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MO N T H L Y

REVIEW

of Financial and Business Conditions

F if t h

Reserve

Federal

D ist r ic t

Federal Reserve Bank of Richmond, Richmond 13, Va.

April 30, 1947

Business Conditions
E V E LO PM E N TS in the Fifth Federal Reserve Dis­
trict in March and the first half of April give indica­
tions that some sort of change is in the making in the
curvature of the rising path on which the District’s
business has been moving since the winter of 1945. From
the total retail trade point of view, the pathway appears
as though the crest would not be reached for quite a num­
ber of months, but, on the other hand, important segments
of non-durable goods trade appear already to have reached
that crest. Whether these segments face flat country or
a down-slope future developments will decide; develop­
ments mainly in the nature of price adjustment and main­
tenance of employment levels.
From an agricultural point of view, the outlook for most
farmers in the District is bright in that incomes (except
for tobacco farmers) will very likely be higher in 1947
than in 1946. In the first two months of the year incomes
have increased 61 per cent over the same months a year
ago. This does not deny the prospect of a reduction in
farm prices, but rather it raises the question whether
declines that occur will bring the year’s averages as low as
those of 1946. Tobacco incomes will likely be adversely
affected through lower prices, in part occasioned by the
steep increase in British tobacco taxes and a resultant de­
crease in British purchases of this year’s crop.
If no material drop occurs in food prices in coming
months the non-durable goods trade outlook will be more
vulnerable than it now appears. One of the chief un­
settling general trade factors at the present time is the
enlarged amount of consumers’ budgets that must be di­
verted to the purchase of food, and this together with cer­
tain other high prices has found its reflection in a reduc­
tion in purchases of items normally in demand by the
entire population. It is presumed this reduction in pur­
chases has come about because large numbers of people of
fixed incomes and those whose incomes have run behind
the average are being priced out of the market both by
direct price rises in the products themselves and by the
very large rise in food prices. Therefore, the consumer’s
outlook is varied according to the size of his income and
the proportion of it required for food and fixed expendi­
tures such as rent, insurance, taxes, etc. Sales trends in
some durable goods lines give the impression that the




“ high income” market is a large one, and, short of panicky
conditions, will be a sustaining factor in the durable goo'ds
market and therefore in total retail trade. Selected city
figures of the District show large percentage increases
from a year ago in aggregate dollar retail sales as late as
February. These sales gains were largely accomplished
by an inordinately large gain in automotive, building ma­
terial, and other durable goods.
Wholesalers, particularly in grocery and dry goods lines,
are jittery over their inventory position, despite the fact
sales records show little or no slackening in dollar figures.
Most lines of wholesale trade in this District which de­
creased on a seasonally adjusted basis from January to
February recovered notably in March. Other lines held
their gains or increased them; and only tobacco and elec­
trical wholesalers showed lower March sales than in Feb­
ruary.
Some wholesalers in the District are exercising a policy
of purchasing smaller quantities of goods than they are
selling in order to reduce their inventory positions. Many
retailers over the District are also indicating by clearance
sales and otherwise that they are mindful of the fact that
many commodities on their shelves are priced too high
to keep them moving into consumption channels in the
increased volume in which they are arriving. Unfilled
orders have been drastically reduced and purchasing poli­
cies are in the main holding close to shore.' This leads up
to what is beyond the horizon in the volume of output of
manufactured products and the resulting level of em­
ployment.
A retail and wholesale purchasing policy in non-durable
goods, geared as it apparently is to a level somewhat below
the actual consumption level should have an adverse affect
on the District’s production level to the extent of that out­
put which has been required to build the physical quantity
of inventory. For example, if 90 per cent of the current
production of cotton goods had gone into consumption
and 10 per cent into building wholesale and retail inven­
tories, production would fall 10 per cent if, after these
inventories had risen to a given level, they were held there.
The production outlook in the District’s largest labor
employing industries is complicated with the demands that
will be forthcoming from abroad. These demands have

MONTHLY REVIEW

2

thus far been insistent for cotton goods, rayon goods,
lumber, and bituminous coal. If this foreign demand in­
creases in an amount sufficient to take the quantity of
goods released by a cessation of domestic retailer-wholesaler inventory accumulation, that would maintain the
going level of production or perhaps increase it and pre­
vent any material downward adjustment of prices. In the
event that demands were insistent enough to keep the Dis­
trict’s mills and factories operating at current or higher
rates o f production, it should be expected that the wages
of labor would continue to rise and domestic trade improve,
particularly in non-durables.
The employment outlook in industry other than agricul­
ture will be closely tied in with the level of demand that
prevails for the products o f these industries. Employ­
ment levels thus far have, for the most part, been main­
tained or moderately increased. In most areas of the
District employment levels are anticipated to show a
further moderate increase up to June. Thereafter the
level will be determined by the individual firm’s ability
to sell its products and this ability will be dependent on
the level of domestic consumption plus exports. Given an
adequate demand there are quite a large number of firms
which would like to expand their operations and employ­

ment by moderate proportions, but are unable to do so be­
cause of a dearth of workers of required skills, or because
housing facilities are not available to bring in workers
from other areas. In the main, however, employment in
the District is at what is currently called “ full employ­
ment.”
New residential building started in March fell notably
on a seasonally adjusted basis from February and local
real estate people indicate that April starts are even less
than those of March. This drop is attributed mainly to
high prices of houses and to a lack of quality to fit the
requirements of those in position to purchase. There is
still, however, a large number of residences uncompleted,
and construction employment should rise seasonally. March
construction contracts awarded in the Distrist, as compiled
by the F. W . Dodge Corporation rose 13 per cent in value
from February on a seasonally adjusted basis, but March
levels were 17 per cent smaller than in that month last
year. There are many indications that a substantial
volume of commercial and industrial projects in the Dis­
trict are planned, but because of government restrictions,
flow of materials, price, etc., these have not arrived at the
contract stage, and there is no clear indication available
when they will be placed under contract.

BUSINESS INDEXES—FIFTH FEDERAL RESERVE DISTRICT
Average Daily 1935-39 = 100—Seasonally Adjusted
March
1947
Bank Debits .........................................
Bituminous Coal Production*..........
Building Contracts Awarded............
Building Permits Issued.....................
Business Failures ................................
Cigarette Production .........................
Cotton Consumption5 ........................
1
'
Department Store Sales............... .....
Department Store Stocks....................
Electric Power Production................
Employment—Mfg. Industries* .......
Employment—Nonmfg. Industries*
Furniture Sales— Retail ............. .......
Gasoline Consumption ......................
Life Insurance Sales............................
Wholesale Trade:
Automotive Supplies** ..................
Drugs ...... ................. ...........................
Dry Goods ........................................
Electrical Goods** ..........................
Groceries ...........................................
Hardware.......................... .................
Industrial Supplies** ....................
Paper and Its Products**...............
Tobacco and Its Products**...........
*Not seasonally adjusted
**1938-41 = 100




Feb.
1947

Jan.
1947

March
1946

293
150
272
144
19
242
152
307
296

291
159
240r
246
14
262r
157
281
306
234
134

278

234r

239

247

278
149
304
216
9
241
160
292
313
235
134
122
263
169
238

254
163
328
304
2
252
139
298
206
205
125
123
255
150
244

345
260
163
65
277
114
271
164
108

345
236
153
80
271
113
242
150
123

331
248
148
77
267
121
289
155
132

288
248
166
31
239
101
196
142
107

% Change
March 1947 from
Feb. 47
Mar. 46
+
1
— 6
+ 13
— 41
+ 36
— 8
— 3
+ 9
— 3

4- 15
8
_____ 17
—
53
+850
_____
4
4- 9
4- 3
4- 44

4- 19

+

9

—

3

—

2

+
+
—
44+
+
—

0
10
7
19
2
1
12
9
12

4- 20
4- 5
2
4-110
4- 16
4- 13
4* 38
4- 15
1
+

3

MONTHLY REVIEW

Survey of the Municipal Bond Market
During the spring of 1946 there was completed an interesting cycle in the history of yields on municipal securi­
ties1 when the Bond Buyer’s Index reported an all-time
low of 1.29 per cent. The other terminus of the cycle
was in May 1933 when the average yield on municipal
bonds reached an all-time high of 5.69 per cent. Thus,
although the records of municipal security prices and
yields extend well back into the 19th century, the record
extremes to which yields have risen and fallen were es­
tablished within the past fourteen years.
From the price peak in April 1946 municipals entered
a declining market that registered steadily falling prices
right down to the end of the year. Some authorities ex­
pressed the opinion toward the close of the year that in
attempting to discount prospective developments, the
trend of correction was overextended, and that prices may
have declined more than was justified by the short-term
outlook. This explanation has not been supported by
recent market movements; following a rise in the prices
of municipals during January of this year, the announce­
ment on February 19th of the giant Michigan offering of
$200,000,000 of Veterans’ Bonus Bonds softened prices
on outstanding bonds and the market went above the 2.00
per cent level for the first time since 1943. It would ap­
pear that the primary force in the decline of municipal
yields since last April, viz, the prospect of a large volume
of new issues, continues to be the dominant conditioning
factor of the market.
It has been pointed out that at the rate at which new
municipal and corporate issues came into the market dur­
ing 1946, the resumption of private financing and of State
and local government financing has reached a larger scale
than has been experienced since the large-scale Govern­
ment financing which began in the thirties. Continu­
ing the rapid expansion started in 1945, corporate financ­
ing in 1946 reached a volume that has been exceeded in
only three past years, 1927 through 1929. Similarly,
municipal financing expanded well beyond war-year emis­
sions despite the fact that the total volume for the year
was materially restrained by the postponement of plans
by a number of states and cities for the expansion of
facilities and services. Even urgent programs were held
up or reduced as a consequence of costs of construction
and of the scarcity of materials and labor. Nevertheless,
the volume of new municipal issues in 1946 was the second
largest since 1936. The amount of bonds issued so far
this year and the prospective issues indicate a greater
volume this year and one that will run toward record pro­
portions.

V eterans' B o n u s P la n s
That the expectation of a greatly increased supply of
municipal obligations has not been without foundation
was indicated by the almost 100 per cent increase from
1945 to 1946 in the amount of proposed state and munici­
pal bond issues as estimated by the Daily Bond Buyer.
It will be seen in the following table that very substantial
increases occurred in every state of the Fifth District
with the exception of Virginia which registered a decline
in the amount of proposed issues on the given date.
xThe term “ m unicipal securities’ * is intended in this article to cover all
towns and districts.




in v e n t o r y

of

pro po sed

(A s o f N ov. 15.
Total
1946
U. S.
$4,576,915
104,472
5th Dist.
Md.
47,163
Va.
6,485
W . V a.
2,271
N. C.
41,181
S. C.
7,372

state

State & State
1945

$2,367,945
56,194
28,425
7,130
800
19,639
200

and

m u n ic ip a l

A m ounts in thousands.)

Agencies

1946

1945

$1,520,577
21,625
6,625

$738,180
21,625
6,625

15*000

*15,000

M unicipal
1946
$3,056,337
82,847
40,538
6,485
2,271
26,181
7,372

1945
$1,584,765
34,569
21,800
7,130
800
4,639
200

S ou rce: The Daily Bond Buyer, D ecem ber 2, 1946.

Actually, the expansion in proposed issues was greater
than is indicated in the table inasmuch as bonds authorized
and sold between the two dates used are not included.
Similarly, in certain cases, particularly in some large cities,
bond issues need not be submitted to the voters and are
excluded from the inventory shown. Proposed issues
which have not progressed beyond the “ idea” stage are
also excluded.
In November 1946 the long anticipated flood of munici­
pal issues approached realization when voters throughout
the country approved the offering of almost $1 billion of
new bonds. A sign of the times was reflected in the
substantial majorities by which all the proposals for
veteran aid and bonus payments submitted to state elec­
torates were; approved, These authorizations will involve
about $835,000,000 o f bonds, but prospective approvals in
fourteen other states in which bonus bond issues have
been proposed may add as much as $2.7 billion to the
estimated $13 billion net amount of tax-exempts now
outstanding. Only one state of the Fifth Federal Reserve
District is included in the list of states with pending bonus
measures; a bill authorizing the state to issue $100 million
of bonds to finance a bonus payment was introduced in
the Maryland legislature on February 6, 1947. The pro­
posal, which would be submitted for consideration of the
voters in 1948, provides for payment of the bonds from
real estate taxes. The Maryland proposal affords a good
idea of the relative size of bonus bills in general; bonds for
this single purpose in that state would double the total
shown in the preceding table of proposed state and muni­
cipal bond issues for the Fifth District and would be al­
most 5 times the amount shown for Fifth District states
alone.
Including $67 million approved prior to 1946, the total
state bonus measures! approved and proposed to date
amount to over $3.5 billion. This, it should be noted, is
accounted for by less than half the states but is half
again as much as the gross indebtedness of all states at
the end of the fiscal year 1946 and is twice as much as
the net long-term debt outstanding on that date.
The heavy majorities by which voters approved bonus
bills last November indicate a strong likelihood that
similar measures will be proposed and approved within
the next few years in many of the remaining states. The
prospect of a continuous feed of large amounts of new
bonds into the market from this one source alone consti­
tutes a depresesing force in a market that already has
experienced a much greater decline over the past year
than the markets for Governments and corporate bonds.
ids issued by states and their political subdivisions— cities, counties,

MONTHLY REVIEW

4
F

in a n c ia l

C o n d it io n

of

S tates

and

L

area that may entail bond offerings of as much as $300
million.
There is, however, one offsetting factor in the need to
resort to the capital market by the various states; that is,
the large accumulations of state funds for postwar im­
provements. The Census Bureau of the Department of
Commerce reported last December that aggregate balances
of state general, highway, and postwar-reserve funds
reached record levels at the close of the fiscal year 1946.
The factors primarily responsible for the growth of major
fund balances in most states during 1946 and the pre­
ceding war years were: (1 ) a high volume of tax col­
lections, and (2 ) an abnormally low rate of capital ex­
penditure, with continued postponement of improvements
and equipment purchases, due mainly to material short­
ages.
Recent figures on the amounts of these funds held by
the states of the Fifth District are not available, but the
following table of 1945 and 1946 data affords a reasonable
comparison of accumulated funds with the debts of the
specified states at the end of the fiscal year 1946.

ocal

G overnm ents

In addition to bonus bonds, states and municipalities
will enter the market with increasing amounts of issues
to finance improvements and expansion programs. The
high costs of construction referred to by the Governor
of Virginia in his initial message to the General Assembly
on January 22, 1946 have become more pronounced and
may further postpone substantial amounts of construc­
tion, but the urgency of many of the needs awaits only
the availability of materials. This point does not need to
be labored; examples are legion, such as the estimate that
New York City lags about 70 schools behind in its con­
struction program. Examples are prevalent also of the
huge sums involved in many of the requisitions to be made
on the capital market; for example, the $90 million
financing program of the Chicago Transit Authority, the
$135 million bill for low-cost housing to be submitted to
New York voters this November, and the plan for airport
development and operation in the New York Metropolitan

C H A N G E S IN D E B T O F F IF T H D IS T R IC T S T A T E S, 1940-1946
A N D M AJO R F U N D B A L A N C E S*
(Amounts in thousands)
Debt— 1946

Debt— 1940

% Change

Gross
All states, U.S.
Maryland
Virginia
W est Virginia
North Carolina
South Carolina

Netf

Gross

Netf

Gross

Net

$2,365,510
34,563
21,539
70,226
101,699
75,671

$1,750,264
29,937
4,908
64,119
30,142
67,148

$3,642,378
58,307
28,503
80,896
150,613
61,903

$2,626,699
56,934
21,744
75,743
122,716
60,058

— 35.1
— 40.7
— 24.4
— 13.2
— 32.5
+22.2

— 33.4
— 47.4
— 77.4
— 15.4
— 75.4
+11.8

General
Funds
$1,188,000
8,265$
43,529
21,651$
5,074
6,184

Highway
Funds
$550,000
16,116$
19,936
671$
46,816
10,256

Postwar
Reserve
Funds
$536,000
9,032$
20,331
5,503

*At end of fiscal year, 1945.
fLong-term debt.
$At end of fiscal year, 1946.
Source:

State Finances: 1946, Volume 2, No. 2 (Prel.), No. 3; State Finances: 1945, Volume 2, No. 4 (Final); Bureau of the
Census.

The preceding table does not, of course, disclose many
pertinent details such as the transfer of $51.6 million
by North Carolina from its General Fund to a sinking
fund in 1945 in order to set aside a sufficient amount to
retire all general-fund bonds outstanding. Also, although
no separate amount of postwar reserve funds is shown
for West Virginia, the 1946 unencumbered balance (Gen­
eral Funds) includes $10.7 million contingent appropria­
tions for postwar-construction projects. It is important
to realize that for the most part the accumulated balances
in the three types of funds shown represent the deferral
of capital outlays, the undertaking and costs of which
have been postponed merely for the time being. .A con­
siderable amount of the reduction of both state and
municipal debt was achieved at the expense of uneconomic
curtailment and postponement of repairs and improve­
ments. Thus, in material aspects the reduction of debt,
a consequence of the exigencies of the war effort, means
that the condition of many municipalities is less favorable
than it was at the outbreak of the war. Obviously, the
war-time reduction of state and municipal debt is, to a
very considerable extent, a temporary contraction which
is being reversed now that economic conditions are per­
mitting the activation of plans for capital improvements




and expansion. War-time reduction of debt means for
the most part postponed borrowing.
Although cities generally have attained unusually strong
financial positions as a consequence of curtailed capital
expenditures during the war years and increased tax
collections, there are signs pointing to fiscal difficulties
for many municipalities in the nearer-than-expected fu­
ture. One of the obvious signs is the required extension
of municipal services and facilities at a high cost conse­
quent upon the recent rapid growth of many communities.
What is not so obvious in this connection is the likelihood
that such costs to many cities that have experienced a ma­
terial increase in population will exceed related revenues
for a considerable period of time.
Another sign may be found in the inability of munici­
palities to reduce their taxes ; in fact, quite to the contrary,
cities and towns across the country are seeking to boost
property tax yields by upward revaluation of properties
and by assessing property at more nearly its full value.
Even at the present inflated real estate values, however,
property tax levies are sufficiently inadequate to force
finance officers in many cities to seek new sources of
revenues. But the growth of Federal taxation to its
present proportions has crowded tax structures all down

MONTHLY REVIEW

the line, and the necessity of introducing new taxes into
a system that has been built around the property tax poses
more than a few problems. A partial list of the taxes
being adopted or increased indicates the broad area into
which local governments are moving under necessity of
tapping new sources of revenue. Some of the more im­
portant taxes on the list are city amusement taxes, public
utility taxes, local retail sales taxes, and city income taxes.
At present, only four cities impose a local income tax, but
at least five other cities are considering its adoption.
In summary, the financial positions of states and
municipalities generally are decidedly stronger than they
were prior to the war and afford an excellent basis for
the improvement and expansion of public services and
facilities. Nevertheless, the need for planned growth and
prudent debt accumulation is greater than it ever has been.
The Governor of New York in his inaugural address on
January 8, 1947 keynoted this requisite by asserting that,
“ W e must not be deluded by our financial soundness to­
day into excesses which could destroy our financial struc­
ture tomorrow.”
It may be that the recent relatively large decline in
municipal bond prices reflects to some extent the fear
that the borrowing power of state and local governments
is not being used wisely. In view of the heavy expendi­
tures that have been and will be made by the Federal
Government for veteran benefits, the generous bonus
bills enacted and proposed in a number of states give
pause to those who weigh benefits and costs and take into
consideration the many urgent and fundamental needs
for incurring public debt. The increasing rate of post­
war spending by states and municipalities has attracted
considerable attention and some warnings, in commenting
on the reduction of the Federal budget, a trade journal
referred to the pending proposals for state bonus pay­
ments, and pointed out that “ While these State bonus
proposals involve a large aggregate sum in themselves, they
are more serious as a symptom. There is a tendency on
the part of State and local governments to embark on
spending sprees on their own account.” 1
A

B

roadened

A

rea

of

D

e m a n d

The effect on the municipal market of the prospect of
a greatly enlarged supply of new securities has held the
spotlight of attention, but another factor that appears to
be developing in importance is the broadening demand
for tax-exempt obligations. In large part, this is a matter
of pricing, for with yields on municipals moving in the
area above two per cent, insurance companies and other
investor institutions that have withdrawn from this mar­
ket are likely to renew their interest in new municipal
offerings.
From the record-low prices registered during 1933
municipals began an upward trend that culminated in an
all-time high mark in April of last year (as measured
by Standard and Poor’s index of high-grade issues). One
of the potent factors in this price rise was the elimination
of tax-exempt privilege for Federal bonds issued beginning
March 1941 and the consequent reducton in the amount of
outstanding Federal tax-exempt bonds. From a total of
17,197 million outstanding on June 30, 1936, the supply de­
clined over ninety-five per cent by mid-year of 1945 when
only 767 million tax-free United States obligations were
’ J ourn al o f Commerce, February 17, 1947.




5

outstanding. During this time the supply of municipals de­
clined only fifteen per cent, but the reduction was effected
after 1941, and the concentration of the decline of almost
$4 billion during the war years acted as a strong upward
pressure on prices of municipal bonds,
A third important factor in the rise in prices (and de­
cline in yields) of state and local government securities
to their peak in April 1946 was the increased rate of in­
dividual income taxes during the war, which increased the
attractiveness of such bonds to many investors. The taxexemption privilege accorded municipals afforded a profit­
able haven to those persons in the high-income brackets and
constituted a strong impelling force in the rising market.
One of the consequences of the high price levels reached
in the municipal market was the very low costs at which
state and local governments were able to float loans. The
following issues, picked at random, are indicative of the
low costs that prevailed toward the close of 1945.
M aturity

Coupon
Rate

N et. Int.
Cost

$13,050,000 Baltim ore, M aryland
School, Sewer, A irport,
and P ublic Buildings
Offered N ov. 8, 1945

5-19 yrs.

1%

0.942%

$90,000 K inston, N orth C arolina
W ater and Light, Sewer,
and Street
Offered N ov. 27, 1945

10 yrs.

1%

0.994%

$2,840,000 Richm ond, V irgin ia
P ublic Im provem ent
bonds.
Offered Dec. 19, 1945

20 yrs.

1%

0.887%

Another consequence of the rise in the municipal mar­
ket was the virtual disappearance of life insurance com­
panies and savings banks, to which the tax-exemption fea­
ture offers little advantage, as buyers of new municipal
issues. Life insurance companies, formerly an important
factor in the demand for municipals, were in the 1946
market principally as sellers, continuing a trend that has
resulted in over $1.3 billion of state and local government
obligations being turned back into the market during the
past six years. Whereas in 1940 municipal securities com­
prised about 10.6 per cent of the total investment of all
life insurance companies in bonds and stocks, in 1946 the
proportion was well under two per cent.
T

he

D ow nturn

As we noted at the outset of this discussion, the market
receded steadily from the price peak reached in April of
last year, and by the end of December the 2 per cent level
(as measured by Standard and Poor’s index of high-grade
municipals) was being threatened for the first time since
the close of 1943. The success of a number of under­
writings during the last part of December introduced a
note of cautious optimism in the opening of the 1947
municipal market, and during the month of January a
decline of about seven basis points in yield was experienced.
By the end of the first week in February, however, the
market had resumed its declining price trend, and the an­
nouncement on February 19 of the $200 million Michigan
bonus bond ssue— the largest single bond issue offered for
competitive bidding up to that time— brought a rise of nine
basis points in yield as the Standard and Poor price index
fell from 133.8 to 132.1 in the week ending February 22.
N

arrow ed

S pread B e t w e e n Y

ie l d s

It can be seen from the following chart that the decline
in municipals since last April has far exceeded that of

MONTHLY REVIEW

6

Governments and high grade corporates. Whereas by the
end of February 1947 the yields on long-term Governments
and corporate Aaa bonds, moving inversely to prices, had
risen 13 and 9 basis poiMs respectively since last April, the
municipal bond yield index registered a gain of 60 basis
points. In terms of prices municipal securities have de­
clined almost 8 per cent over the period indicated com­
pared with a decline of 2.1 per cent for Governments and
1.2 per cent for high-grade corporate bonds.

MAR.

APR.

MAY

JUN.

JUL.

1946

AUG

SEPT.

OCT.

NOV.

DEC.

JAN.

FEB.

1947

FEDERAL RESERVE BULLETIN, MARCH 1947

Thus, on the basis of the yields plotted on the foregoing
chart, the spread between the yields on municipals and
those on Governments and corporates has narrowed con­
siderably since last April. When the data on Government
bonds are adjusted to show the tax-free yield, however,
the spread between tax-exempts and Government bonds
has widened over the past year. On April 4, 1946, the
average yield on the twenty municipal bonds of the Bond
Buyers Index of the Municipal Bond Market was 1.29
per cent. On the same date the tax-free yield (to a cor­
poration after 24 per cent normal income tax and 14 per
cent surtax) on Bank 2j4s of 1972/67 was 1.21 per cent.
Thus, there was a spread of eight basis points. On De­
cember 5, 1946, the comparable yields were 1.90 and 1.36
per cent, and the spread had widened to 54 points.
A consequence of the movements indicated in the yield
spreads is a renewed interest in municipals on the part
of savings banks and insurance companies w’hich, if
municipal bond yields should rise, say, twenty-five basis
points above the present level, would materialize in an
active demand for these securities. Evidence of this was
exhibited in insurance company buying in Louisiana’s
$19 million issue of new hghway bonds reoffered after
February 20 of this year. Bonds of this issue maturing
in 1965 were priced to yield 2.60 per cent, 28 basis points
above the 2.32 per cent yield in Treasury Victory 2}4s.
In view of the prospective supply o f municipal securi­
ties, which will include a number of large individual issues,
it may be that the field of institutional investors will have
to be tapped to a much greater extent than has been the
case in recent years.
Another aspect of the broadening demand for taxexempt securities is reflected by the increased commercial
bank holdings of municipals during 1946. The following
table shows the declines in percentage holdings of member
banks during the war and the increase that occurred last
year; these reflect both an increase in holdings of state and
local bonds and a decline in total investments during 1946.
It is expected that any further improvement of yields
on municipal bonds will activate increased buying by com


S T A T E A N D M U N IC IP A L BO N D S
H ELD B Y M E M B E R B A N K S , 1940-46
(A s per cent o f total investm ents)
A ll M em ber
Banks— U .S.

Country M em ber M em ber Banks
Banks— U .S.
5th D istrict

13.8
1940
12.1
1941
6.9
1942
4.6
1943
3.9
1944
3.9
1945
5.1
1946
S ource: M em ber Bank Call R eports.

20.8
18.4

11.0
6.9
5.2
4.6
5.7

10.2
8.7
5.1
3.5
2.6
2.2
2.9

mercial banks, although some limitation will be imposed
by the inferiority of the marketability of these securities
relative to that of bank-eligible Government obligations.
An increased demand for tax exempts by commercial
banks should derive also from the effect on investment
portfolios of the retirement of Federal debt and of the
shortening, through run-offs and the passage of time, of
maturities of the investment in Government bonds. At
the end of this past February there were $175,410 million
of marketable Government securities outstanding; of this
total 53 per cent are due or callable within five years, in­
cluding about two-thirds of the total amount held by the
commercial banks.
The possiblity of an increased demand for municipal
securities by commercial banks is indicated also by the
reduction that will occur over this year in the amount of
bank-eligible Government issues due or callable beyond
five years. At the end of December 1946 there were
$32,403 million of these particular securities outstanding;
by January 1, 1948 there will be only $15 billion eligible
for purchase by commercial banks— about $4,644 million
less than the amount held by those banks at the beginning
of this year.
C o n c l u s io n

It has been pointed out that surveys of the post-war
municipal bond market have, for the most part, centered
attention on the supply side, stressing the proposals and
tentative plans of states and local governments that may
require the issue of huge amounts of bonds. However, it
should not be overlooked that the amount of approved and
proposed bonus bond issues, totaling about $3.5 billion—
only a small part of which will be offered within the next
year— is very much smaller than the decrease that will
occur over this year in the amount of bank-eligible Treas­
ury bonds due or callable beyond five years.
In addition to the amount of state bond issues for bonus
payments, the volume of bonds that will be floated for
state construction projects and the amount of bond issues
of municipalities leaves little doubt that the total of such
new security issues will run toward record levels over
the next few years. Again, however, it should not be
overlooked in calculating the effect on the market that the
amount of state and municipal issues offered this year will
probably be considerably less than the amount redeemed by
the Federal Government.
It is possible that the effect of the factors pointed out
in the preceding sections and of the pending reduction of
income tax rates has not been fully discounted by the mar­
ket and that municpal prices may decline below current
levels. It is significant, however, that the spread between
municipal yields and the tax-free yields on Government
bonds has widened considerably over the past year; a
further growth of this spread of any proportion might
turn largely on such a factor as the lack of orderliness in
the rate and timing of subsequent issues of states and
municipalities.

MONTHLY REVIEW

7

The Use of Index Numbers
2. Cotton Consumption
In the first article of the series on the Use of Index
Numbers appearing in the February issue of the Monthly
Review of this Bank, the use of department store sales in­
dexes was discussed as a guide to retail trade or the value
of goods reaching the ultimate consumer. But department
store sales are measured in dollars and they represent
changes in quantity, quality and price. Therefore if re­
tail sales over a period of months hold at the same dollar
level while at the same time average prices rise, it is ob­
vious that the quantity of sales must have fallen. When
the number of items sold at retail declines the effect is to
reduce orders to wholesalers or manufacturers which in
turn results in lower production and less employment.
This discussion is concerned with a production problem
and for this purpose the cotton textile industry has been
selected. It has been selected because it is the largest
source of employment in the Fifth District, exclusive of
agriculture, and because monthly statistics are available
on the consumption of cotton which is a satisfactory
measure of cotton mill activity.
The index of cotton consumption o f the Fifth District,
(shown graphically on the chart, which also includes the
United States wholesale price index of cotton goods) is
compiled from the monthly records of the Census Bureau
for the states of Virginia, North Carolina and South Caro­
lina. The actual cotton consumption figures are effected
notably by seasonal factors such as purchasing of cotton
textiles to make various goods for specific selling seasons,
July and end of year mill shut-downs for inventory and
holiday purposes. In order to show the trend of cotton
consumption, therefore, it was necessary to adjust the
figures for seasonal variation, and it is the seasonally ad­
justed index on a 1935-39 base which is shown on the
chart.
The trend of cotton consumption was up rather mark­
edly during 1946, but at the end of the year the level of
usage had no more than regained the loss sustained during
1945. The year 1946, however, was at 147 per cent of
the 1935-39 average, compared with the 1940 level of 119
per cent of the same average, 1940 being the last previous




year not materially affected by the war and the highest
annual level up to that time.
The quantity of cotton consumed in Fifth District mills
in 1946 was 32 per cent larger than in 1939 which com­
pares with a gain in total national employment from 1939
to December 1946 of 21 per cent. If the 1946 index of
cotton consumption were lowered 8 per cent to account
for the approximate increase in exports of cotton textiles
from 1939 to 1946, it would appear that the percentage
increase in Fifth District cotton consumption for domestic
use and the percentage increase in national employment
were not greatly different. This would seem to indicate
that the production of cotton textiles in 1946 was not at
a level that could be considered a saturation point in
domestic consumers’ requirements.
However, many of the fabricated cotton goods sold
directly to the consumer have lately met with considerable
sales resistance as a result of an inordinate rise in prices
following the demise of the OPA. This risistance is
shown quantitatively in the sales levels and rising inven­
tories of selected items merchandised by department stores.
These sales in some instances are no greater in dollars in
recent months than in the same months of last year, and in
some instances they are lower. With prices having risen
in this post-OPA period quite substantially it is clear that
the number of units sold is smaller than a year ago, as long
as it is expedient for cutters, wholesalers and retailers to
accumulate inventories to fill out an unbalanced stock
position no acjverse consequences will be felt in the rate of
operations and employment levels of the cotton mills.
Sooner or later, however, reduction in unit sales must find
their reflection in reduced production.
Apparel and home furnishings which are sold directly to
the consumer account roughly for 60 per cent of the
domestic consumption of cotton goods. Industrial uses
account for the remaining 40 per cent. Cotton goods used
industrially either do not reach the consumer at all or are
a minor portion of the cost of the products of which they
are a part. Thus consumer resistance, in order to affect
industrial fabrics, must come as resistance to such things

8

MONTHLY REVIEW

as automobiles, and tires, bags, insulated wire, shoes,
tarpaulins, farm machinery, etc. Consumer resistance for
the chief industrial products using cotton fabrics does not
appear to be material at this time, nor does the prospect
for the remainder of the year appear to be adverse. A l­
though consumer resistance to numerous cotton manufac­
tures is already noted in department store sales, there is
still a large “ Quality Market” (i.e. consumers who have
adequate income to purchase despite the price rise) and
this group of customers, together with those who are
forced to buy at present prices for indispensable require­
ments, are maintaining a retail sales volume in dollars at
high levels. This market development together with the
continued strong demand for piece goods signifies that
the need for cotton goods is still large, and creates the im­
pression that a reduction of 10 to 15 per cent in retail
prices at current income levels would suffice to maintain
manufactured output at current or perhaps somewhat
higher levels.
The cotton mills have sold their output, through the
first half of 1947 and about two-thirds of the July-September output, also has been booked. Some customers
have even covered their fourth quarter requirements, but
this coverage does not account for any considerable part
of the potential output of that quarter. If the impression
is correct that these contracts are not subject to cancella­
tion then a rising level of production can be expected
through June at least. If the full third quarter production
is not sold by the first half of June it would be reasonable
to expect a spreading of the mid-year mill shutdowns and

a stretching out of the amount of time thus involved.
The current market for cotton goods is extremely quiet;
second hand sales prices have undergone some weakening
in recent weeks; and cutters, wholesalers and retailers
have adopted an ultra-conservative purchasing policy. This
policy of staying close to shore in purchase commitments
is responsible for the wide differentials currently existing
between contract prices, spot prices and in turn second­
hand sales prices.
It is not knowT to what extent existing retail prices are
n
based on spot price costs, but if any considerable propor­
tion of the cottons are so priced the elimination of the
spot-contract differentials would permit a substantial re­
duction in these costs. As to whether the necessary ad­
justments in cotton goods prices can be accomplished,
without reducing mill output and lowering the level of
employment only time will tell.
Since the prices of cotton goods retain the “ competitive
market” characteristics and since there appears to be a
continuing strong and as yet unsatisfied demand for the
gamut of durable goods which have an important effect
on income levels it may be that the necessary balance be­
tween the supply of cotton goods and the demand for them
can be effected by orderly price adjustments. Current
indices of cotton consumption in the mills of the Fifth
Federal Reserve District are still in a rising trend. As to
whether they continue to rise or turn downward sometime
in the last half year will depend on the price-income ad­
justment of either a lowering of prices or an increasing of
incomes of the great mass of consumers.

Banking
Loans and investments of Fifth District weekly report­
ing member banks declined substantially during the five
weeks ended April 16, reaching a low of $1,827 million on
April 2 and then recovering part of the losses during the
succeeding two weeks. These changes were caused by
fluctuations in holdings of United States Government ob­
ligations; the major part was attributable to the sale of a
large block of Treasury bills that had been acquired by one
bank during the first week o f March.
Loans showed a five-week rise of $12 million, again
reaching a new high for the postwar period of $494 mil­
lion. The catch-all category of “ Other Loans” — which
includes consumer loans as an important element— led the
rise with an increase of $5 million to $108 million. Com­
mercial, industrial, and agricultural loans continued their
trend of growth that commenced in August 1945, reaching
$259 million on April 9 and dropping to $256 million on
April 16 for a net gain of $3 million during the five weeks.
The figure of $256 million was exactly double the volume
outstanding on V-J day, representing a gain of 100 per
cent in 20 months. Loans to brokers and dealers for pur­
chasing and carrying securities increased by $1 million to
$5 million; similar loans to others than brokers and dealers
increased to $16 million, a gain of $3 million. Real estate
loans gained $2 million to reach a level of $84 million, this
being a 54 per cent increase over the figure for April 17,
1946.
Total investments declined on balance by $76 million
during the five weeks, even though a partial recovery was




achieved in April. The April 2 figure of $1,335 million
marked a three-year low point in portfolios; this level
was passed in June 1944 during a period of increasing
holdings resulting from the Fifth War Loan drive. As
may be seen from the table below, losses were noted in all
types of United States Government obligations, Treasury
bills showing the greatest drop both dollarwise and pro­
portionately. Effects of the March 15 note redemption
and the April 1 partial redemption of certificates are
shown in the changes of the weeks including those dates.
H OLD IN G S OF U. S. G O V E R N M E N T O B L IG A T IO N S
W E E K L Y R E P O R T IN G M E M B E R B A N K S
F ifth D istrict
(M illions o f dollars)
Date
March

A p ril

Bills
12
19
26
2
9
16

67
57
18
5
23
22

C. o f I.
177
173
166
151
167
166

N otes

Bonds ♦

Total

84
78
76
74
74
74

1,028
1,026
1,023
1,014
1,013
1,014

1,356
1,334
1,283
1,244
1,277
1,276

♦Includes obligations guaranteed b y the U nited States, which w ill be thus
included in future presentations o f this series.

Average daily deposits of Fifth District member banks
during the last half of March showed a gain over the
February average, arising almost entirely from an in­
crease in the figures for banks of the District of Columbia.
With the exception of North Carolina, the five states of
the Fifth District registered losses, the most substantial
being in Virginia.

9

MONTHLY REVIEW
A V E R A G E D A IL Y T O T A L D E PO SITS* OF M EM BER B A N K S
Last h a lf o f February
$ m illions

% o f U. S.

M aryland
985
.95
Reserve city banks
622
.60
Country banks
383
.35
D istrict o f Columbia
902
.87
Reserve city banks
881
.85
C ountry banks
21
.02
V irginia
1,307
1.26
Reserve city banks
305
.29
Country banks
1,002
.97
W est V irginia
540
.52
N orth Carolina
824
.80
362
Reserve city banks
.35
C ountry banks
462
.45
South Carolina
424
.41
F ifth D istrict
4,983
4.82
♦Excluding interbank demand deposits.

Last H a lf o f M arch
$ m illions
982
619
363
942
921
21
1,286
291
995
540
832
377
455
422
5,004

% o f U. S.
.95
.60
.35
.91
.89
.02
1.24
.28
.96
.52
.81
.37
.44
.41
4.85

Member bank reserve balances showed but little net
change for the five-week period, but week-to-week changes
were large. Tax payments accounted for substantial
transfers to the account of the Treasury during the latter
half of March and the disbursement of these funds in the
redemption of the obligations maturing on March 15 and
April 1 were not made directly to banks of this District
in all cases. Payments made to money-center banks for
the account of Fifth District banks undoubtedly made
possible to some extent the substantial inflows of funds
that occurred through commercial and financial transac­
tions. These included interbank transfers of funds and
have customarily been a source of reserve funds for mem­
ber banks in periods of reserve strain occasioned by Treas­
ury absorption of funds. The net loss of reserves during
the week ended March 19 was moderate due to gains from
currency transactions and commercial and financial trans­
actions as well as an expansion of Federal Reserve credit
locally extended. This last took the form of purchases by
the Reserve bank of Treasury bills and an increase in the
float. During the following week, withdrawals of reserves
due to Treasury transactons brought down reserves by
$112 million, which was only partially offset by an inflow
of $72 million on commercial and financial account and a
return of currency amounting to $6 million. The $8 mil­
lion loss of reserves o f the preceding week was increased
by an additional $34 million. The week ended April 2
saw the greatest inflow on commercial and financial trans­
actions of the period, $109 million, which was principally
responsible for a $40 million gain in reserves. Treasury
and currency transactions drew down $91 million and the
gain in Reserve bank credit gave evidence of pressure
upon reserves since $14 million was from the sale of
Treasury bills by member banks. The following week
brought inflows both from commercial and financial trans­
actions and from Treasury operations. The pressure upon
reserves was definitely eased as banks repurchased Treas­
ury bills and paid off loans to the Reserve bank in spite
of a decrease in float and a loss of reserves due to increased
currency demands. The last week of the period was a
quiet one as an increase in float, a return of currency, and




an inflow of funds through commercial and financial
transactions exceeded by $18 million the Treasury with­
drawals of reserves amounting to $11 million. The table
below presents a summary of the net effects for the period
of the forces operating upon member bank reserves.
FA CT O RS A FF E C T IN G M E M B E R B A N K R E S E R V E S
F ifth D istrict
Change fo r 5 weeks
ended A p ril 16, 1947
(M illions o f dollars)

F actors increasing ( + ) or
decreasing(— ) reserves:

+ 7

Reserve bank credit extended locally
Com m ercial and financial transactions
Treasury transactions
Currency transactions
Other factors

+ 204
— 228

+ 15

— 2

N et change in reserve balances
♦Less than $500,000.

A SSE T S A N D L IA B IL IT IE S OF M E M B E R B A N K S
F ifth Federal Reserve D istrict
M arch 26, 1947
P relim in ary
(M illions o f D ollars)
Chg. from
Reserve
city
Other
A ll
Feb. 26, ’ 47
m em ber m em ber m em ber all member
banks
banks
banks
banks

ITEM S
A ssets
1. Loans and investments
' a. Loans and discounts
b. U. S. Gov’ t obligations
c. Other securities
2. Reserves, cash, and bank
balances
a. Reserve with F. R. bank
b. Cash in vault*
c. Demand balances with
banks in U. S.
d. Other bank balances*
e. Cash items in process
o f collection
3.

Other assets*

4. Total assets

1,984
530
1,362
92

2,358
673
1,541
144

4,342
1,203
2,903
237

— 17
+ 31
— 54

671
380
43

722
311
82

1,392
691
125

— 41
— 23
— 3

97
7

258
3

355
10

— 22

143

67

211

29

36

65

— 4

2,684

3,115

5,799

— 62

2,049
313
65
1,670

2,052
114
72
1,866

4,101
428
137
3,536

— 68
— 24
— 15
— 29

+

+

6

7

L iabilities and Capital
5.

Gross demand deposits
a. 'Deposits o f banks
b. W ar loan accounts
c. Other demand deposits

6. Tim e deposits

447

859

1,306

+

2,496

2,911

5,407

— 66

8. B orrow ings from F. R. bank

14

4

18

—

1

9.

16

8

24

+

1

158

193

351

+

5

2,684

3,115

5,799

7. T O T A L DE PO SITS

Other liabilities*

10. T otal capital accounts*
11. T otal liabilities and capital
accounts*

♦Estimated
Details m ay not add to totals due to rounding.

2

— 62

MONTHLY REVIEW

10

D EBITS TO IN D IV ID U A L A C C O U N T S

FE D E R A L R E S E R V E B A N K OF RICH M O N D

(000 om itted)

(A ll Figures in Thousands)
ITEM S
T otal Gold R eserves...................
Other Reserves ............................
Total Reserves .......................
Bills Discounted .......................
Industrial A dvances .................
Gov. Securities, T o ta l...............
Bonds ........................................
N otes ..........................................
Certificates ................................
Bills ............................................
Total B ills & Securities...........
Uncollected Items .....................
Other Assets ................................
Total Assets ............................

,

Fed. Res. Notes in C ir..............
Deposits, Total ............................
Mem bers’ Reserves ...............
U . S. Treas. Gen. A cct........
Foreign ......................................
Other Deposits .......................
D ef. A vailability Item s.............
Other Liabilities ........................
Capital A ccounts .......................
Total Liabilities .....................

A p ril 16
1947
$1,008,447
15,583
5,248
0

46,377
354,559
1,439,827
17,884

730,716
42,628
18,955
4,972
219,804
619
35,319
2,736,072

Chg. in A m t. from
4-17-46
3-12-47
— 86,037
+ 89,336
—
—
5,739
1,817
— 87,854
+ 83,597
— 11,210
— 11,406
—
0
38
+ 50,001
+ 10,783
10,258
28
— 70,126
—
5,711
— 42,338
— 62,508
+ 133,505
+ 118,248
339
+
+ 38,791
+ 50,296
+ 44,983
— 27,109
—
8,765
+ 101,810
7,532
—
— 29,436
— 21,975
—
2,017
—
13,354
—
6,051
553
—
+ 43,473
—
13
419
+
—
7,532

+
+
+
+

.

+
+
+
+
+

17,353
17,866
12,186
16,320
12,501
1,861
61,507
60
5,024
101,810

41 R E PO R TIN G M EM B E R B A N K S — 5th D IS TR IC T
(A ll Figures in Thousands)
ITEM S
T otal Loans . . ..................................
Bus. & A g r i...................................
Real Estate L oa n s .......................
A ll Other L o a n s . . . . . .................
Total Security H old in gs.................
U. S. Treasury Bills ......................
U. S. Treasury Certificates . . . .
U . S. Treasury Notes ...............
U . S. Gov. Bonds ....................
Other Bonds, Stocks & Sec........
Cash Items in Process o f Col........
Due fro m B an ks................................
C urrency & C o in ..............................
Reserve w ith F. R. B a n k ...............
Other Assets ......................................
Total Assets ......................................

A p ril 16
1947
$ 492,721
255,925
83,585
153,211
1,366,425
22,293
166,142
74,163
1,013,544
90,283
169,898
118,263*
39,419
344,231
71,860
$2,602,817

Total Demand D eposits...................
Deposits o f Individuals ...............
Deposits o f U. S. Gov...................
Deposits o f State & L ocal Gov.
Deposits o f Banks .......................
Certified & Officers’ C h e ck s .. . .
Total Tim e D ep osits.........................
Deposits o f Individuals...............
Other Tim e D eposits...................
Liabilities fo r B orrow ed M o n e y ..
A ll Other L ia bilities.........................
Capital A ccoun ts ..............................
T otal Liabilities ................................

1,953,344
1,392,519
67,907
101,582
353,267*
38,069
339,206
382,479
16,727
260
99,414
150,593
2,602,817

Chg. in A m t. from
4-17-46
3-12-47
9,189
+
+ 75,957
2,880
+
+ 70,529
1,576
+
+ 30,548
25,120
4,733
+
— 417,528
75,533
— 19,422
— 44,838
— 10,421
267,310
— 116,089
—
9,972
— 14,421
— 28,801
4,119
+ 14,094
+
18,223
+
+ 38,086
16,944
32,317
—
1,742
1,682
+
8,893
3,252
+
—
6,579
4,456
— 349,532
— 67,951

__

__ 60,054
37,340
19,631
9,225
21,378
9,070
+
436
+
440
+
4
8,440
—
1,186
1,293
+
— 67,951

.
—
—
+

—

378,270
+ ' 47,945
— 377,178
3,916
+
48,669
—
4,284
+ 25,368
+ 22,994
2,374
+
11,615
5,654
+
9,331
+
— 349,532

—

♦Net figures, reciprocal balances being eliminated.

M arch
1947
D istrict o f Columbia
W ashington . . . . . ___
M aryland
B altim ore .....................
Cumberland .................
F rederick .....................
H agerstow n .................
N orth Carolina
A sheville .....................
C harlotte .....................
Durham .........................
Greensboro ...........
K inston .........................
R aleigh .........................
W ilm ington . . . . . . . . .
W ilson
.........................
W inston-Salem ...........
South Carolina
Charleston ...........
Columbia .....................
Greenville
...................
Spartanburg ...............
V irginia
Charlottesville ...........
'Danville ......................
L yn chburg ...................
N ew port N ews ...........
N orfolk ................... ......
Portsm outh ...........
Richm ond .....................
R oanoke .......................
W est V irgin ia
Bluefield .......................
Charleston ...................
Clarksburg ...................
H untington .................
P arkersburg ...............
D istrict Totals

...............

% Chg.
from
Mar. 1946

$ 631,783

—

3 Mos.
1947

% Chg.
fro m
3 Mos. 1946

1

$ 1,885,285

+

5

888,789
20,405
18,756
24,632

+ 9
+ 13
+ 26
+ 14

2,613,586
59,052
51,107
71,484

+
+
+
+

13
23
19

46,736
209,705
87,119
62,893
11,965
113,138
34,584
13,653
115,749

+
+
+
+
+
+
+
+
+

26
28
9

30
36

134,086
607,489
273,994
184,960
40,136
293,909
98,169
44,335
350,332

+
+
+
+
+
+
+
+
+

50,522
96,348
72,121
44,632

—
+
+
+

3
33
33
39

147,575
249,389
205,127
120,622

+ 3
+ 29
+ 33
+ 32

7

61,247
84,684
100,638
84,791
455,282
54,307
1,178,809
212,256

— 10

22

17
48
1

20,470
23,452
35,109
29,936
163,713
18,863
402,883
76,669

_

+
+
+
+
+
+
+

19
15
23
19

34,253
124,469
25,350
46,758
23,482

+
+
+
+
+

17
16

6

13
27

+
+
+
+
+

100,202

16
19

344,338
77,126
137,963
70,884

+ 13

$3,568,937

+
+
+
+
+
+
+

$10,393,164

10

10

24
36
16
23
35
47
2

40
38

40
22
21

14
8

17
26
22

18
18
16
26

+ 16

COTTON C O N SU M PT IO N A N D ON H A N D — B A L E S
M arch
1947

M arch
1946

F ifth D istrict S ta tes:
Cotton consum ed .................
426,233
391,043
Cotton G row ing S ta tes:
Cotton consum ed .................
767,893
707,837
Cotton on hand M arch 31 in
consum ing establishm ents 1,917,353 2,051,843
storage and com presses 3,292,306 8,480,138
United S tates:
Cotton consum ed .................
875,124
804,290
Cotton on hand M arch 31 in
consum ing establishments 2,257,524 2,391,275
storage and compresses 3,354,119 8,616,252
Spindles active, U . S ................ 21,953,050 21,413,108

A u g. 1 to M arch 31
1947
1946
3,326,420

2,897,758

6,066,018

5,262,049

6,919,450

5,957,068

COTTON CO N SU M PT IO N — F IF T H D ISTR IC T
(In B ales)
M O NTH S
March 1947 . .
February 1947
March 1946 . .
3 Mos. 1947 ,
3 Mos. 1946. . .

N . Carolina
228,162
219,232
211,891
692,427
615,785

S. Carolina
V a.
175,925
18,967
166,747
18,570
158,585
17,183
532,073
57,608
366,844
49,744

Md.
3,179
3,224
3,384
10,131
9,384

D istrict
426,233
407,773
391,043
1,292,139
1,141,757

P R IC E S OF U N FIN IS H E D COTTON T E X T IL E S
M ar. 1947
C O M M ER C IA L F A IL U R E S
N um ber Failures
M O N TH S
D istrict
U . S.
M arch 1947 .................... 9
254
February 1947 ___ _____ 7
238
M arch 1946 .....................1
86
3 Mos. 1947.............
21
694
3 Mos. 1946............. ......... 7
258
S ou rce: Dun & Bradstreet




Total Liabilities
D istrict
$ 697,000
207,000
25,000
$1,248,000
78,000

U . S.
$15,251,000
12,976,000
4,421,000
$43,420,000
11,776,000

Average, 17 con stru ction s. . .
Printcloths, average ( 6 ) .........
Sheetings, average ( 3 ) .............
T w ill (1 ) ....................................
Drills, average ( 4 ) ...................
Sateen (1) ..................................
Ducks, average ( 2 ) ...................

Feb. 1947

M ar. 1946

88.19
114.40
79.45
79.86

85.42
111.29
75.66
71.10
65.90
97.61
62.54

48.93
52.81
44.23
50.77
44.02
67.53
43.96

97.61
62.54

N o te : The above prices are those fo r the approxim ate quantities o f
cloth obtainable from a pound o f cotton with adjustm ents fo r
salable waste.

11

MONTHLY REVIEW

B U ILD IN G PE R M IT FIG U R ES
Total Valuation
M arch 1946
M arch 1947
M aryland
Baltim ore .......................................... .......................
Cumberland ............................
Frederick .......................................... .......................
Hagerstown .................................... ...............
Salisbury ..........................................
V irginia
Danville ............................................
Lynchburg ......................................
N orfolk ............................................
Petersburg ...................................... ........................
Portsmouth
.............................................................
Richm ond ........................................
Roanoke
..........................................
W est V irginia
Charleston ........................................
Clarksburg ......................................
H untington ......................................
North Carolina
Asheville ..........................................
Charlotte ..........................................
Durham ......................................
Greensboro ......................................
H igh Point ......................................
Raleigh ............................................
R ocky Mount ..................................
Salisbury ..........................................

$ 7,459,845
50,270
28,675
179,245
229,572

$ 2,602,855
55,850
239,100

205,844
214,139
691,030
117,312
80,314
2,921,079
894,790

91,100
50,013

775,440
755,300
774,265

213,650
315,417
179,185
301,710
3,823,021

4,852,466

D istrict Totals ................................
3 Months ..........................................

$26,335,312
$51,461,013

CON STRU CTIO N C ON TRACTS A W A R D E D

STATES

Maryland ............... $ 8,681,000
Dist. o f C olum bia.
4,829,000
V irginia .................
16,220,000
5,764,000
W est V irgin ia . . .
9,379,000
N o. Carolina .........
4,224,000
So. Carolina .........
F ifth
D is t r ic t .. $49,097,000
S o u rce: F. W . Dodge Corp.

% Chg.
from
Feb. 1946
—
+
+
+
—
—
—

43
26
11
94
5
37
8

2 Mos. 1947

% Chg.
from
2 Mos. 1946

$ 29,830,000
13,989,000
30,983,000
8,927,000
22,998,000
7,997,000
$114,710,000

+
+
+
—
+
—
+

33
85
40
4
28
26
27

R E T A IL F U R N IT U R E S A LE S

S TATE S
Maryland (5 )* .........................
Dist. o f Columbia ( 6 ) * ...........
V irgin ia (2 0 )* .........................
W est V irgin ia (1 0 )* ................
N orth Carolina (1 5 )* ..............
South Carolina (1 1 )* ...............
F ifth D istrict ( 6 7 )* ...............

Percentage Changes in Mar. and 3 Mos. 1947
Compared with Compared with
3 Mos. 1946
M arch 1946
+ 16
+ 19
0
0
+ 16
+ 23
+ 8
+ 27
+ 15
+ 14
+ 9
+ 12
+ 12

Individual Cities
Baltimore, Md. ( 5 ) * .................
W ashington, D. C. ( 6 ) * ..........
Lynchburg, V a. ( 3 ) * ...............
Richm ond, V a. ( 6 ) * .................
Charleston, W . V a. ( 3 ) * . . . . .
Charlotte, N . C. ( 3 ) * .............
Columbia, S. C. (3) * . . . . . .

Mar. 31, 1947
Total Deposits ......................... $385,209,962

T O BACCO

+ 19
0
+ 9
+ 28
— 10
+ 29
— 26

+ 16
0
+ 9
+ 25
— 14
+ 35
— 17

Feb. 28, 1947
$382,907,799

Mar. 31, 1946
$356,755,072

M A N U F A C T U R IN G
% Chg.
from
Mar. 1946

M arch
1947
S m oking & Chewing tobacco
(Thousands o f l b s .) .........
15,661
Cigarettes (T h ou sa n d s). . . .26,335,579
Cigars (Thousands) ........
426,785
Snuff (Thousands o f lb s .).
3,083

230,581
1,311,707
542,840
575,893
463,055
538,070
344,275
298,585
790,758

South Carolina
Charleston ........................................
Columbia ..........................................
Greenville .............................
Spartanburg .............................
D istrict o f Columbia
W ashington ....................................

February
1947

DEPOSITS IN M U T U A L SAV IN G S B A N K S
8 B altim ore Banks

+ 4
0
— 11
— 10

3 Mos.
1947

c 0 Chg.
/
from
3 Mos. ’ 46

46,823
81,124,831
1,383,091
9,433

0
+8
0
—1

W H O L E S A L E T R A D E --206 FIR M S
N et Sales
M arch 1947
com pared with
Mar.
Feb.
1946
1947

L IN E S
\uto Supplies (7) +...........
Drugs & Sundries (14) ♦.
Dry Goods ( 8 ) * ...............
Electrical Goods ( 5 ) # . . .
jro ce rie s (7 3)* ...............
hardware (1 5)* .............
[ndustrial Supplies (6 )*
Paper & Products (6 )* .
Tobacco & Products (9 )*
Miscellaneous (6 4 )* .........
Dist. A vg. (2 0 6 )* .........

—
+
+
+
+
+
+
+
—
+
+

2
17
7
121
19
31
39
24
2
25
23

—
+
+
—
+
+
+
+
+
+
+

3
15
3
5
9
11
17
21
3
7
8

Stock
R atio Mar.
M arch 31, 1947 collections
com pared with
to a cc’ts
M ar. 31 Feb. 28 outstand’ g
1946
1947
March 1
+ 124
+ 18
+ 123
+ 92
+ 43
+ 86
+ 58
+ *57
+ 58
+ 59

81
122
76
98
157
97
88
97
54
92
107

+ 4
+ 0
+ 15
+ 11
+ 3
+ 10
+ 1
+ ’i

—

1

+

5

Source: Departm ent o f Commerce
♦Number o f reporting firms.

D E P A R T M E N T STO R E T R A D E
Richm ond
P ercen tage
+ 19
Percentage
+ 17
P ercentage
+ 77
Percentage
— 45
P ercentage
+ 62
P ercentage
43
Percentage
27

Baltim ore

W ashington

Other Cities

D istrict

chg. in M arch 1947 sales, com pared w ith sales in M arch *46:
+11
+10
+ 7
+11
chg. in 3 mos. sales 1947, com pared with 3 mos. in 1946:
+ 8
+ 4
+ 7
+ 7
chg. in stocks on Mar. 31, 1947, com pared with Mar. 31, *46:
+30
+46
+56
+43
chg. in outstanding orders M ar. 31, 1947 from Mar. 31, *46:
— 42
— 53
— 46
— 48
chg. in receivables Mar. 31, '47 fro m those on M ar. 31, *46:
+38
+49
+34
+46
o f current receivables as o f M ar. 1, 1947 collected in M a rc h :
52
45
55
48
o f instalm ent receivables as o f Mar. 1, ’ 47, collected in M a r .:
32
26
37
29

M aryland Dist. o f Col. V irginia W . V a. N o. Carolina
So. Carolina
P ercentage chg. in Mar. 1947 sales from Mar. 1946 sales, by states:
+ 11
+10
+15
+ 6
+12
+ 3
P ercentage change in 3 months 1947 sales from 3 m onths 1946 sales:
+ 7
+ 4
+13
+ 6
+10
+ 1

♦Number o f reporting stores.

SOFT C O A L P R O D U C TIO N IN T H O U SA N D S OF TONS

RAYON YARN DATA
Mar. 1947

Feb. 1947

Mar. 1946

R ayon Y arn Shipments, L b s . ...
Staple F iber Shipments, Lbs-----

62,700,000
15,500,000

55,700,000
14,600,000

58,500,000
16,800,000

R ayon Y arn Stocks, Lbs...............
Staple Fiber Stocks, Lbs...............

6,800,000
2,500,000

6,900,000
2,400,000

9,300,000
2,000,000

Source : R ayon Organon




M arch
R EG ION S
1947
W est V irgin ia ,. .13,515
162
Md....................... . .
5th D ist......... , 15,254
U . S............ . .54,995
% in D is t.. .. 27.7

M arch
1946
14,442
1,793
236
16,471
56,540
29.1

%
Chg.
— 6
— 12
— 31
— 7
— 3

3 Mos.
1947
42,613
5,050
599
48,262
164,605
29.3

3 Mos.
1946
41,312
5,083
626
47,021
160,590
28.1

%
Chg.
+ 3
— 1
— 4
+
+

3
3

MONTHLY REVIEW

12

SUMMARY OF NATIONAL BUSINESS CONDITIONS
(Compiled by the Board of Governors of the Federal Reserve System)

Industrial output and factory employment were un­
changed in March. Value of retail trade continued to show
little change, after allowing for holiday buying. The gen­
eral level of wholesale commodity prices declined slightly
in the first three weeks of April, following increases in
February and the early part of March.

I n d u s t r ia l P r o d u c t io n
The Board’s seasonally adjusted index of industrial
production in March was at a level of 189 per cent of the
1935-39 average for the third consecutive month.
Output of durable manufactures continued to show a
very slight gain in March, reaching a level of 223 per cent
of the 1935-39 average. Activity in the iron and steel in­
dustries advanced in March after a slight decline in
February. Steel mill operations averaged 94 per cent of
capacity in March and they have been maintained at about
this rate during most of April. Activity in the machinery
and transportation equipment industries also showed a
slight gain in March. Output of passenger cars totalled
303,000, and of trucks, 117,000. Lumber production con­
tinued to advance and, in March, was at the highest level
for this season in almost 20 years. Output of most nonferrous metals at smelters and refineries continued to ex­
pand, following increases earlier in domestic mine produc­
tion.
The Board’s seasonally adjusted index of output of
nondurable manufactures again declined by one point in
March to a level of 175 per cent of the 1935-39 average.
Production in most lines was at the February rate or de­
clined very slightly. Output of textile-mill and leather
products in February and March remained somewhat be­
low last year’s peak rates.
Minerals production increased slightly in March to a
level of 147 per cent o f the 1935-39 average, reflecting a
continued advance in output of crude petroleum, and a
slight increase in coal production. Bituminous coal out­
put dropped sharply during the first two weeks of April,
as work was curtailed at mines in a dispute over safety
conditions, but subsequently increased.

E m ploym ent
The number of employees in most lines of nonagricultural activity in March remained at about the level of
other recent month, after allowance for usual seasonal
changes. Total nonagricultural employment of about 42,500,000 persons was 7 per cent higher than the level a
year ago. The number of persons unemployed showed a
slight seasonal decline in March to 2,330,000.

C o n s t r u c t io n
Total value of construction contracts awarded, as re­
ported by the F. W . Dodge Corporation, was about onethird larger in March than in February, reflecting chiefly
seasonal influences, but one-sixth smaller than in March
1946. The reduction from a year ago was in awards for
private nonresidential construction, which were excep­
tionally large at that time. Value of residential awards
increased by about one-third from February to March and
was slightly larger than in the same period last year. Since
a year ago building costs have increased considerably and



the number of dwelling units contracted for in March was
somewhat less than the March 1946 volume. Construction
activity continued to decline after allowance for seasonal
variation.
D is t r ib u t io n
Value of deportment store sales during the six weeks
preceding the Easter holiday was three per cent larger
than during the corresponding number of weeks before
Easter last year, reflecting chiefly a sharply higher level
of sales of household appliances and men’s clothing. Value
of sales of most other goods sold at department stores
was about the same as a year ago, although prices were
generally higher than at that time. Retail sales o f auto­
mobiles, radios, and office and farm equipment both in
unit and dollar volume continued far in excess of last
year’s levels.
Freight carloadings rose in March owing mainly to in­
creased shipments of grain and miscellaneous freight.
Shipments of coal dropped sharply at the beginning of
April and then recovered to the March rate during the
week ending April 19. Shipments of forest products de­
clined considerably during the first three weeks of April,
while loadings of most other classes of freight showed
little change.
C o m m o d it y P r ic e s
Wholesale prices of basic commodities generally de­
clined from the middle of March to the latter part of
April, with the largest decreases shown for hogs, fats and
oils, coffee, print cloths, and steel scrap. Prices of corn,
cotton, and copper, on the other hand, were at about the
same level on April 24 as in the middle of March.
The consumers’ price index of the Bureau of Labor
Statistics advanced two per cent from February 15 to
March 15, reflecting chiefly increases in food prices. Since
that time prices of foods have declned somewhat and price
reductions have been announced for certain other products
by manufacturers and distributors.

T r e a s u r y F i n a n c e a n d B a n k C r e d it
During March and April the Treasury continued its
program of debt retirement, using an excess of tax re­
ceipts over budget expenditures and drawing upon balances
at commercial banks and Federal Reserve Banks. Retire­
ments, which aggregated about 4.8 billion dollars, included
notes maturing on March 15, a portion of certificates ma­
turing March 1 and Aprl 1, and 200 million of Treasury
bills each on April 17 and 24. A further reduction of 200
million was announced for the bill issue to mature May 1.
Federal Reserve holdings of Government securities de­
clined by more than 2.2 billion dollars in the eight weeks
ending April 23, while holdings of member banks in lead­
ing cities showed little change. The reserve position of
member banks was maintained in this period by the re­
duction in Treasury balances at Federal Reserve Banks.
Bank deposits and currency in circulation, which had
declined considerably in January and February, showed
some net increase in March and the first half of April.
Commercial loans increased further in March but declined
in April. Real estate and consumer loans increased mod­
erately.

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