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I*. THE BUSINESS REVIEW teessc. FEDERAL RESERVE BANK OF PHILADELPHIA .TUNE, 1947 BUILDING, REAL ESTATE, AND MORTGAGES—WHICH WAY? Recent developments in new construction activity force recognition of alternative courses for building, real estate, and mortgage lending. The hopes and fears of our economy that were so often expressed during the war years are now being tested. One of the hopes was that the upswing in construction that had been interrupted by the war would be resumed and expanded, helping to sustain a high level of income and employment. One of the fears was that the construction industry after a brief building spree would again, as in 1920, receive a sharp set-back as the result of high costs, and would contribute to a general slump in business activity. Not only would such an interruption delay vitally needed housing and industrial development, but the bursting of another real-estate bubble might wipe out homeowners’ equities and place many mortgage loans in a precarious position. Real Estate and Construction Since the War From the viewpoint of market stability and the avoidance of an unfavorable post-war reac tion, real-estate price experience during the war years was not encouraging. Virtually all types of real estate participated in a sustained boom. A nation-wide survey by the National Housing Agency showed that a typical home selling for $5,000 in the spring of 1940 sold for about $7,000 by September 1945. Higher family incomes and the desire for roomier living quarters, an increased rate of family formation, migration to war centers, and a sharply in creased rate of migration from the farms to the cities were all factors making for an increased demand for homes at a time when supply could not be greatly augmented. The sale of rental dwellings to owner-occupants, prompted in many cases by the existence of rent ceilings, was also a factor Commercial properties rose in price as retail sales volume expanded. Farm land prices rose 50 per cent from 1940 to 1945 as a result of rap idly rising farm incomes. In a rising market, accompanied by general credit ease, buyers in most fields were undeterred by high prices, even for buildings which appeared to be above nom inal replacement costs. With ceilings on mate rials and wages and little except war construc tion going on, however, it was difficult to esti mate what actual replacement costs would be when free markets returned. Building restrictions had been modified some what during the early months of 1945 and some projects were begun at that time. With the revocation of Limitation Order L-41 in October, virtually all the direct Government controls on construction were removed. Rent ceiling regu lations were retained but wage and materials Page 59 CHART I BUILDING CONTRACT AWARDS AND BUILDING COSTS 1935-1939-100 INDEXI n~T CONTRACT AWARDS BUILDING COSTS adequate. By February, 1946 the prices of low-cost homes had risen, on the average, 65 per cent over their 1940 level and had registered a rise of over 17 per cent in the preceding five months. And prices were still rising. The appointment of a housing expediter with broad powers and the establishment of limitations on nonresidential building spurred the construction of homes in 1946. The Depart ment of Labor estimates that the number of dwelling units started throughout the United States increased from about 30,000 a month at the end of 1945 to over 67,000 a month in May 1946. During the summer the index of building contract awards in this district hit a peak well above that reached in the early months of the war, and for two or three months it exceeded the monthly rate of the late twenties. In the fall, new construction activity throughout the nation rose to over $1 billion a month. The building boom appeared to be on. 1946 ESTIMATED NUMBER OF FAMILY DWELLING UNITS STARTED AND COMPLETED IN NONFARM AREAS OF THE UNITED STATES *roa THIRD ITOERAL RESERVE CMSTRICT THREE-MONTH MOVING AVERAGE, SEASONALLY ADJUSTED. * «SOuaCC NATIONAL HOUSING AGENCY PU'LOING COSTS FOR STANDARD LOW-COST HOUSE_________ price ceilings which remained in force were lib eralized. It was believed desirable to give the construction industry maximum stimulus be cause of a need for homes and industrial facil ities to produce “bottleneck” goods, and because it was thought necessary to counteract a large volume of unemployment that was expected to develop. Private construction, estimated at only slightly over $100 million a month at the begin ning of 1945, had doubled shortly after the end of the European war. After V-J Day it shot up even more rapidly. Dollar volume of contract awards in the Third Federal Reserve District, shown in Chart I, increased by about 80 per cent during 1945. This index is, of course, an indi cator of prospective building rather than a gauge of building activity actually going on in the current month. With acute shortages of building materials prevalent, and the return of thousands of vet erans reenforcing the pressure on hous ing facilities, it soon became clear that some priorities control would have to be reestablished in order to insure the success of a housing pro gram. Commercial and industrial building had absorbed the lion’s share of available supplies during the fourth quarter of 1945, and although the number of new dwelling units started had increased substantially, the total was far from Page 60 New permanent family dwellings* . . Started Completed 1946, total.................................................................. 670,900 453,800 January.................................................................. February................................................................ March...................................................................... April......................................................................... May.......................................................................... June.......................................................................... July........................................................................... August..................................................................... September............................................................. October................................................................... November............................................................. 36,100 43,100 60,400 66,100 67,600 63,600 64,300 64,400 57,100 58,100 49,700 40,400 18,700 20,300 22,600 26,400 30,300 34,900 41,000 42,200 49,800 54,500 55,100 58,000 42,100 41,600 53,400 63,500p 59,300 59,800 57,100 53,400p 1947 January.................................................................. February................................................................ March...................................................................... F April......................................................................... J * Data cover conventional and prefabricated units, p Preliminary. (Source: Bureau of Labor Statistics.) The real estate situation in the Philadelphia area seems to have changed somewhat during the summer or fall of 1946. Reports from other parts of the country indicate that the change was probably consistent with a nation-wide trend. Tangible evidence of a shift may be seen in the chart of applications for title insurance in the Philadelphia area. Applications rose until the summer of 1946, then turned downward rather sharply, indicating a slowing down in real estate turnover. Since November 1946 title insurance applications have been below the rate for the previous year. Accompanying this V CHART H APPLICATIONS FOR TITLE INSURANCE PHILADELPHIA AND NEARBY COUNTIES INDEX 1945 1946 1947 trend, reports indicate that although the prices of some types of used homes in Philadelphia continued to advance until the spring of 1947, the third and fourth quarters of 1946 saw a definite tendency for prices of older houses to level off and, in some cases, decline slightly. Emergency buying and “forced” sales of rental properties diminished. In contrast, the prices of the new homes that were being completed continued to rise. Good business kept prices of mercantile properties firm, although a much slower turnover and a generally cautious market is indicated by a survey of this area. Prices of farm properties continued to move ahead in response to higher farm incomes. From November 1946 to March of this year, farm land in the Third District rose an additional 2 per cent. At 92 per cent above its pre-war average, the price of farm land throughout the nation is causing no little con cern. President Truman has recently called for a conference of farmers and farm mortgage holders to discuss the problems it raises. up of activity. New construction in the first quarter was 12 per cent below the previous expectations of the Department of Commerce, based upon the availability of labor and mate rials and a strong demand. Contract awards in the district—only 20 per cent above the previous year—represented a physical volume of prospective construction that was probably no larger than that of 1946. Although comple tions of new homes had almost tripled, the num ber of new dwellings started was below last year. Despite the rise in starts during April, the total is falling further behind last year’s activity. In the Third District the index of contract awards rose substantially in April and is still above the 1946 level. This index, however, is a three-month moving average. Under ordinary circumstances it properly eliminates the effects of insignificant fluctuations, but in this case developments in the month of April alone appear to be revealing. As shown in the following table, total contract awards for the month were actually below the same month last year. The cumulative total for the first four months of 1947 is still slightly higher than for the same period last year, owing largely to public works and utilities construction, but most types of build ing, including family houses, show a decline. BUILDING CONTRACTS Philadelphia Federal Reserve District Per cent cha nge April 1947 (000’s omitted) Residential..................................... Apartments and hotels........... Family houses........................................... Nonresidential..................... Commercial................................. Factories....................................... Eeucational.......................... All other............................................. Total buildings.......... Public works and utilities............................ Grand total............................ During this same period—beginning in the summer of 1946—something happened to the building boom. The index of contract awards in the Third District declined steadily from August to February 1947. Housing starts throughout the nation fell off. In part this may have been due to exceptionally bad weather conditions in many parts of the country, but the recovery during the first quarter of 1947 has been disappointing and confirms a slowing From month ago $12,508 1,507 11,001 15,727 2,789 10,089 813 2,036 - 44 - 87 - 1 + 68 - 33 +223 + 82 + 26 + — + + + + 62 76 66 35 19 65 68 31 - 5 +336 - 25 - 6 - 34 + 21 - 35 - 3 $28,235 10,716 - 11 + 65 - 36 +316 - 5 +106 $38,951 + - 17 + 2 From year ago 1947 from 4 mos. 1946 5 (Source of data: F. W. Dodge Corporation.) Little of the system of Government building controls remains in effect at the present time. Ceiling price limitations on new homes and on all building materials and wages were removed with the end of price control last November. Rent limitations were liberalized somewhat, but not removed, and a size limit of 1,500 square feet was placed on new dwellings. This limit Page 61 has now been increased to 2,000 square feet under certain conditions. Priorities for con struction were discontinued after December 23, 1946. As building materials increased in vol ume and residential construction lagged, the limit on approvals of nonresidential construc tion was raised to $35 million a week and later to $50 million. A further increase in this allow ance is being delayed pending the further prog ress of the housing program. An allowance of $75 million would probably take care of all ap plications. Veterans’ preference in most aspects of the construction program has been reduced. Government agencies still extend limited aid to certain building materials and housing pro ducers, but as far as restrictive regulation is concerned, the building industry has come a long way toward restoration of its pre-war status. It does not appear that the falling off of construction activity can be mainly the result of direct restrictions imposed by legislation. Mortgage Lending Since the War The volume of mortgage lending reflects the course of real-estate and building activity. Non farm home-mortgage debt has grown by about $6.5 billion, or over one-fourth, since the war. At the end of 1946 the volume outstanding was chart nr the largest on record, surpassing the previous peak of 1930 by 15 per cent. Post-war expansion has occurred despite the fact that individuals have been paying off their mortgages at an extremely rapid rate. These pay-offs reflect a continuation of wartime influ ences—extensive real-estate transfers and mort gage refinancing, high incomes, and the use of accumulated liquid assets for reducing debts. In contrast to wartime experience, new mort gages made since the war have far exceeded pay-offs. For one reason, a growing proportion of mortgages has been created in connection with new home construction. During the war construction activity was curtailed and many individuals were forced to buy old homes at rising prices. Expansion of loans at that time reflected principally changing hands of old homes. The post-war rise in construction, how ever, has added new mortgages which did not exist previously. Another factor stimulating the volume of new mortgages has been the in flation in real-estate prices. The average size of mortgages recorded in 1946 was almost onefourth larger than in 1945. Finally, a substan tial proportion of the new mortgages has been G.I. loans, many of which are on a 100 per cent basis. Commercial banks have supplied the funds for almost one-fourth of the new mortgages, thereby expanding their business in this field more rapidly than any other group of lenders. In the Third Federal Reserve District most of the mortgage lending by member banks has been carried on by country banks, institutions in Philadelphia being more disposed to supply interim funds for builders than long-term financing for home owners. HOME MORTGAGE TRENDS BILLIONS OUTSTANDINGS NEW LOANS WHICH BANKS ARE MAKING REAL ESTATE LOANS? Member banks Third Federal Reserve District Distribution of incr ease in mortgages— June 1945 to ] December 1946 Resi dential Area Philadelphia..................................................... Outside Philadelphia.................................. 12% 88 Farm i% 99 Other Total n% n% 89 89 Third Federal Reserve District. . . Size of bank Banks with total deposits of— $100 million or more............................. $ 10 million to $100 million............. $ 2 million to $10 million............... Under $2 million..................................... 1939 1940 1941 1942 1943 SOURCE5 FEDERAL HOME LOAN BANK. Page 62 1944 1945 100% 100% 100% 13% 34 44 9 2% 22 58 18 3% 61 32 4 10% 40 42 Third Federal Reserve District. REPAYMENTS 100% 100% 100% 100% 100% 1946 8 What are the indications that mortgage lend ing has paralleled the recent decline in real estate and building activity? Chart IV shows that the post-war peak for recordings of non farm home mortgages was reached in October 1946 and that declines were registered in suc ceeding months. Seasonal factors, no doubt, have exerted a strong influence, but the avail able evidence, supplemented by interviews with men active in the mortgage field, suggests a change in trend. Home-purchase mortgages made by savings and loan institutions reached their peak as early as May 1946. The turnover of properties has been declining since about mid-1946. Much of the urgent buying apparently has been com pleted and construction of new homes probably CHART E NEW MORTGAGES... BILLIONS (ANNUAL RATE) has taken the edge off the used-home market. Similarly, mortgages made in connection with new construction have reflected the current level of building activity; for four months they remained below their peak of October 1946, a level not exceeded until March of this year. While the volume of new loans has declined, repayments apparently have continued at a rapid rate. Although the turnover on old prop erties is lower, pay-offs have been sustained by continued high levels of income and employ ment, and the inability of individuals to obtain many of the goods for which they have been saving. One explanation of the recent trend in the mortgage situation is to be found in a decline in demand for mortgage loans. Many indi viduals are unable to assume a heavy mortgage burden, and others are unwilling to incur long term debts under present conditions. Prices and Costs Costs of home building, shown in Chart I, were 45 per cent above pre-war levels in June 1946, before price controls were relaxed. Dur ing the remainder of the year, and particularly at the beginning of 1947, they shot up rapidly. In March they were about 80 per cent above the 1935-1939 average. Some estimates, includ ing other types of building, have placed the increase at over 100 per cent. To build at cur rent costs is out of the reach of many indi viduals and businesses. NONFARM MORTGAGE RECORDINGS .WHAT THEY ARE MADE FOR REFINANCING & OTHER HOME PURCHASE There are several factors involved in the cost increase. One is the rise in prices of building materials. The National Housing Agency esti mates that the increase in the cost of materials between the first quarter of 1946 and the first quarter of 1947 has been about 30 per cent. This is part of the rise in the general level of prices, of course. But the Bureau of Labor Statistics’ index of wholesale prices shows that building materials prices have risen faster than all wholesale prices since 1945. CONSTRUCTION A RECONDITIONING 1—1 , , AND WHO IS DOING THE LENDING INSURANCE CO'S AND MUTUAL SAVINGS BANK! INDIVIDUALS SAVINGS AND LOAN i/C ASSOCIATIONS wm BANKS AND TRUST CO’S '39 '40 '42 '43 '44 '45 s o 1945 1946 SOURCE: FEDERAL HOME LOAN BANK. vert-SAND LOWtRCHARTS NONFARM MORTGAGES OF *2^000 AND UNDER RECORDED. CENTER CHART: NEW MORTGAGE LOANS BY ALL SAVINGS AND LOAN ASSOCIATIONS. 1947 According to the NHA, labor costs have not increased so greatly as materials, but recently, builders indicate, labor has replaced materials as the number one problem. Wage rates have risen by 15 to 20 per cent since the end of the war. It is not basic wage rates alone, however, Page 63 that determine labor costs. Low efficiency, overtime, and over-scale rates have raised unit costs in excess of the stated boost in wage rates. To some extent, higher labor costs may arise out of an uneven flow of materials and the con sequent increase in building time. Workers must be paid while they are waiting for a load of bricks to arrive as well as while they are put ting up a wall. A contractor who is held up by shortages of key supplies must nevertheless keep his organization together if he wants to remain in business. When controls were released it was fairly easy to start building, and many people, includ ing inexperienced builders, were eager to begin. Foundation materials were available. As the construction program progressed, however, it became obvious that there was not enough of certain materials to go around. Building time lengthened and costs rose. In part, the boom is a victim of its own impatience. Building time for small homes is still far above normal. In most cases, houses are now being completed in six months; but many units under construction in the Philadelphia area still require from nine to fourteen months for full completion. Overhead costs, including interest, are burdensome under these conditions. All these factors add up to a big headache for the construction industry, and there are doubtless some instances in which builders and contractors are subject to a tight squeeze. That many experienced builders are now reluctant to start new operations is evidence that the squeeze may be growing tighter. On the other hand, it is also probable that in many cases builders’ and contractors’ margins, as well as manufacturers’ mark-ups, padded to allow leeway for unfore seen contingencies, have been larger than usual. Prices are not determined by cost factors alone. With demand at a high level, with the conditions of a sellers’ market present, it was entirely natural that the prices for building, from blueprints to window-latches, should ad vance to a point that is close to what the traffic will bear. One man’s prices are another man’s costs, hence it appears to the seller that his sale price is the irreducible resultant of the prices of materials and labor that he has to buy—and so it is. The seller must remember, however, that Page 64 the “costs” of the goods he buys are partly a consequence of his—and others’—demands for them. A reduction in effective demand would tend to force prices down along the entire chain of supply. The high prices of existing dwellings and buildings are closely related to the cost of new construction. Large scarcity premiums on the former make it worthwhile for the buyer to pay a high price for a new building. High reproduc tion costs, in turn, sustain the market for used buildings. The most urgent buyers are soon satisfied, however, and as prices rise a point is reached where, despite the great need for housing and the great desire for industrial ex pansion, potential buyers are “priced out of the market.” This seems to be the main source of difficulty at the present time. The supply of building ma terials has been improving, and although certain types of skilled workmen are scarce the volume of labor supply is, in general, adequate. High costs and prices are the problem. In the Phila delphia area it does not appear that there is as yet serious consumer resistance to the price of new dwellings. Although the veterans’ market is noticeably weaker, there are still many ready buyers waiting for completion of homes. But the fact that builders have curtailed operations in the face of rising costs is tacit recognition of the fact that new home prices have reached a danger point. The hundreds of thousands of families who constitute the “demand” for homes are, for the most part, thinking in terms of a $6,000 to $8,000 house, which is all they can afford. Above that price most of the market is likely to disappear. No builder wants to risk being caught with a row of $10,000 houses in an $8,000 market. From all parts of the country come reports of the cancellation or postponement of industrial and commercial building projects. A long con struction period, during which original cost estimates are far surpassed, discourages in vestors who are wary of being burdened with high fixed charges for construction whose re placement costs, they feel sure, will fall. Immediately after the first world war a situation developed that was in many respects similar to the present one. As building prices rose during 1919 and 1920 buyers left the mar- V v k ket, and the construction industry experienced a severe slump. It was not until 1921, when construction costs and real-estate prices had declined substantially from their post-war highs, that the industry recovered and started on a period of sustained activity. Materials and labor prices did not fall back to pre-war levels after the first world war, but they declined sufficiently to come into reasonable conformance with the general price level and so permit a rise in building activity. Today’s situation differs in many respects from that of 1920, but there is sufficient parallel with the events of that period to serve as a warning of possible trouble ahead. All evidence points to the con clusion that high building costs and inflated real-estate prices are again threatening — at least temporarily—to choke off a sustained building boom. Prices and Risk Inflated real-estate prices raise problems which are just as serious for mortgage lenders as for home buyers. Because of their long-term nature, real-estate loans involve exceptional risk in periods of inflation. Although current in comes of home buyers may appear to justify loans at existing high prices, reduced incomes or even unemployment in the future may mean eventual foreclosure and loss. Moreover, home values may actually fall below the amount of the outstanding mortgage. How are lenders attempting to solve these problems? Has lenders’ resistance combined with buyers’ resistance to bring the boom to an end? As early as last fall the secondary market for G.I. mortgages began to reflect a more cautious attitude on the part of mortgage buyers. Since that time, investors have been coming back into the market, but on a much more selective basis. There are indications also that original lenders are becoming more conservative in some re spects. Appraisals are the crux of the situation. Appraised value should reflect the flow of bene fits of a property over its lifetime. Present mar ket prices reflect current scarcities rather than enduring values, and appraisals based on re placement cost under present conditions would likewise result in values that may not be sus tained. Appraisers must take into considera tion long-run values that will prevail after cur rent abnormal conditions have run their course. Many lenders as well as Government agencies are offering increasing resistance to current high real-estate prices. Beginning this year, the Veterans Administration returned to the prac tice of specifically designating the appraisers to pass on the “reasonable value” of properties on which G. I. loan applications are filed. This eliminated the use of a panel of designated ap praisers, which in some cases made possible unduly high appraisals. The Federal Housing Administration has also attempted to resist in flationary tendencies. In a sense these appraisals have come to represent a sort of ceiling price which some consider unrealistic and a deterrent to new construction. But inasmuch as home buyers and investors both rely heavily on VA and FHA appraisals, these agencies are charged with heavy responsibilities for maintaining sound mortgage and real-estate conditions. Requirement of substantial cash down pay ments does not obviate the need for careful appraisals, but can contribute to the solu tion of mortgage lending problems. Sizable down payments may enable borrowers to pay off their mortgages over a shorter period of time, lessening somewhat the risks inherent in long-term loans. They reduce the total amount of interest which borrowers must pay and establish better equity from the outset, thereby providing an incentive for keeping up payments when conditions become less favorable. Some mortgage lenders indicate that larger down payments are being required than heretofore. Despite the fact that Veterans Administration guarantees were designed to take the place of down payments, many lenders have ceased making 100 per cent G.I. loans and now ask 10 per cent cash payment. Amortization of mortgages, now almost a uni versal practice, may also help to prevent diffi culties in the future. But again, amortization should not be relied upon to compensate for inflated appraisals. Ideally, amortization sched ules today should call for heavy early payments, while incomes are high. Apparently, however, such schedules are not in widespread use. Alternatively, shorter-term loans could be made with provision for renegotiation later if the bor rower is unable to meet the heavy charges. But there is no general evidence that maturities are becoming shorter. In fact, in some cases they actually have been lengthening—perhaps partly Page 65 because many of the G.I. loans now being made are to veterans with lower incomes, necessitating smaller payments over a longer period, and perhaps also because of the greater prevalence of down payments. Pay-offs might be even greater than they have been except for the fact that many mortgages place a limit on pre payments. In their search for sustained sources of income, lenders may be doing themselves as well as the economy a disfavor if they place undue restrictions on prepayments while in comes are high. Interest rates on mortgages apparently have shown no general tendency to rise. An increase in rates might be expected to choke off some of the demand for mortgage credit and help com pensate for some of the greater risks of lending. However, rates on G.I. and FHA loans are gov erned by law, and the pressure of investable funds apparently is still too great to permit other rates to increase. The Construction Industry in the Economy In April of this year over 1.6 million workers were employed directly in the construction in dustry—a total equal to 4 per cent of all nonagricultural employment. In “good years” of the pre-war period this proportion often reached 6 per cent, with at least an additional 6 per cent employed in industries supplying building ma terials and services. It is estimated that almost 20 per cent of all revenue freight in 1929 con sisted of construction materials. Last year pri vate construction was valued at $8 billion—25 per cent of the total private investment in new capital goods. Clearly, the level of construction activity has an important bearing on the welfare of the nation’s economy. Building activity has shown wide fluctuations over the years, but the building cycle—from a period of high activity through recession and recovery to another high—does not correspond in time with the more common “trade cycle,” or “business cycle” of three to four years’ duration. The building cycle, an upswing of which was interrupted by the war, appears to have a length of about seventeen or eighteen years. This does not mean that there is no con nection between the construction industry and the level of general business activity. The ups and downs of the business cycle cause minor fluctuations in building; but, most important, Page 66 new building, because it stimulates many sectors of the economy, exerts an influence on the busi ness cycle which is greater than its dollar volume would indicate. When construction is expanding, business booms are accentuated and depressions are made less severe. In its down ward phase, the building cycle has a dampening effect on the booms and aggravates depressions. These long-run tendencies have important implications for the present business situation. As production of consumers’ goods increases and the flow of supplies becomes sufficient in one line after another, readjustments in prices and em ployment will take place. Once inventories are restocked, unless consumption increases to an unexpected degree, workers who were formerly producing goods for inventories will have to seek other jobs. Such developments are already apparent in some of the “soft goods” lines. Between March and April nonagricultural em ployment throughout the nation fell off by 140,000. Almost all of the decline took place in the textile, apparel, and other soft goods industries, reflecting, in some cases, a reestab lishment of seasonal trends. But this need not be the forerunner of large-scale unemployment. If price and employment readjustments take place gradually and smoothly, the“bump” which the economy might feel could be very slight. It was hoped that a sustained expansion of construction activity would cushion the shock of any recession that might develop. This could not be done by putting garment workers to lay ing bricks, of course; but the multiple shifts in employment and the new incomes generated in the process of building homes and factories could be an important factor in taking up the readjustment “slack.” Thus far this spring, the seasonal increase in construction employment has been disappointing. As we have seen, the building boom has hit a snag. Postponements of industrial construction, moreover, may mean cutbacks in orders for equipment as well. With out a rising trend in construction, the prospects for smooth readjustment are considerably less favorable. Mortgages and Finance Just as construction plays a strategic role in business activity, mortgage lending exerts an important influence on financial conditions. Mortgages constitute a substantial segment of private debt. Expansion during periods of in flation runs the risk of burdening debtors with long-term obligations which they may be unable to discharge. Commercial bank lending on mortgages has an added significance in that the resulting creation of deposits tends to augment inflationary pressures, particularly if the funds facilitate speculation in the real-estate market rather than new construction. To the extent that the recent mortgage situation reflects a more cautious attitude toward inflated prices, there fore, the economy will benefit. Which Way? The boom in mortgage lending also has pro found implications for lenders. The rate of return on mortgages is higher than that on in vestments and many other types of loans. But expenses are high, particularly because of serv icing operations as loans are amortized. The net return on mortgages becomes even smaller when losses, which have been severe in the past, are taken into account. Provision for future losses can be made now by setting aside re serves. While insurance and guarantees may solve the individual lender’s problem, these safe guards cannot eliminate the over-all risks in mortgage lending. Undue reliance on guar antees and unsound lending which would call for Government agencies to make good a large amount of their guarantees might eventually jeopardize the position of private lending institutions. As long as individual incomes and business activity remain at their present levels, hope for recovery from the slump in new construc tion depends on the possibilities of lower costs. There are three main cost factors: labor costs, materials costs, and materials flow. The first of these—labor costs—appears at first glance to be unfavorable. Philadelphia home builders, in line with a national trend, signed a contract last month with building trades workers calling for pay boosts averaging 20e an hour. Applying these raises to hours worked on typical homes, it has been estimated that they will raise the cost from $200 to $400. Without disparaging the upward pressure on costs which wage increases will undoubtedly create, it must be pointed out that there are some offsetting factors. The present contract strictly prohibits over-scale pay and unnecessary overtime work. To the extent that these are now eliminated, the new wage rates are perhaps not so much in excess of the old scale that was actually paid as the contract terms indicate. Furthermore, if the new contract will eliminate labor pirating and excessive labor turnover and, through stabilizing the market, promote in creased efficiency, the increase in unit labor costs will be minimized. This also applies to other areas in some measure, although the specific contract clauses may not exist. The labor supply situation should improve in the coming months. The adequacy of apprentice training programs is subject to question, but training is going on and new men are coming into the industry. These various elements of cost and risk im pinge more heavily on some banks than on others. As the following table indicates, mort gage lending in this district is of particular im portance to country banks and institutions of relatively small size. HOW IMPORTANT ARE MORTGAGES TO BANKS? Percent of total loans—December 1946 Third Federal Reserve District Resi dential Farm Other Total Area 3% 34 Third Federal Reserve District. * Less than .05 per cent. 2% 10 6% 48. 19% 2% 6% 27% 3% 27 39 42 Third Federal Reserve District. . . Size of bank Banks with total deposits of— * 3% * 2% 13 9 5 A% 6% 27% Real estate and construction prospects in the near future will depend to a large extent on gen eral business conditions. Both are strongly influenced by the incomes of individuals and businesses. No analysis of the factors bearing upon construction alone can hope, therefore, to be a firm prediction of what will happen to the building boom. But setting down what we know about the construction situation may throw some light on future developments. 19% l% 10 2% 53 57 Little hope is expressed that building mate rials prices will decline substantially in the immediate future. The index of all building material prices has leveled off, but with the exception of some grades of lumber and a few other items there have been no actual declines. Page 67 With building at a lower level than expected, however, it is probable that materials will be more plentiful than had been anticipated and that stocks will be built up more quickly. The effect that this will have upon prices is, of course, not determinable, though it is possible that by late summer it may induce a consider able downturn; but it is certain that it will contribute to a much smoother flow of materials to the building site. This, in turn, will shorten building time and improve efficiency all around. The probability of a smoother flow of mate rials is the most favorable factor in the cost situation. Unfortunately, it will not be fully effective for some months. Unless some factor operates to bring real estate and new construction prices down, it is probable that this summer will see consumer resistance make itself felt through fewer property transfers and a lower level of construction activity. When a readjustment does come, a relatively slight de cline in prices will probably uncover a large market. If incomes have fallen off in the interim, however, a considerably larger read justment will be necessary. And the longer construction remains at a low level, the more danger there is that the national income will decline. Prospects for mortgage lending depend pri marily on the outlook for construction. Reduc tion of building costs would bring prices of homes nearer to levels which buyers could afford to pay. If prices remain high, not only will many individuals be prevented from buying new homes but others will postpone home pur chases in anticipation of lower prices. According to the Federal Home Loan Bank Review, home mortgage debt may increase during 1947 by $3 billion to $4 billion, as com pared to $4.5 billion in 1946. Reports from several mortgage lenders in Philadelphia sug gest that the volume of new loans is expected to be less than in 1946. Pay-offs are apt to slacken, however. Incomes may decline; and even if they are sustained, individuals may want to spend a larger part for long-awaited durable goods. Despite slower repayments, fewer new loans may make for less rapid expansion of mortgage portfolios. From the longer-run point of view, there Page 68 should be ample opportunity for lenders to expand their mortgage holdings. Industrial and public construction are planned in large volume. The need for housing seems almost unlimited. It must be pointed out, however, that need is not equivalent to economic demand. For the great majority of those who want and need homes, the ability to buy them or rent them requires that they be low-cost dwellings. In this con nection it is well to recall the experience during the decade of the twenties when high costs priced a large portion of the “needs” out of the market. There is every reason to believe that once the period of readjustment is out of the way the construction industry can look forward to a period of unprecedented activity. But to realize the full potentialities of the market, building costs, especially housing costs, will have to be lower. There are in readiness new materials, new tools, and new methods, including prefabrication and site fabrication. If adopted, they will help to reduce costs. By mitigating the discontinuity of building operations they may also help to combat the “spread-the-work” doctrine which seems to be common throughout the industry. That doctrine has given rise to restrictive meas ures on the part of small groups within the in dustry, designed to protect the share of work done by each. In the past it has tended to perpetuate existing practices and relationships after they have become outmoded by technolog ical progress. The adoption of new methods and materials has been made difficult not only by these re strictions but also by consumer prejudice against new designs and by antiquated building codes which exist in many communities. The predomi nantly local organization of the building indus try, the large number of small specialized units, and the ease with which new firms can enter (or leave), while giving rise to healthy compe tition, have also minimized the possibilities of building research and over-all planning, both of which are important for the use of modern man agement techniques. Much depends on how well the construction industry, including both management and labor, can overcome these obstacles. The challenge of construction needs is great. To a significant degree, the manner in which it is met will determine future stand ards of living. BUSINESS AT RETAIL CREDIT STORES IN 1946 Spending increased sharply at retail credit stores in the Third Federal Reserve District and sales in 1946 surpassed all previous records. Compared with the year before, people in creased their expenditures primarily in the pur chase of those items which they had been denied during the war. The eagerness with which they bought goods in 1946 is likewise reflected in the notable shift from cash to credit buying. The record volume of business was not ac complished without affecting the resources of stores. At the end of the year current liabilities were larger than at the outset and although current assets were also greater they showed substantial change. Cash and Government se curities declined and inventories and receiva bles increased. Sales Sales in 1946 were higher than in the pre ceding year in all nine classes of credit-granting stores. Increases ranged from 18 per cent to Apparel stores made the smallest gains in sales. Production of clothing was a civilian essential that had not been curtailed seriously during the war, though, of course, quality was not up to standard and consumer choice was of necessity limited. Gains in sales at men’s apparel stores were greater than those at women’s apparel stores, owing largely to heavy demands on the part of veterans demobilized last year. RETAIL SALES BY TYPE OF TRANSACTION Percentage Change 1945 to 1946 Type of Business Total Sales Automobile dealers.......................................... Automobile tire and accessory stores . Department stores........................................... Furniture stores................................................. Hardware stores................................................. Household appliance stores........................ Jewelry stores...................................................... Men’s clothing stores..................................... Women’s apparel stores............................... +173 + 42 + 24 + 48 + 61 +138 + 27 + 24 + 18 Cash Sales Charge Account Sales +++++++++ The transition was facilitated by a reduction of income taxes on individuals and by a down ward adjustment of savings by individuals. As a result, consumer expenditures expanded more than $20 billion between 1945 and 1946. This rise in consumer spending and accompanying changes in spending habits are reflected in the findings of the 1946 retail credit survey of this district which is conducted annually through out the country by the Federal Reserve System. 173 per cent, as shown in the accompanying table. The greatest gains were made by auto mobile dealers and household appliance stores, which is not unexpected in view of the fact that the public had encountered the greatest war time famine in these items. +++++++++ Production of goods and services was main tained at an unusually high level in 1946 while our economy was undergoing major readjust ments from a war to a peace-time basis of operation. Some fears had been expressed that business activity would encounter a severe jolt upon the curtailment of Government ex penditures for war purposes, but the initial adjustments were made with comparative ease. A decline in Government expenditures from $84 billion in 1945 to $85 billion in 1946 scarcely affected business activity because individuals and industries quickly seized the opportunity to buy goods that were coming on the market in rapidly growing volume. Install ment Sales +199 + 68 + 34 + 43 + 69 +182 + 32 + 22 - 3 Growth in Credit Buying The large dollar volume of sales was sus tained in part by a shift from cash to credit buying. At all major classes of stores except furniture stores and automobile dealers, in creases last year were greater in credit sales than in cash sales. In this respect the buying habits of people showed the beginning of a return to the pre-war pattern. However, auto mobile dealers and furniture stores did not experience the same shift from cash to credit buying which occurred in the other seven types of stores. Because of unusual difficulties en countered last year, automobile production fell far behind schedule and as a consequence dealers had to allot the few cars available. The abundance of customers with cash in hand may explain, in part, why cash transactions ac counted for 76 per cent of automobile sales in contrast to only 42 per cent in pre-war years. Page 69 CURRENT ASSETS AND CURRENT LIABILITIES Percentage Changes—1945 to 1946 Current Liabilities Current Assets Type of Business Cash, Bank Dep. and Govt. Sec- Automobile dealers............................................................................. Automobile tire and accessory stores....................................... Department stores................................................................................ Furniture stores...................................................... .............................. Hardware stores..................................................................................... Household appliance........................................................................... Jewelry stores........................................................................................... Men’s clothing......................................................................................... Women’s apparel................................................................................... + - 47 9 17 14 1 3 21 27 26 Total Inventories Receivables In any event, it is quite apparent that pur chases of automobiles and furniture took prior claim on the cash resources of buyers. It is only reasonable to expect increased installment buying of these items as production catches up with demand. Changes in the Current Position of Retail Credit Stores +ni + 93 + 47 + 64 + 41 + 89 + 79 +101 + 51 + 66 + 37 + 46 + 29 + 52 +104 + 39 + 56 + 21 . . The large volume of business transacted by the stores last year was accompanied by changes both in the size and composition of their cur rent assets and current liabilities. Throughout the year, current liabilities increased more than current assets, so that by the end of the year their current ratios were generally lower. In all classes of stores there were increases in notes payable to banks as well as in trade pay ables and other current liabilities. Cash, bank deposits, and U. S. Government securities decreased in all types of stores with the notable exception of automobile dealers. The relatively greater proportion of cash sales enabled them to improve their cash position + + + + + + + + + 67 22 17 21 23 28 27 15 11 Notes Payable to Banks + 109 + 25 + 41 + 95 + 44 + 37 + 353 +1067 + 53 Trade Payables Other Current Liabilities Total Current Liabilities +150 +187 + 10 +169 + 88 +237 + 88 + 38 + 34 +141 +164 + i + 14 + 60 +153 + 37 + 38 + 4 +144 +174 + 5 + 48 + 71 +117 + 83 + 44 + 28 while other stores experienced declines. Inventories and accounts payable were higher at all classes of stores without exception. In creases in inventories, as shown in the accom panying table, range from 40 per cent at hard ware stores to 100 per cent and over at auto mobile dealer establishments and men’s clothing stores. Changes in the inventory position of automobile dealers are not particularly signifi cant, since inventories at the beginning of last year were extremely low. At men’s clothing stores, inventories had been drained by veterans demobilized after V-J Day and it should be noted that despite substantially higher inven tories by the end of 1946 buyers were still confronted with a limited choice of items. Sportswear and tweeds are in greater abun dance, but stocks of worsted suits are still inadequate. The huge volume of trade in 1946 was based upon a high level of income. People saved less and spent their money more freely for goods that flowed into retail markets in ever-growing volume and at higher prices than those pre vailing the year before. SW5 Page 70 Total Current Assets BUSINESS STATISTICS Production Production Workers in Pennsylvania Factories Philadelphia Federal Reserve District Adjusted for seasonal variation Not adjusted Summary Estimates—April 191/7 Per cent change April 1947 from Mo. ago Indexes: 1923-5 -100 Apr. 1947 Mar. Apr. 1947 1946 INDUSTRIAL PRODUCTION 105p 106 MANUFACTURING................. 107p 108 Durable goods............................. 114p 113 Consumers’ goods................... 98p 100 Metal products... 144 137r Textile products .................. 67p 71 Transportation equipment . llOp 112 1 ood products............................. 124p 123r Tobacco and products............ 109 119 Building materials..................... 46p 52 Chemicals and products.... 140p 147 Leather and products............. 87 89p Paper and printing................... 118 117r Individual lines Pig iron............................................ 93 87 r Steel.................................................... 108 lOOr Iron castings................................. 97 85 Steel castings................................ 106 98 Electrical apparatus................ 233 228r Motor vehicles............................. 39 45 Automobile parts and bodies 123 122 Locomotives and cars............. 52 59r Shipbuilding.................................. Silk manufactures..................... 84 85 Woolen and worsteds.............. 72p 75 Cotton products......................... 43 45 Curpets and rugs........................ 91p 87 Hosiery............................................. 69 74 Underwear..................................... 132 127 Cement............................................. 68p 84 Brick.................................................. 54 58 Lumber and products............. 29 29 Slaughtering, meat packing. 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.............................. ELEC. POWER—OUTPUT Sales, total..................................... Sales to industries..................... BUILDING CONTRACTS TOTAL AWARDS!.................... Residential!.................................. Nonresidential!.......................... Public works and utilities!-. ii2 103 104r H0r 99 103r 72r 198 120 128 43 133r 84 115 Year ago 1947 from 4 mos. 1946 - 1 - 1 4- 2 - 2 + 5 - 6 - 2 +1 - 8 -10 - 4 + 2 + 1 + 2 + 3 + 4 - 1 + 40 - 7 - 45 + 4 - 15 + 8 + 5 + 6 + 3 + 6 + 7 + 7 + 6 + 54 + 3 - 45 + 4 + 1 + 18 + 9 + 4 + 2 81 r 98 r 81 110 120 35 96 57 + 7 + 8 +15 + 8 + 2 -13 + i -12 + 1 87 - 1 75r - 4 48 - 4 69r + 4 75 - 7 143 + 4 60 -19 52 - 7 29 + 2 + + + + + + — + + + + ii4 - 2 + + + + + + - a 15 12 1 14 42 35 18 1 48 1 16 ** 7 5 9 10 94 191p 109 91 124 96p 82p 45 104 I87p 169p 67 64 92 283 446 450 318 105 64 196 120 91 122r 90 84 77 107 191 162 74 71 loir 273 450 460 343 145 142 137 166 128 138 157 162 107 128 101 l 85 15 11 20 4 95 11 29 9 70 4 4 10 32 8 8 14 6 2 + 7 +47 - 2 - 9 0 +1 + 6 - 2 -42 - 3 - 2 + 4 -10 -10 - 9 + 4 - 1 - 2 - 7 + + + +13 - 9 +27 +64 34 172 129 82 122 112 58 69 88 189r 114 68 76 2 303 r 426r 412 290 + + + + + + + + — + + + 5 - 12 + 7 + 96 * Unadjusted for seasonal variation. t 3-month moving daily average centered at 3rd month.; ** Increase of 1000% or more from the low level. Mar 1947 Apr. 1946 103p 105p 106 107 102 103 139 68p 118p 118p 99 137r 73 119 118 110 45 148 89 U9r 102r 70r 208 113 116 43 135r 83 119 142p 88p 120 105 114 101 108 203 49 134 56 lOOr 107 r 89 110 212r 49 133 91r 103r 84 113 104 44 104 61 82 26 39 18 31 80 17 46 32 71 3 3 0 28 3 1 28 11 7 + + + + + Apr. 1947 87 r 73r 48 87 77 138 65 57 27 86 45 87p 69 129 67p 57 28 109 122 161p 99 92 126 96 r 80p 45 109 186p 175p 66 50 66 r 75 140 59 54 27 - 6 + 33 + 20 0 + 2 + 2 - 13 + 33 + 7 + 15 + 2 + 45 - 4 - 9 + 29 - 5 + 10 + n + 12 84 292 437 463 322 110 44 145 117 93 124 96 r 112 83 56 77 70 109 92 189 188 r 169 119 75r 68 76 71 103 r 2 279 313r 417 r 459 424 455 326 293 + + + 139 132 139 153 111 119 107 92 15 47 14 59 99 98 174 110 93 133 151 131 78 p—Preliminary, r—Revised. Local Business Conditions* Percentage change— April 1947 from month and .. year ago. . Employment Mar. 1947 April 1946 Payrolls Mar. 1947 April 1946 Allentown............. Altoona.................. Harrisburg........... Johnstown...... Lancaster.............. Philadelphia ... Reading.................. Scranton................ +1 - 1 0 + 2 - 1 - 1 - 2 - 2 +n - 3 + 6 + 4 + 6 + 4 + 7 +10 + + + + - 6 1 3 7 1 3 2 4 +25 + 9 +16 +15 +24 + 9 +21 +20 Wilkes-Barre... Williamsport... . Wilmington......... York ...................... - 2 - 7 0 - 4 +13 + 1 +1 + 3 - 7 6 3 3 +22 + 8 +10 +10 Building permits value Mar. 1947 + 83 ** - 37 +178 + 17 +118 + 72 - 55 + 42 +221 +240 + 23 + 44 April 1946 +174 ** - 58 +200 +477 - 66 - 21 + 29 + 60 +483 +193 - 57 + 38 Retail soles Mar. 1947 April 1946 - 7 -11 - 8 + 6 - 7 - 4 +1 -12 + 5 + 3 + 6 +14 +14 + 6 +13 + 4 - 7 +14 - 3 - 7 + 3 + 7 Debits Mar. 1947 - 1 + 3 -17 + 3 - 6 - 3 - 1 - 3 +13 - 4 + 2 - 5 - 5 April 1946 +18 +16 +14 +22 +25 - 4 +21 +17 + 5 +21 +24 - 9 +21 Weekly Payrolls Weekly Man-Hours Worked 1,110,400 635,800 $49,183,000 30,673,000 43,475,000 25,054,000 474,700 18,510,000 18,422,000 Employ ment All manufacturing ........... Durable goods industries Nondurable goods industries............................... Changes in Major Industry Groups Employment Indexes (1939 average=100) Apr. 1947 In dex All manufacturing................ Durable goods industries. Nondurable goods industries .......................... Food .......................................... Tobacco..................................... Textiles........................................ Apparel........................................ Lumber............................................. Furniture & lumber products Paper................................................. Printing and publishing.... Chemicals........................................ Petroleum and coal prods.. . Rubber.............................................. Leather............................................. Stone, clay and glass............. Iron and steel............................... Nonferrous metals..................... Machinery (excl. electrical).. Electrical machinery................ Transportation equip. (excl. auto)................................ Automobiles and equipment. Other manufacturing .......... Per cent change from Mar. Apr. 1947 1946 Payrolls Apr. 1947 In dex Per cent change from Mar. Apr. 1947 1946 129 157 0 +i + 9 +14 256 292 +1 + 3 + 19 + 23 105 124 96 83 93 93 102 118 136 121 141 173 96 139 141 168 197 230 -1 0 -5 -2 -1 +2 “I -2 0 -1 0 -8 -1 +3 +2 0 -1 -2 + 3 + 2 + 7 + 1 + 9 + 9 +18 + 3 + 2 + 1 + 4 + 3 - 2 +12 + 6 +12 +21 +84 212 216 198 175 208 169 212 230 258 228 234 360 189 265 259 308 365 422 + + - 2 3 9 7 6 3 2 0 3 1 3 4 1 4 7 1 1 4 + 14 + 13 + 20 + 9 + 17 + 22 + 38 + 15 + 21 + 13 + 14 + 6 + 7 + 22 + 14 + 19 + 33 +138 225 193 149 -6 +2 +2 -14 +22 +12 347 365 274 -11 + 2 0 - 27 + 32 + 27 + + + + - Average Earnings and Working Time April 1947 per cent change from year ago Weekly Earnings Aver age All manufacturing. . . . $44.29 Durable goods indus.. 48.25 Nondurable goods industries .................. 39.00 Food .................................. 38.97 Tobacco ............................. 27.06 Textiles................................ 37.62 Apparel................................ 31.50 Lumber........................... 34.05 Furniture & lumber products .................. 38.63 Paper.................................... 42.16 Printing & publishing.. 53.83 Chemicals.......................... 44.65 Petrol. & coal prods. . 50.42 Rubber .......................... 51.72 Leather................................ 33.54 Stone, clay and glass.. . 43.77 Iron and steel................... 49.57 Nonferrous metals.... 47.66 Machinery (excl. elec.). 47.06 Electrical machinery. . 51.23 Transportation equip. (excl. auto)................... 47.02 Automobiles & equip.. 52.07 Other manufacturing . 38.56 Hourly Earnings Weekly Hours Ch’ge Aver age Ch’ge Aver age Ch’ge + 9 + 8 $1,131 1.224 +11 + 8 39.2 39.4 - 2 0 +10 +11 +12 + 8 + 7 +13 1.005 .947 .743 1.010 .857 .877 +14 +14 +18 +16 +13 +20 38.8 41.2 36.4 37.3 36.8 38.8 - 3 - 2 - 5 +17 +12 +19 +12 +10 + 3 + 9 + 9 + 7 +16 +10 +30 .918 .967 1 353 1.103 1.281 1.239 .879 1.083 1.266 1.179 1.180 1.319 +27 42.1 43.6 39.8 40.5 39.4 41.7 38.1 40.4 39.1 40.4 39.9 38.8 + — + + + -14 + 9 +13 1.349 1.233 .998 + 2 +10 +15 34.9 42.2 38.6 -16 - 2 - 1 +20 +14 + 5 + 6 +10 +11 + 5 +u — 7 - 5 - 6 0 2 1 2 5 3 1 2 2 1 1 2 * Area not restricted to the corporate limits of cities given here. ** Increase of 1000% or more from the low level. Page 71 Distribution and Prices ................ Drugs ....................................... Dry goods.................................. Groceries..................................... Hardware..................................... Jewelry.......................................... Paper............................................ 1947 from Month Year ago ago Sales Total of all lines April 1947 from mos. 1946 - 1 —10 - 1 + 4 - 6 +22 + 4 - 3 +1 + 4 0 + 6 + 4 - S Indexes; 1935-1939=100 +10 + 3 -29 + 8 + 4 - 8 +12 - 7 +27 +49 +66 +52 +64 +65 + 3 + 7 +13 - 1 +16 - 9 +34 Sales Basic commodities (Aug. 1939=100) . Wholesale. . (1926—100)................... Farm.................................. Food .......................... Other.................................. Living costs (1935-1939=100) . . United States................ Philadelphia.................. Food ........................ Clothing........................ Fuels. . . Housefurnishings. . . Other............................... 175r 172 r 209 59 + 3 + 3 -14 -18 -21 + 2* + 14 + 13 + 1 - 1 - 5 + 2* 223 207 221 112 171 170r 210 53 - 2 + 2 + 1 +12 + 6* + 28 + 23 +138 + 43* Forest products......................................................... Grain and products............................................... Livestock..................................................................... 145 137 96 178 301 211 97 136 104 143 137 95 145 159 200 95 147 91 104 126 101 43 117 85 113 107 142 + 1 - 1 + 1 +23 +89 + 6 + 2 - 8 +14 + 40 + 8 - 5 +317 +157 +148 - 14 + 27 - 27 + + + + + + + - 19 17 1 18 97 55 6 9 19 138 135 96 143 156 171 82 127 95 135 132 95 150 70 188 83 140 84 98 125 101 34 61 69 95 100 130 MISCELLANEOUS Life insurance sales................................................. 207 194 255 + 7 - 19 — 5 207 201 255 226 -24* +697* +350* -58* ** + 83 + 2 - 1 + 7 24 20 219 31 47 217 3 1 221 FREIGHT-CAR LOADINGS Aug. 1939 - 4 +68 +220 148 177 162 132 - 1 - 3 - 3 0 +34 +31 +47 +28 + 97 +190 +142 + 65 156 155 182 181 125 180 138 0 - 1 - 2 0 0 0 + 3 +19 +19 +30 +19 + 9 +17 +11 + + + + + + + 320 223p 223 212p 209 222 242 139p 125 219r 205 r 226 263 203 Shoe ................................................................................ 58 58 96 82 30 79 37 Check payments....................................................... 224 220 * Computed from unadjusted data. p—Preliminary. ** Increase of 1000% or more from the low level. Source: U. S. Bureau of Labor Statistics. + 13 + 13 - 2 + 12 0 228 211 262 252 248 243 226 265 318 245 219p 210p 222 125p Per cent change from Apr. Month Year 1947 ago ago 255 247 228 235 249 282 279 232 222p 250 249 232 228 261 193p Philadelphia ............. Women’s apparel.................................................... Source: U. S. Department of Commerce. Prices Mar. Apr. 1947 1946 Apr. 1947 RETAIL TRADE Inventories Paper "............................................ Not adjusted Adjusted for seasonal variation Per cent ch mge April 1947 1947 from Apr. Mar. Apr. from 1947 1947 1946 Year Month 4 1946 ago ago Per cent change Wholesale trade Unadjusted for seasonal variation r—Revised. BANKING STATISTICS MEMBER BANK RESERVES AND RELATED FACTORS Third Federal Reserve District (Millions of dollars) April 30 May 7 May 14 May 21 Changes in four weeks Sources of funds s Reserve Bank credit extended in district................................ Commercial transfers (chiefly interdistrict)........................... Treasury operations.............................................................................. +12 + 7 -19 - 8 +23 -23 +20 +15 -21 -15 +10 - 1 + 9 +55 -64 - 8 +14 - 6 + 4 -12 + 3 +11 - 8 +14 Changes in weeks ended— Changes in— Reporting member banks (Millions $) 21, 1947 Assets Commercial loans...................... $ 413 18 Loans to brokers, etc............... 20 Other loans to carry secur.. . 53 Loans on real estate................. Loans to banks ................... 2 186 Other loans.................................. Four weeks One year -$ 4 +$117 Government securities........... $1308 207 Other securities.......................... —$15 - 3 -$532 + 15 Total investments.................. *1515 — $18 -$517 Total loans & investments.. *2207 Reserve with F. R. Bank . . Balances with other banks Liabilities Demand deposits, adjusted. U. S. Government deposits. . Interbank deposits.................... Borrowings..................................... Capital account.......................... Page 72 —$22 -$400 $420 33 84 47 - *5 + *3 + - 1 2 $1822 309 53 316 4 24 263 -$ 8 1 - 18 + 1 - 1 — 2 + 2 +* 47 + 68 - 472 - 45 1 + 3 Uses of funds: Member bank reserve deposits....................................................... + 1 1 Total loans.................................. $ 692 Total............................................................................................................. 1 +$138 - 24 - 42 + 12 + 1 + 32 ww 8 1 2 1 2 4 -$ + + + - i - 1 Federal Reserve Member bank reserves (Daily averages; dollar figures in millions) Re Held quired Ex cess Pjiila. banks 1946: May 1-15. . 1947: Apr. 1-15 . Apr. 16-30. . May 1-15.. $412 410 414 414 $400 404 406 408 $12 6 8 6 Country banks 1946: May 1-15. . 1947: Apr. 1-15 . Apr. 16-30. . May 1-15.. $372 379 371 377 $313 330 330 332 59 49 41 45 Ratio of excess to re quired 3% 2 2 1 19 15 12 13 + 4 - 3 (Dollar figures in millions) - 6 Changes in 21, 1947 Discounts and 9.6 advances.................. $ 1.6 Industrial loans.... 1626.6 U. S. securities.......... Total............................. $1637.8 Fed. Res. notes ... 1635.6 Member bk. deposits 785.5 35.5 U. S. general account. Foreign deposits . 38.1 2.1 877.5 Gold certificate res.. 35.1% Reserve ratio.............. Four weeks -$ 3.4 + 0.6 + 18.1 +*15.3 - 1.8 - 3.6 + 5 8 - 6.2 One year +* 2.2 + 0.3 + 32.5 +*35.0 + 28.5 + 18.3 - 6.0 - 13.1 - 0.9 + 5.1 - 20.3 - 0.8% - 0.2% THE THIRD FEDERAL RESERVE DISTRICT
@FedFRASER