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FEDERAL RESERVE BANK OF RICHMOND
R I C H M D N D 13, V I R G I N I A

A U G U S T 31, 1 9 4 B

Business Conditions
EV E LO PM E N TS in the Fifth District in July
show reductions in production of the major indus­
tries in retail trade and in building, but both gains and
losses in different lines of wholesale trade after adjust­
ments for seasonal variation. Employment levels in
manufacturing industries held steady through June, but
in several important industries working time was cut in
June and this appears to have been more pronounced in
both July and August.

D

Production
Output of the District’s major industries was reduced
during July due in part to worker vacations and in part
to lack of demand. A reduction o f 5 percent in the sea­
sonally adjusted coal output from June to July was
caused both by worker vacations and by lack of freight
cars at certain mines. A drop from June to July in sea­
sonally adjusted indexes of 11 percent in cotton con­
sumption and 19 percent in cotton spindle-hours run
reflect both longer vacations than are allowed for in
computing the seasonally adjusted index and reduced
demand.
Vacation periods this year covered a larger portion of
the cotton textile industry than heretofore and the July
drop is probably somewhat exaggerated. Nevertheless,
all current trade indications point to a level of activity
this fall considerably below the spring levels. The ac­
companying chart shows graphically the extent to which
mill activity was reduced in July.
Although employment in the lumber and timber indus­
try has held quite steady thus far this year there has been
some lessening of activity at sawmills, particularly those
small mills which sell undried lumber. Although lumber
prices have firmed of late after having shown some
weakness around midyear, the market demand is for
good dry lumber and the small mills without drying fa­
cilities do not face a bright outlook despite the large
amount of construction unless export demands become
considerably larger than they are now. No complaints
have, thus far, been heard regarding car shortages for
hauling lumber. This had been expected owing to the
shifting of cars to move the wheat crop.
New orders booked by the reporting members of the
Southern Furniture Manufacturers Association fell
sharply during the first half of the year, but shipments
have maintained a good level, though in the second quar­
ter they were lower than earlier in the year. Em­
ployment levels have declined appreciably in both North



Carolina and Virginia, with the brunt of the decline com­
ing in Virginia. Retail sales of furniture stores in the
Fifth District dropped 14 percent from June to July
after seasonal correction. July sales, however, were still
15 percent ahead of July last year.
Apparel industries in the District maintained produc­
tion through the first half year at something better than
seasonal levels. There have been a few indications that
lessened activity has occurred recently in some lines such
as skirts and pajamas, but the extent of this slackening
is not known. It is apparent, however, that all of these
industries are exercising a decidedly conservative pur­
chasing policy and this has found its reflection in the
cotton goods markets.
Cigarette production in the District fell 9 percent in
July compared with June after allowances for seasonal
change. The July output was 7 percent smaller than in
that month last year. The employment level in cigarette
manufacturing continued on a downward trend in V ir­
ginia during the first half of 1948 while that in North
Carolina has flattened out after having risen for the past
two years.
Trade
Department store sales, seasonally adjusted in the
Fifth District, after establishing an all time peak in June
declined 2 percent in July to a level 9 percent higher than
July 1947 and the highest level of all time except for
June. Indications based on sales in the first two weeks
of August point to a further decline in the index during
that month, which is in contrast with an indicated in­
crease for the country as a whole.

FEDERAL RESERVE BANK OF RICHMOND

The high sales levels, after seasonal correction in June
and July, have permitted stores to work their inventories
into a better relationship to current sales volume. It is
still store policy to maintain a conservative level of inventores, but the sales experience thus far this summer
will probably result in a somewhat more liberalized rate
o f purchase in the fall months. Anything beyond this
will probably be governed by the sales reaction to a some­
what slackened employment situation.
The fall and winter trade outlook must also reckon
with stiffer installment credit terms on major household
appliances. These terms are about twice as stiff as cur­
rent practice regarding down-payments, and affect a mi­
nority of probaly 15 to 20 percent of the transactions
which are currently running beyond 18 months These
new regulations on installment credit are likely to have
their greatest retarding effect in sales in the furniture
field.
Sales of wholesalers in the Fifth District showed
mixed changes after seasonal correction irom June to
July as well as from July 1947 to July 1948. Dry goods
sales rose 16 percent from June to July, but July sales
were only 1 percent ahead of those last year. Electrical
goods sales gained 21 percent in July from June and

stood 7 percent above a year ago. Sales of automotive
and industrial supplies declined 16 and 13 percent re­
spectively during the month, but held 23 and 19 percent
respectively ahead of a year earlier. Grocery sales in
July were 1 percent above June but failed by 4 percent
of equaling the July 1947 level. Wholesale sales of paper
and its products decreased 9 percent from June to July
to a level 15 percent below July 1947.
Building
June established the peak month for building permits
in the Fifth District thus far. July figures seasonally ad­
justed declined 27 percent from the June level but still
remained 15 percent higher than in July a year ago and
25 percent higher than the average for the year 1947.
In the first 6 months of 1948 construction contract
awards in the Fifth District amounted to $525 million,
which was $102 million or 24 percent larger than in the
first half of 1947. O f this increase of $102 million, nonresidential accounted for 66 percent, residential 20 per­
cent and public works and utilities 14 percent. The table
on page 7 shows that the gains in the first half of 1948
over the same months of 1947 were very substantial in
Continued on page 7

BUSINESS IND EXES—FIFTH FEDERAL RESERVE DISTRICT
AVERAGE D A ILY 1935-39 = 100— SEASONALLY ADJUSTED

Automobile Registration* _______________
Bank Debits
........ - __ - Bituminous Coal Production________________
Building Contracts Awarded ____ ________
Apartments and Hotels
- - ____
Commercial Construction Contracts----------Manufacturing Construction Contracts-----One and Two Family Houses------------------Public Works Utilities___________________
Residential Construction Contracts----------Building Permits Issued____________________
Business Failures—No. ------------------------------Cigarette Production ---------------------------------Cotton Consumption _______________________
Cotton Spindle Hours______________________
Department Store Sales_________________ _—
Department Store Stocks___________________
Electric Power Productions
- - _____
Employment—Mfg. Industries* _________
Furniture Orders
____________
Furniture Shipments
- __ _________
Furniture Unfilled Orders__________________
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**______________ ____

July
1948

261p
263

June
1948
105
327
165r
335
305
478
246
299
453
271r
441
29
245r
148
155
335r
304
256
135
276
323
641
299
253

May
1948
106
326
189r
365
312
461
418
320
523
313r
277
31
232
148
152
313
337
254
135r
216
282
907
263
190
252

July
1947
125
285
125
249
205
454
379
184
289
212
280
45
242
137
136
302
272
235
130
226
215
602
224
182
252

364
270
198
93
276
159
342
146
98

431
260
170
77
273
175
391
161
93

408
253
172
89
262
138
387
153
92

295
264
197
87
287
146
287
172
110

329
163
346
------404
323
35
224p
131
125
328
308

♦Not seasonally adjusted
**1938-41 = 100




[2]

% Change
July 1948 from
+ 1
— 1
+ 3

+ 15
+ 30
+ 39

+
—
+
—
—
—
—
+

49
27
21
9
11
19
2
1

+
+
—
—
—
—
~h
+

—
+
—
+
+
+
+
—
—
—
+

13
4
16
4
16
21
1
9
13
9
5

+ 17
+ 4
+
+
+
4—
+
+
—
—

91
15
22
7
4
8
9
13

23
2
1
7
4
9
19
15
11

AUGUST 1948

MONTHLY REVIEW

State and Municipal Bond Offerings-Fifth District
by the electorate at a referendum. It is likely, however,
that the total amount of $2.7 billion currently authorized
and proposed will be exceeded by a substantial amount
by the time the final tally is taken.
Whereas the national total of new municipal* issues
for the first half of this year represents an increase of 19
per cent over the volume of the first half of 1947 and a 29
per cent reduction from flotations in the last six months
of that year, the Fifth District total of $78.2 million was
179 per cent and 13 per cent over the volumes of those
respective periods.
With the exception of the absence o f bonus bonds, the
purpose-pattern of issues in this District was similar to
that of the country as a whole; schools, water and sewer,
and street and highway accounting for major proportions
of the total issues. And as was the case throughout the
country, the relatively few large individual offerings in
the Fifth District were accompanied by a continued heavy
flow of small issues that saw amounts as small as $6,500
borrowed for a period of 8 years.
It will be noted in the following table that on a dollar
basis school building and improvements were, for the
District as a whole, the most important purpose for which
debt was incurred, absorbing about 36 per cent of all
borrowed funds. Improvements and extensions to water,
sewer, and sanitary systems ranked next, accounting for
22 per cent of the total funds borrowed; and repairs and
construction of streets, roads, and bridges required bond
issues amounting to 19 per cent of the total issued in the
District.

In keeping with so many other indicators and results
of economic activity in the first six months of this year,
offerings of new issues of municipal bonds in the United
States attained record proportions with a volume of $1,599,903,001. This was an increase of $252 million over
the total in the same period of 1947 and presages the pos­
sibility that this full year’s total may approximate the
record volume of 1947. As typified last year’s experience,
offerings during the first half of this year were swelled
by $585 million of veterans’ bonus bonds issued by New
York, Ohio, and Illinois.
To date only nine states have authorized bonuses, rang­
ing in total amounts from $1.5 million in Vermont to
$400 million in New York. (The other states in which
bonuses have been paid or have been authorized to be
paid are Connecticut, Illinois, Massachusetts, Michigan,
New Hampshire, Ohio, and Rhode Island.) The total
amount paid out by these nine states, about $1.6 billion,
will be augmented by about $1.2 billion if voters in In­
diana, Iowa, Minnesota, Missouri, North Dakota, Penn­
sylvania, South Dakota, and Wisconsin give their ap­
proval this November to present bonus proposals. It is
interesting to compare the amount of $2.7 billion of au­
thorized and proposed bonuses in 17 states with the total
payments of $398 million by 20 states after the First
World War. In about 19 of the remaining states bonus
proposals have been made but have not yet been acted
upon by the legislatures. In a number of states, legisla­
tures have rejected bonus proposals, and in Maine a plan
that had been approved by the legislature was rejected

STATE A N D M U N IC IP A L BOND OFFERINGS
January 1-June 30, 1948
M ARYLAN D
V IR G IN IA
W E S T V IR G IN IA
NO. C A R O L IN A
SO. C A R O L IN A
F IF T H D IST RIC T
No. o f A m t.
P er­ No. o f A m t.
P er- No. o f A m t.
P er- No. o f A m t.
Per- No. o f A m t.
P er- No. o f A m t.
P er­
cent issues $000
cent issues $000
cent issues $000
cent issues $000
cent issues $000
issues $000
cent
School building and im ­
provem ent
W ater, drainage, sewer and
sanitary systems
Street, road and bridge
building and im provem ent
P ublic im provem ent
A irports
Parks and playgrounds
R ecreation center
Hospitals
E lectric system
Combined public utility
system
T ow n h a l l ; m unicipal
buildings
Cemetery
M em orial auditorium
General refunding
Total

7

14,320

74.8

3

1,950

25.1

8

4,715

24.6

2

1,290

16.6

2

75

.4
‘ 2
1
1

2SSb
74
150

36.1
1.0
1.9

2,771

14.9

45

28,377

36.3

3

1,180

6.3

40

17,078

21.9

14
5
1
1

3,029
2,115
200
20

10.4
7.2
.7
.1

(2
(1
2

900
10,000^
500

58.5
2.7

"3

........

17

27646

11.0

7

75

31.4
10.1
56.3

32.0
33.9

3,954

13.6

21
10
4
2
1
3
8

15,089
5,765
2,224
170
75
2,040
5,454

19.3
7.4
2.8
.2
.1
2.6
7.0

230

1.2

30
20

.1
.1

"7

1,500

"i

(
85
(1,000#
350
1,950

9,336
9,893

1

"l

_____
..

1
1
1
2

------

27

2
1

____
____
____
_

18

—

560

1.9

83

29,157

100.0

2.2

19.3

.

"2
"i

45

.2

18

19,155

100.0

10

7,764

100.0

6

3,460

100.0

1,000

5.4

31

18,621

100.0

1

230

.3

2
1
2
8

30
20
1,000
605

1.3
.8

148

78,157

100.0

♦State issues
S ou rce: W eekly listings in The Comm ercial and Financial Chronicle

The percentage breakdown shown in the table is only
approximately correct inasmuch as the sums for specific
purposes were not revealed in some items such as a $1.6
million Kanawha County, West Virginia issue floated
for airport, park and courthouse construction. Also
there is overlapping of certain items shown in the table;




for example, public improvements may overlap any of
the other items listed in the table and combined public
utility system may overlap electric system.
O f the 148 state and municipal bond issues in the
♦Where the term “ m unicipals” is used, it refers to state and local gov­
ernment bonds.

FEDERAL RESERVE BANK OF RICHMOND

Fifth District during the first six months of this year
there were only two state issues, accounting however, for
14 per cent of the total. South Carolina offered for sale
$10,000,000 of certificates of indebtedness covering nineyear loans for highway construction, while West Vir­
ginia issued $1,000,000 of bonds for the same purpose.
During the first six months of last year there were also
only two state issues; they, however, accounted for 41
per cent of a much smaller District total.
Including both state and municipal issues, North Caro­
lina accounted for 37 per cent of the District total, Mary­
land, 25 per cent; South Carolina, 24 per cent; Virginia,
10 per cent; and West Virginia, 4 per cent. With the
exception of the switch between North Carolina and
Maryland for first place, the foregoing percentage dis­
tribution reflects the order and relative importance of
state and municipal bond issues of the five states of the
Fifth Federal Reserve District for the past two years.
Although Maryland municipalities floated only 18
bond issues as compared with 83 in North Carolina, the
total value of the former was only 34 per cent less than
that of the latter, $19.2 million as compared with $29.2
million in North Carolina. Whereas only four of the 83
offerings in North Carolina amounted to as much as
$1,000,000, six of the 18 Maryland municipal issues were
in the $l,000,000-and-over class. In the other three
states individual municipal issues amounting to $1,000,000 or more totaled two in Virginia, two in South Caro­
lina, and one in West Virginia.
Including both state and municipal issues, the average
face value per bond issue for the first half of the year
was $1,064,166 in Maryland, $776,400 in Virginia, $600,677 in South Carolina, $576,667 in West Virginia, and
$351,289 in North Carolina. The increase to an average
value of $528,088 for the District from $484,972 in the
last half of 1947 and $394,613 in the first half of that
year reflects the mounting backlog of municipal repairs,
improvements, and new construction as well as the in­
creasing costs of implementing the projects.
Although issues of revenue bonds in the country as a
whole increased during the first half of this year, avail­
able reports indicate that the trend in the Fifth District
was contrary to that of the national pattern. Listings in
The Commercial and Financial Chronicle show that in
the Fifth District during the first half of last year two
revenue bond issues totaling $751,000 were floated; for
the second half of last year the figure rose to eight issues
amounting to $1,655,000, but in the first half of this
year only three revenue bond issues totaling $765,000
were floated.
It is interesting to note that the number of municipal
bond issues with the initial serial maturity date more
than two years from the date of issue showed a tremen­
dous increase during the first half of this year as com­
pared with the last half of 1947. In the last half of 1947
only seven of the 143 municipal bond issues in the Fifth
District had the initial serial maturity date more than
two years from the date of issue. But in the first half
of this year, of the 148 municipal bond issues, 36 showed
the initial serial maturity date more than two years after
the date of issue.




The costs at which local governments in the Fifth
District were able to float loans increased during the
first half of the year. Although no attempt was made to
segregate strictly comparable credits to measure accu­
rately increased costs, the following examples of similar
purpose and similar maturity issues taken from the list­
ings of state and municipal bond offerings are indicative
of the higher costs that prevailed during the first half
of 1948.
Purpose and Period Covered

M aturity

N et Interest Cost R ange

School Building and
Im provem ent
Jan.-June 1947
July-Dee. 1947
Jan.-June 1948

15 to 20 yrs.
15 to 20 yrs.
15 to 20 yrs.

1.285% to 2.97 %
1.57 % to 2.622%
1.86 % to 3.367%

W ater drainage, sewer and
sanitary systems
J an.-June 1947
July-Dee. 1947
Jan.-June 1948

25 to 30 yrs.
25 to 30 yrs.
25 to 30 yrs.

2.045% to 2.972%
2.225% to 2.58 %
2.42 % to 2.926%

Street, road, and bridge
building and im provem ent
Jan.-June 1947
July-Dee. 1947
Jan.-June 1948

18 to 20 yrs.
18 to 20 yrs.
18 to 20 yrs.

1.495% to 1.93 %
1.3814% to 2.039%
2,336% to 3.033%

Proposed Issues
Despite the record volume of new offerings of state
and municipal bonds during the past year, present indi­
cations support the view that the flow of these securities
into the investment market will continue at high levels.
The need for expanded school facilities, for example, is
one of the pressing requirements throughout the country
and one, it should be noted, that is going to increase in
severity. In 1947 the birth rate in the United States was
26.2 per 1,000 population, the highest birth rate on record
in this country. This rate was likely the culmination of
the increase that set in during the war and which by 1947
reached almost 50 per cent above the pre-war rate of
slightly under 18. Last fall the United States Office of
Education estimated that first grade school classes would
be 9 per cent larger than those of the preceding year as a
consequence of the arrival at school age of the oldest
group of the 17 million war babies. The Census Bureau
has estimated that first grade enrollment will go up 13
per cent this fall to reach 2,570,000 and that “ moppet
matriculation” will continue to rise until 1953 when some
3,750,000 children are expected to begin school. Thus,
even though the birth rate tapers off, towns and counties
can be certain that their present school facilities will not
be adequate for the future enrollment in primary and
secondary schools.
The necessity for heavy capital outlays by municipali­
ties is not, of course, confined to the provision of school
facilities; road improvements and extensions, water and
sewer lines, gas and electric utilities— the list is a com­
prehensive and urgent one if municipal plant and serv­
ices are to be restored from the war-time neglect and
enlarged to meet the requirements of an increased familypopulation.
The more immediate effects of these requirements is
reflected in the latest compilation by “ The Bond Buyer”
of the inventory of proposed state and municipal bond

f 41

FEDERAL RESERVE BANK OF RICHMOND

F E D E R A L R E S E R V E B A N K OF RICHM ON D
(A ll Figures in Thousands)
A ugu st 18,Chg. in A m t. From
1948
7-14-48
8-13-47

ITEM S

Total Gold Reserves...............................$1,051,512
15,973
Other Reserves .......................................
Total Reserves ................................... 1,067,485
Bills Discounted .....................................
22,392
Industrial A dvances .............................
54
Govt. Securities, Total........................... 1,399,591
Bonds ....................................................
481,219
Notes ......................................................
120,640
Certificates .........................................
333,059
Bills .... ...................................................
464,673
T otal Bills & Securities...................... 1,422,037
U ncollected Items .................................
249,918
24,984
Other Assets ...........................................
T otal Assets ....................................... 2,764,424

—
+
—
+
—
+
+
—
+
—
+
—
+
—

14,819
991
13,828
4,453
1
1,925
70,739
6,507
12,794
75,101
6,377
3,523
2,040
8,934

+106,199
+
2,964
+ 109,163
+
9,211
+
54
— 85,152
+437,289
+ 98,160
— 81,083
— 539,518
— 75,887
+ 36,872
+ 10,147
+ 80,295

Federal Reserve Notes in C ir.............$1,631,968
Deposits, T otal .......................................
869,124
Members’ Reserves ..........................
719,102
U. S. Treas. Gen. A cct...................
129,910
18,174
Foreign .................................................
Other Deposits ........................ ..........
1,938
D ef. A vailability Items......................
224,475
Other Liabilities ...................................
623
Capital A ccoun ts ...................................
38,234
T otal Liabilities ............................... 2,764,424

+
—
—
+
—
—
—
—
—
—

12,659
7,663
23,727
21,928
2,538
3,326
12,794
185
951
8,934

—
+
—
+
—
+
+
—
+
+

17,189
58,999
9,373
72,803
4,763
332
35,543
303
3,245
80,295

51 R E PO R TIN G M EM BER B A N K S— 5th D ISTRIC T
(A ll Figures in Thousands)
A ugust 18,
1948

ITEM S

$ 847,847T
386,562
197,559
268,900
1,705,566
39,116
208,694
84,759
1,240,537
132,460
212,858
151,074*
64,335
479,146
47,010
3,507,336

Bus. & A g r i.................
R eal Estate Loans ....
A ll Other L oans........
’otal Security H olding
U. S. Treasury Bills ..
U . S. Treasury Certifi<
U . S. Treasury Notes

Currency

Chg. in A m t. From
8-13-47
7-14-48

& Coin..

Other Assets

T otal Dem and Deposits.....................
Deposits o f Individuals .................
Deposits o f U. S. Govt..................
Deposits o f State & L ocal Govt..
Deposits o f Banks .........................
Certified & O fficers' Checks......
Total Tim e Deposits......................... .
Deposits o f Individuals.................
Other Tim e Deposits.....................
L iabilities fo r B orrow ed M oney....
A ll Other Liabilities.........................
Capital A ccoun ts ................................

+ 27,541
8,385
+
3,720
+
+ 15,518
1,433
+
10,010
—
10,186
+ 16,445
2,528
+
2,656
+
—
20,112
—
25,298
—
4,007
— 13,181
—
7,948
41,572
—

+ 128,787
+ 49,755
+ 43,874
+ 40,832
L10,288
+ ' 9,686
9,204
+
4,432
136,435
+ 11,689
+ 24,673
—
15,226
529
+
7,979
—
—
4,990
+ 15,506

$2,659,346
1,980,193
72,358
187,615
375,899*
43,281
602,444
583,330
19,114
12,700
18,163
214,683
3,507,336

____

53,842
43,169
6,778
8,660
9,892
1,101
1,692
635
2,327
8,700
954
924
41,572

17,176
41,572
+ 27,472
+ 15,698
+ 13,640
1,938
+
—
14,901
—
14,565
—
3$6
5,200
+
—
160
8,191
+
+ 15,506

—

+
—

+
+
+
+
+
+
—

+

♦Net Figures, repicrocal balances being eliminated.
fL ess losses fo r bad debts.

STA TE S

C O N STR U C TIO N C O N TRA C TS A W A R D E D
% Change
June
from
1948
June 1947
6 Mos. ’ 48

$19,986,000
Maryland ...................
Dist. o f Columbia
5,535,000
. 18,757,000
V irgin ia .......................
W est V irgin ia ............
5,841,000
N orth Carolina .........
37,185,000
South Carolina ................ 10,525,000
F ifth D istrict ................ $97,826,000
S ou rce: F. W . Dodge Corp.

M O N TH S

6
31
2
59
161
162
26

$158,204,000
41,452,000
108,644,000
54,474,000
103,256,000
50,225,000
$516,255,000

C OM M ER C IA L F A IL U R E S
N um ber o f Failures Total Liabilities
D istrict
U .S.
D istrict

July 1948 ....................
11
June 1948 ....................
12
July 1947 ....................
14
7 Months 1948............
105
7 Months 1947............
60
S ource: Dun & Bradstreet




+
—
+
—
+
+
+

420
463
299
2,963
1,931

$ 195,000
337,000
1,360,000
$2,724,000
3,521,000

DEBITS TO IN D IV ID U A L A CC OU N TS
(000 om itted)

District Totals ................
COTTON

$ 5,066,972

+ B
+ 16
+ 10
+ 13

6,668,358
146,736
130,216
184,611

+
+
+
+

+
+
+
+
+
+
+
+

19
22
12
24
17
27
13
1
9

349,321
1,598,194
662,088
514,553
81,049
765,623
241,212
95,524
831,911

+ 14
+ 16
+ 3
+ 20
0
+ 15
+ 3
— 2
+ 7

60,406
87,999
78,990
41,834

W inston-Salem ...........
South Carolina
Charleston ....................
Columbia ......................
G reenville ...................
S partanburg .................
V irginia
Charlottesville ...........
Danville .......................
L ynchburg ................... .
N ew port News .........
N o rfo lk ...........................
Portsmouth ..................
R ichm ond ...................
R oanoke .......................
W est V irgin ia
Bluefield ....................... .
Charleston ................... .
Clarksburg .................
H untington ................
Parkersburg ............... ......

+ 10

51,853
239,825
107,404
75,818
12,151
121,282
36,791
14,821
122,351

$

745,614
964,509
25,037
19,579
27,471

D istrict o f Columbia
W ashington .................
Maryland
B altim ore .....................
Cumberland .................
F rederick .....................
H agerstow n .................
N orth Carolina
A sheville .....................
Charlotte .......................
Durham .......................
Greensboro .................
K inston ....................... .
R aleigh .........................
W ilm ington .................

% Change
from
July 1947

+
+
+
+

20
14
18
13

388,338
631,664
548,621
322,201

+
+
+
+

13
11
16
18

b 6
- 2
-13
- 6
-1 8
- 7
f- 24
J-19

149,749
173,173
264,889
219,357
1,246,261
138,248
3,138,120
592,694

+
+
+
+
+
+
+

6
0
13
7
14
9
14
18

30
12
22
33
6

288,597
912,682
220,548
397,991
185,313

+
+
+
+
+

22
13
19
21
9

+ 14

$27,154,814

21,896
22,325
38,468
32,467
190,811
19,591
481,996
90,085
42,541
134,437
34,299
62,136
29,332

25
4
6
24
32
61
22

U.S.
$ 13,876,000
12,163,000
37,137,000
$111,214,000
132,945,000

+
+
+
+
+

$ 4,034,119

CO N SU M PT IO N

AND

7 Mos.
1948

+ 13
9
3
8
9

+ 12

ON H A N D — B A L E S

July
1948
318,905

333,271

4,739,654

4,893,549

561,452

589,039

8,246,738

8,776,357

.. 1,182,812
1,292,981

F ifth D istrict S tates:
Cotton consumed ..............
Cotton G rowing S tates:
Cotton consum ed ..............
Cotton on hand July 31 in

July
1947

1,135,292
850,452

A ug. 1 to July 31
1948
1947

United S ta tes:
Cotton consumed ..................
627,393
677,780
Cotton on band July 31 in
consum ing establishments .. 1,471,644 1,406,094
1,335,996
904,028
21,328,000 21,383,000
Source: Departm ent of Commerce.
COTTON
M O NTH S

CO N SU M PT IO N — F IF T H

July 1948 .............................
168,767
June 1948 .............................
219,469
July 1947 ............................
170,366
7 Months 1948.................... 1,514,546
7 Months 1947.................... 1,488,741
S ou rce: Departm ent o f Comm erce.

135,656
167,509
147,653
1,159,298
1,192,076

9,346,845 10,024,811

D IST R IC T

(In B ales)
N. Carolina S. Carolina

% Change
from
6 Mos. '47
+
+
+
+
+
+
+

% Change
from
7 Mos. '48

July
1948

V irginia

District

14,482
15,195
15,252
123,841
128,570

318,905
402,173
333,271
2,797,685
2,809,387

COTTON T E X T IL E S
July
1948

June
1948

July
1947

79.04
81.83*
88.71
86.92
89.08*
109.86
63.59
67.08
74.08
Twill (1)
99.71
116.15*
79.86
69.27
71.14*
63.47
128.15
128.15*
97.61
63.23
63.27
62.54
♦Revised, due to a substitution o f constructions.
N o te : The above figures are those fo r the approxim ate quantities o f
cloth obtainable from a pound o f cotton with adjustments for
salable waste.
DEPOSITS IN M U T U A L S A V IN G S B A N K S
8

B altim ore Banks

July 31, 1948
Total Deposits .................. $392,484,523

June 30, 1948

July 31, 1947

$393,465,624

$387,125,144

AUGUST 1948

MONTHLY REVIEW

W H O L E SA L E T R A D E , 187 FIRM S

B U IL D IN G PE R M IT FIG U R E S
Total V aluation
July 1947
July 1948
M aryland
B altim ore .... ...................
Cum berland ....................
Frederick ...........................
H agerstow n ....................
Salisbury ..........................
V irgin ia
Danville .............................
Lynchburg ......................
N orfolk .............................
Petersburg ......................
Portsm outh ....................
R ichm ond ........................
R oanoke ..........................
W est V irgin ia
Charleston ..................... .
Clarksburg ......................
H untington ...................
N orth Carolina
A sheville ..........................
Charlotte ..........................
Durham ............................
Greensboro ......................
H igh P oint ......................
R aleigh ............................
R ocky M ount ..................
Salisbury ..........................
W inston-Salem .............
South Carolina
Charleston .....................
Columbia ..........................
Greenville ........................
S partanburg ...................
D istrict o f Columbia
W ashington ...................

$

$

5,281,080
67,625
21,800
110,235
67,370

3,791,145
70,120
100,825
153,780
172,504

274,861
236,786
1,693,985
174,196
206,815
1,149,498
838,929

437,250
248,548
554,667
141,100
68,290
2,645,450
1,090,945

711,361
164,876
548,334

496,295
69,640
524,715

327,686
2,943,191
398,485
739,783
322,175
475,500
163,300
79,375
596,749

255,614
552,944
675,995
975,863
276,344
642,436
89,150
144,009
605,877

223,244
1,452,590
634,050
152,483

137,737
716,195
239,625
111,178

3,486,160

4,451,518

$ 23,542,522
$173,160,827

$ 20,439,759
$119,456,537

..

SOFT C O A L PR O D U C TIO N IN TH O U SA N D S OF TON S
July
1948

REG ION S
W est V irgin ia ......
V irgin ia ...................
M aryland .................
F ifth D istrict
United States ....
% in D istrict......

July
1947

14,643
1,796
155
16,594
48,315
34.3

11,282
1,235
132
12,649
39,882
31.7

7 Mos.
1948

+
+
+
+
+

30
45
17
31
21

7 Mos.
1947

98,634
10,674
1,211
110,519
331,553
33.3

%
Chg.

92,656
11,310
960
104,926
354,299
29.6

%
Chg.
+
—
+
+
—

6
6
26
5
6

N et Sales
July 1948
com pared with
July
June
1947
1948

L IN ES

+
+
+
+
+
+
+
—
—
+
+

H ardware (9 )* ................
Industrial supplies (4 )*..
Drugs & sundries (15)*..
Paper & products (5)*....
T obacco & products (6 )*..
Miscellaneous (6 7)* ........

— 6
+ 16
— 7
-— 15
+ 6
+ 18
+ 1
— 8
+ 6
+ 23
+ 3

18
35
6
14
9
9
1
4
1
3
7

Stocks
July 31, 1948
com pared with
June 30
July 31
1947
1948
+
+
+
+
—
+
+

—
—
+
—
—
+
—

1
38
31
1
1
27
12

1
2
9
6
2
3
2

— *3
— 3
0

+ 19
+ 32
+ 22

S ource: Departm ent o f Commerce.
♦Number o f reporting firms.

R E T A IL F U R N IT U R E SA LE S
Percentage com parison o f sales in
periods named with sales in same
periods in 1947
July 1948
7 Mos. 1948

STATE S
Maryland (5 )* ..........................
Dist. o f Columbia ( 6 ) * ...........
V irginia (1 8)* ...........................
W est V irgin ia (1 0 )* ...............
North Carolina (1 4 )* ...............
South C arolina ( 9 )* .................
D istrict (6 2)* .......................

+
+
+
+
+
+
+

47
7
6
21
20
21
21

+ 12
+ 4
+ o
+ 4
+ 1
+ 7
+ 6

Individual Cities
Baltimore, M d., (5 )* ...............
W ashington, D. C., (6 )* ...........
Richmond, V a., (6 )* .................
Lynchburg, V a., ( 3 ) * ...............
Charleston, W . V a., (3 )* ...
Charlotte, N . C., (4 )* .............
Columbia, S. C. (3 )* ...............

+
+
+
+
—
+

47
7
7
26
10
19

+
+
—
+
—
—
+

12
4
3
10
1
4
10

♦Number o f reporting firms.

D E P A R T M E N T STORE T R A D E
Richmond

B altim ore

W ashington

Other Cities

D istrict

Percentage change in July 1948 sales, com pared with sales in July 1947 :
+ 16
+ 13
+ 6
+16
+12
TOBACCO M A N U F A C T U R IN G
July
1948
Sm oking & chew ing tobacco
(Thousands o f lb s .)................
14,889
Cigarettes (Thousands) ............27,520,762
Cigars (Thousands) ..................
430,210
Snuff (Thousands o f lb s .)........
2,991

% Change
from
July 1947
— 19
— 7
—

2

+11

7 Mos.
1948

112,575
199,537,097
3,194,792
24,310

% Change
from
7 Mos. *47
+ 3
+ 4

+ 2
+ 9

S ou rce: Treasury Departm ent.

J uly
1948
yarn
fiber
yarn
fiber

shipments, lbs................. 72,600,000
shipments, lbs................. 22,300,000
stocks, lbs.................... .
9,400,000
stocks, lbs....................... 4,000,000

S ou rce: Rayon Organon.




Percentage changes in stocks on July 31, '48, com pared with July 31, '4 7 :
—8
+ 12
+10
+18
+ 9
Percentage chg. in outstanding orders July 31, ’ 48 from July 31, '4 7 :
—2
0
— 16
— 5
— 16
— 12
Percentage chg. in receivables July 31, 1948, from those on July 31, '4 7 :
+ 40
+ 22
+21
+27
+25
Percentage o f current receivables as o f July 1, *48, collected in J u ly :
31
45
46
50
42

R A Y O N Y A R N SH IPM EN TS A N D

R ayon
Staple
Rayon
Staple

P ercentage change in 7 m onths sales 1948, com pared with 7 m onths in '47 :
+ 9
+ 2
+5
+10
+ 6

Percentage o f instalm ent receivables as o f July 1, ’ 48, collected in J u ly :
17
20
21
23
21

STOCKS
June
1948
70,400,000
22,400,000
9,200,000
4,300,000

July
1947
63,000,000
18,800,000
8.700.000
7.700.000

Maryland D ist.of Col.

V irginia

W . V irgin ia

N o. Carolina

So. Carolina

Percentage change in July 1948 sales from July 1947 sales, by states:
+ 13
+ 6
+16
+23
+15
+ 9
Percentage change in 7 m os. 1948 sales from 7 months 1947 sales:
+ 2
+ 5
+ 9
+16
+ 7
+ 5

MONTHLY REVIEW

AUGUST 1948

issues for the Fifth District. The District volume shown
in the following table as of July 1, 1948 represents an
increase of 47 per cent over the amount of planned issues
at the same date last year. This is an impressive rise in
view of the large volume of bonds marketed during the
year ended June 30, 1948 and indicates that the prospect
of a continuing large supply of new issues will continue
to be a, if not the, dominant factor in the municipal bond
market in this District. A comparison of the two tables
shows that the total of the proposed issues is almost 5
times as large as the amount of new state and municipal
bonds issued in this District during the first half of this
year.
IN V E N T O R Y OF PR O PO SE D
STA TE A N D M U N IC IP A L BOND ISSU ES
(A m ounts in thousands)
State &
Total
State A gencies <
M unicipal
7-1-48
7-1-47
7-1-48
7-1-47* 7-1-48
7-1-47
M aryland
V irgin ia
W est V irgin ia
N orth Carolina
South Carolina
F ifth D istrict

153,850
54,695
106,383
53,372
10,706
379,006

129,507
15,625
54,386
49,393
8,972
257,883

1,085

2,000

97.000
15.000
5,000
118,085

50.000
15.000

676
766

152,765
54,695
9,383
38,372
5,706
260,921

127,507
15,625
4,386
34,393
8,972
190,883

S ou rce: The Bond Buyer

Despite the fact that Maryland has accounted for
about 44 per cent of the total state and municipal bonds
issued in the District during the past two years, its share
of the proposed issues amounts to 41 per cent and is com­
prised almost entirely of offerings of local governmental
units. Reflecting perhaps the relatively small amount of
new state and municipal bonds issued in West Virginia

during the past two years, this State accounts for 28 per
cent of the estimated proposed issues for the District and
as is shown in the table, an overwhelming proportion of
the planned issues will be originated by the State itself.
Virginia and North Carolina each plan to issue about 14
per cent of the District total, with the entire amount of
the Virginia issues to be made by towns and other sub­
divisions. On the basis of the estimates shown the bond
issues of South Carolina and her political subdivisions
will amount to about 3 per cent of the District total and
will be divided almost equally between the state and mu­
nicipalities. It might be noted that although only $5
million of proposed State and State Agency bonds are
shown in the table for South Carolina, that state offered
for sale during July $10 million of bonds to be dated
August 15, 1948.
Holdings of State and Municipal Bonds
by Individuals
As a consequence of the curtailment of new state and
municipal bond issues during the defense and war periods
and the maturing of part of the outstanding issues, a de­
cline in total holdings of these securities in the United
States began in the last half of 1940 and continued up to
June 30, 1946. Increased new issues after that date
raised holdings on June 30, 1947, 6 per cent over those
of a year earlier but left the total still 17 per cent under
the peak amount held on June 30, 1940. The latest avail­
able data on holdings of all categories of investors is
shown in the following table.

DISTRIBUTION OF OW NERSHIP IN THE UNITED
OF STATE AND MUNICIPAL BONDS
JUNE 30
(Billions of dollars)

Individuals*
Commercial banks
U.S., State & local govts.
Insurance Companies
Corporations & assocs.
Mutual savings banks
Totalf

1947
$ 6.8
5.0
2.9
1.1
0.7
0.1
16.6

1946
$ 6.8
4.1
2.9
1.2
0.7
0.1
15.7

1945
$ 6.9
3.8
3.4
1.4
0.8
0.1
16.4

1944
$ 7.1
3.5
4.0
1.6
1.0
0.2
17.3

1943
$ 7.5
3.5
4.4
1.7
1.1
0.2
18.5

1942
$ 7.6
3.6
4.6
2.2
1.1
0.4
19.5

1941
$ 7.9
3.7
4.6
2.2
1.1
0.5
20.0

STATES
1940
$ 8.2
3.6
4.3
2.2
1.2
0.6
20.0

1939
$ 8.5
3.2
4.1
2.0
1.3
0.6
19.8

1938
$ 8.7
2.8
4.1
1.9
1.1
0.7
19.3

1937
$ 8.8
2.8
4.0
1.8
1.1
0.8
19.3

^Including unincorporated businesses and trust accounts.
fSum of details does not necessarily equal totals, due to rounding.
Source: Annual Report of Secretary of Treasury, June 30, 1947.
Because of the advantage afforded by tax exemption
to persons in the higher income brackets, holdings of
state and local government bonds have been heavily con­
centrated in the hands of individuals. In 1937, for ex­
ample, such holdings amounted to almost $9 billion, about
45 per cent of the total of such securities then outstand­
ing. As shown in the preceding table, however, the total
amount owned by individuals began to decline in 1938
and fell off steadily each year until 1947 when approxi­
mately the same amount was held as in the preceding
year— although that amount was 41 per cent of the total
outstanding on June 30, 1947, as compared with 43 per
cent a year earlier. Although the proportion of the total
held by individuals turned upward to 41 per cent in 1943
from 39 per cent in the previous year and continued to




rise slightly to 43 per cent in 1946, it is interesting to
note that at that time absolute as well as relative indivi­
dual holdings were substantially lower than they were
in the earliest year shown in the table. In view of the
large increases in income tax rates during this period it
might have been expected that the tax-exemption feature
would have led to increased holdings by individuals. But
as pointed out in a study made by the Federal Reserve
Bank of New York ( Monthly Review, December, 1947)
the 'Very high level of taxation in recent years has great­
ly reduced the potential accumulation of savings by in­
dividuals in the upper income brackets, and thus has ap­
parently reduced this most important single market for
municipal securities, although it has strengthened the
incentive to invest in tax-exempt securities.”
51

FEDERAL RESERVE BANK OF RICHMOND

It will be interesting to note when the information be­
comes available the effect on individual holdings of the
sharp rise in the index of municipal bond yields that oc­
curred during the period from September 1947 to Feb­
ruary 1948. Under the income tax rates of the Revenue
Act of 1948 a taxable bond must yield 3.14 per cent to
provide an individual with a taxable income of from
$8,000 to $10,000, a return equivalent to that on tax
exempt bonds with an interest yield of 2.20 per cent. The
advantage of tax exemption becomes more pronounced,
of course, as we move into the higher income brackets;
if the individual just assumed to be holding a municipal
bond yielding 2.20 per cent were in the taxable income
bracket of $50,000-60,000, a taxable bond would have to
yield 6.47 per cent to provide him with an equivalent re­
turn, all other things assumed equal (as compared with
about 7.66 before the tax reduction effective as of Janu­
ary 1, 1948).
If the information were available, it would be interest­
ing also to determine the extent to which individual in­
vestors in the high income brackets do take advantage of
such conditions as just indicated. In a study made in
1938 (C. H. Chatters, “ Distribution of Tax-Exempt Se­
curities,” Tax Exemptions, Tax Policy League, Inc.,
1938) it was pointed out that only 18 per cent of the
total amount of state and municipal bonds outstanding
in that year was held by individuals with net incomes in
excess of $15,000. It would seem that some owners of
municipals in that class must have enjoyed a very favor­
able position inasmuch as they were evidently relatively
free of competition for such securities by the other per­
sons in their income groups. In other words, with the
price for these securities set by the marginal buyer all
supra-marginal investors benefited to the extent of the
differential between the price of the security and the
value to them of the tax exemption. In view of the in­
creased volume of new issues and the price decline of
state and municipal bonds since the spring of 1946 it
might be expected that individual holdings of these se­
curities would begin to reflect the greater differential
just mentioned.
Commercial Bank Holdings
Referring to the preceding table of ownership of state
and municipal bonds it will be seen that commercial banks
are the only group of investors to have increased their
holdings of these securities over the period shown.
Whereas all commercial banks in the country owned al­
most 15 per cent of the state and municipal bonds out­
standing on June 30, 1937, their holdings'of $5 billion on
June 30, 1947 comprised 30 per cent of the total out­
standing. The rise in the proportion held by this class
of investors was particularly rapid after 1943 as a con­
sequence of the increase in their dollar holdings while
the total amount outstanding was contracting. It should
be pointed out that the growth of bank investment in
state and local government bonds has differed somewhat
by class of bank, being relatively greatest during the past
decade at country member banks.
The following table shows that country member banks




maintain a larger proportion of their investments in
state and municipal bonds than do all member banks, in­
cluding central reserve city and reserve city member
banks. During the war the ratios declined in all classes
of banks, but in 1946 the trend was reversed and con­
tinued upward through the first quarter of this year, the
latest date for which the information is available. It
will be noted, however, that the ratios are far below what
they were in 1940.
S T A T E A N D M U N IC IP A L BONDS
H ELD B Y M E M B E R B A N K S , 1940-1948
(A s per cent o f total investm ents)
Banks— U. S.
A ll Mem ber
1940
1941
1942
1943
1944
1945
1946
1947
1948 (A p ril 12)

13.8
12.1
6.9
4.6
3.9
3.9
5.1
6.4
7.1

Banks— U. S.
Country M ember
20.8
18.4
11.0
6.9
5.2
4.6
5.7
7.7
8.4

5th D istrict
M em ber Banks
10.2
8.7
5.1
3.5
2.6
2.2
2.9
3.7
4.1

A ll years as o f Decem ber 31, except 1948.
S ource: Mem ber Bank Call Reports.

The experience of member banks in the Fifth District
with respect to holdings of state and municipal bonds
and their ratio to total investments has followed the same
pattern during and since the war as that described for
the country as a whole. As is apparent in the preceding
table, holdings of these securities by Fifth District mem­
ber banks have regularly constituted a much smaller pro­
portion of their total investments than has been the case
in member banks throughout the country, reaching the
lowest point in 1945 when at the end of that year the
ratio was only 2.2 as compared with 3.9 for all member
banks in the United States. Since then it appears that
the ratio has increased slightly more for the member
banks of this District than it has in all member banks.
An analysis of yields on tax-exempt and taxable
bonds indicates that the progressive pattern of Federal
income tax rates makes state and local government se­
curities especially attractive to banks with income under
$50,000 but with some income in the $25,000-50,000
bracket. In conjunction with the current yield differen­
tials between tax-exempt bonds and alternative security
investments this suggests a continuation of the rising
trend of state and municipal bond holdings by commer­
cial banks.
Other Ownership
Among the other investor groups, aggregate holdings
of state and municipal bonds increased annually in the
period 1937-1941. During the war, however, investment
and trust funds of state and local governments were used
to purchase Federal Government securities, and their
holdings of state and municipal bonds fell off $1.7 bil­
lion up to June 30, 1946. Mutual savings banks, which
had been reducing their holdings during the five years
preceding the war, were joined as sellers by insurance
companies in 1942. The negligible advantage of tax
exemption to these investors was greatly offset by the
large profits to be realized in selling their holdings in a
market reflecting the greatly curtailed volume of new
issues.
F61

MONTHLY REVIEW

AUGUST 1948

Although it was reported in various comments on the
municipal market that the sharp price drop in the last
quarter of 1947 and the inverse movement of yields on
state and municipal bonds over the 2 per cent mark for
the first time since May 1943, as measured by the Bond
Buyer index, had brought back life insurance companies
as important buyers of these securities, published data
show no material increase in such purchases by this
group of investors until February of this year. Accord­
ing to the information published by the Institute of Life
Insurance, a smaller volume of such securities was ac­
quired during the last half of 1947 by life insurance com­
panies than was the case during the first six months of
that year. As of December 31, 1947 this group of in­
vestors held only $21 million more of state and munici­
pal bonds than on that date a year previous. Recorded
monthly acquisitions of such bonds have been running
higher this year so far, and total holdings of life insur­
ance companies have increased, as of April 30, to $637
million, $23 million more than at the close of 1947. Data
for 1948, however, are not strictly comparable with pre­

ceding years inasmuch as there are included for the first
time the investments of the accident and health depart­
ments of the life insurance companies.
From February through May of this year municipal
prices rose sharply and moved out of the buying range
of such investors as life insurance companies and public
trust and pension funds that had shown an interest in
these securities as they reached the 2.50 basis mark.
Since early June, however, prices of state and municipal
bonds have given ground as unsold balances of new is­
sues in the hands of dealers rose and the latter attempted
to move their inventories. As measured by the DowJones index, yields on representative state and city issues
moved up from 2.16 at the end of May to 2.30 at the
start o f the last week in July. Should there be a further
downward adjustment in municipal prices during the
course of this year, as many dealers appear to anticipate,
activity on the demand side of the municipal market by
life insurance companies is likely to become more pro­
nounced.

Business Conditions
Continued from page 2

educational buildings and in other non-residential con­
struction. In fact the increases in these two categories ac­
counted for 58 percent of the $102 million increase.
Residential building contract awards were $21 million
or 12 percent larger in the first half of 1948 than in the
same period of 1947; public works and utility contract
awards were up $14 million or 11 percent; while nonresidential contract awards rose $67 million or 58 per­
cent. The figures for the first half of 1948 are shown
herewith together with the change from the same period
of 1947 in both amount and percentage.

AVERAGE DAILY TOTAL DEPOSITS* OF
MEMBER BANKS
Last half of June Last half of July
% of
% of
$ thousands U.S. $ thousands U.S.
998,169
.94 1,003,565
Maryland
.94
636,854
.60
.60
Reserve city banks 635,073
366,711
.34
Country banks
363,096
.34
881,107
.83
.85
District of Columbia 902,628
858,914
.81
.83
Reserve city banks 880,590
22,193
.02
Country banks
22,038 .02
1,266,748 1.19 1,279,308 1.20
Virginia
303,337
.28
.28
Reserve city banks 301,390
975,971
.92
Country banks
965,358
.91
602,279
.56
586,829
.55
W. Virginia
821,400
.77
813,287 .76
No. Carolina
380,687
.36
.35
Reserve city banks 378,752
440,713
.41
Country banks
434,535
.41
418,781
.39
420,158
.40
So. Carolina
4,987,819 4.69 5,006,440 4.69
Fifth District
106,671 100.0
U. S. (millions)
106,322 100.0
^Excluding interbank demand deposits



CO N STR U C TIO N C O N TR A C T A W A R D S
FIF TH D IST R IC T
(Thousand dollars)
Jan. June
1948
Com m ercial buildings
M anufacturing buildings
Educational buildings
Other non-residential buildings
Total non-residential
Apartm ents and hotels
One and tw o fam ily houses
Other shelter
Total residential
Public works and utilities
Total construction

50,969
35,773
47,449
50,315
184,506
59,124
137,070
711
196,905
143,447
524,858

Increase from
Jan.-June 1947
Perc<
A m ount
12,843
— 4,358
28,447
30,607
67,539
13,149
7,825
16
20,990
13,814
102,343

34
— 11
150
155
58
29
6
2
12
11
24

PRINCIPAL A S S E T S AND L I A B I L I T I E S
FIFTH D IS T R IC T M E M B E R BANKS
(BILLIONS OF DOLLARS)

FEDERAL RESERVE BANK OF RICHMOND

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

Industrial output declined somewhat in July and re­
gained part of the loss in August. Unusually favorable
weather in July resulted in a further marked gain in crop
prospects. Prices of basic commodities generally de­
creased somewhat further from mid-July to the latter
part of August, reaching the lowest levels since the end
of August 1947. The general wholesale price level showed
little change and was 10 per cent higher than a year ago.
Industrial Production
The Board’s seasonally adjusted index of industrial
production declined 5 points in July to a level of 187 per
cent of the 1935-39 average. This decline reflected in
large part the effects of employee vacations, especially in
certain nondurable industries. Preliminary information
for the first part of August indicates a somewhat higher
rate of total production than in July.
Output of durable goods showed a slight decrease in
July. Production of iron and steel declined 3 per cent, but
recovered during August to about the June rate. A c­
tivity in the automobile industry showed a substantial
further gain in July as assembly of passenger cars and
trucks reached a new postwar peak rate. Lumber produc­
tion increased more than seasonally in July. Output of
most other durable goods declined somewhat.
Production of nondurable goods declined about 4 per
cent in July, mainly because of reduced activity in the
textile and paper industries. Cotton consumption de­
clined 18 per cent from June to July as compared with a
decrease of 11 per cent during the same period last year.
Pork production was reduced more than seasonally in
July while beef production was maintained. Activity in
most other nondurable goods industries showed little
change.
Minerals production declined 3 per cent in July main­
ly because of reduced output o f bituminous coal. Total
coal production for the month, however, was 'about onefifth above the rate in July 1947. Crude petroleum pro­
duction continued at an exceptionally high rate in July
and rose further in the early part of August.
Construction
Value of new construction put in place, according to
joint estimates of the Departments of Commerce and
Labor, rose further in July to a new record bf over 1,700
million dollars, an increase of 100 million from June.
The number of new houses started in July was estimated
at 94,000, 2,000 units fewer than in June, but 13,000
more than the number started in July 1947.
Distribution
Department store sales in July and August showed
chiefly seasonal changes. Value of sales in the first half
of August was substantially larger than in the corres­
ponding period last year when sales were temporarily
limited by unfavorable weather. Also, sales in recent
weeks appear to have been stimulated by prospective re­
strictions in terms resulting from the reimposition of
instalment credit regulations on September 20.



Shipments of railroad revenue freight were main­
tained in July at about the June rate. Loadings of coal
were reduced further, while shipments of grain and
forest products continued to show marked gains. Load­
ings of coal and most other classes of freight were in
somewhat larger volume in the first half of August.
Commodity Prices
Prices of most basic commodities decreased further
from the middle of July to the latter part of August.
Cotton and grains reached Federal price support levels.
Nonferrous metal prices, however, were raised sharply.
Wholesale prices of meats were_generally maintained at
the advanced levels reached in mid-July and some addi­
tional increases occurred in prices of other manufactured
products.
The consumers’ price index rose further by 1.2 per
cent from mid-June to mid-July, reflecting chiefly higher
retail prices for foods and automobiles, and increased
transportation fares.
Agriculture
During July and August weather conditions continued
to be unusually favorable for crop development. The
August 1 official forecast of cotton was 15.2 million
bales, more than a fourth larger than last year’s crop.
The outlook for grains showed further marked improve­
ment and total production of these and other principal
crops was indicated to be 12 per cent larger than last
year.
Marketings of livestock and products in August con­
tinued below the same period a year ago, reflecting main­
ly the reduced number of meat animals on farms.
Bank Credit
Support purchases of Treasury bonds and certificates
by the Federal Reserve System were large in July and
the first three weeks of August. These additions to the
portfolios of the Reserve Banks were in excess of re­
ductions in holdings of bills as a result of Treasury cash
retirement and market sales, and total System holdings
of Government securities increased somewhat. A further
increase in gold stock also added to bank reserves.
Commercial and industrial loans increased substan­
tially at banks in leading cities during July and the first
three weeks of August. Real estate and consumer loans
rose further. Government security holdings expanded
somewhat over the period ; bill and note holdings were
increased and certificate and bond holdings reduced.
Interest Rates and Security Markets
In August the Treasury announced a rate of 1 yi per
cent on the October issue of one-year certificates and
yields on outstanding short- and medium-term Govern­
ment securities rose. The Federal Reserve Banks in­
creased discount rates from 1% to i y 2 per cent. Some
increases also occurred in other short-term money mar­
ket rates and in rates on commercial bank loans.
Prices of corporate bonds declined further in the first
three weeks of August. Common stock prices fluctuated
near the reduced level reached in the third week of July.

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