The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
:u?OL;i RAR m 1 4 1946 BUSINESS REVIEW FEDERAL RESERVE RANK OF PHILADELPHIA MAY 1, 1946 First Quarter Review of Business The headlines tell the story. January 2: place and ready to go, but there was frequent “Boom in Industrial Production Forecast Despite clashing instead of meshing of gears. In some Labor, Price Troubles”—optimism with a note instances progress was retarded by shortages of of restraint. January 19: “Household Wonders skilled labor and materials. In other cases the Are Only for Display, Would-Be Buyers Find”— flow of output was interrupted while labor and production goes civilian but in many cases only management went into a huddle over the issue as far as the show windows. January 21: “Steel of wage rates. A clash between costs and pricing Strike Begins”—Pittsburgh joins Detroit in liv occurred in one industry after another and pro ing on wartime savings. February 15: “New duction was delayed. Meanwhile, the consumer Stabilization Policy Allows Higher Wages and grew more impatient because civilian goods Prices”—the dikes spring another leak. March were not available in anything like the quanti 11: “Dejected Builders Can’t Even Guess New ties and types people were eager and able to Home’s Price or When It Will Be Ready”—the buy. Nation’s Number One Problem. March 20: “Public Has Itchy Feet, Plenty of Cash; Vaca The Difficulties Imagined tion Resorts Flooded With Requests”—Christ When the war ended many officials, both pub mas shopping which began early never stopped. lic and private, feared a palsy of depression. In short, the first three months of this year Unemployment was expected to attain high were characterized by a spasmodic flow of end levels as a result of demobilization. Consumer products, a wave of strikes, and a flood of purchasing was expected to collapse in the wake spending. The first quarter of this year was in of sharply curtailed Government expenditures. Fortunately, those forecasts proved to be erron many ways a more difficult period than the pre ceding quarter. In the last three months of 1945 eous. » we were busily engaged in closing out the war Unemployment was only 3 million instead of and in tooling up for peace. Salvaging materials 8 million as had been predicted. Teen-age and intended for war and overhauling assembly lines elderly workers and women who constituted for civilian production were primarily engineer the emergency working crews during the war, ing jobs. By the end of the year the technicians retired from the labor force in greater numbers had virtually completed that phase. than expected. Veterans, though discharged by the millions, did not enter the labor force as The next phase of readjustment was more rapidly as expected. Some took time out to re turbulent. The machinery of production was in establish homes or to attend to personal alfairs, Page 47 and others elected to complete their education before looking for jobs. The contraction of Government expenditures was scarcely noticed. Although war payrolls and Federal purchases were down more than a third from the already sharply contracted fourth quarter of last year, consumers kept on spending freely. Civilian production now stands at the highest level ever reached but output still falls short of demand. The Difficulties Encountered The progress of reconversion is apparent in the records of the national output of goods and services. Despite all of the obstacles encoun tered, production for the civilian market was at the rate of $150 billion at the end of the first quarter. Compared with the preceding quarter, there was a small gain in output of consumers’ goods and services and a substantial gain in producers’ goods. Productive capacity is enor mous but greater output hinges upon reconcili ation of the clash between costs and prices in basic industries like steel and coal as well as numerous producers of small but essential items. Business Activity in the Third District The difficulties encountered during the first In the Third Federal Reserve District, busi quarter centered on wages, prices, and indus ness activity in the first quarter of 1946 was very trial relations. Workers sought higher wage much like that in other parts of the country. The rates to compensate for reduced “take-home” lines sketched in the group of charts summarize pay. Producers were naturally reluctant to incur the major changes—industrial production and higher costs while the Government kept the lid employment recovered from their February on prices. Disagreement over this issue caused wage rate troubles, trade zoomed merrily up work stoppages in numerous industries and as a ward without interruption, and construction rose consequence the flow of goods was retarded. sharply in March by reason of new contracts for family dwellings. There is no easy remedy because wages and It may be recalled that industrial production prices are complementary; they cannot part company indefinitely. If prices rise faster than had a setback in the months immediately after wages, consumers cannot buy all that is pro the war ended, but production pushed ahead duced, and the economic machine bogs down. If vigorously in the closing months of 1945. The labor and other costs rise faster than prices, van subsequent relapse was occasioned largely by ishing profits kill off enterprise and again the work stoppages here and elsewhere in the steel, economic machine bogs down. If wages and automobile, and electrical equipment industries. prices chase each other without restraint, we court inflation and disaster. The February dip was most severe in durable goods; in fact, there was no recession whatso ever in consumers’ goods, according to the com Toward Solution of the Difficulties posite index for the district. Interruptions When idleness through industrial unrest caused by industrial disputes were confined threatened the orderly processes of reconversion largely to plants making durable goods like a policy had to be devised to facilitate the settle steel and transportation equipment. In the tex ment of labor-management disputes without tile, apparel, and leather industries, so promi complete sacrifice of price control. Collective nent in this district, wage readjustments were bargaining is being retained as the basic proce effected with practically no interruptions in dure for establishing wages but limitations were operation. imposed upon the extent to which wage increases Although strikes were less serious than in may be passed on in the form of higher prices. Provision has been made for granting price relief some other parts of the country, numerous where firms or industries are experiencing hard plants in this district were affected in that they ships and price control is being relinquished were unable to get parts and components. The where such action has little or no significant adverse effect upon employment in Pennsylvania effect upon the cost of living. Within the frame factories is apparent in the chart. However, the work thus established most of the labor-man resumption of employment in March is gratify agement disputes that arose during the first ing. In that month the volume of employment increased in 51 individual lines of industry, three months of this year have been settled. Page 48 \ BUSINESS TRENDS IN THIRD DISTRICT (1935-39=100) INDUSTRIAL PRODUCTION* EMPLOYMENT INDEX INDEX 140 130 PENNSYLVANIA FACTORIES LAST QUARTER FIRST QUARTER LAST QUARTER FIRST QUARTER 1945 1946 1945 1946 TRADE DEPARTMENT STORE SALES CONSTRUCTION CONTRACTS AWARDED’ LAST QUARTER FIRST QUARTER LAST QUARTER 1945 1946 1945 * ADJUSTED FOR SEASONAL CHANGES. compared with decreases in only 7 lines. The greatest gains, percentagewise, occurred in steel works, blast furnaces, foundries, iron and steel fabricating mills, automobiles and locomotives —plants that had been involved directly or in directly in national wage negotiations. FIRST QUARTER 1946 **3-M0NTH MOVING AVERAGE. are confronted by a high labor turnover. Pro duction of men’s clothing in Philadelphia is held up for want of hand workers needed to perform the finishing operations on garments. Retail trade continued to expand with un abated vigor. The temporary decline in depart In the Philadelphia area, employment in ment store sales of the district last December March in both manufacturing and non-manu after adjustments reflected shortages in numer facturing concerns was above January levels. ous lines and advanced holiday buying in the Textile mills are still handicapped by shortages preceding month. Current dollar sales are more of raw materials but a greater difficulty is the than twice the pre-war volume, but it must be shortage of experienced workers. A similar sit recognized that much of the bulge represents uation exists in apparel establishments which advancing prices. Page 49 In order to meet minimum housing require tial construction has caused delays by tying up ments about 175,000 new homes must be built materials unsuitable for home construction. in this district before the end of 1947. Not only Many builders contend that price ceilings are here, but throughout the country, there is an the major bottleneck to expanding construction. urgent need for housing at prices that buyers or renters can afford to pay. The housing short Growing realization of the world-wide food age did not develop over night and it cannot be eliminated over night. During the depression, shortage affects all phases of local agriculture. building was at a low ebb and during the war Farm labor is scarce and so is farm machinery. Costs are higher and so are prices. Cash receipts home building had to be curtailed. from marketing continued to flow near record Meanwhile the number of families has been volume in the early months of the year. Some increasing rapidly. For the entire country, mar of the increased farm income goes into the re riages averaged about 1.2 million a year before duction of old mortgages but the abundance of the war but during the last five years they have cash is also continuing to push up land values. averaged about 1.6 million a year. Many of the Although average values throughout the coun newly married men were called into the armed try are still below the high level reached after services before they could establish homes. Now the First World War, they have risen above this they are returning, and until the housing deficit peak in about one-third of the states, including is met thousands of them will have to live New Jersey in this district. “doubled up” or occupy substandard dwellings. For the immediate future, as in the months It will take considerable time before adequate housing can be provided. The industry was dis just past, we must press toward the same goals rupted by the war and has to be reestablished. —to sustain and increase production and to Building materials are scarce, labor is difficult restrain inflationary pressures by a wise use of to get, and both are higher priced. In order to administrative measures until rising output ap hasten the construction of housing for veterans, proaches demand. We have not overcome all of limitations have been imposed upon most other the wage-price hurdles; in bituminous coal and forms of construction. Efforts are being made several smaller industries the issue is still un to provide low-cost housing by using priorities settled. However, the mechanism of labor-man assistance to steer lumber, brick, and other agement negotiations has been made more flex scarce building materials into homes well under ible and price ceilings are being removed as the $10,000 sales and $80 rental limits. Some rapidly as possible where such action does not builders contend that restriction of nonresiden- jeopardize prices at the consumer level. Banking Developments During the First Quarter Although banking conditions during the first quarter of 1946 were influenced in some degree by developments in the business situation, Gov ernment fiscal operations continued to dominate the picture. The period followed directly on the heels of the Victory Loan Drive, and experience with other war loans would lead us to expect some decline in bank deposits at such a time. De posit totals, however, appear to have been influ enced to a greater degree during recent months by the use of part of the Treasury’s huge cash holdings to reduce the public debt. Normally, bank credit extended to business Page 50 tends to decline early in the year as inventories have been liquidated by the holiday trade and by continued reduction of receivables during January and February. Contrary to the usual seasonal decline, commercial, industrial, and agricultural loans of reporting member banks increased rather steadily through January, Feb ruary, and March of this year, and reports from country banks indicate a similar trend. This ex pansion was particularly marked in the Third Federal Reserve District, where such loans by reporting member banks increased about 14 per cent as compared with a 3i/2 Per cent rise for the country as a whole. Loans to business and agriculture, it is true, now represent only about one-tenth of total earning assets of reporting banks in leading cities, but the contraseasonal growth is still sig nificant. It may be explained by the progress of reconversion and expansion to meet the enor mous demand for consumers’ goods and by ef forts to build up inventories in the face of rising costs and in anticipation of further increase in prices. Although relatively small in total, private financing by banks following June 1945, in creased more rapidly percentagewise than Gov ernment financing for the first time since 1937, and during the first three months of 1946 private financing continued to expand while Govern ment financing declined. Between January 2 and April 3, holdings of Government securities by reporting member banks throughout the coun try declined over $2 billion, and loans to pur chase or carry Government securities by almost $1 billion, representing a total decline of almost 6 per cent in their financing of Government debt. The principal reason for this decline was the cash redemption by the Treasury of more than $5 billion of outstanding public issues during the same period, a substantial part of which were held by banks. Another factor which may have accounted for some reduction in bank hold ings of Government securities is to be found in selling by individual banks to meet a loss in deposits, although such sales have been largely to other commercial banks or to Federal Re serve Banks. Loans against securities by reporting banks declined, but these are relatively unimportant at banks in this district. All other loans in creased during the quarter. In addition to the sharp upturn in commercial, industrial, and agricultural loans, real estate loans were up slightly, and unclassified loans—including con sumer financing—increased a little over 10 per cent. Current figures on earning assets are available only for reporting member banks in the larger cities. Judging by the rate of increase in country bank deposits and by their more substantial excess reserves at the end of 1945, however, it is probable that non-reporting banks also have increased their loans substantially. Random reports from country banks in this area substan tiate this opinion. The net effect of all these influences as shown by semi-monthly averages was a decline of more than $2 billion in deposits of all member banks between the latter part of December and of March. Deposits of member banks in this district, however, were approximately the same at the beginning and end of the period, which indicates some relative gain locally. Funds continued to flow toward country banks on net balance in this district as well as in the country as a whole. Whereas reserve city banks of the district experienced a decline in deposits of over 2 per cent between the last half of De cember and of March, country banks in the dis trict gained an offsetting amount. It is likely that the direction of this flow will be reversed later; not, however, as long as the world’s food supply is under heavy pressure and farm pro duction remains at high levels in this country, while at the same time farmers are unable to obtain farm machinery and consumers’ durables in large volume. The Government security holdings of report ing member banks in the Third District changed considerably between January 2 and April 3 of this year, both in total amount and in the rel What is the significance of recent develop ative importance of different issues. While their Government portfolios declined almost $200 ments for the present situation or for the imme million, proportionately more than at banks diate future of banking in the Third Federal throughout the country, holdings of Treasury Reserve District? In the first place, the district certificates actually increased. This is in contrast has maintained deposits in the face of a small to the rest of the country, where certificate hold decline throughout the country. Neither total ings by reporting banks decreased over three- reserves nor excess reserves have declined by any quarters of a billion dollars. Banks in the dis substantial amount in the district, although ex trict, on the other hand, decreased their hold cess reserves of all member banks in the United ings of Treasury bills by over 60 per cent and States decreased over $400 million in three Treasury notes by more than one-fourth. Gov months. These facts are consistent with earlier ernment bonds remained unchanged at report estimates that the district would experience rela tive gains in deposits during the transition period ing banks in this area. Page 51 as compared with the country as a whole, in con trast to the relative lag experienced during the war period. In spite of large holdings of liquid assets by business generally, the transition period has de veloped some needs for additional bank finan cing as indicated by increased commercial and industrial loans. While such loans still are not very important in total volume, either in the dis trict or in the United States, the rate of increase is significant as indicating a source of bank credit expansion which may grow in importance. Although commercial and industrial loans of reporting member banks expanded more slowly in the district for some time after the war, by the end of March their total post-war expansion was proportionately greater than for the country. The decline in Government security holdings of banks, both locally and throughout the coun try, during the first three months of 1946 may continue as long as the Treasury uses its large cash balance to retire substantial amounts of maturing Government debt. By its very nature, however, this influence will come to an end. Even if the Federal budget is brought into bal ance before present excess cash funds are ex hausted, making further deficit financing un necessary, individuals and businesses may re duce their holdings of Government securities. If such is the case, the Treasury will have to depend on the banking system to increase its holdings of Governments. Should regional shifts of deposit funds occur in large amount, banks in districts gaining re serves and deposits will need to absorb Govern ment securities sold to meet deposit drains by banks in areas losing funds, if further monetary inflation is to be avoided. The alternative would be the purchase of such securities by the Federal Reserve Banks and an over-all expansion in bank reserves, with particular concentration in those districts gaining funds. Rapid increase of private financing wherever excess reserves ap pear would tend to increase inflationary pres sures and the danger of funds being siphoned into inventory accumulation, the real estate market, or other speculative uses. If funds con tinue to flow toward this area, such problems will present themselves to banking in the Third District. Changes in Growth, Location, and Ownership of Deposits The process of readjustment to peacetime conditions has had a noticeable, but as yet minor, effect on bank deposits. Recent develop ments in the growth and ownership of deposits, however, may mark the beginning of changes which will become more pronounced during the coming year. Nation-wide Deposit Growth Two broad deposit trends which prevailed during the war period continued during the sec ond half of 1945. The first was the rate of de posit growth which, although obscured by the effects of war loan drives, apparently was main tained. More recently, however, cash retirement of Government securities has contributed to a fairly substantial drop in deposits. The second wartime trend which was continued in the last half of 1945, and extended through March of this year as well, was the rising proportion of the Page 52 nation’s deposits held by the smaller outlying banks as compared with larger city banks. A new development during the last half of 1945 was the occurrence of a definite shift in the importance of the various factors which influ ence deposit growth. At any time, deposits of the banking system as a whole expand or con tract primarily as banks increase or decrease their loans and investments, as currency flows into or out of banks, and as gold flows into or out of the country. For several years the last two factors were offset largely by Federal Reserve credit, so that earning assets were the dominant factor influencing deposit growth. The importance of various types of earning assets in relation to deposit expansion occurring during the second half of 1945 differed from that which prevailed during the war, as can be seen from Table 1. In this table “public” credit consists of banks' holdings of Federal Govern ment securities and extension of loans to finance purchases of such securities by others; “private” credit consists of other loans and investments. Third Federal Reserve District Deposit Growth Table 1 CHANGES IN “PUBLIC” AND “PRIVATE” CREDIT EXTENDED BY BANKS Dollar amounts (Billions) All Member Banks Dec. 1939 to Dec. 1941 Dec. 1941 to June 1945 June 1945 to Dec. 1945 Percentage distribution of changes Dec. Dec. June 1939 1941 1945 to to to Dec. June Dec. 1941 1945 1945 Gov’t, security holdings................ +5.2 + .2 +53.7 +5.1 + 4.4 + .4 +5.4 +58.1 +5.5 56 104 72 +3.9 + -3 - 1.9 +1.7 - .3 + .5 41 3 - 3 - 1 22 6 Other securities....................... 54% 2 96% 8 period, the expansion of private credit repre sented a significant factor influencing the growth of deposits. 66% 6 During the war deposits in the Third District and the New York and Boston Districts grew less rapidly than in other sections of the country. The Third District’s share of all deposits conse quently declined. Previous analyses of deposit trends have suggested that, for various reasons, when wartime forces become less important, de posits may flow from the areas which enjoyed the greatest relative wartime deposit expansion to those which experienced the least. There are some indications that this new trend has begun, although the evidence is still incon clusive. During 1945, for the first year since * Estimated. 1932, deposits in the Third District expanded more rapidly than deposits in the country as a In the preparedness stage of World War II, whole, and the district increased its share of the prior to Pearl Harbor, there was an expansion of nation’s deposits. Since the gain took place dur “private” as well as “public” credit extended by ing the first half of 1945 and was partly can banks, reflecting the growth in both the “guns” celled by a relative lag in the deposits of Third and “butter” sectors of our economy. Private District banks during the second half, it is ques credit was used to facilitate production of war tionable whether the end of the war was much materials and civilian goods. The extension of of a contributing factor. Since the end of 1945, both private and public bank credit at that time however, the district has maintained its propor contributed to the expansion of bank deposits. tion of the nation’s deposits, and in the last half Later, the entry of the United States into the of March increased its share. The fact that the war necessitated the curtailment of unessential wartime trend was halted during 1945 and activities and the greatest possible diversion of early 1946 suggests that a new trend may be resources to war production, much of it financed beginning, and at least makes it important that by the Government. Bank deposits grew as relative deposit shifts be examined closely dur banks increased their holdings of Government ing the coming months. securities. Curtailment of nonessential private credit was encouraged, in part as a means of Ownership of Demand Deposits* retarding deposit expansion as much as possible. The latest survey on January 31, 1946 indi cates the beginnings of new developments as The change from a war to a peace economy well as the continuation of some wartime trends during the second half of 1945 brought about an in the ownership of deposits. embryonic revival of private credit and caused +4.2 - 2.2 +2.2 +9.6 +55.9 +7.7 44 - 4 28 100% 100% 100% some shift in rates of expansion among the types of earning assets of banks. The expansion of public credit was still dominant, but private credit was growing in importance. Commercial and industrial loans at all member banks rose 26 per cent and consumer loans 13 per cent. Banks with increasingly large wartime incomes continued to buy tax-exempt state and municipal obligations, and some banks searching for higher yields increased their holdings of corpo rate bonds. For the first time since the early war From the end of July 1945 to the end of Jan uary 1946, deposits of individuals continued to expand more rapidly than business accounts, representing an increasingly important segment of total demand deposits. Part of the expansion of personal deposits during the six-month period reflects the seasonal growth in farmers’ bal ances; but the fact that the deposits of other •In the discussion of deposit ownership, the term “demand deposits” refers to demand deposits of individuals, partnerships, and corporations. Page 53 individuals continued to mount during the recon version period suggests that individuals as a class have not used accumulated balances to sup plement current income, that they have not yet been able to satisfy their demands for new con sumers’ goods, and that they still are using part of current income to accumulate deposits rathei than to invest in Government bonds or other assets. Deposits of retail and wholesale trade estab lishments stepped up the rapid rate of growth which they had exhibited during the war period. This reflects the building up of cash balances and depletion of inventories resulting from steadily mounting retail sales, particularly with the unprecedented spending during the Christ mas season of 1945. OWNERSHIP OF DEMAND DEPOSITS * THIRD FEDERAL RESERVE DISTRICT MILUONS 1400 PERSONAL 1200 The most striking new development revealed by the survey of deposit ownership was the sharp decline between July and January in ac counts of manufacturing and mining businesses. Although past surveys indicate that this type of deposit grew less rapidly than the average from July 1943 to July 1945 and was consequently becoming a less important part of total deposits, the reports at no time indicated an actual de cline. The recent reversal of direction stems from the change-over to peacetime production. The explanation may lie in the decline of output, which reduced current incomes at the same time that new outlays were being made for plant and inventory and tax payments. The drop in manu facturing and mining accounts might have been even greater had business not expanded its bank borrowings during the period. 1000 MANUFACTURING AND MINING: 800 600 TRADE400 FINANCIAL BUSINESS' 200 0 % The only other deposits which declined from July 1945 to January 1946 were those owned by public utilities. Some of the same factors which influenced manufacturing and mining business accounts may have affected public utility bal ances, although these balances have shown even more substantial declines at times during the war. PERCENTTAGE OF TOTAL 40 P :rsonal\ 30 MANU 'ACTURING AND MINING', 20 TRADER 10 FINANCIAL BUSINESS •demand 7------ -- JULY 31 o FEB. <?9 JULY 31 JAN. 31 JULY 31 JAN. 31 1943 1944 1944 1945 1945 1946 deposits of individuals, bawtnebships, and corporations.___________ Page 54 Changes in the ownership of deposits in this district paralleled fairly closely those in the United States as a whole. The expansion of personal deposits and those of trade concerns was practically the same in both areas. The most significant disparity was in manufacturing and mining accounts, which experienced a more drastic decline in the country as a whole than in the district. The reason may well be that indus tries in this area, because they produced much Table 2 OWNERSHIP OF DEMAND DEPOSITS OF INDIVIDUALS, PARTNERSHIPS, AND CORPORATIONS THIRD FEDERAL RESERVE DISTRICT Dollar Amounts (millions) Percentage Distribution Percentage Change July 1945 to Jan. 1946 July 31, 1943 July 31, 1945 Jan. 31, 1946 July 31, 1943 July 31, 1945 Jan. 31, 1946 July 1943 to July 1945 $ 808 249 351 145 $ 949 241 492 169 $ 875 230 561 187 27.1% 8.4 11.8 1 4.9 : 25.7% 6.5 13.3 4.6 22.0% 5.8 14.1 4.7 +17.5% - 3.2 +40.2 +16.6 - 7.8% - 4.6 +14.0 +10.7 fcTotal nonfinancial business................................................ Financial business: Insurance companies.............................................................. P Other financial.......................................................................... r", Total domestic business............................................................. Trust funds.................................................................................... Nonprofit associations................................................................ Personal, incl. farmers................................................................ Foreign........................................................................................... $1,553 $1,851 $1,853 52.2% 50.1% 46.6% +19.2% + 0.1%' 81 137 81 182 93 235 2.7 4.6 2.2 4.9 2.3 5.9 +32.8 +14.8 +29.1 $1,771 207 82 912 2 $2,114 221 110 1,250 2 $2,181 226 137 1,430 3 59.5% 7.0 2.8 30.7 * Grand total............................................................................. $2,974 $3,697 $3,977 100.0% Domestic business: Nonfinancial: Manufacturing and mining................................................. 1 Public utilities......................................................................... IF Trade.......................................................................................... fe Other nonfinancial business.................................................. * 57.2% 6.0 3.0 33.8 * 54.8% 5.7 3.4 36.0 .1 +19.4% + 6.8 +34.1 +37.1 t + 3.2% + 2.3 +24.5 +14.4 t 100.0% 100.0% +24.3% + 7.6% * Less than 0.1 per cent. t Because of rounding small totals, percentage changes are meaningless. the same types of goods in war as they had in peacetime, were less affected by sudden cancel lation of war contracts and found reconversion easier than did industries in other sections of the country. Other differences included more rapid increases in accounts of financial and miscel laneous nonfinancial business in this district than nationally. Prospects It is still too early to state with certainty whether new trends in deposits have set in since the end of the war or how extensively peacetime conditions will affect deposits. Monetary read justment requires more time than physical read justment. Nevertheless, on the basis of the fore going analysis of a few months of peace, it is pos sible to draw three tentative conclusions: 1. Trends in total deposits will be influenced largely by the volume of banks’ earning assets. To the extent that banks hold Gov ernment securities which are retired by the Treasury, the volume of public credit ex tended by banks will tend to decline, thus tending to decrease deposits. On the other hand, any shifting of Government securi ties from nonbank to bank ownership and any further expansion of private credit ex tended by banks will tend to raise deposits. Continued expansion of deposits will ag gravate existing inflationary pressures. 2. The possibility that, even with a leveling off of deposits nationally, this district may gain deposits from other areas is tentatively suggested by the more rapid rate of expansion experienced by this dis trict than by the country as a whole during 1945. An eventual return flow of deposits to this section of the country still seems a reasonable expectation. A decline of Gov ernment expenditures and any outward movements of population are likely to re strict the deposit expansion of “war cen ters.” In agricultural areas, expenditures for new equipment and possible declines in agricultural income may tend to transfer funds to manufacturing centers, although up to the present the flow has continued in the opposite direction. 3. The next survey of deposit ownership may reveal further shifts among the various types of deposits, reflecting a more com plete return to peacetime conditions. What apparently occurred between July 1945 and January 1946 was that industrial con cerns drew upon their bank balances to meet expenses incurred in returning to Page 55 peacetime production. Part of these funds were passed on to individuals who, not yet being able to purchase many of the con sumers’ durable goods for which they have been waiting, continued to add to their bank accounts. If more goods are pro duced in the coming months, consumers may draw more heavily upon their bank balances to pay for purchases. These de posits, of course, will be passed on to other E N THE THIRD FEDERAL RESERVE DISTRICT Page 56 owners—businesses as well as individuals —and it is possible that business balances may increase their importance in the pat tern of ownership distribution at the ex pense of personal deposits. To the extent that individuals use currency holdings in making purchases, business deposits also will be increased, but in this case without any decrease in personal deposits. BUSINESS STATISTICS Production Philadelphia Federal Reserve District Adjusted for seasonal variation indexes: 1923-5 =100 Mar. Feb. Mar. 1946 1946 1945 INDUSTRIALPRODUCTION MANUFACTURING............... Durable goods......................... (Consumers’ goods................. Metal products....................... Textile products...................... Transportation equipment.. Food products......................... Tobacco and products.......... Building materials.................. Chemicals and products.... Leather and products........... Paper and printing................. Individual lines Pig iron...................................... Steel........................................... Iron castings............................ Steel castings........................... Electrical apparatus.............. Motor vehicles........................ Automobile parts and bodies. Locomotives and cars........... Shipbuilding............................. Silk manufactures.................. Woolen and worsted............. Cotton products...................... Carpets and rugs.................... Hosiery...................................... Underwear................................ Cement...................................... Brick........................................... Lumber and products........... Bread and bakery products. 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............................... ELECTRIC POWER.............. Sales, total................................ Sales to industries.................. BUILDING CONTRACTS TOTAL AWARDSf................. Residential............................. Nonresidentialf___........ Public works and utilities 1. . 102p 101p 109p 135 139 210 90 r 174 64 r 493 120 95 36 168 81 95 + + + + + + 46 23r 75 36 87 r 35 67 r 24r 8i 83 74p 68 47 46 69p 67 72 70 130 131 63p 70 53 49 r 28 26 r 84 r 128 75 195 290 59 120 93 118 117 61 61 166p 163 r 124 134 91 94 120 123 106p 104 64p 60 73 71 91 91r 201 216 165p 83 82 78 79 76 108 92 298 301 403 394 413 410 305 295 102 68 167 94 83 97 92 70r 227 92r 198 162 74 72 92 r 325 426 443 357 + 66 +300 + 4 +101 + 3 — 8 + 14 + 51 __ 2 + 3 + 10 + 4 + 2 + 3 0 — 10 + 9 + 9 + 2* 0 0 + 2 — 7 — 3 — 3 + 2 + 6 + 2 0 — 7 +100 + 6 + 4 + 17 — 1 + 2 — 1 + 3 96p 90 68p 214p 121p 123p 44p 146p 84p 115 75 93 78 73 90 33 76 36 83 65r 41 54 r 65 128 26 52 33 Not adjusted Per cent change Mar. 1946 1946 from from 3 Mo. Year mos. 1945 ago ago 92 91 83 95 46 r 65 214 119 133 44 r 142 82 118 + — + + — 10 11 30 1 95 4 0 2 7 0 3 3 3 — __ + + — + + + + + 25 27 48 6 48 7 57 1 30 21 13 4 21 _ — __ + + + + + — + 10 — 28 + 4 63 — 69 — 44 — 36 — 61 __ 59 0 + 15 + 16 + 26 + 11 + 2 +138 + 2 — 17 4* + 16 — 10 — 1 + 32 + 11 + 23 + 14 — 8 — 68 — 1 + 1 + 2 + 11 + 10 + 17 8 — 6 — 7 — 15 — Employment and Income in Pennsylvania Employment Mar. Feb. Mar. 1946 1946 1945 26 29 50 4 50 3 57 1 27 22 17 7 20 25 46 — 1 — 68 — 56 — 37 — 34 — 57 __ 60 — 2 + 11 + 12 + 17 + 7 0 +130 + 3 20 — 102p 102p 92 91 136 140 93 70p 225p 117p 114 39p 147p 87p 117 46 r 69 212r 115 112 37 r 141 r 87 118 174 66 r 516 116 88 34 169 83 97 87 99 82 81 84 35 83 39 47 24r 76 40 84r 36 73 24r 97 r 137 79 219 270 63 131 100 86 72p 50 69p 75 142 49p 52 26 124 111 93 151p 115 93 122 112p 63p 73 93 199 172p 82 79 110 304 411 409 290 + 21 28 0 + 27 + 11 + 22 — 6 — 11 — 67 — 1 — 1 — 25 + 12 + 11 + 12 5 — 6 7 — — 17 107 63 40 + ro +169 +141 93 93 44 4 +112 ** ** 71 132 111 70 + 19 + 88 + 88 132 73 33 49 + 125 + 49 + 50 67 * Unadjusted for seasonal variation. p—Preliminary, t 3-month moving daily average centered at 3rd month. r—Revised. ** Increase of 1000% or more from the low level of a year ago. 86 86 70r 63 r 49 43 69r 55 r 67 73 143 140 49 r 20 47 r 51 24 32 116 79 150 112 94 123 109 65r 71 89 r 213 87 r 79 76 100 301 417 443 292 96 r 104 149 87 84 99 98 69 227 93 197 168 74 r 72 94r 332 435 438 339 63 31 112 39 35 3 70 45 Factory employment month and year ago Feb. 1916 Mar. 1945 Feb. 1946 Mar. 1945 Feb. 1946 Mar. 1945 Feb. 1946 Mar. 1945 Feb. 1946 Mar. 1945 AUentown........... Altoona................ Harrisburg.......... Johnstown........... Lancaster............ Philadelphia.... Reading............... Scranton.............. + 5 0 + 2 +18 + 3 + 6 + 3 + 1 -21 - 4 -16 + 4 -11 -26 - 7 -18 + 35 + 2 + 30 +106 + 5 + 9 + 8 + 2 -34 -13 -22 - 6 -11 -38 - 7 -20 - 2 + 2 +10 - 1 -30 -19 -37 -20 0 + 12 + 8 + 3 -38 -22 -45 -31 ** +244 +291 ** ** +460 ** +137 ** +249 ** ** +215 +28 +59 +31 +20 +30 +25 +31 +35 +17 +28 + 2 +16 + 9 + 8 +11 + 9 +14 +13 +15 +12 +23 +26 +18 + 9 0 +1 +25 +21 + 6 +19 +21 +37 — 14 +21 + 5 +30 +17 +15 +29 Wilkes-Barre___ +312 +399 - 26 +428 +888 +306 +368 +256 +334 + 19 Wilmington........ York..................... +210 + 12 Retail sales * Area not restricted to the corporate limits of cities given here. ** Increase of 1000% or more from the low level of a year ago. Per cent Per cent Mar. change from Mar. change from 1946 1946 index Feb. Mar. index Feb. Mar. 1946 1945 1946 1945 CF.NERAL INDEX............. Manufacturing...................... Bituminous coal mining. . . Building and construction.. Quar. and nonmet. mining. Crude petroleum prod........ Public utilities...................... Retail trade......................... Wholesale trade.................... Hotels.................................... Laundries............................... Dyeing and cleaning........... 120 147 80 58 82 142 107 131 119 109 104 101 +11 - 8 281 +24 +17 + 3 + 7 +10 + 3 + 2 + 2 + 2 - 4 +1 + 2 -16 371 409 131 286 268 173 200 186 211 222 220 +35 + 6 + 8 +27 + 1 + 4 + 3 + 3 - 5 +11 +n +37 +n +u +n + 4 +14 + 9 + 5 + 2 -14 -24 +21 +26 +20 + 9 +14 +21 +22 +19 +25 +19 +n Manufacturing Employment* Payrolls* Per cent Per cent Mar. change from Mar. change from 1946 1946 index Feb. Mar. index Feb. Mar. 1946 1945 1946 1945 Indexes: 1923-5=100 TOTAL..................................... Iron, steel and products... . Nonferrous metal products. Transportation equipment. Textiles and clothing........... Textiles................................. Clothing................................ Food products....................... Stone, clay and glass............ Lumber products.................. Chemicals and products.. . Leather and products........... Paper and printing............... Printing................................. Others: Cigars and tobacco............. Rubber tires, goods............ Musical instruments.......... 95 86 179 92 81 76 99 121 95 50 113 84 120 117 + 17 - 16 151 + 66 - 30 171 + 3 - 19 388 + 1 - 38 146 + 1 + 5 143 + I + 7 135 + 1 - 2 178 + 1 — 3 197 + 4 + 17 153 - 2 82 + 9 - 2 202 + 2 + 17 147 + 2 + 20 206 + 2 + 25 193 + 35 +119 + 7 + 7 + 4 + 4 + 4 + 2 + 7 + 7 + 16 + 4 + 4 + 4 49 134 111 + + + 3 0 77 0 - 8 317 2 + 16 185 + + + + + + + + 24 37 20 49 14 18 3 2 18 7 5 21 33 40 7 + 3 0 + 1 + 11 + 33 * Figures from 2771 plants. Factory workers Averages March 1946 and per cent change from year ago Percentage change— March Building permits value Indexes: 1932=100 Payrolls Hours and Wages Local Business Conditions* Factory payrolls Industry, Trade and Service Debits +10 - 2 + 9 +18 +22 +14 — 7 + 4 + 4 TOTAL............................ Iron, steel and prods.. Nonfer. metal prods... Transportation equip.. Textiles and clothing.. Textiles........................ Clothing....................... Food products.............. Stone, clay and glass.. Lumber products......... Chemicals and prods.. Leather and products.. Paper and printing... . Printing........................ Others: Cigars and tobacco. . Rubber tires, goods.. Musical instruments. Wee tly working tim B* Hou rly earnir gs* Weekly earningsf Aver age Ch’ge Aver Ch’ge Aver Ch’ge hours age age 39.9 -12 $1 079 - 1 $42.93 -13 38.9 40.2 40.2 39.6 40.6 37.0 42.5 39.5 41 .9 40.9 41.3 43.3 40.8 -17 -14 -13 - 3 - 2 - 5 - 4 - 6 - 6 -12 - 4 - 3 - 3 1.183 1.073 1.172 .896 914 .844 886 1.000 .819 1.178 .833 1.071 1.277 + 3 + 5 -11 + 11 +12 + 8 + 9 + 6 + 1 +10 + 6 +14 +16 46.03 43.10 47.09 35.51 37.14 31.71 37.97 39.42 34.19 48.05 34.44 46.39 52.08 -14 -10 -23 + o +10 + 4 + 5 0 - 4 - 3 + 2 +10 +13 38.5 45.5 45.7 -10 +1 +10 .749 +15 1.154 + 9 .954 + 5 28.80 52.47 43.63 + 3 +10 +15 * Figures from 2627 plants. tFigures from 2771 plants. Page 57 Distribution and Prices Per cent change Wholesale trade Unadjusted for seasonal variation Sales Total of all lines................... Drugs....................................... Dry goods............................... Groceries................................. Hardware................................ Jewelry.................................... Paper....................................... Inventories Mar. 1946 from 1946 from Month Year ago ago mos. 1945 - 1 — 9 - 1 + 2 +30 - 5 - 5 +1 + 5 +20 +45 +13 +33 +123 +18 +10 +89 +1 + 2 + 3 + 1 0 0 +24 +74 +42 +16 + 2 Adjusted for seasonal variation Per cent cha uge Indexes: 1935-1939=100 RETAIL TRADE Sales Department stores—District........................ Philadelphia............... Women’s apparel.............................................. Men’s apparel.................................................... Shoe...................................................................... Basic commodities (Aug. 1939-100)... . Wholesale (1926=100)................. Farm............................. Food.............................. Other............................. Living costs (1935-1939=100) United States............. Philadelphia............... Food........................... Clothing..................... Rent............................ Fuels........................... Housefurnishings. . . Other.......................... Source: U. S. Bureau Aug. 1939 190 +1 + 3 + 90 109 133 109 102 +1 + 2 + 1 + 1 + + + + + 45 +119 + 63 + 28 3 5 5 3 130 0 + 3 129 + 1 + 3 139 + 3 + 1 152 + 5 + 1 107 0 0 115 0 + 4 151 + 1 + 5 122 + 1 + 1 of Labor Statistics. 221 198 298 188 240 203 r 190r 220 229 202 +20 +u +13 +17 - 3 +31 +48 +22 0 +19 +20* +44* +12 +10 +19 220 199 285 224 228 +19 174 161 215 147 175 199 r 185 r 241 208 212 Inventories Per cent change from Mar. 1946 Month Year ago ago 244 223 287 278 240 Mar. Feb. Mar. 1946 1946 1945 1946 from 3 mos. 1945 Month Year ago ago +13 +20 +18 - 1 Source: U. S. Department of Commerce. Prices Mar. 1946 frc m Mar. Feb. Mar. 1946 1946 1945 +17 +19 +16 +65 + 5 Not adjusted + + + + 32 32 49 53 + 19 + 50 + 21 Shoe.................................................................. Furniture........................................................ FREIGHT-CAR LOADINGS Total...................................................................... Merchandise and miscellaneous................... Merchandise—l.c.l............................................ Coal...................................................................... Ore........................................................................ Coke..................................................................... Forest products................................................. Grain and products.......................................... Livestock............................................................. MISCELLANEOUS Life insurance sales............................................ Business liquidations 158p 153r 138 156p 151r 132 192 203 168 53 59 54 + 3 + 4 - 5 -16 + 9* +14 +19 +14 — 3 +12* 142 129 93 166 138 185 107 123 125 113 96 90 153 50 97 101 160 126 146 141 90 138 260 223 110 137 109 +26 +34 + 5 +177 +91 -23 - 1 - 3 - 9 + 5 +20 -47 -17 - 2 -10 +15 -11 -20 + 4 +19 -51 -33 - 6 + 9 -10 133 124 95 171 61 174 93 117 116 104 88 85 159 19 104 82 141 115 138 136 90 142 114 210 95 130 101 219 207 132 + 6 +66 +62 228 224 L37 3 49 204 3 2 205 3 1 187 0* Check payments................................................. * Computed from unadjusted data. 206 211 189 p—Preliminary. - 2 158p 148r 138 158p 133 211* 198 185 61 59 61 0* +100* + 9 + 7 r—Revised. BANKING STATISTICS MEMBER BANK RESERVES AND RELATED FACTORS Chan ges in Reporting member hanks (Millions $) Apr. 24, 1946 Five weeks Assets Commercial loans................... * 269 —$ Loans to brokers, etc.............. 44 + Other loans to carry secur---70 + Loans on real estate............... 38 + 1 154 + Other loans............................... Total loans............................. $ 576 +$ One year 7 4 1 2 +$ 63 + 2 + 55 + 4 + 1 8 + 40 Mar. 27 Apr. 3 Apr. 10 Apr. 17 Apr. 24 Change p in five weeks Commercial transfers (chiefly interdistrict).... +15 - 7 -14 + 5 +13 -17 - 9 - 1 + 5 - 6 + 5 -21 +19 + 9 + 4 +10 -18 Total........................................................................... - 6 + 1 -10 + 4 + 7 - 4 - 1 - 4 - 1 + 1 - 1 + 1 + 7 -15 - 2 + 3 - 5 +11 + 1 + 5 - 9 + 1 - 6 + 1 -10 + 4 + 7 - 4 Changes in weeks ended—• Third Federal Reserve District (Millions of dollars) Sources of funds: Uses of funds: Currency demand...................................................... 8 +$165 Total........................................................................... Government securities.......... $1896 Obligations fully guar’teed.. Other securities....................... 193 -$ 95 +$159 - 54 - 11 + 15 Total investments................ $2089 —$106 +$120 Total loans & investments.. 12665 Reserve with F. R. Bank.... 420 Cash in vault............................ 33 Balances with other banks. . 81 48 -$ 98 +$285 6 - 11 + i + 2 5 2 + + 5 Liabilities Demand deposits, adjusted.. $1733 Time deposits........................... 240 U. S. Government deposits. . 604 Interbank deposits................. 374 Borrowings............................... 13 Other liabilities........................ 25 258 Capital accounts..................... Page 58 -$ 71 -$119 + n + 35 - 45 + 323 7 + 22 + 6 3 + 4 + 8 + 2 + 15 Changes in Member bank reserves (Daily averages; dollar figures in millions) Re Held quired Ex cess Ratio of excess to re quired Federal Reserve Bank of Phila. (Dollar figures in millions) Disc, and advances.. Phila banks 1945: Apr. 1-15.. 1946: Mar. 1-15. . Mar. 16-31. . Apr. 1-15. . $410 408 410 406 $402 400 403 398 $8 8 7 8 2% 2 2 2 Country banks 1945: Apr. 1-15. . 1946: Mar. 1-15.. Mar. 16-31. . Apr. 1-15.. $321 370 374 369 $263 301 304 306 $58 69 70 63 22% 23 23 21 U. S. securities......... Total......................... Fed. Res. notes........ Member bk. deposits U. S. general account Foreign deposits.. . . Gold ctf. reserves.. . Reserve ratio............ April 24, 1946 Five weeks One year $ 21 1 1601 +$ 9 +$ 3 2 + 265 $1623 1603 776 20 57 4 839 34.1% -$ 1 - 2 - 9 - 33 - 2 - 10 - 37 -0.9% +$267 + H6 + 41 - 21 - 42 2 - 159 - 8.0%
@FedFRASER