9 + 2 +34 + 10 +21 228 271 269 248 +5 +3 0 +1 + 6 + 14 + 7 + 5 320 282 181 291 289 288 442 458 +5 +4 +6 0 —2 0 +1 + 19 —16 — 2 + 6 + 3 — 1 +10 — 1 408 —2 + 10 312 255 +2 -4 —17 — i +1 Average Earnings and Working Time June 1948 Per cent change from year ago Weekly earnings Hourly earnings Weekly hours Aver Ch’ge Aver Ch’ge age 1 age Ail manufacturing.... $50.23 1 + 7 $1,267 1 + 7 Durable goods indus.. 54.57 1 + 5 1.369 1 + 5 Nondurable goods industries.................... 44.52 I +10 1.131 I +10 Food.................................. 45.48 1 + 8 1.074 + 8 Tobacco........................... 28.89 1 + 2 .756 1 + 2 Textiles........................... 45.64 +19 1.163 +15 Apparel........................... 35.78 + 9 .962 +12 Lumber........................... 42.37 +13 1.033 + 16 Furniture and lumber products....................... 44.23 +10 1.019 1 + 7 Paper................................ 49.22 + 14 1.108 1 +11 Printing and pub........... 55.82 + 7 1.474 + 9 Chemicals....................... 49 59 + 6 1.201 1 + 6 Petroleum and coal products....................... 62.15 +12 1.528 +10 47.52 — 6 1.316 Rubber........................... 0 Leather............................ 35.08 + 4 .966 1 + 4 Stone, clay and glass. . 49.36 + 8 1.212 | + 8 Iron and steel................ 55.95 + 4 1 421 M- 5 Nonferrous metals. . .. 52.84 + 7 1.335 1 + 7 1 Machinery (excl. electrical).................. 53.22 + 6 1.323 + 6 Electrical machinery. 57.22 + 1 1.452 + 2 Transportation equip. (excl. auto)................ 57.36 + 3 1.461 | + 5 Automobiles and equip 58.45 + 7 1.393 1 + 9 Other manufacturing. . 40.99 + 6 1.094 | + 7 Aver Ch’ge age 39.7 0 39.9 — 1 39.4 42.3 38.2 39.2 37.2 41.0 0 0 0 + 3 — 3 — 3 43.4 44.4 37.9 41.3 + 2 + 2 — 2 0 40.7 36.1 36.3 40.7 39.4 39.6 + 3 — 6 0 0 — 1 + 1 40.2 39.4 0 — 1 39.3 41.9 37.5 — 2 — 3 — 1 ♦Area not restricted to the corporate limits of cities given here ••Increase of 1000% or more. Page 93 Distribution and Prices Per cent ciuuage 1948 June 1948 from from 6 Month Year mos. ago ago 1947 Wholesale trade unadjusted for seasonal variation Sales Total of all lines.................. Dry goods ........................... Electrical supplies ........... Groceries .............................. Hardware .............................. Jewelry ................................ Paper .................................... Inventories Total of all lines ................ Dry goods.............................. Electrical supplies ........... Groceries .............................. Hardware ........................... Jewelry.................................. Paper .................................. 7 6 2 6 4 3 3 + 4 — 8 + 5 +14 0 + 14 + 6 + 3 — 8 0 + 9 — 3 + 7 + 3 + 1 0 + 1 0 + 3 + 3 + 5 +14 +12 + 2 + 4 +34 —13 +34 — + + + + + — + — — — — — — Source: U. S. Department of Commerce. Prices Per cent change from June 1948 Month Year Aug. 1939 ago ago Basic commodities (Aug. 1939 = 100) Wholesale (1926 = 100) ......................... Farm ...................... Food ....................... Other .................... Living costs (19351939 = 100) United States .... Philadelphia ......... Food .................. Clothing ............. Fuels .................. Housefumlshings Other .................. 330 + 2 + 10 +230 166 196 181 150 + 1 + 4 + 2 0 + 13 + 10 + 12 + 14 +122 +221 + 170 + 87 172 172 209 193 136 197 147 + 1 + 1 + 2 0 + 1 0 0 4- 9 +10 + 12 + 6 +11 + 9 + 6 + 74 + 76 +125 + 95 + 41 + 96 + 46 Indexes: 1935-1939 = 100 Adjusted for seasonal variation Not adjusted Per cent change June 1948 1948 June May June from from 1948 1948 1947 6 Month Year mos. 1947 ago ago June May June 1948 1948 1947 RETAIL TRADE Sales Department stores—District. . . . PhiladelDhia Women’s apparel—District........... Philadelphia Furniture ........................................... 283 250 258 276 — 284 261 262 269 255r 232 244 264r — — — + — Inventories Department stores—District......... Philadelphia . Women’s apparel—District........... Philadelphia Furniture ........................................... 251 219 190 203 — 257 229 209 237 — 212 202 185 213 — — 2 — 4 — 9 —14 — 2* +18 + 8 + 3 — 5 + 8* FREIGHT-CAR LOADINGS Total ...................................................... Merchandise and miscellaneous. . Merchandise—l.c.l............................... Coal ...................................................... Ore ...................................................... Coke .................................................... Forest products ................................ Grain and products......................... Livestock ............................................. 139 124 76 182 203 195 89 116 77 141 123 79 187 217 225 90 108 85 141 131 89 175 196 182 91 139 104 — 2 + 1 — 4 — 3 — 6 —14 — 1 + 7 — 9 200 202 185 — i _ — 215 —15* +28* +38* —19* +42* +47* + 5 +15 +12 MISCELLANEOUS Life insurance sales ....................... Business liquidations Number ........................................... Amount of liabilities.................. Check payments ............................. — 247 •Computed from unadjusted data. 235 + 10 + 8 + 3 + 3 0 +n 4 + 8 1 + 6 3 9* + 12* 266 235 219 226 — 287 254 251 258 — 238 216 207 217 - — — — — 238 206 181 191 — 259 227 209 232 — 201 190 176 200 — 2 — 5 —14 + 4 + 4 + 7 — 3 —17 —26 — 6 — 5 —15 — 9 + 6 — 3 — 7 —20 —23 143 126 76 164 299 181 101 100 70 143 127 79 166 276 192 86 100 78 146 133 89 157 288 169 104 121 95 + 8 + 1 204 200 189 34 60 267 40 75 235 27 42 232 r Revised. Source: U. S. Bureau of Labor Statistics. BANKING STATISTICS Reporting member banks (Millions $) July 28 1948 Five wks. Assets Commercial loans ........... Loans to brokers, etc. . . Other loans to carry secur. Loans on real estate......... Loans to banks .............. Other loans ....................... 524 18 13 81 2 261 +20 + 1 — 2 + 3 —32 + 7 One year + — — + — + 87 5 3 1 4 50 Total (net)*.................. 892 — 6 + 122 Government securities . Other securities.............. 1,353 —39 —105 280 + 4 + 20 Total investments ... 1,633 —35 — 85 Total loans & invest.. Reserve with F. R. Bank Cash in vault .................. Balances with other bks. Other assets—net........... Liabilities Demand dep. adjusted. . Time deposits.................. U.S. Gov. Deposits .... Interbank deposits .... Borrowings .................... Other liabilities.............. Capital account ................ 2,525 472 44 101 54 Page 94 2,012 445 57 341 14 25 302 —41 + 8 + 1 — 2 + 4 + 37 + 8 + 4 + 14 + 1 —20 — + 2 + + 5 + —23 + 8 + — 2 — — + •Total net after reserves; details gross, earlier dates partly estimated. MEMBER BANK RESERVES AND RELATED FACTORS Changes in — 7 23 38 — H 2 i Changes in weeks ended Third Federal Reserve District (Millions of dollars) July 28 Ch’ges in five weeks — 2 + 3 — 9 — 8 —16 + 9 — 12 + 96 — 91 1 — 8 —15 — 7 — 19 + 19 + 1 —13 + 6 — 1 June 30 July 7 July 14 Sources of funds; Reserve Bank credit extended in district........... Commercial transfers (chiefly interdiatrict). ... Treasury operations .................................................... — 3 +64 —25 — 12 + 24 — 33 + 13 + 21 — 33 Total ......................................................................... +36 — 21 + +36 + 19 — 40 Uses of funds: Currency demand ......................................................... Member bank reserve deposits.................................. “Other deposits” at Reserve Bank......................... Other Federal Reserve accounts.............................. Total ............................................................................. Ratio of excess to re quired Member bank reserves (Daily averages; dollar figures in millions) Held Phila. banks 1947 July 1-15 1948 June 1-15 June 16-30 July 1-15 $420 391 403 395 $412 388 394 391 $ 8 3 9 1 4 Country banks 1947 July 1-15 1948 June 1-15 June 16-30 July 1-15 $376 408 409 412 $338 365 365 367 $ 38 43 45 45 Re Ex quir’d cess 2% 1 2 1 i 1 11% 1 12 ! 12 1 12 +36 | 21 | + 1 July 21 ! — 6 | — 19 ~=!+“ — 8 | —15 | — 7 Chan gesin— Federal Reserve Bank of Pblla. July 28 Five One (Dollar figures in 1948 weeks year millions) Discounts & advances $ 21.6 $— 3.2 $+ 12.2 Industrial loans . . . — 5 — 1.2 1,515.0 + 14.2 —142.8 U.S. securities......... Total ..................... $1,537.1 $+ 11.0 $—131.8 Fed. Res. notes .... $1,627.8 $— 4.2 $— 1.4 Member bank dep.. 806.8 + 12.3 + 13.8 U. S. general acct.. 167.1 1 + 88.8 | +122.7 Foreign deposits . . + .5 1 — 14.8 29.4 Other deposits .... 2.0 + .1 — A Gold cert, reserves. 1,100.1 1 + 88.2 +241.6 Reserve ratio ........... 41.8% | +1.9% + 7.6%
@FedFRASER