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FEDERAL RESERVE BANK OF PHILADELPHIA

Mistress Mary vs. The Millstone Inn
Higher Goals for Capital Spending




B U S I N E S S R E V I E W is produced in th e D epartm ent of Research. Lawrence C. M urdoch, Jr. was p rim a rily respon­
sible for the article “ M istress Mary vs. The M illsto n e In n ,” and Evelyn E. M ajor and Bertram W. Zum eta for "H ig h e r Goals for
Capital S pending.” The authors w ill be glad to receive com m ents on th e ir articles.
Requests fo r a d d itio n a l copies should be addressed to Bank and Public Relations, Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania 19101.




Fighting to serve an expanding market
restaurants seek to answer a
fundamental question. Can small
business survive in an age when big
business has many apparent
advantages?

,

Mistress Mary is only 12 years old yet her in­

only three people at work, yet they seem to be

come runs close to $100 million a year. Like

serving the 150 customers out front with no

many youngsters, she has a special yen for

strain at all.
An order blares from an intercom system and

fried chicken— but she buys it by the ton.
Mistress Mary, you see, is a restaurant chain.

one of the three “ cooks” withdraws a plastic

Except for the name, which we invented, Mis­

parcel from a large freezer. The bag may con­

tress Mary could be one of a number of organi­

tain anything on the menu from Newburg to

zations which are winning an increasing share
of the nation’s eating-out budget.

hamburg. It was prepared, preseasoned, pre­
cooked and frozen in Mistress Mary’s central

No doubt you have enjoyed a meal in a

commissary, located near a large eastern city.

restaurant that closely resembles one of the

Then it was stored at zero degrees Fahrenheit

Mistress Mary units that stand in purple-roofed

in a vast Antarctica of a warehouse.

majesty along major highways from Maine to

When Mistress Mary’s main-office computer

Virginia. You remember the modern decor, the

sensed that inventory was low in this partic­

substantial, if somewhat unimaginative, menu

ular

and the pleasant, efficient waitresses in crisp

of

uniforms.

truck.

unit,

the

bag,

along

others, was shipped

with

out by

thousands
refrigerated

But most people never see what really dis­

Now all the cook has to do is pop the bag

tinguishes the Mistress Mary chain— its kitchens.

into an infrared oven and in a few minutes the

All 70 of them are walled with the same glisten­

contents will be warm and appetizing. When the

ing white tile. Look around and you will see

bag has been emptied on an imitation Wedg­




3

business review

wood plate and garnished with reconstituted
parsley,

it is sent via

conveyor

belt to

a

hovering waitress, and the hungry customer is
pitching in, five minutes after he made his

D IN IN G NEAR TH E DELAWARE
The restaurant industry in the Philadelphia Metro­
politan area shares the general problems and pros­
pects mentioned in this article with the nation.
Details of operations in this area may differ, however.
PHILA. METRO.
AREA
U.S.

selection.
Down the highway and to your right is an­
other restaurant, the Millstone Inn. It has those
wide, creaky floorboards one expects to find in
old Pennsylvania farmhouses; it has candles
on checked tablecloths, Currier and Ives prints
on rough-plaster walls and a terrace where ta­
bles are set in summer. Eating at the Millstone
Inn costs twice as much and takes twice as long

Number of eating p la c e s *.......... 5,381 229,815
Restaurant sales (m illions)* . . . $298 $11,037
Average sales per establishment* $55,000 $48,000
Number of persons per restaurant
787
754
Sales per c a p ita * ............................
$70
$64
Average number of employees* .
8
7
Average sales per employee* . . . $7,231
$7,030
Employees' hourly earnings . . . .
$1.12
$1.14
(1963, not including tips)
* Figures are for 1958, the latest census that provides
separate information for Philadelphia. National figures for
later dates often are used in the body of the article.

as at Mistress Mary’s. Again the kitchen reveals
the character of the operation.

seems to be turning more and more toward au­

Step through the swinging door marked “ IN”

tomated efficiency. Small business already has

and you will see a bustle of activity. Vegetables

lost out in automobile production, steel, appli­

are being sliced and diced, a rib roast is re­

ances and so

ceiving a pre-oven trimming, and all shapes of

doomed to extinction everywhere or can it sur­

steaming aromatic pots are being stirred. A

vive and even grow? If so, how? Perhaps part

many

other industries.

Is it

man in his fifties, taller than the rest, stands

of the answer lies in what is happening to

by a large black-hooded stove, adding pinches

Mistress Mary and the Millstone Inn.

of herbs to a saucepan on the front burner.
From time to time he dips in a wooden spoon

Eating out is in

and tastes the creamy contents.

He frowns

The chains and the small independents are con­

slightly and then pinches some more. Every­

testing for a mighty market. Surveys show that

thing must be just right for he has recently

almost 50 per cent of our adult population

bought the Inn with his life’s savings and he

visits a restaurant at least once a week. All to­

desperately desires it to be a gastronomic as well

gether, public eating places total up checks

as a financial success.

worth about $14 billion a year and many bil­

Mistress Mary’s and the Millstone Inn occupy

lions more are spent for food eaten in bars,

opposite corners in the current struggle within

company cafeterias, hospitals, church meetings,

the restaurant industry. One represents big busi­

private clubs and the like. Estimates of the

ness, the other small; one represents mass pro­

total food-aw ay-from -hom e market run to

duction, the other oldtime craftsmanship; one

$20 billion.

emphasizes price and speed, and the other serv­

Restaurant spending has more than doubled

ice and selection. Indeed, the restaurant indus­

during the postwar period. This growth rate is

try has become something of a testing ground

about the same as, or faster than, that of all

which could shed considerable light on the over­

retail sales, total consumer spending and per­

all prospects for small business in a world that

sonal income. On a per capita basis, restaurant

4




business review

outlays rose from $44 in 1948 to $72 in 1962.

households. Also important is the rapid and

Some of these favorable comparisons are due

pervasive growth in consumer income during

to inflation. The cost of restaurant meals is up

the postwar period.

25 per cent over the last decade, while the over­

But all is not full tables and fat checks for

all consumer price increased only 14 per cent.

the restaurant industry. It faces an imposing

The price index masks an important qualitative

array of problems.

change' in the typical restaurant check, how­
ever. Patrons are buying a third more meat

A tureen of troubles

than they did in the early 1950s, and, as any­

Too few cooks can spoil the broth just as surely

body who has ever scanned a menu knows, it

as too many. That’s why the industry is con­

costs more to eat high on the hog than high

cerned about a serious shortage of qualified

on the stalk.

chefs. Lack of job prestige, long hours, inade­

Industry publications cite many factors to

quate training facilities, attractive opportuni­

explain the growth of restaurant sales: increased

ties elsewhere and rising wages in Europe, a

travel, the growth of expense accounts, a larger

traditional source of culinary talent, are among

percentage of working wives, more white-collar

the factors responsible.

workers, the trend toward urbanization, expand­

Many other food preparation jobs can be

ing leisure and the increase in single-person

filled with relatively unskilled labor and a large
number of such work­
ers is readily avail­
able.

But

numbers

alone are not enough.
A successful restau­
rant requires a high
degree of care and
attention from its un­
skilled
poorly

workers. A
washed fork

or a speck of foreign
1948

'54

'58

'62

Eating place sales as a percentage of
total retail sales




1948

54

58

'62

Eating place sales as a percentage of
total consumer spending

matter

in

the

best

rarebit is enough to
drive away a steady
customer. Many res­
taurants find it diffi­
cult to attract nonsupervisory

employees

with the proper per­
sonal habits and atti­
tudes. A high turn­
over

rate— common

5

business review

with

most

unskilled

labor — compounds

the

tained a sizeable margin over 1962— there is
no doubt that certain eating places were hurt.

problem.
As is the case in most service industries, com­

Restaurants also are pinched by the increased

pensation of restaurant employees is not high—

popularity of entertaining at home. Couples who

at least for those who do not receive tips. But

once would go out for a meal and maybe some

wages have been rising rapidly due to spreading

professional entertainment now meet in each

unionization, the shortage of suitable workers

other’s living rooms for home-poured refresh­

and the passage of many state minimum wage

ment, gracious buffets and conversation.

laws. One authority estimates restaurants’ labor

But perhaps the greatest problem of the res­
taurant industry in recent years has been adapt­

costs have risen 25 per cent in the past decade—
5 per cent in the last year alone. Increasing

ing to major changes in consumer demand. In

labor costs have hit the restaurant industry

the following paragraphs, we shall look a little

particularly hard because, unlike the burgeoning

more closely at the motives of the man or woman

chains, the industry as a whole has not been able

behind the menu.

to increase productivity significantly through
mechanization.
While the level of food prices has been rel­

The who, when, where/ and why of
eating out

have risen

The demand for restaurant service resembles a

sharply. Silverware is said to cost 12 per cent

bouillabaisse stew; it’s hard to separate, iden­

atively

stable,

most

other

costs

more than it did two years ago, for example.

tify and understand the ingredients. For our

The pressure of rising costs shows in higher

purposes, it might be best to divide restaurant

menu prices, already mentioned, and in disap­

patrons into two very broad, rather indefinite

pointing profit margins. As a percentage of

categories. The first includes those who eat

sales, pre-tax profits of restaurant corporations

out as a semi-necessity, the second those who

have fluctuated within a narrow, no-trend range

do it as a luxury. The semi-necessity category

since 1948. The average profit margin is 1.4

embraces white-collar workers who buy their

per cent, which might be all right for a super­

lunches in a nearby cafeteria, early risers who

market but the typical restaurant corporation

breakfast in a diner because their wives won’t

does only $160,000 worth of business a year.

get up and college students who eat in the cam­

The profits of individually owned restaurants

pus “ beanery.”

average 8.4 per cent of sales, but this includes

travelers and this is where one big demand

whatever recompense the owner takes for his

change comes in. Motorists and truckers want

It also includes all sorts of

considerable labors, as well as return on his

their eating facilities right along the highway

investment. As with corporations, there is no

and they want quick service. In many cases

particular trend in the profits of proprietor­

they prefer to put gas in their cars as well as

ships and partnerships.

their stomachs and often they want a room in

In 1963 the Federal Government tightened

which to sleep— all at the same stopping place.

expense account regulations. While the new

This demand requires many new restaurants,

rules had no noticeable effect on total restau­

since most of the older

rant business— monthly sales in 1963 main­

around population centers. It also requires new

6




ones are clustered

business review

THE RIGHT HAND PART OF THE MENU

who eat out primarily as a matter of choice.

C o n s u m e r p r ic e in d e x , s e l e c t e d item s

The clerk-typist who treats herself to a good
lunch on payday fits in here, as does the mil­
lionaire who regularly goes to some posh place
while maintaining a full kitchen staff at home.
The largest and most important group that
doesn’t have to eat out, but does is the middleincome family. Maybe 25 to 30 million Ameri­
can spending units would fall into this cate­
gory. Sometimes husband and wife eat Friday
or Saturday night dinners in a chosen restau­
rant and sometimes the entire family goes along
— maybe on Sunday afternoon. Either way it’s
something of

an occasion, something worth

necktie and jacket, heels and a skirt.

The tablecloth jungle
These customers have undergone a vital change
in the last decade or two. In a word, they are
more aware— aware of menu selection, food
concepts in restaurant design and operation.
Traveling business executives and salesmen

preparation, service and atmosphere. They are
not “ pinch-pennies” but they are aware of

on the road once were almost captive Mon-

prices in similar establishments and will balk

day-to-Friday restaurant customers. They still

if the cost of a particular meal seems out of

are a vital source of patronage but the jet

line. Experience with pre-cooked and gourmet

plane is cutting their travel time sharply. Hotel

foods at home has given them more discrim­

restaurants, in particular, are feeling the ab­

inating palates. Such customers are not in a

sence of the man who went home for dinner.
Teenagers are voracious as barracudas and
usually

visit

restaurants

for

an

afternoon

hurry but they want good service and attention.
These new middle-class sophisticates know their
restaurants and they seek adventures in eating.

hoagie to tide them over until dinner, or a

It doesn’t take much to induce them to try a

brace of hamburgers after the movie.

Both

different place— but, when they do, it doesn’t

visits should be considered semi-necessities, as

take much to convince them not to come back.

much for social as nutritional reasons. Young

Like as not, they might decide to stay home

people demand cheap but filling food and pre­

next week and invite friends for dinner. With

fer it served in an informal atmosphere. They

several hundred thousand restaurants scram­

aren’t much interested in variety, and fast serv­

bling for a share of this knowledgeable, increas­

ice

ingly fickle demand, it’s not surprising that the

isn’t important,

but parking space and

music are.
The second broad category covers people




restaurant industry ranks as one of the most
competitive there is.

7

business review

The modern way

use major capital markets. At least 15 are listed

How are restaurants coping with the troubles

on the New York and American stock ex­

we have outlined above— the “ chef gap,” other

changes.

personnel problems, rising costs, disappointing

One-stop shopping. Restaurant chains are team­

profits and fast-changing demand? The chains,

ing up with oil and motel companies to offer

for their part, are displaying great resource­

eating, lodging and auto service at the same

fulness. They are employing many of the most

highway location.

modern techniques used by large organizations

How good is good

in other industries:
Automation. All sorts of modern machinery,

With such techniques working for them, you

including computers, are at work in many chain

might expect the restaurant chains to knock

operations.

the customers out of the independents.

Centralization. Food preparation, menu plan­

hard to measure the chains’ market penetra­

ning,

accounting,

purchasing,

etc.

are

It’s

per­

tion with precision, but we can get a few

formed for an entire chain at a single location.

indications of it. Sales of eating-and-drinking-

Quality control. Considerable time and effort

place chains with 11 or more units have risen

is devoted to scientifically maintaining stand­

from about 5 per cent to almost 7 per cent of

ards of food and service.

the industry total since 1952. The unavoidable

Specialization. Highly skilled experts in cook­

inclusion of drinking places, or barrooms serv­

ing, merchandising, management, etc. are de­

ing occasional food, deflates the figures, how­

voting their skills to various problems.

ever. In the early postwar period, restaurant

The volume concept. Borrowing an idea from

corporations accounted for 4 per cent of all

discount stores and supermarkets, some chains

units and 19 per cent of all sales. Now the fig­

offer a low price menu, with a severely limited

ures are 8 per cent and 33 per cent respectively.

number of items. Fast turnover is counted on

As we pointed out earlier, the trend of cor­

to offset low profit per unit.

porate restaurant profits is no better than that

Diversification. Restaurant chains are branching

of the proprietorships. On the other hand, sales

into food-at-home, motels, catering and other

of the 10 largest chains have increased 96 per

businesses.

cent in the past decade compared to 54 per

Publicity. Large restaurants have stepped up

cent for the industry as a whole.

their advertising in media such as radio and

Does this fragmentary evidence indicate an

television.

impressive performance— impressive when you

Market Research. Chains often use consumer

consider all the apparent advantages the chains

surveys to choose new locations and determine

have? Many industry spokesmen seem to be

their bill of fare. New recipes may be tested

awed by the chains but, in spite of their growth,

on a panel of typical customers.

the independent restaurant has shown surpris­

Personnel policies. Company-wide training pro­

ing durability and tenacity.

grams turn out qualified workers who are re­

Indeed, restauranting still is an essentially

tained by competitive wage and fringe policies.

small-scale industry. The latest census lists 230,-

Capital access. Many chains are large enough to

000 eating places and they average only 7 em-

8




business review

is far lower than that of

CHAIN REACTION
Chains with eleven or more units as a
percentage of total restaurant sales

Ten largest chains as a percentage
o f total restaurant sales
PER CENT

most retailers and many
manufacturers.

The old-fashioned way
Small independent restau­
rants must have a number
of particular advantages
to achieve such strength
and staying power. For
one thing they are more
likely than the chains to
have access to nonunion,
and,
1954Pretax profit as a percentage of sales

------ i962----

Corporate restaurant sales
as a percentage of total

therefore,

cheaper
dition,

labor.
the

usually
In

ad­

independent

owner-operator often pays
8

himself far less than a

PROPRIETORSHIPS

-

corporation

7

would have

to pay a unit manager
6

of equivalent skill and
experience.

5

2

-

And then there is “ at­

CORPORATIONS

mosphere” — the essential

I

0

intangible in the restau­
_L

1949

'51

'53

'55

'57

'59

1947-48

1960-61

rant business. The chain
usually mass produces its

ployees each. In fact, over 57,000 have no em­

atmosphere in the New York office and, although

ployees at all; presumably the owner and his

in good taste, it may be somewhat cold to the

family do all the work. The average restaurant

discerning patron. The independent, in contrast,

sells only $58,000 worth of food a year and if

can display a warm, one-of-a-kind personality.

you include drinking places as well, almost

Chains may employ specialists but independ­

90,000 units have yearly sales of only $10,000

ents can specialize their entire operation. Spe­

or less.

cialization in the food of a certain foreign

Food service is an easy business to enter

country is becoming increasingly popular in

since space and equipment often can be leased.

this age when the well-traveled gourmet is a

Naturally many of the small entrepreneurs lack

major status figure. Every area long has had

the necessary skill— or luck— and they quickly

its French, Italian and Chinese restaurants but

fail. But at 42 reported failures per 10,000 con­

now you find Polynesian, Spanish, Russian,

cerns, the rate for eating and drinking places

Greek, Indian and many others as well. Some




9

business review

independents specialize in fresh-caught seafood,

SUCCESS STORY

charcoaled Black Angus steaks or whatever is

Reported failure rate per 10,000 operating retail
concerns, 1962

appropriate to their immediate locality. Others
specialize by type of customer— “ tea rooms”
seek to attract older ladies, for example. Cer­
tain eating places specialize in entertainment;
a popular piano player brings patrons back,
again and again, to one restaurant we know.
Finally, every independent can, and many do,
offer a certain dish as a specialty of the house.
The Millstone Inn features cheese fondu Albert,
named for the owner.
Flexibility is another advantage the independ­
ents have. They can make up their menu from
day to day and take advantage of local foods
available with special quality or at bargain
prices. They can draw on neighbors for parttime help in peak periods and can always rustle

Infants' & Children's W e a r..................
Sporting Goods ....................................
Women's Ready-to-Wear.......................
Furniture and F u rn is h in g s..................
Cameias & Photographic Supplies . . .
Men's W e a r ...........................................
B a ke rie s..................................................
Gifts ......................................................
Books and S ta tio n e ry ...........................
Appliances, Radio & T e le v is io n .........
Shoes ......................................................
ALL INDUSTRIAL AND COMMERCIAL
ESTABLISHMENTS .........................
Women's A ccessories...........................
Lumber and Building M a te ria ls .........
Dry Goods & General Merchandise . . .
Jewelry ..................................................
Automotive Parts and Accessories . . .
EATING AND DRINKING PLACES . . .
Hardware ................................................
A u to m o b ile s...........................................
Drugs ......................................................
Groceries, Meats & P ro d u ce................
Farm Im p le m e n ts..................................

161
145
109
105
94
93
83
74
69
69

66
61
59
54
48
47
44
42
40
35
33
26

21

up a few extra hands for a big wedding party.
Lack of unionization is a key factor in this labor

his eye on details than the manager of a chain
unit with his business school degree and his

flexibility.
The small-scale operation can offer a brand

manual from headquarters.

of personalized service that the chains find
hard to match. The independent owner and

To each his own

most of his employees often are long-time resi­

We mention such things to explain the strength

dents of the local community. They get to know

of the small independents in the face of strong

their customers and vice versa. They can em­

competition

ploy with telling effect, the great secret weapon

chains. We don’t mean to imply that the inde­

of small business— calling customers by their

pendents such as the Millstone Inn will increase

names.

from

Mistress Mary

and sister

you

their present share of the total market. Chains

today? Would you like the same table you had

should continue to wedge slowly into this tra­

last week?” It is of stuff such as this that true

ditional small-business industry— by sheer ef­

customer loyalty is made, not necessarily of the

ficiency if nothing else.

“ Hello,

Mr.

Cooper.

How

are

cheapest, quickest chicken a la king in town.
If baseball is a “ game of inches” restaurant-

Actually, there should be room for an ex­
pansion of chains and at least the present num­

ing is a business of “ details.” A thousand little

ber of independents for years to come. The total

things are of crucial importance to a successful

eating-out market is expected to increase at the

operation and they require constant personal

rate of 3 or 4 per cent a year, mainly on the

supervision. It may well be that the experienced,

strength of the nation’s expanding population

dedicated owner-operator is better able to keep

and affluence.

10




business review

It could be that the chains will concentrate

ness system as a whole. As with restaurants,

on the market for which they are particularly

large firms are likely to continue to expand

well fitted— the semi-necessity section. If you

their market penetration in many industries.

have to eat your lunch out 250 working days

They have the advantages of highly efficient man­

a year you probably will prize quick service

agement, production and marketing techniques.

and low price above all else. If you take a super­

Nevertheless, the small firm is far from ob­

highway to save time you won’t want to squan­

solete in the American economy. As large firms

der a half hour while your meal is cooked to

grow more impersonal and products and serv­

order. Probably you would prefer the speed

ices become more standardized, as we become

of the infrared oven and an impersonal, cat-

a number to the utility company, the mailman,

quick waitress. If you are a teenager pulling up

the insurance company, the tax collector and

in your 1952 convertible you want 15^ ham­

the banker, we could learn to covet some old-

burgers and 20^ malts, not an impeccably served

fashioned, luxurious “ inefficiency.” Small firms

selection of unusual entrees. But when you eat

should be able to capitalize on a growing de­

out instead of at home or in the office, simply

mand for personal attention, unique surround­

because you want to, you tend to seek the many

ings, individualized and hand-made products,

pleasant extras that independents are in a good

warmth of personality, flexible service, special­

position to offer.

ization, selection, attention to detail and face-tosmiling-face relationships.

Conclusion
Possibly these observations about the restaurant
industry apply in some measure to our busi­




“ Goodbye, Mr. Cooper. Thank you for your
patronage and I hope you will be back again
soon.”

11

HIGHER GOALS FOR
CAPITAL SPENDING
Manufacturers in the Philadelphia Metropolitan

ing steadily, though not spectacularly, since the

Area plan to spend $378 million on plant and

leveling-off which occurred late in 1962. In

equipment in 1964. This is an increase of 18
per cent over last September’s projections for

good measure, the current projections of in­

1964 and a rise of 10 per cent from last year.

from this experience.

creased plant and equipment spending result

The estimate represents a sharp reversal from

Another reason for a brighter outlook is the

predictions last fall that capital spending would

recent corporate and individual income tax cut.

be 6 per cent less this year than in 1963.

A substantial part of the corporate tax reduc­
tion will be temporarily offset by accelerated

The projected increases are even larger in
Metropolitan

tax payments, but the individual tax cut also

Areas. Trenton manufacturers now expect cap­

has repercussions on investment spending. Al­

ital expenditures to be 75 per cent higher than

though the magnitude of effects from the tax

the

Trenton

and

Wilmington

in 1963, while last fall they expected a decrease

cut

of 14 per cent. Wilmington industries raised an

change will be toward increased spending on

is

now

unpredictable,

the

direction

of

optimistic fall prediction of a 20 per cent in­

final goods by consumers. Some increases in

crease in 1964 to 38 per cent. The Lehigh Val­

capital spending now planned may anticipate

ley Area still does not predict an increase,

this increased demand for final products, which

although manufacturers in this area are still

is expected to add to total demand and help

more optimistic now than in the fall. They have

stretch out the business expansion. One bit of

shaved their projected 34 per cent decrease to

supporting evidence is the distribution of spend­

20 per cent.

ing increases by industry.

In part, these reversals reflect the traditional
estimates, which are made before final plans

Increases higher in industries making
durable goods

are firm. However, the magnitude of these

Both this Federal Reserve Bank’s survey and

changes seems indicative of a rise in business

current national surveys show that, as manu­

optimism this year, and a feeling on the part

facturers increase their capital spending plans,

conservatism of businessmen in their fall survey

of businessmen that the investment climate looks

durable goods industries are increasing their

good. National surveys of capital expenditure

investment predictions at a faster rate than

plans show similar or even higher increases.

nondurable goods industries. In the Philadel­

It would be surprising if the estimates were

phia Area, current 1964 projections for dura­

not behaving in this manner. For one thing,

ble goods industries are 16 per cent higher

capital spending plans tend to follow changes

than 1963 figures; for nondurables, the increase

in business activity. Business has been improv­

is 6 per cent. Findings are similar in Trenton,

12




business review

where

expected

1964

spending figures for du­
rables are 92 per cent

ESTIMATED CAPITAL EXPENDITURES OF M ANUFACTURERS
IN TH E DELAWARE AND LEHIGH VALLEYS
1 9 6 3 AND 1 9 6 4
1964 Estimate
As of

higher than last year,
while estimates for non­
durables are up 43 per
cent. In Wilmington, the
increases are 81 per cent
for durables and 24 per
cent

for

Only

in

nondurables.
the

Lehigh

Valley, where the other­
wise universal increases
are reversed, is the dura­
bles estimate less opti­
mistic than that for non­
durables.

Investment spending
important in
sustaining nation’s
total product
While capital spending
figures

for

encouraging,

1964

are

they

fall

short of the boom pro­
portions

reached

Fall
1963

Expenditures
1963

Spring
1964

Change
in 1964
Change
Estimate
1963-1964 Fall-Spring

(Dollar Amounts in Millions)

Philadelphia Metropolitan Area
All Manufacturing
Durables
Lumber and furniture
Stone, clay, glass
Primary metals
Fabricated metals
Machinery (excl. elec.)
Electrical machinery
Transportation equipment
Instruments and misc.
Nondurables
Food and tobacco
Textiles
Apparel
Paper
Printing and publishing
Chemicals
Petroleum and coal
Rubber and leather
Lehigh Valley
All Manufacturing
Trenton
All Manufacturing

$343.6
137.4
1.5
22.0
15.5
20.9
29.2
28.6
11.9
7.8
206.2
45.8
6.7
3.0
23.4
18.7
68.9
39.2
0.5

$321.1
130.9
1.6
17.3
21.9
17.5
28.3
29.4
6.6
8.3
190.2
28.3
9.4
1.9
33.1
7.8
69.0
40.2
0.5

$377.9
159.2
1.9
21.2
28.9
19.3
29.3
31.5
7.3
22.8
218.7
39.9
13.1
1.9
34.4
11.4
78.5
40.5
0.6

68.6

45.9

22.3

55.2

— 20

+ 20

19.1

39.0

+

75

+ 104

53.4

62.0

+

38

+

135.7

118.4

152.7

+

13

+ 29

479.3

in

+
4
+
7
+ 11
+ 175
+ 15
+ 41
+ 39
1
+
4
+ 46
+ 14
+
1
+ 17

44.8

Wilmington
All Manufacturing
3 Area Total
All Manufacturing
4 Area Total
All Manufacturing

10%
16
27
4
+ 86
8
0
+ 10
39
+ 192
6
+
13
+ 96
37
+ 47
39
+ 14
+ 3
+ 20

439.5

534.0

+

11

+ 22

+
+
+

+ 18%
+ 22
+ 17
+ 22
+ 32

+ io

16

1955—
57, even though the size of the economy

provide a very strong stimulus. But now the

has grown since then. Industry still is not push­

new increases planned in plant and equipment

ing against capacity limits as it was in the

spending are enough, perhaps, to offset some

mid-fifties. Nevertheless, the projected increases

projected leveling-off of increases in Govern­

in plant and equipment expenditures should

ment expenditures. Private investment spending

make an important contribution to growth this

thus may pick up a greater share of the burden

year in the gross national product.

of

augmenting

the

gross

national

product.

From late in 1961 until well into 1963, in­

Heightened activity in the capital-goods indus­

creases in the national product were sustained

tries also stimulates, consumer spending, the

by sectors of spending other than private in­

sector which must make the major contribution

vestment. Even thereafter, investment did not

if economic growth is to continue through 1964.




13

FOR THE R E C O R D

•

• •

BILLIONS $_________________ MEMBER BANKS 3RD F.R.D._____________f t

INDEX

BANKING
/

>1,
/ 1
1% / |
f

CHECK
.
PAYM ENTS*
(20 CITIES)

A

rH i

i

/

V \

#

v \ jr

V

1
1/

’

i/
if
w

M

!
y

V
1

i

\

A i' l 1
n

,

V

DEPOSITS

—

■
”

INVESTMENTS

/'

i*
2 YEARS
AGO

YEAR
AGO

MAR.
1964

2 YEARS
AGO

Third Federal
Reserve District

United States

Per cent change

Per cent change

YEAR
AGO

M AR.
1964

Department
Store**

Factory*
Employ­
ment

Payrolls

Sales**

Check
Payments

Per cent
change
March 1964
from

Per cent
change
March 1964
from

Per cent
change
March 1964
from

Per cent
change
March 1964
from

SUMM ARY
Mar. 1964
from

Mar. 1964
from
mo.
ago

year
ago

+

mo.
ago

year
ago

3
mos.
1964
from
year
ago

i
1

+ 2
+ 18

LO CA L
CH AN GES

+ 6

+

3
mos.
1964
from
year
ago

mo.
ago

MANUFACTURING
Electric power consumed...........
Man-hours, to ta l* ........................
Employment, to ta l..........................
W age income*..............................

+
+
+
+

6
3
2
3

+ 8
0
+ 1
+ 4

+
+

7
3
1
1

CONSTRUCTION**........................ + 3 2

-

3

+ 11

+32

COAL PRODUCTION..................... - 1 2

-

3

+

-

DEPARTMENT STORE SALES***. . . -

+ 2

BANKING
(All member banksl
Deposits..........................................
Loans...............................................
Investments.....................................
U.S. Govt, securities...................
O ther............................................
Check payments.............................

1

6

0

5

+ 2

0

+ i

+ 16

Harrisburg.........

0

+3

+

+

Lancaster............

0

-1

4

Philadelphia. . . .
Reading..............

+ 6 + 5
+ 9 + 8
+ 3 + 2
- 5 - 6
+20
+20
+ 12t + 4 | + 5 t

+
+
+

1
2
1
0
+ 2
+16

+
+
+
+
+

7
12
1
7
17
12

+ 7
+ 12
0
- 8
+ 18
+ 10

•Production workers only.
••Value of contracts.
•••Adjusted for seasonal variation.




0

year
ago

mo.
ago

year
ago

1

+ 12

+ 3

+ 6

-1 5

-

6

+ 9

+ 12

+ 7

year
ago

+n

0

mo.
ago

+11

+

+20

8

-1

+

1

+

1

+

2

+

2

+ 13

+

4

-2

+ 1

-

2

+

7

-

2

+

4

+

7

+

9

-

Scranton.............

-1

+ 1

Trenton...............

+ 1

+3

W ilkes-Barre. . .

3

+

7

-

3

-

1

+

5

+

6

0

+

9

+

2

+

5

+

1

-

7

o t + 2 t + 2*

0
0

+
+

1
1

+

t20 Cities
JPhiladelphia

0
1

+ 1

+2

+

3

+ 10

-

4

0

+ 17

+ 14

W ilmington........

PRICES
Consumer.......................................

mo.
ago

Lehigh Valley. . .

+ 10

+ 1
+ 2
0
— 1

year
ago

0

+2

+

1

+ 11

-

8

+ 3

+ 15

-

Y ork....................

0

+3

0

+

-

5

-1 0

+

+ 15

8

9

5

*N o t restricted to corporate limits of cities but covers areas of one or more
counties.
••Adjusted for seasonal variation.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102