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JANUARY 1950 TH E BUSINESS REVIEW FEDERAL RESERVE BANK OF PHILADELPHIA THE BUSINESS OUTLOOK: SHORT- AND LONGER-RUN r^rr.ummt Most people agree that short-run prospects are good. During the first half of 1950 consumers are likely to spend heavily, outlays for construction will stay high, and Government will run a deficit. These factors are expected to offset a decline in capital outlays by business. Inventory policies are apt to have a more neutral effect than in 1949. There is much less agreement about the longer-run outlook. Yet, more and more observers now feel that strong forces are at work tending to produce chronic inflation. THE MONTH'S STATISTICS Business expansion prevailed over a broad front in November. Early reports indicate continued improvement in December. THE BUSINESS REVIEW THE BUSINESS OUTLOOK: SHORT- AND LONGER-RUN t By this time a sufficient number of forecasts for 1950 have been published to permit a consensus to be drawn. A rather high degree of uniformity of opinion exists— from which this article does not deviate greatly—to the effect that the first half of 1950, at least, will see a high level of business activity. Opinions about the longer run are considerably less uniform. A growing number of ob servers, however, are coming to the view that strong forces now at work are tending to produce chronic inflation. The virtual unanimity of opinion about short-run pros pects is significant in itself. But even more important is the fact that, in contrast with the early post-war years, most observers now foresee only moderate changes over the near term. Fear of imminent depression during the last three years undoubtedly contributed to the avoidance of inflationary excesses. But the record of 1949, far from reminding the nation that business does not always run smoothly, more likely reinforced the idea that the econ omy is fairly well “under control.” With the cry of “wolf” dying down, the door is once again open to inflation. On the other hand, the increasing attention being fo cused on longer-run prospects should help to curb infla tion. For it is basically the longer-run forces—the growth of powerful economic groups, the search for security, the zeal for social justice—which would tend to produce the kind of creeping, chronic inflation about which more and more observers are becoming concerned. Consumer Income and Expenditures Personal consumption expenditures for all purposes amounted to about $179 billion last year, and spending at that rate or slightly better may be expected to con tinue. Buying power will be augmented by the payment of $2.8 billion of national service life insurance divi dends to veterans, and some states, including Pennsyl vania, are making substantial bonus payments. These windfalls plus large holdings of liquid assets, the con tinued availability of credit under liberal terms, and in creases in consumer income arising out of high levels of activity give promise of a large volume of consumer expenditures. PERSONAL INCOME, CONSUMPTION AND SAVING ANNUAL RATES' bi!-ljons ANNUAL RATES r PERSONAL INCOME /••disposable I NCOME ^ CONSUMER EXPENDITURES SHORT-RUN PROSPECTS Optimistic predictions for the first half of 1950 are based largely on anticipated strength in three sectors: con tinued large spending by consumers, heavy outlays for construction, and Government spending in excess of re ceipts. These forces are expected to offset a gradual de cline in business spending for new plant and equipment. Business spending on inventories is likely to have a some what neutral effect. NET PERSONAL | SAVING | 1939 1940 1941 1942 1943 1944 1945 1946 SOURCE: DEPARTMENT OF COMMERCE. 1947 1945 1949 *ESTIMATED There is some question about the duration of consumer spending for new and used cars. This will have an im portant influence on the course of business in view of the large size and far-reaching ramifications of the auto Page 1 THE BUSINESS REVIEW mobile industry in our economy. The conservative view is that production and sales in 1950 are unlikely to reach the peaks of last year, which were the best in the history of the industry. Of course, this view may be underesti mating elements of strength in demand for cars which is influenced by factors such as new models, lower prices, the financial position of buyers, and the abnormal pro portion of over-age cars on the road. Capital Outlays Reduced capital expenditures are in prospect in prac tically all major lines of business. Capital expenditures last year were slightly below the peak rate of 1948, which indicates that most expansion programs have been com pleted or are nearing completion. Capital outlays during the last half of last year were 14 per cent below the cor responding period of the preceding year, and according to estimates of the Department of Commerce and the Se curities and Exchange Commission, expenditures for the first quarter of 1950 will also be 14 per cent below the corresponding quarter of 1949. Expenditures in the first quarter of 1950 are expected to be lower than the corresponding period of last year by amounts ranging from 12 per cent for commercial and related service enterprises to about 40 per cent for rail road and other transportation companies. Manufacturing and mining concerns are apparently curtailing expendi tures about 18 per cent, with a shift in emphasis from ex pansion of capacity to modernization and improvement of facilities. In only one industry group—electric and gas utilities—are higher capital outlays scheduled. While the peak in expenditures for plant and equip ment appears to have been reached, declines in the months ahead are likely to be moderate because of the very na ture of such expenditures. Expansion and renovation programs are time-consuming, and the programs are in various stages of completion. Amounts spent by manufac turing concerns in Philadelphia, according to annual sur veys made by this Bank, tapered off gradually from a peak of $153 million in the year ending October 1947 to $111 million spent in the year ending September 1949, and $84 million was scheduled for the year ending Sep tember 1950. Although business generally may expect diminishing stimulus from capital expenditures in 1950, it is a mistake to think of unfinished plans as a fixed Digitized for Page 2 FRASER amount that runs down without renewal. Plant renova tion and improvement is a never-ending process in a dynamic economy. Inventories During 1949 the greatest single factor making for a decline in total expenditures was the decision made by businessmen to stop accumulating inventories and to start reducing them. Between the last quarter of 1948 and the third quarter of 1949, business shifted from building stocks at the rate of $9 billion a year to liquidating them at the rate of $2.4 billion a year, thus exerting consider able downward pressure on production. With such a great difference in possible expenditures for inventory, it is clear that business policy in this field will be very impor tant during the first half of 1950. There is a rough sequence of events which must be fol lowed as the business community builds or reduces stocks. If it can be determined that business is at or near the be ginning of that sequence, there is a fairly strong presump tion that the current policy will be continued for some time; if it is near the end, a new phase may be in the offing. For instance, although the attempt will be made, it is impossible for industries at every stage of the pro duction process to reduce inventories all at once. Once the decision to cut stocks is made, orders are cut and stocks of purchased materials are lowered. This means, however, that finished goods inventories may rise for a time, even though strenuous efforts are made to cut them. A reduction in finished goods stocks cannot come until the process of inventory reduction has been going on for some time. It now appears that for many lines a decision to reduce inventories was made in the last quarter of 1948. In man ufacturing, nondurable goods producers were the first to feel the pressure of reduced sales. They began to cut their stocks somewhat before durables producers cut theirs. In trade, wholesalers, whose sales had fallen off after the mid dle of the year, began to cut shortly before retailers. It was not until the second quarter of 1949, however, that sub stantial cuts in total manufacturing inventories were made, and it was not until July and August that stocks of manufacturers’ finished goods were reduced. An improvement in manufacturers’ sales in the third quarter brought stock-sales ratios down considerably and THE BUSINESS REVIEW this, combined with continued reduction of finished goods stocks, indicated that the inventory adjustment was near ing its end. Retailers and wholesalers actually began to increase their stocks moderately by late summer as sales held up better than they had previously expected. Strikes in the steel and coal industries undoubtedly accelerated completion of the inventory reduction process in the dur able goods industries. While it appears probable that a reduction phase of the inventory cycle is over, it is doubtful that a new round of inventory accumulation will contribute heavily to total ex penditures during the first half of 1950. It is true that stock-sales ratios in general are low, and that new orders showed some improvement toward the end of 1949. They did not pick up sufficiently, however, to justify large-scale stock-piling. Nevertheless, business will be free of the same kind of downward pressure exerted by efforts to re duce inventories during 1949, and this must be regarded as a favorable factor. Housing and Other Construction Dollar volume of construction in 1950 is expected to equal last year’s performance, according to joint esti mates of the Department of Commerce and the Depart ment of Labor. About $191/4 billion of new construction was put in place in 1949. This was much better than was generally anticipated at the outset of the year, and as shown in the accompanying chart, it exceeded the pre ceding year’s construction by a small margin, owing chief ly to a substantial increase in the Federal, state, and local category of construction. NEW CONSTRUCTION about one-third of the total money outlay for all con struction, both public and private. With only one ex ception, military and naval construction, public construc tion is expected to increase in all other categories such as schools, hospitals, highways, public housing, and related public facilities. The weight of authority points toward a modest con traction in dollar volume of private construction, both residential and non-residential. In the non-residential field, the largest decline is expected in industrial con struction, continuing the downtrend that has been in evi dence for some months. Residential construction, which accounts for about half of the dollar volume of all private construction, is ex pected to hold up well in 1950 but not quite equal to the 1949 peak outlays, according to appraisals of the Depart ment of Commerce and the Department of Labor. New housing starts, which in the early months of 1949 lagged slightly behind those of early 1948, picked up rapidly to attain a September-October level of 100,000 units a month. The final tally for the year may eclipse the 1948 peak, if not the all-time record of 937,000 units in 1925. Substantial evidence that business will receive consid erable stimulus from the building construction industry for some months is indicated not only by the high level of new housing starts, but also by the sharp increase in contract awards. Total awards for all kinds of construc tion for the 37 states east of the Rocky Mountains rose from a monthly level of a half billion dollars in the early months of 1949 to over $1 billion a month in September and October. All major classes of construction, except public works, contributed to the rise, with the greatest in crease in the field of residential construction. tvX'-l FEDERAL, STATE, AND LOCAL* Z///A 1939 Government Finance and Monetary Policy OTHER PRIVATE 1942 1944 1946 1947 1948 1949 • •includes public residential construction SOURCE: DEPARTMENT OF COMMERCE Most of the sustaining activity is anticipated in the field of public construction, which is expected to contribute One of the strongest supporting factors in the short-run picture is the fact that Government will spend more than it takes in. During the fiscal year 1950, the Federal Gov ernment is expected to run a cash deficit of around $4.9 billion and in fiscal 1951 a cash deficit of $2.7 billion. The deficits are mainly the result of higher expendi tures. Estimates for fiscal year 1950 are for cash expen ditures of $46.5 billion and for fiscal 1951 cash expendi tures of $45.8 billion as against cash receipts of $41.7 billion and $43.1 billion. Important reasons for higher total spending in fiscal year 1950 are larger outlays for Page 3 THE BUSINESS REVIEW national defense, veterans, social welfare, and housing. Outlays for veterans are expected to decline in fiscal year 1951, but spending for defense, social welfare, and hous ing will continue to rise. Foreign aid, on the other hand, is expected to decline at an increasing rate. The Federal Reserve System, accordingly, is likely to face a somewhat different situation in the first half of 1950 than it did in early 1949. Prospects of substantial deficits stand out in contrast to the Treasury surpluses of earlier post-war years. Because banks may finance part of the deficit, private deposits are not likely to de cline as sharply as in the first part of 1949. During the first part of last year, a number of deflationary influences were in operation. In addition to the cash surplus, bank loans declined. Businesses paid off loans as they reduced inventories and made smaller outlays for capital expan sion. The mortgage market was tight and the expansion in real estate loans slowed down. Similarly, consumer credit increased less rapidly. As a result of these factors the money supply declined. In response to these changing conditions, the Federal Reserve took action to ease credit. Early in the year, Regulation W was liberalized and at the end of June the System’s power to impose consumer credit controls ex pired, resulting in a general easing of installment credit terms. Stock margin requirements were lowered at the end of March. Beginning in early May and continuing through early September, the System made a series of reductions in member bank reserve requirements, which freed a total of $3.8 billion of reserves. Partly as a result of these actions and partly because of the shrinking out lets for investment funds, prices of Government securities rose. The Federal Reserve found itself confronted by the reverse of its previous dilemma. During inflation, it was forced to buy Government securities to support their price, thus tending to increase bank reserves and the money supply. Conversely, during the readjustment from infla tion, the System was forced to sell Government securities to prevent their prices from rising too rapidly, tending to decrease bank reserves and intensify deflationary trends. In June, however, the Federal Open Market Committee made a major declaration of policy to the effect that “it will be the policy of the Committee to direct purchases, sales, and exchanges of Government securities by the Federal Reserve Banks with primary regard to the general business and credit situation.” For the rest of the year, prices of Government bonds reflected more the interplay Page 4 of private demand and supply. The System stands ready, therefore, to act in case of inflationary or deflationary tendencies, at the same time maintaining orderly condi tions in the Government security market. OVER THE LONGER-RUN While most observers predict a relatively stable econ omy at a high level of activity for the short run, a grow ing number of them are concerned about forces now at work tending, over the longer run, to produce creeping inflation. Their thinking is no longer dominated by the philosophy of the ’thirties. Conditions have changed. In the ’thirties, our resources were only partially employed; but during and since the war, resources have been prac tically fully utilized. In this new environment, thinking is shifting back toward “old-fashioned” principles of economics. Making Choices If there is any single word that summarizes these prin ciples, it is the word choice. Economics involves the hard fact that we always want more things than we can have. Accordingly, we must decide which things we want most. During a depression the choice is fairly wide. If we want more butter and more eggs, we can get both by putting idle resources to work. But during prosperity we are apt to face the choice of more butter or more eggs because resources must be taken away from one to produce more of the other. Put another way, in a depression many kinds of spend ing programs can be undertaken at the same time with out bringing on inflation. The main effect is to increase production rather than prices. But when resources are practically fully employed, a rapid increase in total spend ing tends to produce higher prices because production cannot be increased quickly. If we want to spend more for some things, we must spend less for others; otherwise, we are likely to have inflation. Put still another way, in a depression all economic groups can seek a larger amount of the nation’s output and all may benefit because total output can be increased. But in prosperity the total can be increased only as fast as productivity rises—a slow process. If all groups try to get more, prices tend to rise and income shares are THE BUSINESS REVIEW then redistributed through inflation. If inflation is to be avoided, one group can get a larger share of the total only if some other group gets a smaller share. In surveying the longer-run prospects, it is important to understand that in a period of full employment “we can’t have our cake and eat it too.” And even if this is understood, are we willing to limit our demands and make the necessary choices to avoid inflation? Competing Croups The behavior of the various economic groups since the war suggests an answer. The natural tendency of each group is to try to maintain or increase its share of the national income. In post-war years, labor, bargaining chiefly on an industry-wide basis, obtained three “rounds” of wage increases and recently received further benefits in the form of pensions. Such increases, if not accom panied by an increase in productivity, raise the cost of production and tend to be passed on to consumers in the form of higher prices. The farm price support program limits the fall in the prices of farm products and helps maintain the farmer’s share of the national income above what it would be if prices were determined by free market forces. In the battle over shares of real income, the weak est group usually fares the worst. People with fixed in comes have lagged behind in the income race, and as their living costs have risen their share of the real national in come has shrunk. The various economic groups might tend to moderate their demands if they thought excessive demands would create unemployment. But in an economy where a major aim of public policy is to prevent unem ployment, there is a tendency to bolster economic groups at the risk of chronic inflation. Fiscal and Monetary Problems The problem is also reflected in the Federal budget. As each group seeks support, Government spending and tax ing rise. Government assumes an ever larger role, and decisions as to the expenditure of an increasing propor tion of income are transferred from individuals to Gov ernment. The economy becomes governed more and more by “political” rather than “economic” considerations. The problem of an unbalanced budget is truly “economic” in the sense that the prime purpose of any budget is to force choices and decisions. A budget should help us decide what we want most. In present conditions of relatively full employment, it points up the inflationary implications of spending more for expanded social services while at the same time bearing the huge direct and indirect costs of war. Where does the money come from to support the spend ing programs? In an environment where each economic group asks Government to support its demands and at the same time prevent unemployment, the path of least resis tance is likely to be inflation through the monetary sys tem. When resources are being fully employed, competi tion for more income tends to raise prices, requiring a larger flow of dollar expenditures to carry on the same physical volume of production. Traditional anti-inflation policy of the monetary authorities operates via manage ment of the money supply to keep the expansion of spend ing in line with the expansion of output. But to restrict spending is to restrict incomes. When total incomes are held down, one group can get higher incomes only by causing lower incomes, and perhaps unemployment, else where. Thus, anti-inflationary monetary policy may be in conflict with policies of appeasing the strong economic groups and of guaranteeing full employment. What Are the Alternatives? If this is, in broad terms, the type of economy we are drifting toward over the longer run, what are the alterna tive solutions facing us? One method which is often proposed is voluntary co operative action. This course of self-discipline would call for all groups to limit their demands for additional in come to the rate of increase in productivity; to under stand that competition for larger income shares in con ditions of full employment tends to produce inflation; that a higher standard of living for all can be achieved only by enlarging the size of the income pie through maximum economic progress; and that the maintenance of artificial supports runs the danger of preventing the shifting of resources so essential for an expanding econ omy. It also requires that individuals and groups make the “right” decisions and take the “right” actions. But this implies a more complete knowledge and under standing of how our economy works than can reasonably be expected. Moreover, such actions might well mean gains for some and lower incomes for others in order that resources could be redistributed in accordance with Page 5 THE BUSINESS REVIEW changing wants. Finally, all groups and individuals would have to cooperate fully for this method to be effective. Since it seems extremely unlikely that these essential conditions for voluntary action can be met, some form of collective action would be necessary. Such action may take either of two forms: direct economic controls, or in direct controls primarily through monetary-fiscal policy. In national emergencies the public has been willing to impose direct controls over prices, wages, etc., to curb in flation. As a permanent measure, however, the public would have to decide whether the stability achieved by direct controls would be worth the restrictions they in volve. The attitude of the public, moreover, would have an important bearing on whether direct controls would do the job, or whether they would merely turn free mar kets into black markets, destroy initiative, and provide opportunities for administrative errors. The type of control generally considered more com patible with our economic system is the more indirect and impersonal regulation of the flow of expenditures through monetary-fiscal policy. As applied to the prob lem of chronic inflation, however, “compensatory” fiscal policy would mean a continual budget surplus. The real question is whether the public would be willing to sup Page 6 port the actions necessary to achieve a budget surplus. If it would not be willing, the task of the Federal Re serve becomes more important and more difficult. Along with the shift back toward “old-fashioned” economics, there seems to be a trend toward greater belief once again in the effectiveness of monetary policy. But the post-war experience of the Federal Reserve System has demon strated that monetary policy cannot be really effective in combating inflation if at the same time it is maintaining low interest rates and fixed prices on Government securi ties. The recent hearings of a sub-committee of the Con gressional Joint Committee on the Economic Report are an important attempt to arrive at a solution to this prob lem. Moreover, monetary policy can be effective only as it limits the income-expenditure flow. Again, there is a question whether the public would support anti-inflation policies which restrict incomes. Whatever the approach—whether through voluntary co operation, direct controls, or indirect controls—all of the above alternatives involve making choices. Each has some disadvantages. Success in meeting the problem of chronic inflation, if it comes, will require concerted action on a broad front. The basic step, however, is to recognize that we “can’t have our cake and eat it too,” and then choose whether we want to have it or eat it. c<9o THE BUSINESS REVIEW THE MONTH'S STATISTICS November was characterized by vigorous and widespread industrial recovery. Employment, production, income, and trade rose substantially above the levels of the preceding month which reflected some adverse effects of the stoppage in steel and coal mining operations. Preliminary reports indicate continued improvement in December. Recovery was most pronounced in industries producing durable goods—particularly iron and steel. Output of nondurables as a whole declined slightly, but textiles showed some improvement. The substantial increase in physical output of all manu factured products in Pennsylvania was accompanied by a rise of 7 per cent in employment and 8 per cent in wage pay ments. November contract awards for building and construction, though slightly smaller than those of October, were about one-third greater than in November of 1948. Merchants had a good Christmas season. Department store sales in November equaled the dollar volume of a year ago, after lagging 6 per cent during the first ten months of the year. Latest indications are that December trade may duplicate the all time peak attained in December 1948. Nationally, the privately owned money supply, in recent months, has been at levels substantially the same as a year ago. A small increase in November reflected chiefly expansion in loans, partly offset by a decrease in bank holdings of Govern ment securities. Further expansion in December is suggested by growth in deposits at reporting banks in leading cities. In the Third District, deposits at these institutions reached the highest point of the year shortly before Christmas. For the month as a whole, their loans show a moderate increase in total despite some falling off in loans to business. Third Federal Reserve District United States Per cent change Per cent change SUMMARY Nov. 1949 from mo. ago OUTPUT Manufacturing production... . Construction contracts............. Coal mining.................................. 11 mos. Nov. 1949 f1949 from year year ago ago 11 mos. 1949 from year year ago ago mo. ago + 5* -24* -14* - 1 -12 - 2 +32 - 2 - 4 +43 + 8 - 3 -25 +165 -12 - 8 + 8 -26 i -12 - 9 TRADE** Department store sales............. Department store stocks.......... + 3 0 0 - 5 1 - 7 + + 0 1 2 2 2 +1 + 2 + 5 +12 - 5 + mo. ago year ago Payrolls year ago Sales Stocks Per cent Per cent change change Nov. 1949 Nov. 1949 from from mo. ago year ago mo. ago year ago Per cent change Nov. 1949 from mo. ago year ago — 2 -15 Allentown.......................... + 40 - 9 +46 - 8 + 13 -68 Harrisburg......................... + 26 - 9 + 21 —16 o +411 —15 25 0 0 - 1 + 5 + - 0 2 1 1 0 +1 0 + 9 + 9 +13 Lancaster........................... 0 — 8 0 - 2 Of - 2t - It - 8 + 4 - 4 - 4 - 4 - 3 - 2 - 3 0 - 8 Philadelphia...................... 0 -11 4 -10 0 + 3 0 - 1 + 5 - — 6 - 1 - 1 - — 4_| —14 1 -14 +28 0 +1 - 2 - 6 +20 0 -12 +31 + 2 0 -10 -11 - 4 + 5 -15 +34 - 5 - 1 -12 + 9 + 9 3 -10 — 4 —11 Wilkes-Barre..................... - 4 -15 - 7 -17 Williamsport..................... + 7 - 9 + H - 8 + 1 -13 + 6 -15 York.................................... - 4 -14 - 5 -19 - 6 * Pennsylvania. ** Adjusted for seasonal variation, f Philadelphia. Per cent change Nov. 1949 from mo. ago LOCAL CONDITIONS Reading.............................. + 0 - 9 PRICES OTHER Check payments......................... Output of electricity.................. Check Payments Employ ment Per cent cha nge Nov. 1949 fre)in +267 — 9 + 7* -19* -ii* + 8* -24* -11* Consumers.................................... Department Store Altoona............................... + 15 -57 EMPLOYMENT AND INCOME Factory employment................. Factory wage income................ BANKING (All member banks) Deposits........................................ Loans............................................. Investments................................. U. S. Govt. Securities............. Other............................................ Factory* + 6 +20 + 5 o — 5 +27 - 2 + 3 -10 + 2 - 1 - 1 - 5 - 9 — 3 —10 +20 0 — 3 + 1 + 3 -16 * Not restricted to corporate limits of cities but covers areas of one or more counties. Page 7 THE BUSINESS REVIEW EMPLOYMENT AND INCOME MEASURES OF OUTPUT Per cent change Nov. 1949 from 11 mos. 1949 from year ago month ago year ago + 5 +12 - 1 -24 —35 - 8 -14 —18 - 8 - 2 0 +1 - 2 - 3 + 3 0 - 2 - 2 - 1 + 4 - 2 - 1 +68 + 2 -13 - 3 -14 -17 0 - 4 -18 - 9 + 5 —15 - 7 - 7 - 1 —15 -25 - 8 - 3 -18 -45 -31 -39 —18 -32 -18 -14 - 4 -13 -17 - 3 — 10 -18 -11 - 2 — 9 - 7 -21 - 7 -14 -19 -19 -21 —12 — 6 —24 —15 COAL MINING (3rd F. R. Disl.)+.. + 8 Anthracite................................................ - 1 Bituminous.............................................. +489 - 3 + 1 -32 -25 -23 -33 CRUDE OIL (3rd F. R. DisUtt.... - 1 -17 -12 - 2 +14 + 6 -29 +32 +33 +28 +33 - 2 — 6 -18 +27 MANUFACTURING (Pa.)*............... Durable goods industries..................... Nondurable goods industries.............. Foods......................................................... Tobacco.................................................... Textiles...................................................... Apparel...................................................... Lumber...................................................... Furniture and lumber products......... Paper......................................................... Printing and publishing........................ Chemicals................................................. Petroleum and coal products.............. Rubber...................................................... Leather...................................................... Stone, clay and glass............................. Iron and steel.......................................... Nonferrous metals................................. Machinery (excl. electrical)................. Electrical machinery............................. Transportation equipment (excl. auto) Automobiles and equipment............... Other manufacturing............................ CONSTRUCTION — CONTRACT AWARDS (3rd F. R. Dist.)**......... Residential................................................ Nonresidential......................................... Public works and utilities.................... Pennsylvania Industries* Indexes (1939 Avg.=100) Per cent 1’er cent Nov. change Nov. change from from 1949 1949 (In(Index) mo. year dex) mo. year ago ago ago ago Nov. 1949 % chg. from year ago - 2 1.452 - 1 0 1.176 3 1 2 2 4 1.131 .784 1.194 .919 1.092 + + + 45.22 50.58 - 1 + 2 1.034 1.214 — 3 + 6 + 3 -11 61.04 52.94 + 4 + 4 1.645 1.332 + 4 + 4 - 1 + 5 - 2 -26 - 5 0 66.81 52.31 36.16 + 2 + 6 - 2 1.717 1.439 1.050 + 4 + 3 + 1 250 180 216 - 1 +73 + 2 -19 -45 -32 50.40 55.22 55.37 - 2 -11 - 4 1.273 1.528 1.401 0 0 - 2 -19 233 + 8 -24 $50.13 +16 -29 232 +17 -35 54.55 99 0 - 6 234 - 1 - 6 45.71 126 89 78 90 84 - 2 0 + 2 - 1 + 8 - 4 -16 - 8 0 - 9 261 204 202 228 179 - 3 0 +1 - 2 - 3 - 1 -16 -10 + 2 -13 46.33 30.36 46.46 35.78 39.89 + + - 90 117 + 3 + 1 - 8 - 3 220 274 + 4 + 2 - 9 - 1 133 107 - 1 - 1 - 1 -15 287 237 - 1 - 1 113 125 87 ♦Temporary series—not compa ra ble wi th former prod uction in dexes. ♦♦Source: F. W. Dodge Corporation. Changes computed from 3month moving averages, centered on 3rd month. fU. S. Bureau of Mines. ttAmerican Petroleum Inst. Bradford field. Nonferrous metals.. . Machinery (excl. chg. from year ago - 8 + -i - 1 + 4 0 -27 -11 + 2 248 263 184 114 88 102 0 +62 + 3 -17 -38 -29 Printing and Nov. 1949 - 6 $1,312 104 110 All manufacturing... . Average Hourly Earn mgs Average Weekly Earm ngs Payrolls Employment 0 2 2 1 3 3 Transportation equipment (excl. auto)............... 147 - 9 -29 307 - 9 -33 53.05 - 6 1.440 + 4 202 0 -15 426 - 2 -18 59.12 - 4 1.512 - 1 176 - 8 -29 332 -13 -31 57.68 - 4 1.584 0 -19 0 -15 -11 57.55 40.90 - 1 - 4 1.512 1.140 + 3 0 109 Other manufacturing 129 -14 + 2 -14 -8 228 252 ♦ Production workers only. TRADE Third F. R. District Nov. 1949 from Indexes: 1935-39 Avg.=100 (Index) month Adjusted for seasonal variation Stocks (end of month) Sa es Per cent change II mos 1949 from year ago Departmental Sales and Stocks of Independent Department Stores Third F. R. District % chg. % chg. % chg. Ratio t o Sales (moc th’s Nov. 11 mos. Nov. 1949 1949 1949 supi>ly) Nove mber from from from ago -15* Recent Changes in Department Store Sales in Central Philadelphia Per cent change from year ago + - * Not adjusted for seasonal variation. Page 8 p—preliminary. 7 4 2 9 8 ago 1949 1948 - 6 - 9 2.2 2.4 0 -11 - 3 + 1 - 1 + 7 + 1 - 6 - 6 8 3 5 6 3 9 8 - 8 0 - 5 - 7 - 7 - 3 -13 -12 2.4 3.3 3.1 2.4 1.6 2.6 2.5 1.9 2.6 3.0 3.1 2.7 1.7 2.9 2.9 2.1 + + - 4 2 2 8 7 2 5 - 6 3 4 6 6 7 6 -12 -10 -12 -14 -13 -16 - 4 1.5 2.3 1.8 1.3 1.6 1.4 2.4 1.7 2.5 2.1 1.4 2.0 1.7 2.4 0 STOCKS Department stores................. Women’s apparel stores.... Furniture stores..................... ago - 1 SALES Department stores................. Women’s apparel stores. . . . Furniture stores...................... - 3 THE BUSINESS REVIEW CONSUMER CREDIT BANKING Receiv ables (end of month) Sales MONEY SUPPLY AND RELATED ITEMS United States (Billions $) Nov. 30, 1949 Money supply, privately owned........................................ Demand deposits, adjusted.............................................. Time deposits........................................................................ Currency outside banks..................................................... Changes in— % chg. % chg. % chg. Nov. 11 mos. Nov. 1949 1949 1949 from from from yearago yearago year ago Third F. R. District Department stores - 5 4- 4 +19 - 8 - 2 - 2 - 7 + 5 +19 - 1 -10 - 7 + 2 five weeks year 168.6 + .6 + .5 85.5 58.0 25.1 + .8 — .4 + .2 + 19.1* +3.2* -8.2* + .3 +5.9 10.2 - .6 0 +4 3 +1.1 Member bank reserves held................................................ Sales Credit 16.0 - .1 -3.8 Required reserves (estimated).......................................... Excess reserves (estimated).............................................. 15.3 .7 0 - .1 —3 7 - .1 Turnover of demand deposits............................................ +12 Commercial bank earning assets....................................... Furniture stores Loans made Loan Credit Third F. R. District +11 Loan bal ances out standing (end of month) % chg. % chg. % chg. Nov. 11 mos. Nov. 1949 1949 1949 from from from yearago yearago year ago Consumer instalment loans Commercial banks.......................................................... Industrial banks and loan companies............. +52 - 8 +32 + 1 +13 - 6 + 9 +14 +19 + 2 +13 +21 U. S. Government securities............................................. Other securities..................................................................... 120.2 42 9 67.1 3 +1 0 - .8 Changes in reserves during 5 weeks ended November 30 reflected the following: Effect on reserves Increase in Reserve Bank holdings of Governments + .3 Increase in Reserve Bank loans................................... 2 Net payments to Treasury........................................... ’ _ '2 Increase of currency in circulation............................... — .2 Decrease in gold stock....................................................’ _ ’j Other transactions............................................................. _ [j Change in reserves........................................................ — 1 * Annual rate for the month and per cent changes from month and year ago at leading cities outside N. Y. City. PRICES Nov. 1949 (Index) Index: 1935-39 average =100 Per cen t change from month ago Wholesale prices—United States................ Farm products................................................ 188 206 201 179 0 - 2 Consumer prices United States.................................................. Philadelphia.................................................... Food................................................................ Clothing......................................................... 169 169 197 185 0 0 _ 1 0 Fuel.................................................................. Housefurnishings......................................... Other........................................................ 147 191 152 + 2 0 year ago Weekly reporting banks — leading cities United States (billions $): Loans — Commercial, industrial and agricultural.................. - 8 -13 Real estate......................................................................... To banks............................................................................ All other............................................................................. Total loans — gross................................................. Investments...................................................................... Deposits.............................................................................. 0 - 2 - 2 - 6 Third Federal Reserve District (millions $): Loans — Commercial, industrial and agricultural.................. Dec. 28, Changes in— 1949 OTHER BANKING DATA five weeks 13.9 2 2 4.3 .3 year + .1 —1.7 4.5 + .1 + .1 + .1 + .3 + .1 + .5 25.2 42.5 76.2 + .6 + .1 +1.0 — .6 +5.3 +1.5 Weekly Wholesale Prices—U. S. (Index: 1935-39 average=100) Week Week Week Week ended ended ended ended December 6........................... December 13........................... December 20........................... December 27........................... Source: U. S. Bureau of Labor Statistics. All commodities products Foods"* 187 187 187 187 203 203 204 204 198 198 197 f 197 Other 179 179 179 179 472 36 113 18 311 Total loans — gross........................................... Investments.................................................................. Deposits........................................................................... - 5 0 Real estate..................................................................... To banks.................................................................... All other ........................................................... 950 1,849 3,105 16.3 18.8 24.4 27.8 1.0 + .3 +1.1 - .1 + .3 + .6 —3 9 -4.6 + 2 — 6 - .3 + + + + - —398 — 29 —198 +194 +11.1% Member bank reserves and related items United States (billions $): Member bank reserves held................................... Reserve Bank holdings of Governments.................. Gold stock...................................................................... Money in circulation...................................................... Treasury deposits at Reserve Banks...................... Federal Reserve Bank of Phila. (millions $): Loans and securities................................................... 1,289 Federal Reserve notes........................................... 1,643 Member bank reserve deposits.................................... 765 Gold certificate reserves.............................................. 1,283 Reserve ratio (%)........................................................... 50.3% - 6 - 66 + + + 5 8 5 + 22 + 6 + 34 + 15 + 21 + 53 + 4 +263 +143 77 32 22 35 .8% Page 9
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