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FEBRUARY 1953 ORED IN PHILADELPHIA apparel manufacturing in Philadelphia is a prosperous, mpetitive, rapidly growing, central-city industry. seasonality, changes in style and consumer income, of small, medium-sized, and large firms. INGS, 1952: THIRD DISTRICT contributes to higher current earnings. FEDERAL ADVISORY COUNCIL The Council's activities constitute one of the Federal Reserve System's channels of communication. CURRENT TRENDS Additional copies of this issue are available upon request to the Department of Research, Federal Reserve Bank of Philadelphia, Philadelphia 1, Pa. Apparel-making is an amazing industry. It is a they are accustomed. Apparel comes in an al maze of firms, products, styles, prices, operating most infinite variety. First is the obvious dis practices, and distributing methods. One of the tinction between men’s and women’s clothing. oldest industries, it is forever turning out some Then there are outerwear and underwear, night thing new. Without sacrificing individuality of wear and evening clothes, work clothing and its products, it has achieved mass production; play clothing, sport wear and business clothing, yet it is hardly a model of mass production. The industry is large in size, small in scale. rain wear, children’s clothing, infants’ wear, casuals, separates, coordinates, and n.e.c. cloth It is highly specialized, greatly diversified, and it has “ inside” shops and “ outside” shops. The ing— that is, apparel not elsewhere classified. No wonder clothing is one of our largest industries. industry is almost wholly unionized, seldom strike-bound. It observes cycles and seasons. In 1947, when the last Federal census of manufactures was taken, there were 31,000 The pace is irregular— usually very busy, some clothing manufacturing establishments, employ times very dull. The business is easy to enter, ing over a million workers. No other major in Once in, it is easy to fail and dustrial group had more operating plants and many do. Tailoring is a hard-hitting, fast-mov only five other groups employed more workers. and many do. ing, highly competitive industry. Owners, like The men’s wear industry differs from the workers, work in their shirt sleeves but the own women’s wear industry in a number of respects. ers usually look more worried. In men’s wear, the plants are fewer and larger; Big cities are the favorite habitat of the in they are less highly concentrated in New York dustry, preferably the central business district City; the manufacturers make greater use of You may walk by the front of a wool as their basic raw material; and the indus building totally unaware of the fact that you try is somewhat less sensitive to style changes. have passed three clothing factories. The chances Men’s wear is the smaller of the two industries; are they occupy upper floors of the structure it has fewer firms, employs fewer workers, and that looks like an office building or a business turns out a smaller volume of products whether school. measured in physical units or dollar value. The or nearby. It takes a diversified industry to keep 158 million Americans dressed in the style to which leading urban centers of manufacture are tra ditionally referred to as markets. 3 business review THE PHILADELPHIA MARKET delphia is shown in the accompanying chart. By Apparel is the largest industry in the Philadel phia metropolitan area from the standpoint of industrial employment. In December 1952, clothing firms in the Philadelphia eight-county reason of the overriding prominence of men’s tailored clothing in the local market, the follow ing analysis is confined to that division of the industry. area employed 10 per cent of the industrial workers of the region. Right on the heels of ap PHILADELPHIA M EN ’S WEAR MARKET (1951) parel are the manufacturers of electrical ma chinery and of textiles, each employing slightly less than 10 per cent of the total. Apparel, par ticularly men’s clothing, has been a prominent Philadelphia industry for many years. All branches of the clothing industry are rep resented in Philadelphia but the most important branch is the men’s wear division. Men’s wear, moreover, embraces a number of divisions that are in many ways separate and distinct from each other. The largest division is the men’s and boys’ tailored clothing industry. The stand ard product of this industry is suits, but numer ous manufacturers also produce topcoats, over coats, sport coats, and slacks. In 1951 the local industry turned out a variety of products worth $145 million, which was 10 per cent of the coun try’s total output of men’s tailored clothing. The work clothing and furnishings industry ranks second in dollar volume in Philadelphia. The principal items of apparel in this division I i 1 | Work Clothes and Furnishings I Outerwear and Rain Wear ■ ■ Tailored Clothes (Source of data: National Credit Office, Inc.) are shirts, work clothing, underwear, pajamas, robes, sport wear, and children’s wear. The 1951 A central city industry value of output in Philadelphia was $47 million There are no clothing establishments in City Hall — only about one-third of the dollar volume of but there are many within its shadows. The largest group of shops is within an arc swinging tailored clothing. Nationally, however, the two are of about equal importance, dollar-wise. The southeastward from Broad and Spring Garden smallest division of the men’ s apparel industry is the heavy outerwear and rain wear division to Second and Market Streets. Flanking Broad Street, south of City Hall, less than halfway which makes products such as jackets, mack down the peninsula formed by the Delaware and inaws, raincoats, and a variety of leather and the Schuylkill rivers, is another cluster of shops. suede apparel. The relative importance of the Directly west and close to the Schuylkill, in the three major divisions of men’s apparel in Phila Reed Street area, is a third group of plants, and 4 bminen review a smaller colony of clothing firms is directly helpers, west of City Hall in the 22nd and Market power-driven machinery for all of the operations Streets area. that could be mechanized. Only a few isolated plants are subdivided the tasks, and installed found beyond this central city district. Beyond The making of a suit, whether done in a large the city limits, however, in smaller communities or a small plant, requires over 200 different op of both Pennsylvania and New Jersey are a erations. Some operations are mechanized, and number of concerns. Some of these are indepen you see evidence of mass production in the larg dent plants and others are branch plants— fre est plants. Great rolls of cloth unwind for the quently pants-making, country branches of the ride through the sponging vats and steam-drying larger urban establishments. Some of these sub cylinders to pre-shrink and finish the fabric. urban factories took the place of and occasion Electrically ally occupied the buildings vacated by cigar along the chalk lines on the top layer cut mul manufacturers that moved to town following the tiple layers of fabric in one operation. mechanization of that industry. component parts of coats or jackets are joined powered cutters expertly guided The Clothing manufacturers like to be near the in a jiffy on batteries of sewing machines, all central city area because this affords quick ac humming and droning at a clip of 4,500 stitches cess to their style-conscious market and to a a minute. Special machines have been designed readily available supply of labor. The process of manufacture, moreover, does not require for making buttonholes and other operations. heavy machinery; it uses little power, and ma terials are not bulky. Space requirements, con wherever possible, it is surprising how many operations defy mechanization. Tailoring still sequently, are moderate compared with most requires a lot of hand work. In many industries other manufacturing operations. the ultra-modern machine has brought on an Though the industry has adopted machinery almost complete transfer of skill and pace-setting Small shops and large shops from the worker to the machine. Tailoring is a business in which small shops true in the needle trades. While it takes but a compete on an equal footing with the big manu few seconds to make a seam so far as actual facturers. Concerns employing from 100 to 500 stitching is concerned, it takes a great deal more workers are the most common. The 118 firms time to pick up the parts, put them together operating in the local market in 1950 averaged properly, place them under the needle, bring slightly over a million dollars of sales each. At down the attachment that holds the work in the extremes are a few plants employing over place, start the machine, and then repeat the 2,000 workers and not a few with less than ten whole process for the next seam. Handling and workers each. manipulating garments take more than two- This is not Every tailor is a potential manufacturer. A thirds of the time. Hand work is also required bolt of cloth, shears, hand needle or a foot- in many operations such as basting (temporary powered sewing machine, a pressing iron, and stitching), fitting, felling (small precise hand he is in business in its simplest form. This is stitching), and pressing. Technology offers only precisely how many, if not most, of the firms limited advantages to large-scale operations in got their start. this business. Those that prospered, hired 5 business review Closely associated with the small-scale opera City in popular and medium-priced apparel. tion is the practice of subcontracting, which Cleveland has a few firms but large volume. In gives rise to the distinction between so-called St. Louis the dollar volume of men’s wear is al inside and outside shops. Inside shops are es most equalled by that of women’s wear. In Los tablishments that perform all of the manufactur Angeles, men’s wear is overshadowed by wom ing operations on their own premises. This is en’s wear. the predominant type of organization in Phila about 85 per cent of the country’s total output delphia, but there are also some outside shops of men’s tailored clothing. These ten cities together produce which do manufacturing on contract for an agreed price paid by firms buying the cloth and TAILORED M EN ’S WEAR doing the designing and cutting. M IL L IO N S $ — PH I LA . Subcontract BIL L IO N S $ - U.S. ing is more prevalent in New York than in Philadelphia, but some local manufacturers em ploy the services of out-of-town pants-making concerns. Cutters who employ contractors to do the sewing have lower capital requirements and less worries about retention of a skilled labor force. The inside shop, however, naturally has better control over the quality of its products. A prospering industry In Philadelphia, the men’s tailored clothing in dustry is prospering. Since 1946 it has grown faster here than nationally, as indicated in the chart. Just after World War II the local manu facturers produced 8 per cent of the country’s total; in 1951 the local industry accounted for 10 per cent. As a result of this growth, Phila SOURCE OF DATA: N A TIO N A L C R E D IT O FFIC E, INC. Although Philadelphia was the last major mar delphia pushed up into second position among ket to be unionized, cooperation between the the leading clothing centers. Amalgamated Clothing Workers Union and the Ranking ahead of Philadelphia is New York, manufacturers is of the highest order. The basic the traditional center of the industry, with four document is the Philadelphia Market Agreement. times the dollar volume of Philadelphia. Chicago It covers union recognitions, new employees, and Cincinnati do a substantial tailor-to-the- hours, overtime, wages, holiday pay, vacations, trade business; that is, firms that make garments equal division of work, seniority, home work, to individual order and do not maintain stocks. insurance and retirement benefits, and arbitra Boston is a market for woolen fabrics and is tion. All problems, large or small, not settled outstanding in men’s topcoats and overcoats. by negotiation must go to the arbitrator for final Baltimore is a contract market, with firms of decision. The objective is to maintain uninter unusually long standing for the clothing business. rupted production for the benefit of both work Rochester specializes in quality clothing; Kansas ers and employers. 6 The absence of a major business review strike for over two decades is an indication of dustry throughout the country in 1950, less than the spirit of cooperation. one-fourth had entered before 1920, and the The men’s tailored apparel industry of Phila delphia is outstanding primarily in its vigorous growth. Perhaps its strength lies in its diversity 1940-1949 decade was the period with the greatest influx of new firms. Competition at the expense of immigrant and non-conformity. Philadelphia has all kinds workers is a thing of the past. The union took of firms doing all kinds of business. One firm care of that. Through industry-wide bargaining, specializes in business suits,, another in tailored the total labor cost is established for each of the student wear, another in sport wear, and still five or six grades of clothing, depending upon others in topcoats and overcoats. Some houses the amount of hand work necessary to produce make nationally advertised brands, and others them. Piece rates for the same operation may cater to the “ in stock service trade” ; that is, vary from one plant to another, but the total men’s apparel especially made for quick replen labor cost must be uniform. By this system, no ishment by department stores and other retailers. body can use wages as a price-cutting lever. Tuxedos, always custom tailored, were consid Thus competition is based on skillful buying of ered impossible to produce ready-made until a fabrics and trimmings, efficient operation, styl Philadelphia firm began manufacturing them. ing, promotion of brand names, better salesman This company now makes about half of the men’s ship or anything other than wage cutting. formal apparel sold in the United States. As might be expected, this business has greater Philadelphia has small, medium, and large plants. It has inside, outside, and hybrid shops seasonal irregularity than almost any other man ufacturing industry. Men generally buy their — that is, firms that engage in both manufactur clothing in the spring and fall. Manufacturers, ing and contracting. Price-wise, there is also a consequently, are increasingly busy making fall variety— popular, medium, and better, as they clothing from February through June. July is a are designated in the industry. Philadelphia is dull month. generally known, however, as a center for qual manufacture of the spring line of apparel usually ity apparel in the medium-price brackets. Most of the firms are manufacturing wholesalers, sell begins in August and continues to expand until December, when business again slackens. Thus ing to department stores and independent re for the manufacturer, spring and fall are very Resumption of activity for the busy periods, and summer and winter are syn tailers. onymous with dullness and slackness. Survival is tough Apparel is a business of rigorous competition. The heavy hand of seasonal irregularity bears down more on some manufacturers than others. Compare the list of manufacturers now operating Variations are generally the sharpest in “ con with that of, say, ten years ago or even five tract” shops where operations are sometimes vir years ago and note the change. An enterprising tually suspended. Shops least affected by season tailor can set up in business with a modest ality are the manufacturers with their own sales $10,000 capital, but you do not find many of outlets. Between these two extremes are the in these companies belonging to the half-century side shops. In all types of plants the degree of club. seasonality varies with general business condi Of the going concerns in the entire in 7 business review tions. During hard times,, seasonality is at its for informal attire. The growing popularity of worst, but during good times the seasons spread sport wear is an example of how changing over each other. At present, for example, which styles in men’s wear may affect a large section is ordinarily the time of comparative inactivity, of the men’s apparel industry. manufacturers are scrambling for more workers. In men’s wear, fortunately, styles change more Not only skilled workers but also learners are slowly, and are less pronounced than in women’s difficult to get. wear. When patch pockets are introduced it may The market for men’s apparel is not so steady as you might think, in view of the indispensa take several seasons before the vogue gets wide spread acceptance. Men are that way. Lighter- bility of clothing. There is considerable change weight summer wear for men is another example. in demand for men’s suits from one year to Featured a few years ago, it is slowly gaining another. In 1950 the industry turned out about more converts. As for color, men cling to their 24 million units, but last year scarcely 19 million blues, browns, and grays. Many men like to be were produced. Large consumer demand in 1950 well dressed but not many want to look like a was caused by the outbreak of fighting in Korea. peacock. People bought more than their requirements, Nevertheless, within the range of styles that and for that reason demand was considerably men will tolerate there is abundant opportunity smaller during the two ensuing years. for variation, and much of the success of a justment to the lower volume of Read business manufacturer depends upon skill in designing. wrought hardship and some producers went out There are the single- and double-breasted, the of business. cut and roll of the lapel, two or three buttons, A development of no little concern to the men’s tailored clothing industry is the trend to pants suit, pleated or unpleated trousers, suits ward casual wear. Men are buying more in with or without vests. Then there are such di formal attire such as slacks, sport shirts, sport verse choices as sharkskin worsteds, Shetlands, padded or natural shoulders, the single- or two- coats, and zipper jackets. Unit output of men’s cashmeres, flannels, coverts, tweeds, or the more slacks tripled between 1939 and 1950, and pro conventional duction of sport coats multiplied more than four worsteds, and rayons. times during this period. synthetics Post-war production of men’s suits rose nothing like this; in only one year— 1947— was unit output above the 1939 level. like worsteds, Dacron, gabardines, tropical Now come the newer Orion, and various blends of natural and synthetic fibers. Alert manufacturers of men’s apparel must be more than shrewd stylists. They observe what The meteoric rise of sport wear is attributed their competitors are doing with regard to styl to the extension of suburban living, the fact that ing and pricing, and the larger firms also watch men have more leisure time, and the competitive prices on the Australian wool market, the yard price of sport wear. An expanding population age of men’s wear fabrics produced by the tex and rising purchasing power should benefit the tile mills, new fabrics coming on the market, men’s suit industry, but it appears that the retailers’ inventories of suits, the number of men larger consumer income encourages more leisure inducted into the armed services, bonus pay activities, which in turn stimulates the market ments to veterans, and trends in consumer sav 8 view busii ings. Even such apparent irrelevancies as sales aware of the fact that their market has not kept of children’s wear are indicative of prospective pace with the other apparel markets. developments in the men’s wear market. In the The fact remains, however, that the men’s typical American family, any increased budget tailored clothing industry of Philadelphia has ing for clothing usually goes to the children first, been doing very well compared with other cen then comes mother, and last— dad. Men’s wear ters. Just how they do it we are not quite sure, manufacturers know this very well and they are but whatever the formula it seems to work. BANK EARNINGS, 1952: THIRD DISTRICT Despite rising expenses and higher taxes, 1952 THIRD DISTRICT MEMBER B A N K S- 1 9 5 2 was a rather good year for member banks in (Preliminary tabulations) the Third Federal Reserve District. Earnings both before and after current expenses were never higher. And net profits in the aggregate C h a n g e in year Amount Percent E A R N IN G S , E X P E N SE S A N D P RO FITS (D o lla r amounts in millions) $ 52.4 + $ 2.3 1 7.6 4* 1.3 1 2 1.9 + ' 15.5 1.0 3 6.6 + $228.5 + $ 2 0 .1 $ 6 8.3 + $ 5.6 19.3 + 2.3 51.0 + 2.8 $1 38 .6 + $10.7 $ 8 9 .9 + $ 9.4 + 5% + 8 +15 + 3 +10% + 9% +14 + 6 + 8% +12% - $ 6.3 -5 6 % - 2 +18 preliminary tabulations, was the largest in any U .S. G o v ’t securities............... other securities......................... lo an s............................................ oth er............................................ T o ta l.............................................. Expenses— salaries and w a g e s ....................... interest on d ep osits..................... a ll oth er............................................ T o ta l.............................................. N e t current e arn in gs......................................... R e c o v e rie s , p ro fits a n d tra n sfe rs from reserves............................................................. Losses, charge-offs and transfers to reserves. Taxes on net income.......................................... of the post-war years. The explanation is to be N e t profits............................................................ $ 4 5 .0 C ash dividends d e c la re d ................................. 25.3 were nearly as large as in 1951. The number of banks reporting increases in net profits some what exceeded those showing declines. That’ s the story in brief. Now, for a few of the details. The increase of $20 million in total earnings to a record $228 million, indicated by Earnings— on on on a ll $ 4.9 22.1 27.7 — .4 4.3 + - $ .8 - 2 % + 1.6 + 7 found mainly in lending operations. Loan port folios were up more than a quarter-billion dol lars, as much as in 1951, but less than in 1950. Dollar-wise, the increase was greatest in con sumer instalment paper, with real estate financ ing and lending to businessmen also expanding materially but not leading the field as they did in other late years. In some instances, higher rates helped to swell the income on loans. Holdings of securities—-Government and other— did not change materially, but increased income also was E A R N IN G A S S E T S (D o llar amounts in millions) Dec. 31 1 9 52 C h a n g e in ye ar Amount Percent Loans and discounts: Business...................................................... . . . $ 1,218 To purchase or carry securities........... 78 Real e state................................................ 774 O th e r loans to individuals— Instalment.............................................. 435 Single-paym ent.................................... 236 A ll oth er................................................... 69 Total loans— gro ss.............................. Less reserves........................................ 47 76 17 82 + 7% +28 +12 92 + 19 + 1 + + $ : 287 8 + +27 + 9 + 1 +11% +20 Total loans— n et................................. .. . $ 2,763 U .S. Government securities...................... . . . 2 ,768 O th e r securities............................................ 802 Total earning assets.......................... . . . $ 6,333 + $ : 279 + 1 1 % 6 + 11 + 1 + $ 296 + 5 % + $ + + + 9 bwsii view reported from this source. EARNINGS— THIRD DISTRICT MEMBER BANKS Current expenses have been rising without in terruption since 1943, figures for this District show. The increase during 1952, however, offset little more than one-half of the rise in total earn ings. Salaries and wages led the expense parade, accounting for over half of the total increase. Percentagewise, the increase was greater in in terest payments on deposits, marking the first substantial growth in such payments since the early post-war years. Aggregates for both reserve city and country banks, adjusted to take mergers into account, in dicate that total earnings and net current earn ings increased substantially at both groups of banks. But income taxes were higher and the total of recoveries, profits on security sales, and transfers from reserves was smaller than in 1951. Accordingly, net profits increased only slightly at the country banks and were down somewhat at reserve city institutions. Both groups of banks instalment and business loans, while real estate reported larger cash dividends. Loan expansion financing was the leader at banks in the “ coun at the reserve city banks was largely in consumer try” classification. FEDERAL ADVISORY COUNCIL The Board of Directors of this Bank has reap and three years. Recent practice in this District pointed Geoffrey S. Smith to the Federal Ad has been to limit tenure to three years. visory Council for 1953. Mr. Smith, President The Federal Advisory Council consists of of the Girard Trust Corn Exchange Bank in twelve members, one selected annually by each Philadelphia, represents this District for his Reserve Bank through its board of directors. It second one-year term. is required to meet four times each year in Since establishment of the Federal Reserve Washington, and oftener if called by the Board System, six Philadelphia bankers have served on of Governors. It may hold additional meetings, the Council. Those preceding Mr. Smith served select its own officers, and adopt its own methods successive terms of fifteen, eleven, five, three, of procedure. 10 business review By itself or through its officers, it has the power which later became the Federal Reserve Act was under the Federal Reserve Act to: amended. 1. Confer directly with the Board of Governors As to its functions, perhaps the most restrictive view of the role of the Council was stated in the on general business conditions; 2. Make oral or written representations con cerning matters within the Board’s juris Report of the Banking and Currency Committee of the House of Representatives on the original Federal Reserve Act: diction ; 3. Call for information and make recom mendations in regard to discount rates, rediscount business, note issues, reserve conditions in the various districts, the pur chase and sale of gold or securities by Reserve Banks, open market operations by the Banks, and the general affairs of the System. The Council is unique among the principal statutory groups comprising the Federal Re serve System. Unlike the Board of Governors, the Federal Open Market Committee, and the . . . The functions of this board (Council) are wholly advisory and it would amount merely to a means of expressing banking opinion, informing the Reserve Board of conditions of credit in the several districts, and serving as a source of information upon which the Board may draw in case of necessity. The desir ability of such a body as a source of information and counsel is obvious, and it is believed that it gives to the banking interests of the several districts ample power to make their views known, and, so far as they deserve acceptance, to secure acceptance. (H.R. Re port 69, 63rd Congress, 1st Session.) A somewhat broader interpretation, as indi cated particularly by the italicized sentence be twelve Reserve Banks, this body is purely ad low, was expressed in a report filed in Novem ber 1913 by Senator Owen on behalf of himself visory and without authority over instruments and six other senators. of Federal Reserve credit policy; yet it may af upon by some former members of the Council fect policy. as an excellent summary of the general under Its independent status, its powers, and its rep resentation of banking sentiment in the twelve Reserve districts enable the Council to provide Reserve authorities with a source of information and counsel of significant potential influence. Its existence also establishes another mechanism within the System whereby information obtained directly from the Board concerning its opera tions may be conveyed to the districts. From time to time, questions have arisen as to the role which originators of the Council in tended it to play. Events leading up to creation of the Council are clear. Bankers vigorously op posed the lack of representation on the Federal Reserve Board. Wilson As a compromise, President suggested the Council and the bill This has been looked standing in Congress as to its function. It is believed that the Federal Reserve Board itself, consisting entirely of officers of the government, might be made more efficient if it had the advice freely available of the Federal Advisory Council. Moreover, the operations of the Federal Reserve Board would in this way be subject to greater pub licity and enable the banks of the country to have a greater measure of confidence in all the opera tions of the Federal Reserve Board. It was further believed that the banks of the country which are in vited or required to contribute a very large sum to the Federal Reserve Banks would be more content by having an easy and convenient means provided by law of frequent conferences with the Federal Reserve Board and the opportunity to advise the Board with reference to the financial, commercial, and industrial needs of the country. (Vol. I., Senate Reports, 63rd Congress, 1st Session 1913, Report 133, Part 1 and Part 2. Italics added.) 11 business review Perhaps the broadest interpretation is in the tion as much as law and original intent. following passage taken from a document en From time to time, recommendations and ob titled “ Possible Questions Raised by the Banking servations of the Council have been disclosed Bill,” which received considerable circulation in the Annual Reports of the Board of Gov among members of the House during the course ernors. Differences of opinion have quite natur ally arisen on occasion between the Board and of debate on the Federal Reserve Act: Is not the Federal Advisory Council an unnecessary piece of machinery? No, it will serve as a natural, useful, and legiti mate means of communication between the Federal Reserve Board and the several Federal Reserve Banks. Without it, communication would have to be carried on with each Bank separately. It will serve as a useful means of developing public opinion and, conversely, of influencing it. (W illis: “ The Federal Reserve System,” p. 381. Italics added.) These may appear to be fine interpretations of the Council and among Council members them selves. As a group of informed and influential representatives of banking, the Council has fre quently made known its views to Congress and to the public as well as to the Board. The Council has lent its prestige to actions it felt were worthy of support. From 1915 through 1952, 134 representatives from the twelve Reserve districts have served on the Council. In view of the able men who words and intent. Perhaps they are, but they do customarily make up its membership, some ob reflect the fact that the role of the Council has servers have felt that even greater possibilities of not been entirely clear. Time, conditions, and the Advisory Council may be realized than in people often determine the role of any institu the past. CURRENT TRENDS Thus far 1953 has promised many new develop tinued at a substantial level. Last month, for ments. But it has also shown that some things the first month since the outbreak of war in can’t be expected to change overnight; many Korea, people bought more savings bonds than old trends will continue. they redeemed. Whether this will continue re Take, for example, the business situation. The mains to be seen, but it is a reflection of the usual rash of forecasts greeted the new year. fact that people are saving a large part of their This time they almost unanimously predicted a incomes and probably will keep on doing so. continuation for at least six months of the good On the other hand, there is no indication that business without inflation which we have been people are spending less. Department store sales enjoying for about the past year and a half. in the Third Federal Reserve District during January did its best to live up to the optimism January were below a year ago, but that was of the forecasters. Production rose further, em because of the transit strike; stores outside of ployment stayed high, and new construction con the city registered healthy gains. 12 business review Yet, in the midst of these continuing trends was expected to be $4 billion more than in fiscal of good business at least one development bears 1953 but receipts about the same. The principal watching. Beef prices slid off sharply as large item of increased spending was for defense. supplies poured into the market. This was only The new Administration has promised to re one indication of problems likely to arise on the duce spending and to cut taxes, but it has em farm front during this year. phasized that both will take time. Much of the The mixture of old and new was most appar spending scheduled during the next fiscal year ent, perhaps, in policy actions taken or contem will be to pay the bills authorized in the past. plated. The Federal Reserve Banks raised their As the President pointed out,, the accumulated discount rates from 1% per cent to 2 per cent. obligational authority for future payment totals This was in line with the policies which have over $80 billion, and this doesn’t include large been in effect for some time. It was in agree contingent liabilities. ment, too, with the statement which the new director has moved to cut spending by virtually President later made in his State-of-the-Union freezing the obligation of funds for expenditure message that Federal Reserve action should con at the January level, prohibiting the hiring of tinue to be directed toward stabilizing the econ new employees, and curbing new construction omy and encouraging initiative. by Government departments and agencies. A new development of considerable impor tance, however, was the announcement of the Nevertheless, the budget He has called for recommendations for revision of the budget to be submitted by March 2. Treasury’s plan to give holders of Government On the tax front, the President has said that securities maturing in mid-February the choice “ reduction of taxes will be justified only as we between new one-year certificates or five-year, ten- show we can succeed in bringing the budget month bonds. This was the first step in a policy, under control.” Yet, the authority for the excess soon after confirmed by the President, of length profits tax expires in June and a bill labeled H.R.l proposes to reduce individual income ening out the maturity of the public debt. Changes have been promised in the field of Government spending and taxing, too. But here taxes. Only In broader terms, the most significant new development ahead of us is the increased reli eleven days before the switch of administration, ance expected to be placed on the market place a budget which had been in preparation for a and on indirect controls (monetary, fiscal, and year was submitted to Congress. This budget debt management policies) as regulators of ec for the fiscal year beginning in July and ending onomic activity. The sudden removal of price in June 1954, called for total spending of $78.6 and wage controls is perhaps the most dramatic, again, changes can’t be made overnight. billion and receipts of $68.7 billion, leaving a but not necessarily the most important, step in deficit of $9.9 billion. At these levels, spending that direction. 13 FOR THE R E C O R D . . . SUM M ARY Third Federal Reserve District United States Per cent change Per cent change December 1 9 52 from mo. ag o year ag o OUTPUT M anufacturing production. . . + 1 * + 2* Construction contracts!........... + 1 9 + 4 2 C o a l m ining................................ - 1 6 -1 6 EM PLO YM EN T A N D IN C O M E Factory employment.................. 12 mos. 1 952 from year ag o mo. ag o year ago 12 mos. 1 952 from year ag o 8 +22 - 8 0 + 7 -1 1 + 2 1 B A N K IN G ( A ll member banks) Deposits........................................ + 2 0 L o a n s ............................................ 0 Investments.................................. U .S. G ovt. Securities............. + 1 - 1 C h e ck payments......................... + 2 9 § + - 1* 9* 5 5 + 6 +10 + 1 0 + 2 + 1 9§ -5 * -1 * 0 +4 +9 +1 -1 +6 +4§ PRICES - 0 7 8 + + 2 + + - 1+ +2t 2 1 3 1 - 1 - 1 - 1 +31 + + ot + 1 0 4 - 6 0 + + 7 +10 + 3 + 2 + 7 +18 + + + 3 1 + + + + + + 1 1 6 9 5 4 9 7 3 3 ‘ Pennsylvania tPh ila d e lp h ia §20 C itie s “ Adjusted for seasonal variation. tBased on 3-month moving averages. 14 C h e ck Payments Payrolls Per cent change Dec. 1 952 from Per cent change Dec. 1952 from Sales Stocks LO CAL CHANGES mo. year mo. ag o ago ago -4 * +9 -8 Department Store Employ ment A lle n to w n .. 0 +1 0* + + 2* + TRADE** Department store s a le s ............ + C o n su m e r.................................... December 1952 from Factory* La n c a ste r... Per cent Per cent Per cent change change ch an ge Dec. 1 952 Dec. 1 952 Dec. 1 952 from from from year mo. ag o ago year mo. ag o ag o year mo. ag o ag o year ag o + 1 -4 + 6 +20 +13 +9 -1 +16 +18 +16 +1 +6 +7 +16 +42 P hiladelphia +1 +6 +2 +14 +28 +5 -2 4 -8 +31 + 1 9 R e a d in g .. . . +1 +2 +5 +13 +44 +5 -2 4 -3 +35 +22 -1 +6 -1 +12 +8 -2 6 + 1 +17 +19 +21 + 9 Trenton........ +2 +7 +4 +22 +52 +9 -1 9 -3 +23 +19 W ilkes-Barre 0 +6 -4 +11 +45 +1 -2 0 +3 +2 4 +11 +1 +8 +4 +19 +1 +4 +6 +12 +56 Y o rk ............. +47 +24 +6 -3 0 0 +26 +45 ‘ N o t restricted to corporate limits of cities but covers areas of one or more counties.
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