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"Ci'vVX BUSINESS REVIEW IBRAR -p 1 3 1946 :ci£sri!E5§s? FEDERAL RESERVE BANK OF PHILADELPHIA SEPTEMBER 2, 1946 ► Time Deposit Policies of Commercial Banks i Although overshadowed for some years by the more spectacular expansion of demand de posits, time deposits of commercial banks not only have increased at an accelerated rate since 1943, but have grown at a faster rate than de mand deposits. This recent development raises questions which are of importance to banks in appraising the future. Among these are: 1. The nature of the long-term trends in fluencing the present situation. 2. The attitude of banks toward time de posits. 3. The relationship between time deposits and loan and investment policies. 4. The place of time deposits in the exist ing inflationary situation. These questions are particularly important to banks in the Third Federal Reserve District be cause time deposits, while still a more important segment of total deposits in this area than na tionally, in recent years have exhibited trends quite different here than in other areas. w Long-Term Trends Importance of commercial banks in the savings field Over the first thirty years of the century, the proportion of all time deposits in the United States which was held by commercial banks in * creased rapidly. Reasons for this development are not difficult to find: (1) mutual savings banks were confined to a relatively small num ber of states and few new ones have been char tered since 1900; (2) although the Postal Sav ings System was established in 1910, it appar ently carried little appeal to the vast majority of individuals until after the stock market col lapse in 1929; its greatest growth occurred dur ing the banking troubles of the early thirties; (3) commercial banks were multiplying rapidly throughout the country and the growing famil iarity of the public with such institutions led to greater use of their savings deposit facilities; (4) the certificates of deposit offered business concerns a means of earning additional interest on temporarily idle funds—a type of service not available at savings banks; (5) the lack of any maximum limits on individual savings accounts at most commercial banks; (6) the widespread practice on the part of commercial banks of not enforcing their legal right to demand notice before withdrawal. Between 1930 and 1933 time deposits of com mercial banks sharply declined as public con fidence in the banking system deteriorated. Throughout the crisis deposits at mutuals re mained higher than in 1929 and 1930, while postal savings deposits increased, becoming for the first time a significant part of our deposit system. As a result of the crisis the importance Page 89 of commercial banks in the savings field de creased sharply, but after the “banking holi day” it again increased and has continued to rise since that date. At the present time commer cial banks again hold well over 60 per cent of all time deposits, even though the Postal Sav ings System and mutual savings banks pay in terest rates which are in general higher than those paid by commercial banks. Importance of time deposits at commercial banks The period prior to the first World War was one of rising interest rates and increasing de mands for bank credit to finance expansion of American business. The high returns available on investments left attractive profits after pay ing interest to depositors, and stimulated com mercial banks to compete actively for savings deposits. Interest paid on savings accounts by commercial banks in eastern cities ranged typ ically from 3 to 3Vk per cent, usually credited monthly. In some parts of the country, par ticularly in smaller towns, commercial banks paid even higher rates. In the years from 1915 to 1920 time deposits continued to increase rapidly at commercial banks, but under the stimulus of war financing and postwar inflation, demand deposits ex panded at a comparable rate. During the period of credit liquidation from 1920 to 1922, on the other hand, demand deposits contracted sharply whereas time deposits of commercial banks continued to increase moderately. Although demand deposits again entered a period of expansion from 1922 to 1929, time de IMPORTANCE OF TIME DEPOSITS OF COMMERCIAL BANNS INTERBANK DEPOSITS EXCLUDED PERCENT 1900 1905 1910 Page 90 1915 1920 1925 1930 1935 1940 1945 posits at commercial banks rose much more rapidly. In part, this rapid growth in time de posits was the result of influences similar to those prevailing before 1914, but two new fac tors were of great importance during this pe riod; (1) the lower reserve requirements for time than for demand deposits; (2) the appar ent attractiveness of high-yield assets, such as real-estate mortgages, in which it was consid ered appropriate to invest time but not demand deposits. Of the two, the desire to invest time deposits in less liquid assets at higher yields was the more important factor. Many banks actively encouraged customers to take advan tage of the higher interest rates paid on time deposits by shifting part of their funds from de mand to time accounts, pointing out that they did not make a practice of requiring notice if such funds should be needed later. The attrac tiveness of this policy is suggested by the rates listed in the following table: AVERAGE YIELDS ON TYPES OF EARNING ASSETS, 1924-1928 More Liquid Assets Less Liquid Assets Short-term Governments.. .. 3^% Bankers’ acceptances............... 3K> Prime commercial paper.........4)^ Stock market renewal rate on call loans.................... .. 4H Customers’ loans in principal cities......................................... 5 Bonds: Moody’s Baa rating. ... 6% Real estate mortgages: Interest and other charges.... 6-8 Banks that were impressed by a mere tech nical change in classification of their deposits, however, also were likely to be more impressed by yield than by quality in selecting individual investments within a given field. In the period of credit liquidation following 1929 many banks with large time deposits faced a serious di lemma. They had relied on the greater stability of time deposits and in large part invested them in nonliquid and perhaps even unsound assets. If a bank suddenly attempted to enforce its right of requiring legal notice before with drawal, the innovation was apt to be inter preted as a sign of weakness and the bank might face long lines of time depositors clamor ing to file withdrawal notices. Widespread loss of confidence in commercial banks played a dominant part in the decline of their time as well as their demand deposits in the later stages of the financial crisis. In the decade following 1933 the ratio of time to total deposits declined almost constantly be- cause of the more rapid increase in demand than in time deposits. Important reasons for a decline in the relative importance of time de posits since 1933 are to be found in the low interest rates earned on banks’ loans and in vestments, and in the large excess reserves held by banks throughout most of this period. As in terest rates fell to unprecedentedly low levels, some banks felt that any interest paid on time deposits left an insufficient margin of net earn ings to make such deposits desirable, and at tempted to withdraw completely from the sav ings field. Other banks reduced interest paid on time deposits by successive stages. Few commercial banks today offer more than ll/2 per cent, and most banks pay 1 per cent or less on such accounts. The steadily mounting vol ume of excess reserves in the later thirties and early forties made commercial banks even less enthusiastic in their competition for time de posits. The war brought increased competition for individual savings from another source at the same time that commercial banks were reduc ing efforts to attract savings deposits. Higher rates could be earned on United States Savings Bonds, and a far larger proportion of personal savings has been invested in Government se curities than in time deposits during recent years. Deposits in the Postal Savings System, which paid higher interest rates than commer cial banks, also increased more rapidly than time deposits at commercial banks. Time Deposit Policies of Third District Banks For many years time deposits have provided a larger proportion of total deposits at member banks in the Third Federal Reserve District than at member banks throughout the country. The accompanying chart indicates that since 1938 the time deposits of country banks in this district (all banks outside of Philadelphia) in creased more slowly than those of member banks throughout the country. The disparity, however, is little greater than might be ex pected in view of the extent to which the growth of total deposits in the Third District lagged behind that for the rest of the country. In contrast, Philadelphia member banks ex perienced a decline of almost 50 per cent in time deposits by the end of 1942, and at the end of 1945 their time deposits were still about 16 CHANGES IN TIME DEPOSITS OF MEMBER BANKS PERCENT U.S.-COUNTRY BANKS U S-ALL MEMBERS' US-RES. AND CENT. RES. CITY BANKS THIRD DISTRICT " ALL MEMBERS THIRD DISTRICT RES, CITY BANKS 1940 1942 1943 1944 1945 per cent below their 1938 level. The war con tributed little to this unusual local situation and the explanation must be sought in bank policy or other influences. In several respects the time deposit situation in Philadelphia before the war differed from that in the rest of the district and that in cen tral reserve and reserve city banks throughout the country. In the first place, savings accounts were a much less important part of total time deposits. Other time deposits of individuals, partnerships, and corporations (composed mostly of business funds) were therefore a much more important part. And in the second place, the deposits of mutual savings banks in Phila delphia were much larger than the total time deposits of Philadelphia member banks. The largest factor in the decline of time de posits of Philadelphia member banks was the drastic reduction of non-savings deposits of individuals, partnerships, and corporations, composed principally of business accounts. Sav ings deposits, which increased elsewhere in the country, decreased by one-third at Philadel phia member banks prior to June 1942, account ing for about 40 per cent of the total decline in their time deposits. During this period all member banks in the city cut interest rates on savings substantially. Several of the large banks eliminated all interest payment, put sav ings deposits on a demand basis, and recom Page 91 mended that savings depositors invest their sav ings through other channels such as mutual sav ings banks or war savings bonds. Out of the total decline in savings deposits at member banks in Philadelphia between 1938 and June 1942, 73 per cent was accounted for by banks which eliminated all interest payment on savings; 221,4 per cent by changes in mem bership, most important of which was the liquidation of one large bank whose savings ac counts were transferred to a mutual savings in stitution; and 8Va per cent by banks which had reduced interest rates during the period to either one-half or 1 per cent. On the other hand, the very small number of banks still pay ing iy2 per cent interest in 1942 had experi enced a rate of growth greater than that shown by all member banks in the United States. The increase in this small group was equivalent to 4 per cent of the total decline in savings at Philadelphia member banks. Over the entire period, mutuals have paid from one-half to 1 per cent higher interest rates than those paid at member banks in the city. The prevailing rate paid by mutuals was 214 per cent at the beginning of the period, 2 per cent from July 1939 to the end of 1944, and IV2 per cent since the beginning of 1945. By the end of 1945, deposits at mutuals had increased 60 per cent, although time deposits of member banks in the city were still considerably below 1938 levels. In 1945, for the first time during the war, the percentage increase of time deposits in the Third District exceeded that of demand de posits and was almost as high as at member banks throughout the United States. Further more, the rate of expansion of time deposits at Philadelphia banks approximately equaled that of other member banks in the district. Significance for Banking Policy Bo commercial banks want savings depositsf Some institutions have reduced interest rates drastically to discourage such business. Others have withdrawn from the field entirely. Very few member banks have advertised or other wise pushed the development of their time de posit business in recent years. Schedules of rates have been introduced by most Philadelphia member banks in recent Page 92 years. In the majority of schedules, rates are scaled downward as the size of the account in creases and many banks make a deduction for required reserves before figuring interest. For example, 1*4 per cent may be paid on net bal ances up to $1,000; 1 per cent on the next $4,000; and one-half of 1 per cent on balances over $5,000. It has been a common practice in recent years for member banks not only to set a minimum of, say, $100 before interest is allowed but also to set maximum limits on savings ac counts, with no interest paid on amounts in ex cess. Such limits are usually either five or ten thousand dollars. Other factors remaining constant, the cost of administering deposits should decrease rela tively as the size of account increases. For this reason, adoption of schedules which allow higher rates on smaller than on larger accounts may indicate that banks are more concerned with public relations, or in providing convenient facilities for small savers in the community, than with the margin of profit which can be earned on individual accounts. Certainly, use of this type of rate schedule in conjunction with maximum limits indicates that a bank is not anx ious to build up total volume of time deposits. At present yields on bank investments it may well be that many banks do not believe there is sufficient profit in savings deposits to justify the direct and indirect costs involved. This might be particularly characteristic of those large city banks whose organization is geared principally to the service of large individual or business accounts. On the other hand, many banks do find sav ings accounts profitable. The continued growth of mutual savings banks, which are confined en tirely to savings deposits, would indicate that this business can be profitable even under pres ent conditions. The difference may lie in spe cial organization for keeping the costs of ad ministering such deposits at a minimum and perhaps involves the development of loan and investment policies especially adapted to rela tively inactive funds such as savings. As long as yields on loans and investments remain at present low levels and the bulk of banks’ earning assets consist of Government se curities, commercial banks generally are not likely to become enthusiastic about time de posits, at least not to the extent of offering sub stantially higher interest rates than they are now paying. General levels of bank earnings might permit the payment of higher rates on savings accounts but it must first be demon strated that savings deposits themselves earn more than their costs before individual banks will adopt such a policy. Certainly, banks cannot be expected to carry time deposits at a loss, and decisions as to the desirability of this type of business must rest with the individual bank. If member banks wish to maintain or to develop their time de posit business, however, interest rates paid will be an important factor as long as alternative channels for saving offer comparable safety and reasonable availability of funds. The rate of interest paid on time deposits may have little effect on the total volume of saving, but whether savings are held in cash or placed else where than with commercial banks may be in fluenced to a considerable extent by the amount of interest offered. What is the relationship between time deposit policies and loan and investment policies? In de termining loan and investment policies, banks should consider the underlying nature of their time deposits. Do they represent relatively per manent savings of depositors; or is there a seri ous probability that substantial amounts may be temporarily idle funds awaiting opportunity to buy automobiles or other long-denied consum ers’ goods, to build or repair homes, to take delayed vacations, or to be spent in other ways not usually associated with long-term savings? Only the individual bank can answer such ques tions about its particular group of depositors with any degree of dependability; but to the extent that time deposits represent only tem porarily unspent funds, they should be invested in much the same manner as demand deposits. Spending will not decrease bank deposits gen erally but it may produce shifts as between banks or communities and as between time and demand deposits. Finally, how do time deposits fit into the liquid assets picture, and what part do they play in the existing inflationary situation? During the war, accumulated savings of individuals reached un precedented levels. While interest paid on time deposits declined, the same has been true of other savings channels although in some cases to a lesser degree. Familiarity with the use of savings deposits, and the ease with which with drawals can be made, still caused many people to use this channel of savings regardless of re turn. Indeed, some banks which discontinued all interest payments and advised savings de positors to invest their savings elsewhere dis covered that a substantial amount of such funds were not withdrawn. The strong desire, characteristic of the war period, to keep savings easily available is fur ther demonstrated by the great expansion of personal holdings of demand deposits and cur rency. In total, such accumulations of money have increased over $30 billion since 1940 as compared with an increase of only $20 billion in time deposits. This apparently indicates that the interest rates paid on time deposits held little appeal to many individuals who saved substantial amounts during the war. The fact that time deposits have expanded at a more rapid rate than personal holdings of either de mand deposits or currency since the end of 1944, although lagging far behind in the ear lier war period, may indicate that a point exists beyond which even a low interest rate may offset the advantages of further increasing money holdings. Time deposits are not as volatile as cash hold ings when it comes to spending, even though they may represent recent savings partially in duced by wartime scarcity of consumers’ goods. For that reason the attraction of currency hold ings or even demand deposits into savings de posits should be useful in reducing the present inflationary potential of our over-expanded money supply. Furthermore, there should be a definite advantage to banks in encouraging the habit of using banking facilities as a substitute for the old teapot or mattress as a means of saving. Permanent savings habits and valuable bank customers for the future are easier to de velop in times when people have accumulated unspent income. Page 93 Farmers Need Machinery The agricultural implement industry is gearing up for one billion dollars worth of business a year and not just for one year but several years. That is quite a jump from annual sales averaging $300 million just before the war; it would be more than double the peak of 1941 and a substantial increase over the 1945 output. Under constant pressure for greater output throughout the war, farmers ran their machin ery ragged and bought all the new equipment they could get. The demand for food is as great as ever but farm machinery is old and in dis repair. Replacement of outworn and outmoded equipment with modern machinery is the best way to maintain output. Changing Technology in Agriculture Greater use of machinery more than anything else distinguishes one generation of farming from another. Improved technology in harvest ing is illustrated by the shifts from the grain cradle to the drop reaper to the binder to the combine. But mechanization is not confined to grains. Specialized machinery is now in use on almost every major crop, such as corn, cotton, hay, sugar, potatoes, and other vegetables; and machines do the work of land clearing, plowing, planting, cultivating, and in many cases harvest ing. In recent years productivity has been stepped up tremendously by substituting trac tors for animal power. Agricultural machinery pays big dividends to the farmer—less labor, greater output, and more efficient utilization of land. This is illus trated by the vast changes that have taken place in American agriculture between 1870 and 1940, as shown in the accompanying chart. In 1940 the agricultural labor force was only one-third larger than in 1870, but productivity was increased almost twofold and total output rose almost threefold. Since 1910 farm em ployment has actually declined. The use of the tractor has increased the amount of land avail able to grow products for human consumption. Since 1920 the shift from animal power to ma chine power has released over 50 million acres of crop land and large acreages of pasture for merly used for horse and mule feed; this land is now available for growing food, fibre, and oil products. Page 94 Production of agricultural machinery had to be given high priority throughout the war years. Notwithstanding wartime scarcities, sub stantial quotas of steel were allotted for the production of most urgently needed farm equip ment such as milking machines, pick-up balers, corn pickers, and combines. Increased reliance upon the use of machinery was about the only way farmers were able to cope with the un usual conditions that confronted them during the war years. The demand for food and fibre was greater than ever before because of the in creased requirements of the armed forces and Lend Lease, and also because of the greater purchasing power at home. With high incomes, people ate more food, better food, and higherpriced food. Farmers were also confronted by a serious shrinkage in the labor supply. It is estimated that 5 million people left the farms between 1940 and 1945, and this does not in clude the 1,650,000 men who went into the armed forces. The loss of the latter group was particularly serious because it included the most efficient part of the agricultural labor force. Another factor contributing to the unusual wartime demand for agricultural machinery was the effect of the shrinking labor supply upon wage rates. During the war, farm wage rates almost trebled. This was a powerful in fluence to mechanize the farms. FARM PRODUCTION, FARM EMPLOYMENT, FARM LABOR PRODUCTIVITY, AND TOTAL POPULATION UNITED STATES 1870-1940 ■PER CENT INDEX NUMBERS(87 0-100) ; 400 : 300 T " Ft RM PR0DU(:tion-\. TOT AL' POPUL VTION 200 ' FA )M EMPLO YMENT ................ ~ IOO 1870 RODUCTIV TY PER WORK!:r / / 1880 1890 1900 SQPRCE-U.S DEPARTMENT OF AGRICULTURE 1910 . 1920 1930 1940 BUREAU OF AGRICULTURAL ECONOMICS It has been estimated that in 1944 output per worker was nearly one-half above that of the 1935-1939 average. The record shows that it was accomplished largely by greater use of machinery. The grain combine, which har vested about 15 per cent of the acreage in oats and about half of the wheat crop in 1938, har vested about 40 per cent of the oats and threequarters of the wheat in 1945. This machine was also used extensively to harvest soy beans. Soy bean acreage devoted to the production of beans rose from 3 million acres in 1938 to 11 million in 1945. Corn pickers now in use are about 30 per cent above the 1942 figure. Trac tor mowers which cut 15 per cent of the hay crop in 1939 now cut about half of the hay crop. The use of hay balers almost doubled between 1939 and 1944, and the number of milking ma chines now in use is about double that of 1942. Heretofore agricultural mechanization had been most pronounced on the large cash crop farms. Machinery can be used most effectively on large farms such as those found in the corn and wheat growing areas and more recently in the cotton belt. But the use of machinery is by no means fimited to large-scale agriculture. Specialized farm equipment is being used more and more on medium-sized and small farms of the type that predominate in the Third District. Characteristics of Agriculture in the Third District The three states included in the Third Dis trict produced $833 million of agricultural products in 1945—more than double the value of pre-war output. The farming pattern in Pennsylvania, New Jersey, and Delaware is somewhat mixed. While dairying and poultry raising are the most important types of enter prise, farms in this region also derive a substan tial part of their income from field crops and livestock as well as fruits, vegetables, and hor ticultural specialties such as mushrooms. The diversified character of agriculture in this re gion is illustrated by the accompanying table, which shows the relative importance of its prin cipal products. The three states had slightly more than 200, 000 farms, according to the 1940 census. In size they ranged from less than 3 acres to over 1,000 acres each. As shown in the following table, over a quarter of the farms in the tri-state area were in the 50 to 99 acre size; almost one- VALUE OF PRODUCTS SOLD OR TRADED—1939 (000’s omitted) (Excluding produce used on farms) New Jersey Pennsyl vania Delaware Dairy..................................... Poultry and products........ Other livestock products.. Livestock.............................. Field crops............................ Horticultural specialties. . Fruits and nuts................... Vegetables............................ Forest products.................. $22,976 16,501 237 3,918 8,436 7,322 3,927 11,047 $ 68,220 36,432 3,089 25,724 36,905 11,158 7,939 7,314 1,244 Total................................. $74,450 $198,025 Source: U. S. Census of Agriculture, 1940. 86 Three States Per Cent $ 2,225 8,352 42 597 1,838 583 1,075 1,477 53 $ 93,421 .61,285 f 3,368 30,239 47,179 19,063 12,941 19,838 1,383 32.3% $16,242 $288,717 100.0% 21.2 1.2 10.5 16.3 6.6 4.5 6.9 .5 quarter were in the 100 to 174 acre group; and almost 40 per cent were small farms, that is, under 50 acres each. Compared with all farms in the United States, there are proportionately more farms in the 50 to 99 and 100 to 174 acre classes and relatively fewer farms in all classes from 175 acres and upwards. Agriculture in this area is characterized by smaller farms whose resources are utilized most profitably to supply food products for the large metropolitan markets of this region. SIZE OF FARMS—1940 Pa., N. J„ & Del. United States Acres per Farm Number of Farms Per Cent Number of Farms Per Cent Less than 50 acres.............................. 50- 99 acres...................................... 100—174 acres...................................... 175—259 acres.................................... 260-499 acres...................................... 500 and over acres............................. 78,085 57,207 48,868 13,468 5,298 930 38.3 28.1 24.0 37.5 0.4 2,286,662 1,291,048 1,278,617 517,460 458,787 264,225 All farms.......................................... 203,856 Source: U. S. Census of Agriculture. 100.0 6,096,799 100.0 6.6 2.6 21.2 21.0 8.5 7.5 4.3 Opportunities for Mechanization At present the market for agricultural equip ment is ripe for expansion, largely because of conditions brought on by the war. Farmers are still faced with heavy demands for their prod ucts. At home there are 9 million more people to be fed than in 1939, and purchasing power continues at high levels. Abroad, food short ages are acute because of the ravages of war and several years of poor harvests. Our farm ers do not have enough labor and wages are high. Much of the present equipment is run down and needs replacement—a 1944 survey revealed that half of the farm machinery was over twelve years old and a quarter of it ready to be junked. Manufacturers are introducing a variety of new farm equipment. Machines in the experi mental stage or little used before the war and Page 95 now used more extensively include such equip ment as field silage harvesters and land clear ing machines. More and more farmers are buy ing corn pickers, combines, windrow pick-up balers, “baby” tractors, and tractor mowers. The equipment manufacturers are designing one- and two-man machines especially adapted to the needs of smaller farms. According to a recent survey of dairy farming in Pennsylvania, milking machines were used profitably on farms with at least 15 cows when the labor saved could be used in other productive work. Drink ing cups, litter carriers, and other labor-saving equipment were also found on many of the wellmanaged farms. An annual flow of a billion dollars worth of equipment, as some have estimated, from manu facturers through dealers to farmers calls for a huge job of financing. Heretofore much of the financing was done by the manufacturer who took the farmer’s note, which was endorsed by the local dealer. This has not proved satisfac tory because it ties up too much of the manu facturer’s capital, the dealer loses part or all of his cash discount, and the farmer is delayed while his credit undergoes long-distance inves tigation. Furthermore, such paper is apt to be accepted more on the strength of the guarantor than that of the maker whose earning power determines the soundness of the loan. Local banks are in the best position to extend this kind of credit and such loans can be made to the mutual advantage of banker, dealer, farmer, and manufacturer. The manufacturer avoids a type of business which is subsidiary to his major interest and which he is ill-prepared to perform. The local banker is the financial advisor to his local community and he possesses the credit information needed for prompt and intelligent credit judgment. For the dealer, the local banks discount agri cultural machinery paper and this very fre quently leads to other services. The banker can give counsel on budgeting financial require ments to enable the dealer to take cash dis counts, to meet payrolls, and to finance inven tory purchases. Moreover, dealers frequently Page 96 need financial assistance in handling open ac count credits and in carrying through major overhaul jobs. Some banks also supply the credit requirements for the dealer’s flooring. For the farmer, the local bank can “tailor” the credit to the needs of each individual case. Throughout the year, cash farm income varies from low tide of 6 per cent in February to high tide of about 12 per cent in October. But credit requirements vary greatly from one area to an other and from one farm to another. While farm machinery generally increases operating efficiency, it cannot be assumed that every farm can use more equipment profitably. The competent farmer buys a machine only when he sees an opportunity to put the labor saved thereby to profitable use in another farm ing operation. In dairying, for example, it has been found that the most efficiently operated farms are usually those that combined dairying with another income-producing activity, that is, an auxiliary cash crop such as tobacco, pota toes, or poultry. Two or more sources of rev enue not only spread the risks but also afford the means of keeping farm machinery as well as labor employed more productively through out the day and year. Agriculture is on the threshold of great tech nological developments. Substantial improve ment in crop yields and productivity per animal may be expected as more and more farms are operated by modernized practices with respect to soil conservation, scientific plant and animal breeding, disease and pest control and in creased mechanization. While corn picking, hay making, potato digging, sugar harvesting, cotton picking, and many other farming opera tions are on the eve of extensive mechanization, each farmer must buy his equipment with dis crimination. Most machinery is expensive and represents a long term capital investment. On each farm there are very definite limits within which machinery may be employed econom ically; efficient utilization of a piece of equip ment depends upon such factors as the size of the farm, the nature of the enterprise, and the opportunities for engaging in custom work. BUSINESS STATISTICS Production Employment and Income Philadelphia Federal Reserve District in Pennsylvania Adjusted for seasonal variation Indexes: 1923-25 =100 July June July 1946 1946 1945 INDUSTRIALFRODUCTION 108p 101 M ANUFACTURING............... 109p 103 112p 105 105p 101 Metal products....................... 121“ 114r Textile products..................... 76p 74 Transportation equipment.. 161p 143 Food products......................... 141p 125 Tobacco and products.......... 99 104 Building materials................. 44p 42 Chemicals and products.... 154p 151 Leather and products........... 81p 79 Paper and printing................ 121 119 Individual lines Pig iron..................................... 82 80 Steel........................................... 101 87 r Iron castings............................ 78 81 Steel castings........................... 101 94 Electrical apparatus.............. 176 180r 22 Motor vehicles........................ 17 Auto, parts and bodies......... 127 104 Locomotives and cars........... 58 53r Silk manufactures.................. Woolen and worsteds............ Cotton products..................... Carpets and rugs.................... Hosiery...................................... Underwear................................ Cement...................................... Brick.......................................... Lumber and products........... Slaughtering, meat packing. Sugar refining.......................... Conning 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 AWARDS t................. Residential f............................. Nonresidential t....................... Public works and utilitiesf. . 88 76p 56 79p 90 171 59p 58 26 135 102 245p 99 92 127 119p 45p 79 103 214p 146p 86 81 126 128 131 187 91 161 r 67 r 422 118 78 36 173r 74 106 + 7 + 5 + 6 4- 4 + 6 + 3 + 13 +13 - 4 + 3 + 2 + 2 + 1 _ — _ + 102 + 3 +16 - 4 + 8 - 2 +31 — 19 — 26 + 16 41 — 24 — 46 136r 67 172 232 40 127 89 +22 78 55 74 114r 109 293 439 303 426 332 446 429 294 422 307 440 338 218 206 235 164 197 7 109 142 6 76 92 75 90 185 ii8 70p 157p 123p 107 47p 152p 74p 117 22 122 58 115r 156r 62r 72 144 410 111 112 46 152 77 118 110 84 38 170r 68 102r 76 94 89 r 124r 64 80 97 153 180 244 20 41 104 122 55r 89 +232 -23 +24 +23 +153 ** 87 + + 71 201 210 ** +102 206 188 209 249 168 188 32 60 8 100 122 GENERAL 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............ Allentown........... Altoona............... Harrisburg.......... Johnstown........... Lancaster............ Philadelphia.... Reading............... Scranton.............. Factory payrolls Building permits value Debits June 1946 July 1945 June 1946 July 1945 June 1946 July 1945 June 1946 July 1945 June 1946 July 1945 +1 - 1 0 -17 - 8 - 6 + 2 - 3 +12 + + + + + 59 +147 +192 +321 - 95 + 14 - 10 + 64 +500 +156 + 38 +486 + 53 + 18 - 86 - 49 - 48 - 39 + 28 + 79 +126 +234 - 2 - 64 + 57 +278 -26 + i -18 - 7 - 8 +13 - 7 -16 +14 -14 +25 +25 +25 +29 +27 +25 +31 +40 +34 +31 + 9 +13 + 9 +17 + 2 +27 +44 +23 +30 +24 0 0 +20 +21 + 5 + 4 + 1 +45 - 7 +10 -10 0 +16 - 1 0 - 7 + 1 -10 0 + 2 + 5 -15 0 7 3 2 2 4 -21 -23 -14 -19 -29 -22 -14 -27 -24 -22 -16 + 4 Wilkes-Barre... . + 2 - 2 + 1 + 2 Williamsport... . + 4 -24 -23 + 5 -23 Wilmington........ + 2 + 3 + 2 - 3 -13 York..................... + 4 * Area not restricted to the corporate limits of cities given here. +31 +20 0 +1 + 2 + 1 + 1 + 2 - 4 - 3 +1 66 98 148 115 125 119 128 +35 +28 +13 +17 + 7 +16 0 +20 110 + 2 104 0 + 9 + 5 304 401 391 152 345 269 188 207 192 252 237 237 Employment* 0 +1 0 -10 -15 + 5 + 4 - 3 + 2 - 1 + 3 - 2 - 1 - 4 +29 +29 +39 +24 +26 +24 +33 +32 +27 Payrolls* Per cent Per cent July changefrom July chang efrom 1946 1946 index June July index June July 1946 1945 1946 1945 Indexes: 1923-25 =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.......... 102 +1 +1 - 2 102 55 111 84 123 + 6 - 1 +26 + 4 + 2 - 1 83 78 103 116 -34 +u 0 - 1 + 2 88 - 4 + 4 - 1 - 1 104 191 +11 - 2 0 0 120 54 142 0 0 111 - 3 - 8 -11 +12 163 199 404 147 145 138 182 200 +21 165 94 198 141 205 192 +17 + 4 +38 89 333 189 + 18 +19 +1 +1 - 6 + + + + + - 4 2 2 4 3 1 -10 -18 - 8 -38 +24 +25 +18 1 1 +31 +15 - 6 +16 +28 +30 + 2 +26 0 +10 +68 5 5 3 - 4 * Figures from 2757 plants. Factory workers Averages July 1946 and per cent change from year ago Retail sales 0 +1 Hours and Wages Local Business Conditions* Factory employment 126 159 75 Manufacturing * 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. Percentage change— July 1946 from month and year ago Payrolls Per sent Per cent July chang from July chang e from 1946 1946 index June July index June July 1946 1945 1946 1945 123 126 87 87 r 82r 57 r 26 72p 73 48 50 43 13 53 44 74p 74 18 74 77 r 62 13 142 146 126 69p 69 41 70 56 53 50 13 5 29 30 29 111 6* 112 126 11* _ + 49 + 13 121 76 83 + 90 10 55 104 100 + 45 + 13 171p 159 133 r + 29 + 28 107 112 83 88 88 + 6 + 7 83 + 16 + 22 123 124 106 r 86 + 29 + 6 llOp 110 21 15 40p 46 51 78 71 179 — 57 — 66 0 + 2 96 93 94 1 + 1 214p 220 217 28 143p 135 162 — 12 +40 + 11 + 6 84 76 60 +47 + 9 + 9 81 55 74 +10 + 16 17 111 lOOr 96 293 315 332 - 3 12 — 7 + 3 — 2 — 5 408 405 415 + 2 — 2 — 5 404 410 414 - 4 — 13 — 15 300 310 345 66 182 204 243 35 72 Employment Indexes: 1932 =100 104p 100 104p 101 — 20 — 37 + 5 57 — 49 — 44 — 23 — 46 _ 66 3 + 17 + 15 + 28 + 14 + 5 + 94 + 1 16 0 — _ + + + + + + + + Industry, Trade and Service July June July 1946 1946 1945 _ 23 — 25 _ 48 + 8 42 + 9 60 + 4 + 26 + 18 — 15 — 2 + 20 15 17 41 15 25 14 62 19 27 + — + + + 22 — 11 + 9 + 14 + 9 4- 8 83 r - 3 91 60r 0 76 53 49 + 5 76 55 r 4* 4 79r 76 +14 146 152 + 18 58 35 + 3 5Lj 52 +14 28 28 - 6 + 1* 80 91 +69 54 + 9 94 222 170 +11 104 77 - 4 87 + 4 89 125 109 r +1 116 92 + 3 45 57 r + 1 71 183 + 11 91 101 +12 220 216 - 3 135 165 + 8 62 Not adjusted Per cent ch ange July 1946 1946 from from 7 Mo. Year mos. 1945 ago ago +21 +10 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 kly work mg tim e* Hoctrly earnings* Wee dy eamiiigst Aver age Ch’ge Aver Ch’ge Aver Ch’ge hours age age 38.5 37.5 38.3 39.8 38.5 39.5 35.8 42.5 37.2 42.8 40.0 38.3 41.4 40.3 -11 38.3 41.8 42.8 - 9 - 9 + 5 * Figures from 2614 plants. $1,139 1.234 1.127 1.284 .914 .937 .847 - 4 .942 - 8 1.086 0 .848 -13 1.226 -11 .873 - 6 1.086 - 5 1.239 -15 -12 -11 - 1 - 1 - 1 +13 + 12 + 7 +14 + 11 +15 +13 $43.74 46.23 43.21 51.14 35.16 37.04 30.91 40.54 40.36 36.06 49.10 33.31 45.05 50.16 .782 +18 1.252 +15 1.035 +16 29.97 52.27 44.29 +6 + 8 +11 + 3 +12 + 13 - 6 8 2 9 +n +12 + + + + + + 8 9 4 7 1 2 7 7 + 7 + 5 +22 t Figures from 2757 plants. Page 91 Distribution and Prices July 1946 from 1946 from 7 Month Year mos. 1945 ago ago Sales Total of all lines..................... - 2 -37 + 9 + 6 -17 - 4 -25 -15 -17 Drugs....................................... Dry goods............................... Groceries................................. Hardware ............................. Jewelry.................................... Paper...................................... Inventories 0 + 3 -f 8 -10 - 3 + 5 + + + + + + +16 +36 +26 +38 +76 +10 57 27 59 33 14 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..................... 253 238 271 201 228 - 1 - 3 + 15 + 11 - 10 _ 9* + + + + + + 27 23 38 47 13 +i> 4 +“ 4 + 4 + 13 + 6* 199 r 188 226 r 152 181 + + + + + 3 3 9 3 9 14 18 139 187p 179 180p 176 217p 228 63 63 155 149 164 61 134 123 150 134 156 194 137 104 123 98 157 305 203 10 6 146 129 94 162 278 176 131 154 169 + 66 21 21 + + + + 228 207 234 225 243 + + + + + 27 24 32 32 38 174p 148 175p 148p 158 137 120 127 101 66* Inventories 197p 189 196p L88 29 Op 279 73' 65 Per cent change from July Month Year Aug. 1946 1939 ago ago 240 +22 +31 +140 124 157 140 109 +10 +12 +17 +24 + 3 +31 + 9 + 66 +157 + 109 + 36 141 140 161 156 + 6 + 6 + 12 120 + 4 + 9 + 9 +16 + 6 + 6 +22 0 252p 231 312p 223p 205 July June July 1946 1946 1945 1946 from 7 mos. 1945 Month Year ago ago 22 Paper........................................ Source: U. S. Department of Commerce. Prices July L946 fro m July June July 1946 1946 1945 Indexes: 1935-1939 =100 +26 + 35 + 16 -j- 23 + 69 + 106 + 30 + 36 + 47 - 2 Not adjusted Adjusted for seasonal variation Per cent change Per cent cha nge Wholesale trade Unadjusted for seasonal variation + + + + + + + +11 0 Housefurnishings.. . 159 + 1 + 4 Other.......................... 126 Source: U. S. Bureau of Labor Statistics. 43 43 73 57 24 58 25 FREIGHT-CAR LOADINGS Total..................................................................... Merchandise and miscellaneous................... Merchandise—1 .c .1........................................... Coal...................................................................... Ore........................................................................ Coke..................................................................... Forest products................................................ Grain and products......................................... Livestock............................................................ MISCELLANEOUS Life insurance sales........................................... Business liquidations Amount of liabilities....................................... Check payments................................................. 163 162 219 70 32 4 30* 143 129 94 171 186 191 117 115 196 130 174 132 146 91 142 108 147, + 134 + 86 165 — 204 + 221 + 99 + 146 123 + 215 222 133 - 205 226 126 r 199 +397* +397* + 93* 15 ** ** +734* 41 + 6 + 14 + 7 216 3 3 232 189 227 120 100 215 * Computed from unadjusted data. p—Preliminary. ** Increase of 1000% or more from low level. 10 7 6 2 41 30 28 19 82 3 22 60 + 62 + + 15 15 6 9 43 41 4 86 100 111 196 105 3 1 r—Revised. BANKING STATISTICS MEMBER BANK RESERVES AND RELATED FACTORS Aug. 21, 1946 Assets Commercial loans................... $ 314 44 41 Other loans to carry secur... 47 3 Loans to banks....................... 166 Other loans.............................. +$n 6 - + + 2 2 3 Aug. 14 Aug. 21 Changes in four weeks +13 +14 -23 + 6 + 8 -16 -27 -21 +20 +16 Four weeks Aug. 7 +42 -23 + 3 + 4 - 2 - 7 - 2 Member bank reserve deposits.............................................. - 2 + 5 + 3 - 1 + 2 + 2 - 2 - 2 - 3 - 3 - 1 - 1 - 1 Total............................................................................................ Reporting member banks (Millions $) July 31 -13 Changes in— + 3 + 4 - 2 - 7 - 2 Changes in weeks ended— Third Federal Reserve District (Millions of dollars) Sources of funds: One year +$100 + + + 23 14 2 44 Total loans............................. $ 615 +$ 8 +$137 Government securities.......... 51618 Obligations fully guar’teed.. 196 —$68 -$389 Total investments............... $1814 —$68 -$377 Total loans & investments. $2429 Reserve with F.R. Bank.... 423 Cash in vault.......................... 32 Balances with other banks.. 85 Other assets—net................... 48 —$60 - 6 + i - 4 + 4 -$240 2 + 3 + 2 1 —$39 + 1 - 26 +$ 22 + 55 - 311 - 20 + + + + Uses of funds: Liabilities Demand deposits, adjusted. $1803 Time deposits.......................... 268 U. S. Government deposits. . 300 358 2 Borrowings............................... Other liabilities....................... 25 261 Capital account....................... Page 98 + 3 i i - 12 4 8 12 Member bank reserves (Daily averages; dollar figures in millions) Re Held quired Ex cess Ratio of excess to re quired Changes in— & Bank of Phila. (Dollar figures in millions) Disc, and advances. $ Phila. banks 1945: Aug. 1-15.. $407 1946: July 1-15.. 424 July 16-31.. 421 Aug. 1-15.. 416 $397 416 413 409 $10 8 8 Country banks 1945: Aug. 1-15.. 1946: July 1-15.. July 16-31.. Aug. 1-15.. $273 325 326 328 $59 53 52 56 $332 378 378 384 Aug. 21, 1946 17 Four weeks -$ 2 1 7 2% 2 2 2 22% 16 16 17 U. S. securities.......... 1637 Total......................... $1655 Fed. Res. notes......... 1644 Member bk. deposits 795 U. S. general account 34 Foreign deposits.. . . 55 2 Other deposits.......... Gold certificate res.. 885 Reserve ratio............. 35.0% + 8 +$ 6 + 8 - 1 - 12 - 16 - 2 - 26 - 0.7% One year +$ 6 2 + 53 +$ + + + + 57 77 48 15 43 1 24 0.1%
@FedFRASER