View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

M M IT IL Y
FEDERAL RESERVE BANK OF RICHMOND
FEBRUARY 2 9 , 194B

R IC H M O N D 13, V IR G IN IA

Business Conditions
H E shakeout in selected commodity prices occurred
mainly in February and cannot have been a casual
factor of business developments in January, the latest
month of statistical record. While the breaks in com­
modities came largely in grains, there were quite a num­
ber o f important raw materials that were carried down
with them. The results of these price breaks is causing
a general reappraisal of the business outlook by both
buyers and sellers.
The effects on the economy of the Fifth District have
been pretty much in terms of a standstill in new business
booked by the industries of the District, with the chief
impact on the cotton goods and related industries. Thus
far there have been no indications on the part of the pro­
ducers of a change in their price notions; such easing
as has occurred in wholesale markets has come from
second hand sales.
January retail trade in the District, as well as in the
country as a whole, fell substantially from the December
level even after taking account of the normal seasonal
drop. While adverse weather and poor transportation
appear to have been in a large measure responsible for
this decline, there have been increasing apprehensions on
the part of store executives regarding the fall in unit
sales in many departments. Department store inven­
tories in January rose to a new high level on a seasonally
adjusted basis. The combination of falling unit sales
for some months, the sharp drop in dollar sales in Janu­
ary, and the wide break in commodity futures have
created a degree of cautiousness that is likely to result
in subnormal order placing until such time as the retail
markets have demonstrated strength to justify fuller
coverage o f store requirements.
The decline o f farm prices will have an adverse effect
on farm incomes of the District, but this decline will not
be substantial or have a uniform incidence. Feed costs
will be lower and should result in lower dairy costs
which should compensate for any reductions that may
be necessary in milk prices. Lower feed costs and larger
supplies around mid-year should also stimulate expan­
sion in the broiler industry. The decline in this District’s
department store sales index from December to January
was effected much more substantially in agricultural
states o f North and South Carolina than in the other
states of this District.
There is no hesitation in the purchasing o f coal at this
time, and output is continuing as high as the factors of
production will permit. January output fell 2 per cent

T




from the December level on a seasonally adjusted basis,
but this was not due to lack of demand. The chief cause
of the reduction was a shortage of coal cars, attributable
in part to adverse weather conditions, with absenteeism
and mine disabilities secondary factors. A moderate in­
crease in allocations for export have been made for
March. Some opinion is expressed that coal supplies in
Europe will be adequate by summer to cover its require­
ments on the basis of present levels of industrial activity.
Total exports of bituminous coal in the year 1947 totaled
around 65 million tons. The mild winter in Europe has
permitted considerable stockpiling thus far. Coal prices
at the mine in December were at their all time high level.
Shortage of fuel oil has retarded the oil burner business,
but such gain in coal usage as may result from this shift
will be more than offset by the railroads’ trend to Diesel
locomotives. A new wage contract is coming up and this
will no doubt add further to the price of coal for a few
months duration.
Cotton consumption of the mills in the Fifth District
declined 2 per cent from December to January after sea­
sonal correction. January consumption was 6 per cent
below January 1947. Activity at cotton yarn mills in
January, however, was 4 per cent larger than a year ago
when measured in spindle hours o f operation and not in
pounds of cotton consumed. This difference between the
changes in cotton consumption and in spindle hours
shows that a substantial shift has taken place from coarse
to fine yarns. Employment in cotton textile mills con­
tinued in an upward trend through December in both
North Carolina and Virginia. Apparel industries in these
states and in, Maryland rose more than seasonally from
August through December to new high levels. Part of
the gain in employment in these industries is due to new
installation of facilities by firms moving from northern
locations.
Manufacturers’ sales of furniture in December im­
proved substantially over the November level and con­
tinued at a high level. Retail sales of furniture in the
District were also in a comparatively large volume, al­
though the January level declined 6 per cent from De­
cember after seasonal correction. Retail furniture deal­
ers are reported to be well stocked on furniture in gen­
eral and deliveries can be had from manufacturers in
about 60 days. Employment in furniture industries in
North Carolina continued to rise moderately month by
month from the middle of 1947 through December, but

FEDERAL RESERVE BANK OF RICHMOND

in Virginia the employment level in these industries ap­
pears to have reached a peak in the fall.
Building permits valuation in the District in January
gave further evidence of a possible continued substantial
rise in building construction. Permits values in Decem­
ber were already at the District’s highest level of record
(except for January 1928) and this level was augmented
by 10 per cent in January. Some of these permits, how­
ever, are apparently failing to reach the contract stage
for no such performance is shown in the contract awards
of the F. W . Dodge Corporation for this District. These
contracts in October and November were moderately
above the range that had prevailed since back in 1946,
but the December awards fell back into this range.
Business in hand is adequate to maintain, or slightly
improve, the production levels of the District through
March. I f retail trade nationally returns to and is main­
tained at the December seasonally corrected level, it is
possible that the manufacturers’ prices of cotton goods
and fabricated products might hold at the recently ad­
vanced levels. Thus far in February, however, the indi­
cations are that no such level of trade would be seen this
month. With both January and February trade figures
declining the high level of inventories acts as an impedi­
ment to new purchases, but the decision to maintain or
reduce prices may be postponed until after Easter.

AVERAGE DAILY TOTAL DEPOSITS* OF
MEMBER BANKS
Last half of Dec. Last half of Jan.
%of
%of
$ thousands U. S. $ thousands U .S.
Maryland
1,029,230
.95 1,016,776
.94
Reserve city banks
661,053
.61
648,127
.60
Country banks
368,177
.34
368,649
.34
District of Columbia
911,006
.84
936,265
.86
Reserve city banks
889,954
.82
914,645
.84
Country banks
21,052
.02
21,620
.02
Virginia
1,307,768 1.20 1,296,746 1.20
Reserve city banks
300,326
.28
300,315
.28
Country banks
1,007,442
.92
996,431
.92
West Virginia
586,221 ■
.54
583,538
.54
North Carolina
853,871
.78
844,461
.78
Reserve city banks
379,762
.35
381,431
.35
Country banks
474,109
.43
463,030
.43
South Carolina
438,308
.40
438,568
.40
Fifth District
5,126,404 4.71 5,116,354 4.72
United States (millions) 108,899 100.0
108,342 :100.0
*Excluding interbank demand deposits.

BUSINESS IN D E X E S— FIFTH FEDERAL RESERVE DISTRICT
AVERAGE DAILY 1935-39 = 100—SEASONALLY ADJUSTED

Jan.
_____________________________ 1948
Automobile Registration*.........................................
302
Bank Debits ................................................................
166
Bituminous Coal Production*...................................
323
Building Contracts Awarded...................................
375
Building Permits Issued............................................
11
Business Failures—No........................... ..................
220
Cigarette Production .................................................
150
Cotton Consumption .................................................
286
Department Store Sales.............................................
332
Department Store Stocks........................................ .
Electric Power Production.................................... .
Employment—Mfg. Industries* ...........................
Furniture Orders .................................. -...................
Furniture Shipments ................................................
Furniture Unfilled Orders.......................................
261
Furniture Sales—Retail .................................. .......
Gasoline Consumption .............................................
276
Life Insurance Sales..................................................
357
Residential Construction Contracts.:....................
Wholesale Trade:
317
Automotive Supplies** .........................................
276
Drugs ........................................................................
171
Dry Goods ..............................................................
105
Electrical Goods** ...............................................
263
Groceries ..................................................................
140
Hardware ..................... ...... ...................................
Industrial Supplies** ......................... ................
330
Paper and Its Products**....................................
170
Tobacco and Its Products**............................... ........
100
*Not seasonally adjusted
**1938-41 = 100




[2]

Dec.
1947
134
309
170
305
342
33
218
153
322
325
245
136
528
419
979
290r
271
314

Nov.
1947
121
318
180
331
280
52
229
145
310
310
234
136
234
267
1010
302
161
246
405

Jan.
1947
91
278
175
304
216
9
241
160
292
315
235
134
349
311
599
265
169
238
510

289
253
237
94
270
135
422
213
116

308
268
236
92
264
126
398
196
105

331
248
148
77
267
121
289
155
132

% Change
Jan. 1948 from
Dec. 47
Jan. 47
—
—
+
+
—
+
—
—
+

2
2
6
io
67
1
2
11
2

+ 9
— 5
+ 6
+ 74
+ 22
— 9
- 6
— 2
+ ^

— 10
+ 2
+ 14

— 2
+ 16
- 30

+ 10
4- 9
- 28
+ .12
— 3
+ 4
— 22
— 20
— 14

- 4
+ 11
+ 16
+ 36
— 1
+ 16
+ 14
+ io
— 24

FEDERAL RESERVE BANK OF RICHMOND

The European Recovery Program
I. IN TROD U CTIO N
The present international developments are of vital
importance to the United States and to the economy of
the Fifth Federal Reserve District. With changes im­
pending in the course and character of our international
trade, the significance of these developments cannot be
over-emphasized. In recent months, there has been a
great deal of attention given to the general problem of
European recovery. However, there has been no concise
summary of the aid program as it has evolved and no
discussion of its specific importance to this District. For
that reason it seems desirable to present a series of
articles relative to international developments as they
affect the Fifth District. However, by way of back­
ground, this first article discusses in over-all terms the
general European situation and the content of both Eu­
ropean and American proposals for aid.
II.

T H E ECONOMIC SITU ATIO N IN
W EST E R N EUROPE
In his speech of June 5, 1947, Secretary Marshall out­
lined the essence of the postwar European problem and
our policy in relation to that problem. In this speech, he
pointed out that we have not fully realized the impact of
the war on Europe— that more important than “ the phy­
sical loss of life, the visible destruction of cities, fac­
tories, mines, railroads,” was “ the dislocation of the en­
tire fabric of the European economy.” To remedy this
dislocation and to correct the basic factors undermining
the restoration of Europe as a working economy, Mar­
shall called for a cessation of piecemeal aid from this
country and for the development of a planned program.
In his statement, he called for the initiative to come from
a concerted effort by the European nations themselves to
meet their problem and to state clearly what assistance
they would need from us in this process of self-recovery.
Before considering the European response to Mar­
shall's address, however, some consideration shuld be
given to the nature of the problem. This involves three
questions:
(1 ) What constituted the fabric of the European
economy ?
(2 ) What dislocations have caused the breakdown
of that economy?
(3 ) What steps have been taken to rebuild that
economy ?
European Economy
The industry of Europe and the purchasing power of
270 million people played an important part in world
trade before the war. Europe was the second greatest
area of industrial production in the world—centered in
the production of coal, steel, and chemicals. In electric
energy, shipyard tonnage, and textiles, its production
exceeded even that of the United States. In 1938, it pro­
vided over 50 per cent of the world’s imports and ab­




sorbed nearly 50 per cent of the world’s exports. The
United States sent 40 per cent of its total exports to
Europe. European trade, with that of other countries
such as Canada and the South American countries, pro­
vided the basis for a wider market for U. S. exports.
European ships carried the bulk of the world trade, and
its foreign investments financed industries all over the
world.
In this prewar economic structure of Europe, the in­
tertrade between European countries was an integral
and essential part. Trade between the European coun­
tries represented roughly /z to Yi of their total export
l
and import trade. Additional comment may be made as
to the nature of this trade; there was an interflow of in­
dustrial products— coal, steel, and chemicals— from
countries such as Britain and Western Germany in ex­
change for food products from France, Italy, Eastern
Germany, and Eastern Europe. Thus, prior to the war,
the European countries were highly interdependent, and
this interdependence is still a primary factor in consider­
ing current dislocations. The importance of the interde­
pendence is clearly stated by the European countries
themselves in the Paris Report as follow s:
The exceptional degree of specialisation in the in­
dustry and agriculture of the participating countries
and Western Germany was responsible for their
high standard of living, but it contained certain ele­
ments of weakness. The machine was highly de­
veloped and delicate. It depended for its efficient
working upon the smooth working of international
trade and the uninterrupted flow of goods and serv­
ices.1
In considering the prewar structure of Europe, refer­
ence should be made to the fact that Germany was a focal
point in the intra-European trade picture, both as a
source of supply for the coal and steel required by in­
dustries in Western Europe and as a market for the
products of the other Western European nations.
In this brief discussion of the prewar European econ­
omy, two other weaknesses may be noted:
1. Political interference consistently violated the
economic interdependence described above. The
growth of nationalistic and war economies in
Europe and the severe international political
tensions were reflected in measures of economic
nationalism such as import and export quotas,
subsidies, currency manipulation, and trade re­
strictions of various types.
2. The deterioration of the fixed capital position of
the European nations also characterized the pre­
war economy.
The normal peacetime industrial plant in cer­
tain Western European countries was per mi t1Committee o f European E conom ic Co-operation, General Report, V ol. I,
D epartm ent o f State, Paris, Septem ber 21, 1947, p. 5.

[3]

FEDERAL RESERVE BANK OF RICHMOND

ted to run down in the period between the wars.
In some cases, lack of modernization and ob­
solescence seriously retarded industrial activi­
ty and damaged the commercial position of the
countries concerned.2
Dislocations
Although, as indicated above, some of the factors in
the current economic situation in Europe predate World
War II, many of the current dislocations may be at­
tributed to the war. In the Paris Report, the Western
European countries reported the following dislocations
as an outgrowth of the w ar:
(i) Physical devastation and disruption in Western
Europe and in the principal food and timber-pro­
ducing zones of Eastern Europe which, together
with the dislocation of the European transport sys­
tem, caused a temporary paralysis of production in
Western Europe, including Germany;
(ii) prolonged interruption of international trade,
which occurred simultaneously with the loss of in­
come from merchant fleets and foreign investments,
and led to the exhaustion or diminution of dollar
funds in the sixteen countries at a moment when
many vital needs could be met only from dollar
sources;
(iii) human strain and exhaustion resulting from
six years of war or enemy occupation;
(iv) internal financial disequilibrium which is the
inevitable result of a long w ar;
(v ) in South East Asia, the shortage of supply of
food and raw materials which were vital to the Eu­
ropean economy, both for direct consumption and
as earners of dollars;
(vi) the abnormal increase of population in certain
areas resulting from the war-time movement of
peoples.3
The paralysis of production in the immediate postwar
period is reflected in the Paris Report data on the level
of production in Western Europe. This report indicates
that in the immediate postwar period industrial produc­
tion in Belgium, France, and the Netherlands was re­
duced to from 30 to 40 per cent of the prewar level, and
in Italy to only 20 per cent. In Germany, production of
coal and steel was only 30 to 40 per cent of the prewar
level.
Likewise, since food is a primary essential to Eu­
ropean reconstruction and since the participating coun­
tries are predominantly agricultural, the low level of
agricultural production is highly significant. Thus, in
terms o f the specific countries, one of the primary diffi­
culties has been the fall in the production o f bread grains
in France and Italy below prewar levels— a fall aggra­
vated by the severe winter of 1946-47. In France, bread
grains production, which before the war was 8.9 mil­
lion tons, fell to an estimated 3.8 million tons in 194748. In Italy, bread grains production fell from the pre-

war level of 7.4 million tons to an estimated level of 4.7
million tons in 1947-48.
The prolonged interruption of international trade and
simultaneous loss of income from merchant fleets and
foreign investments, with the subsequent diminution of
dollar funds, needs little or no elaboration. Perhaps the
best example is the case of Britain, where the loss of in­
come from foreign investments and merchant shipping
has been most acute. For the participating countries, it
has been estimated that 62 per cent of their 1938 ton­
nage was destroyed by the war, while foreign invest­
ments have been liquidated to the extent that they are
now yielding only approximately
of prewar income.
Thus, in order to obtain the basic, essential imports in
food and raw materials necessary for reconstruction, the
European countries have had to further liquidate gold
and dollar balances.
The internal financial disequilibrium in Europe has
consistently aggravated the postwar problem. Loss of
confidence in the currency and the official over-valuation
of many of the currencies have resulted in the spread of
black markets and the hoarding of farm products and in
discouraging exports. With unbalanced budgets con­
tributing to an increasing money supply and with an in­
adequate supply of goods, a serious inflation has taken
place in most of the European countries. In some coun­
tries, such as Great Britain, the inflation has been “ sup­
pressed” by a series of control measures but there have
been equally serious resultant distortions in the economy.
Again, the losses o f prewar sources of supply have
been an important factor in the postwar disequilibrium.
Particularly vital in this connection has been the failure
to restore production in Western Germany. Belated
recognition has been given to the fact that the German
restoration is at the core of European recovery from an
economic standpoint. Likewise, the Eastern European
countries, which were a vital source of foodstuffs, tim­
ber, and other raw materials, are no longer exporting to
Western Europe in prewar volume. This is attributable
partly to the slow reconstruction from the devastation
in the area and partly to the political developments which
interfered with East-West trade. Finally, Europe’s trade
with Southeast Asia has similarly been reduced by war
destruction and political unrest. These countries— many
of which are European colonies or have industries
financed by European capital— contain the strategic ma­
terials such as tin, jute, rubber, oil, etc., upon which
Europe depended.
Thus, the dislocation of the fabric of European econ­
omy may be summed up in terms of inadequate produc­
tion, disruption of trade relations among the European
nations, internal financial disequilibrium, a low stan­
dard of living and general war weariness, loss of foreign
exchange and other resources, and subsequent restric­
tion of essential imports of fuel and raw materials
necessary for the recovery of industrial and agricultural
production.

2Taken from the E conom ic C o-operation Bill as proposed by President
Trum an.
8Comm ittee o f European E conom ic C o-operation, op. cit., pp. 6 and 7.




[4 ]

Reconstruction
While these dislocations in the Western European
economy still persist in greater or less degree, some at-

FEBRUARY 1948

MONTHLY REVIEW

tention should be given to the efforts at reconstruction
already made by the United States and by the European
nations. There will be no attempt in this paper to analyze
in detail the aid already extended by the United States
to the European nations, totaling some $11.2 billion be­
tween July 1, 1945, and December 31, 1947. A brief
summary of the aid extended would include:
(1) Lend-Lease— Part of the goods transferred
during the war and following the official termina­
tion of lend lease in August 1945 has been used in
the reconstruction process.
(2) U N R R A — Although this was a relief and
rehabilitation program sponsored by 44 nations, the
United States contributed $2.7 billion out of a total
U N R R A aid of $3.7 billion, or over 72 per cent of
the relief funds, and perhaps an even larger per­
centage of the total goods distributed.
(3) The Export-Im port Bank— This agency
was authorized by Congress to the extent of $2.8
billion to make emergency reconstruction loans to
countries of Europe and the Far East.
(4) International Monetary Fund— The U. S.
quota of $2.8 billion, out of a total of $8.8 billion,
has provided the Fund with its primary dollar re­
sources.
(5) The International Bank for Reconstruction
and Development— The Bank has made four
loans— $250 million to France, $195 million to Hol­
land, $40 million to Denmark, and $12 million to
Luxemburg. Practically all of these loans were
made in dollars, so that again the United States may
be considered as having made the primary contribu­
tion.
(6) The British Loan— This made available
to the United Kingdom $3.75 billion, supposedly to
help the British in the transition period and to re­
store convertibility to sterling.
With regard to the reconstruction steps taken by the
Western European nations, a partial list might include
the following:
(1 ) Financial reforms in Belgium, and more re­
cently in France and Italy, represent an attack on
the problem of internal financial disequilibrium.
(2 ) The Benelux Agreement represents a con­
crete attempt to remedy the disrupted trade relations
between Belgium, the Netherlands, and Luxem­
burg.
(3 ) The Clearing Union, operating through the
Bank for International Settlements, will promote
trade between Italy, France, Belgium, Luxemburg,
and the Netherlands.
As a result of the assistance listed in the foregoing,
the Western European nations have made some progress
toward the restoration of a working economy. This is
reflected in the present levels of industrial production.
In 1947, industrial production in the United Kingdom,
the Netherlands, Denmark, Norway, France, and Swe­




IS]

den was up to or above prewar levels. Specifically, it has
been noted that:
A t the middle of 1947, Marshall Europe’s shipyards
had under construction approximately 3,340,000
gross tons of merchant vessels, almost 50 per cent
above the mid-1939 level; 1,540,000 gross tons were
launched in 1946, as compared with an average of
about a million tons before the war. Production of
electric power shows the same improvement, an in­
crease from 130 billion kilowatt hours yearly in 1938
to 170 billions in 1947. Coal production is still below
prewar levels, but even in this field remarkable
strides have been made. Excluding the output of
the United Kingdom, production of coal in Mar­
shall Europe increased from 41 per cent of pre-war
in 1945 to 88 per cent of pre-war in October, 1947.
In the United Kingdom the output was 80 per cent
of pre-war in 1945 and by November, 1947 had
reached 92 per cent of the pre-war level.4
In spite of the apparent progress, the dislocations still
persist to the point that many countries have been forced
by lack of exchange to restrict their imports of the fuel
and raw materials indispensable for their industrial and
agricultural production, and to restrict their imports of
food to the critical point in terms of sustaining further
industrial efforts. Thus, recognizing that the piecemeal
program by the Europeans and by the United States was
insufficient, Secretary Marshall, in his address in Cam­
bridge on June 5, 1947, stated:
Our policy is not directed against any country or
doctrine but against hunger, poverty, desperation
and chaos. Its purpose should be the revival of a
working economy in the world so as to permit the
emergence of political and social conditions in which
free institutions can exist. Such assistance, I am
convinced, must not be on a piecemeal basis as vari­
ous crises develop. Any assistance that this Govern­
ment may render in the future should provide a
cure rather than a mere palliative . . . .
It is already evident that, before the United States
Government can proceed much further in its efforts
to alleviate the situation and help start the European
world on its way to recovery, there must be some
agreement among the countries of Europe as to the
requirements of the situation and the part those
countries themselves will take in order to give
proper effect to whatever action might be undertaken
by this Government. It would be neither fitting nor
efficacious for this Government to undertake to
draw up unilaterally a program designed to place
Europe on its feet economically. This is the business
o f the Europeans. The initiative, I think, must come
from Europe. The role of this country should con­
sist of friendly aid in the drafting of a European
program and of later support of such a program so
far as it may be practical for us to do so. The pro­
gram should be a joint one, agreed to by a number,
if not all European nations.
4John J. M cCloy, “ Europe’ s H ope fo r R ecovery,” address given before the
First A nnual “ F orecastin g” C onference o f the Chamber o f Comm erce o f
Philadelphia, W arw ick H otel, Philadelphia, January 15, 1948.

FEDERAL RESERVE BANK OF RICHMOND

III. TH E EU ROPEAN PROPOSAL— CEEC
There was an immediate response by the European
nations to Marshall's challenge to draw up a program
of self-recovery and to indicate clearly what was needed
from us in the process. By July 12, 1947, sixteen Eu­
ropean nations began the job of formulating a program.
These nations were Austria, Belgium, Denmark, France,
Great Britain, Greece, Iceland, Ireland, Italy. Luxem­
burg, the Netherlands, Norway, Portugal, Sweden,
Switzerland and Turkey. The U SSR specifically de­
clined to participate, and likewise kept all its satellites
from joining in preparing the program. Out of this con­
ference came the Committee on European Economic
Co-operation, plus a number of advisory technical com­
mittees charged with the task of formulating the pro­
gram. And on September 22, 1947, the CEEC submit­
ted its report to Secretary Marshall, a report which may
be considered as the European draft of a recovery pro­
gram.
Briefly, what is in this Report? The Report sets forth
a program calling f o r :
(1 ) a strong production effort by each of the par­
ticipating countries, especially with regard to agri­
culture, fuel and power, transport, and the moderni­
zation of equipment;
(2 ) the creation of internal financial stability in each
of the participating countries as an essential condi­
tion for securing the full use of Europe’s productive
and financial resources;
(3 ) the maximum economic cooperation between the
participating countries;
(4 ) over and above the program of self-assistance,
a definite statement of the import requirements and
dollar deficits of the participating countries.
In the following discussion, an attempt will be made
to describe in summary fashion the various parts of the
European proposal.
Production Effort
The scale of the productive effort required and set
forth in the CEEC Report represents an expansion of
output similar in general scale to that achieved by the
United States in the mobilization years 1940-44, when
coal output was increased by 34 per cent, steel output by
31 per cent, and electric power by 61 per cent. The Re­
port calls for the participating countries to increase coal
output by 33 per cent, steel output by 60 per cent, and
electric power output by 44 per cent over the four-year
period. Specifically, the following objectives are set
forth :
(i) Restoration of pre-war bread grain and other
cereal production, with large increases above pre­
war in sugar and potatoes, some increases in oils and
fats, and as fast an expansion in livestock products
as supplies of feeding stuffs will allow.
(ii) Increase of coal output to 584 million tons i.e.
145 million tons above the 1947 level (an increase
of one-third), and 30 million tons above the 1938
level.




(iii) Expansion of electricity output by nearly
70,000 million Kwh or 40 per cent above 1947 and
a growth of generating capacity by over 25 million
Kw or two-thirds above pre-war.
(iv) Development of oil refining capacity in terms
of crude oil throughout by 17 million tons to two
and a half times the pre-war level.
(v ) Increase of crude steel production by 80 per
cent above 1947 to a level of 55 million tons or 10
million tons (20 per cent) above 1938.
(vi) Expansion of inland transport facilities to
carry a 25 per cent greater load in 1951 than in 1938.
(vii) Restoration of pre-war merchant fleets of the
participating countries by 1951.5
It should be emphasized in connection with these ob­
jectives that throughout the Report the participating na­
tions called for the supply from European production of
most of the capital equipment needed for these expan­
sions. In terms of the countries involved, the production
program represents a commitment for Britain to in­
crease coal production above prewar levels, for France
and Italy to restore their cereal production by 1951 to
prewar levels, and for the Bi-Zonal part of Western
Germany to increase its production of crude steel from
current extremely low levels to at least an approxima­
tion of prewar levels.
Internal Financial Stability
Recognizing that the problem of internal inflation and
the resultant hoarding of food, goods, and capital has
aggravated the European problem, the CEEC Report
calls for provision of $3 billion by the United States to
help check the inflation by increasing each country’s re­
serves of gold and dollars. In addition, various govern­
ments, such as France and Italy, pledged themselves to
take the necessary measures to balance their budgets and
to balance expenditure against revenue. In fact, in the
Report, all the governments pledged themselves to
achieve internal stability.
Since the Report was published last September, both
France and Italy have taken action toward internal
financial reform. In France, for example, a combination
of a heavy compulsory bond issue and tax program with
the devaluation of the franc represents a major step in
this direction.
Economic Cooperation
With regard to the development of economic coopera­
tion between the participating nations, the CEEC Re­
port calls for the restoration of the prewar measure of
self-help through the normal course of trade— for ex­
ample, supplying France with much needed coal out
of production in the United Kingdom and the Ruhr.
Thus, a primary objective of the productive effort in­
volved in the program was to provide other participating
countries’ needs and permit a rapid reduction in the sup­
plies required from the United States. In addition, the
governments pledged themselves to abolish present ab­
normal restrictions on imports and exports whenever
5Committee o f European E conom ic C o-operation, op. cit., pp. 14 and 15.

[6]

FEBRUARY 1943

MONTHLY REVIEW

ticipating countries and Western Germany in their
ing relations with the American Continent and
other non-participating countries. The following
gives the estimated adverse balance of payments
the four-year period.

possible and to aim at multilateral trading in accordance
with the principles of the ITO Charter. Specifically, the
Report calls for (1 ) the setting up of a study group to
consider the question o f a Customs Union, (2 ) a co­
operative plan to expand electric power without regard
to national frontiers, (3 ) standardization of types of
equipment such as mining machinery and freight cars,
(4 ) an international freight car pool, (5 ) exchange of
information on national steel programs.

T A B L E II
B A L A N C E OF P A Y M E N T S
OF P A R T IC IP A T IN G C O U N TRIE S A N D W E S T E R N GE R M A N Y ,
1948-1951
($000 M illion)
1948

Food, Fertilizer
Coal
Petroleum Products*
Iron and Steel
Tim ber
Equipm ent covered
by Technical
Comm ittee
Other imports

1.5
0.3
0.5
0.4
0.1

1.8

Total im ports
Shipping services

21.78
0.66

6.35
0.89

4.65
0.72

3.40
0.60

22.44
3.13

5.46

3.93

2.80

19.31

T A B L E III
($000 m illion)
U .S .A .
1948
1949
1950
1951

Total 1948-1951

1951
Rest
of
A m erica

U.
S.
A.

Rest
of
A m erica
8.3

0.6

13.7
0.7
2.2
1.3
1.0

neg.
0.2

1.2
0.05
0.55
0.3
0.1

neg.
0.1

5.4
0.7
2.2
1.2
0.4

1.1
2.1

neg.
1.2

0.6
1.5

neg.
1.6

3.3
7.2

0.1
5.7

3.4
12.9

6.0
0.6

3.2

4.3
0.3

3.9

20.4
1.7

14.8

35.2
1.7

2.2

oT
i

R est o f
Am erican
C ontinent

0.85
1.11
1.23
1.48

1.31
1.72
2.14
2.46

S ou rce: V olum e I o f the General R eport o f the Committee o f European
E conom ic Co-operation.

Total

In connection with the import program, there is a very
fundamental factor to be considered; namely, that, while
the total volume of imports required is much the same
as in a normal prewar year, the source of supply has
shifted primarily to the American Continent. However,
the Report assumes “ a substantial and steady resump­
tion of Eastern European food, feeding-stuffs, and tim­
ber supplies . . .” 6
Corresponding to the program of import needs is the
question of payments. In the Report, a common account
has been prepared which shows the deficit of the par-




4.58 3.53
0.07 -0.13

E X P O R T S TO TH E A M E R IC A N C O N TIN E N T 1948-51

An additional note which should be emphasized in
connection with the deficit estimates is that they are
based on a change in the terms of trade in favor of the
participating countries. In other words, export prices
are assumed constant, while import prices are assumed
to decline over the period.

♦Amounts required from dollar sources.
N o te : The above figures reflect quantities only and no change in im port
and export prices.
S ou rce: Taken from Volum e I o f the General R eport o f the Comm ittee
o f European E conom ic C o-operation, published by Departm ent
o f State, Publication 2930, European Series 28, released Septem ­
ber 1947.

1Ibid., p. 43.
5

6.09
0.26

In this table, it may be noted that there is a decline in
the dollar deficit over the period, presumably due to (1)
a fall in the need of American imports of certain types—
e.g., coal and steel; (2 ) increased production in Europe;
(3 ) more supplies available in the rest of the world;
(4 ) growth of exports to the American Continent. The
growth of exports to the American Continent over the
period is indicated in the following table:

y

($000 m illions at prices o f July 1, 1947)

U.
S.
A.

15.81
5.97

S ou rce: “ General R eport o f the Committee on European E conom ic Co­
operation,” published by the Departm ent o f State, V ol. I, p. 54.

TABLE I

Rest
of
A m erica

2.62
0.91

. 8.04
k 0.92

IM PO R T PR O G R A M OF TH E P A R T IC IP A T IN G C O U N TRIE S
(E X C L U D IN G T H E IR D E PE N D EN T T E R R IT O R IE S ) A N D
W E S TE R N G E R M A N Y FROM TH E A M E R IC A N C O N T IN E N T

U.
S.
A.

1951 Total

3.28
1.30

7.12

In this European Report, the import requirements,
principally from the United States, were ^ated in prin­
cipally in terms of needs rather than “ availabilities.”
The total import program for the single years 1948 and
1951, as well as the total for the four-year period, is
indicated in the following table:

1948

1950

4.27
1.82

7.58
0.46
Total

1949

5.64
1.94

Since the Report was written, the Western European
governments have gone ahead with their plans for cooperation. In a survey made by Gunnar Myrdal, E x­
ecutive Secretary of the U N ’s Economic Commission
for Europe, it is noted that cooperation has begun on
the road transport agreement, the railway car pool, the
manpower and timber committees, and the establishment
of permanent machinery for allocation of coal and new
steel.
Import Requirements and the Balance
of Payments Problem

trad­
with
table
over

IV. TH E U. S. ROLE IN TH E EUROPEAN
PROGRAM
The emphasis in the above has been on the fact that
the recovery program is primarily a European program,
drafted by the Western European nations and involving
a definite program looking toward self-reconstruction
and recovery. However, in the initial draft by the CEEC,
the role of the United States in assisting in the recon­
struction of Western Europe is clearly outlined in terms
of its import needs and dollar deficits. Therefore, fol­
lowing the submission of the CEEC Report last Sep­
tember, it has been subject to very careful consideration
by a number of specialized technical committees here in
the United States. Analyses of the U. S. role in the pro­
gram have been made by the following groups:
(1) The Krug Committee— a committee headed
by the Secretary of the Interior and charged with

[ 7]

FEDERAL RESERVE BANK OF RICHMOND

pointed to the need for continuing to finance the
program out of tax revenues and for additional
measures to curtail credit expansions.
(3) The Harriman Committee— a special 19-man
committee headed by the Secretary of Commerce,
set up to report directly to the President, and
charged with the determination of what aid could
be safely and wisely extended by the United States
in the light of the analyses by the Krug Committee
and the Council of Economic Advisers. The Harri­
man Committee made a number of estimates of the
aid which the United States should extend, based
on several divergent assumptions regarding avail­
ability of goods and the terms of trade. Specifically,
the Committee scaled down the European requests
and recommended an aid program of $12 to $17 bil­
lion over the four-year period. For 1948, the Com­
mittee suggested an aid program in the magnitude
of $5.75 billion.

the analysis of the foreign aid program in terms of
our resources— to answer the question: Can we meet
the demands on us in terms of our productive abili­
ties and without impairment of our basic resources ?
This Report, titled “ National Resources and For­
eign Aid,” was completed and submitted on October
20.
In general, the Committee notes that our resources
are sufficient to meet the needs outlined in the Eu­
ropean program. However, the Committee further
notes that meeting these needs would impose addi­
tional strain on the domestic supply of several key
commodities; namely, steel, coal, wheat, nitrogen
fertilizers, and certain items of industrial equip­
ment. Thus, with respect to the supply situation of
these commodities, the Committee recommends spe­
cific measures such a s:
wheat— food conservation programs, efforts
to limit the use of wheat for feed, e tc.;
Coal— pooling arrangements to improve the
car supply situation, promotion of coal pur­
chasing during slack season, more orderly sys­
tem of foreign purchase;
nitrogen fertilizers—^fuller utilization of exist­
ing plant capacity;
steel— a strict system of allocation on a priori­
ty basis, an intensive scrap collection drive, a
wider use of new techniques of production.
(2) The Council of Econom ic Advisers— a group
which similarly was charged with the analysis of
the foreign aid program in terms of its economic
impact on the domestic economy— to furnish an an­
swer to the question: What will be the effect of the
program on domestic prices, consumption levels,
etc. ?
In its answer to this question, the Council indicated
that, while the high foreign demand has added to
the pressure on prices, the inflationary price rise has
been due primarily to domestic demand. As evi­
dence, the Council cited the case of foreign demand
reaching a peak in the second quarter of 1947 while
prices stabilized, and of foreign demand dropping in
the third quarter of 1947 while prices began to rise
again. However, while minimizing the over-all price
effect of foreign aid, the Council indicated that ad­
ditional aid will add to the inflationary pressure in
certain specific key areas, the effect of which may
filter through our entire economy. The areas cited
include food, steel, industrial and agricultural ma­
chinery, coal, and fertilizer. In the case of these
specific commodities, the Council warned of further
inflationary danger unless domestic measures were
adopted to soften the impact of the program. The
measures cited included selective distribution to the
most necessary domestic and foreign uses by allo­
cations, export controls, discouragement of misuse
or excessive use, efficient transportation and distri­
bution, and the curbing of speculation and hoarding
of goods. In addition to these controls, the Council




These reports constitute the official governmental in­
vestigations used as a basis for the Administration’s pro­
posal to Congress. The State Department presented to
Congress in December a proposed Outline of Eu­
ropean R ecovery Program, containing a proposed
bill titled “ Economic Cooperation Act of 1948,” an ex­
planation of the Bill, an exposition of the essential ele­
ments involved in the U. S. role in the program, a dis­
cussion of the commodity requirements and the cost
involved in U. S. assistance, and the proposed U. S. or­
ganization and administration of such a program. This
Outline is the end result of the wide cooperative effort
throughout the executive branch reflected in the various
reports described. Thus the data presented to Congress
are based on a careful and thoroughgoing analysis of
the pertinent data and constitute very substantial revi­
sions as compared with the initial CEEC report. Like­
wise, it should be noted that these U. S. estimates took
into consideration the question o f availability and the
result is a considerable reduction of the total values of
imports, an increase in the prospective European ex­
ports, and a considerable shift of European imports be­
tween the United States and the rest of the Western
Hemisphere.
The proposed Bill deals specifically with the problems
of supply, finance, and administration.
Supply— The Bill requests $17 billion for the
four-year period and $6.8 billion for the fiscal year
ending June, 1949. In advance of an appropriation,
the Bill authorizes the RFC to make advances not to
exceed $500 million to be repaid without interest
from appropriations authorized subsequently. In
the breakdown of the $6.8 billion, it may be noted
that $4.5 billion represents anticipated expenditure
during the period. The additional $2.3 billion repre­
sents an appropriation to cover obligations incurred
after June 30, 1949. In other words, this coverage
is to insure that there will be no gap between ap­
propriations.

[ 8]

FEBRUARY 1948

MONTHLY REVIEW

subject to the direction and control of the Secretary of
State.

Finance— Specifically, the executive branch rec­
ommends that aid for financing imports into Eu­
ropean countries should be in the form of grants or
loans, “ depending primarily upon the capacity of
each country to repay and the effect which the ac­
cumulation o f additional international indebtedness
would have upon recovery” .7 The Administration
recommends that the administering agency be given
the responsibility of determining between loans or
grants; but, as far as possible, loans should be used
for the financing of imports of capital equipment
and productive raw materials, while grants should
be used for the financing of imports of current sup­
plies of food, fuel, and fertilizer. With regard to the
internal financing of the program, the Administra­
tion has consistently favored financing out o f tax
revenue, in view of current inflationary pressures in
our own economy.
Administration— The Administration proposed:
. . . that there be established a new Economic Co­
operation Administration (E C A ) under an A d­
ministrator for Economic Cooperation appointed by
the President with the advice and consent of the
Senate. The ECA should be responsible for review­
ing the requests for U. S. assistance submitted by
the participating countries and for developing with­
in the framework of legislative authority and ap­
propriations specific programs for the distribution
of available U. S. assistance airing participating
countries, including methods of financing, classes
of commodities, and determination of the source of
supplies as between the U. S. and other supplying
countries.8

V . CONCLUSIONS
The preceding discussion contains no critical evalua­
tion of the proposed program, but instead attempts to
provide the essential content of the program for use as
background information. Thus, there is no attempt made
in the preceding discussion to evaluate some of the
critical questions involved, such a s: what should be the
magnitude of the aid program; whether it should be in
the form of loans, gifts or a combination of both, and
whether it should be financed by taxes, by sale of special
securities to the public or by borrowing. Neither does
this discussion attempt to go into the questions of who
should administer the plan, or what conditions should
be attached to insure the achievement of objectives
abroad, or what the impact will be on our domestic
economy. Finally, it includes no specific discussion of
the possibility of the program’s achievement of its ob­
jectives, nor any analysis of the major weaknesses of
the program, including (a) the restoration of internal
monetary stability, (b ) trade barriers between the Eu­
ropean nations, (c ) trade relations between Eastern and
Western Europe, (d ) the terms of trade, and (e ) the
reconstruction of Germany.

As to the relationship between the ECA and the De­
partment o f State, the Administration proposed that
the authorizing statute should provide specifically that
ECA functions affecting foreign policy be performed

It is hoped that this general discussion may be fol­
lowed by several articles relating the international
developments more specifically to the Fifth District.
Forthcoming articles are in process of preparation
on the following topics:

7
State Department, “ Essential Elements of Proposed United States Sup­
port for a European Recovery Program,'* Outline of
European Re­
covery Program, Washington, p. 48.

a

8Ibid.,

United States Government Organization and Administration for
a European Recovery Program,” p. 8 .




[9 ]

(1) The Effect of the ERP on the Fifth District
Economy.
(2) The Effect of the ITO Charter on the Fifth
District Economy.
(3) The Ports of the Fifth District.

FEDERAL RESERVE BANK OF RICHMOND

Loans of Fifth District Member Banks
During 1947 the loans of the member banks of the
Fifth Federal Reserve District increased by $287 mil­
lion, or 25 per cent, from their total at the end of 1946.
The year saw a relatively smaller yet substantial increase
in the loans of all member banks in the United States,
their gain being $6 billion, or 22 per cent of the Decem­
ber 31, 1946, figure. The chart below illustrates the new
highs that have been reached in both totals.

T O T A L LOANS OF ME M B ER BANKS
U.
.S

5th DIST.
| BILLION

I BILLION
100

10.0

60

6.0

40

4.0

business purposes— has represented two developments:
the expansion of the total of consumer credit, which
passed its prewar peak at the end of 1946, and the in­
creasing importance of commercial banks in this field.
In the United States as a whole, total consumer instal­
ment loans increased from $1,199 million in December
1944 to $3,163 million by November 1947. O f this
amount, commercial banks had outstandings of $357 mil­
lion in 1944 and $1,307 million by November 1947. The
increase of 266 per cent for commercial banks is almost
double the percentage increase for all lending institu­
tions. The member banks of the Fifth District have fol­
lowed closely the pattern of all commercial banks in the
United States in this type of lending, showing an in­
crease from $101 million to $299 million in such loans
from December 1944 to December 1947.
Loans to farmers not guaranteed by the Commodity
Credit Corporation increased $13 million, but those guar­
anteed decreased $19 million. Loans for the purpose of
purchasing and carrying securities declined $77 million,
or approximately 50 per cent, during the three-year
period from December 1944 to December 1947.

UNITED S T A T E S

20

10
6
4

LOANS OF MEMBER BANKS
FIFTH DISTRICT
(A m ounts in thousands o f dollars)

0 2

Increase
Dec. 30
1944

0.1
193d

1941

1943

1945

1947

During the three-year period ended December 1947,
total loans of all member banks increased by $13.9 bil­
lion, or 74.5 per cent. In the same period, total loans in
the Fifth District registered an increase of $622 mil­
lion, or 85.6 per cent.
The rapid increase in loans began during the first half
of 1945, when loans for purchasing and carrying securi­
ties expanded because of the Seventh War Loan Drive,
which was launched in May 1945. Since that time, the
total amount of loans has continued its upward trend, but
the trends of its individual components have shifted.
Loans for purchasing and carrying securities have de­
clined steadily from their high peak at the end of 1945,
while business, real estate, and consumer credit loans, on
the other hand, have made tremendous increases. These
last three categories of loans comprised 89 per cent of
the Fifth District member banks’ portfolios on Decem­
ber 31, 1947.
Business loans have grown to meet the ever-increasing
demand for capital and consumer goods, while the ex­
pansion of real estate loans has served to finance the
purchase of hundreds of thousands of homes and farms
at prices which many believe are considerably in excess
of the long-run values of the properties.
The expansion of other loans to individuals— which
include instalment loans made, instalment paper pur­
chased, and single-payment loans to individuals for non­




Comm ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
Loans fo r purchasing &
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans
T otal

Dec. 31
1947

252,154

550,266

35,823

29,667

154,383
180,335
100,800
1,039
49,358

77,099
428,350
299,088
3,312
48,554

— 77,284
248,015
198,288
2,273
—
804

— 50.1
237.5
96.7
118.8
—
1.6

773,892

1,436,336

662,444

85.6

A m ount

P er Cent

298,112
—

6,156

218.2
—

17.2

S ou rces: F.D .I.C. Assets and Liabilities, December 30, 1944, O perating
Insured Com m ercial and Mutual Savings Banks.
Member bank call reports, D ecem ber 31, 1947, as tabulated by
Federal Reserve Bank o f Richm ond.

Turning now to an individual analysis of the changes
in the composition of the loan portfolios of each state in
the Fifth District, it is seen that the total volume of loans
increased less during the period under observation in
Maryland than in any of the other Fifth District states.
The member banks of that state increased their loan
portfolios by $66 million, or by only 38 per cent. Real
estate loans, which are the second largest component of
total loans (business loans being first), made a substan­
tial increase of approximately $46 million, or 161 per
cent. Business loans topped this absolute amount by $4
million, but the percentage increase was only 130 per
cent. Loans for the purpose of purchasing and carrying
securities declined in importance in the make-up of total
loans from 47 per cent to 11 per cent, or an absolute de­
crease of $55 million.

[10]

MONTHLY REVIEW

FEBRUARY 1948
L O A N S OF M EM BER B A N K S
V IR G IN IA

LO A N S OF M EM BER B A N K S
M ARYLAND

(A m ounts in thousands o f dollars)

(A m ounts in thousands o f dollars)

Increase

Increase
Dec. 30
1944
Comm ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
Loans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans

38,352

Dec. 31
1947

A m ount

88,316

Comm ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
Loans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans

130.3

49,964

3,203

4,257

1,054

32.9

82,124
28,533
14,002
610
6,588

27,091
74,376
37,308
101
7,896

— 55,033
45,843
23,306
—
509
1,308

— 67.0
160.7
168.4
— 83.5
19.9

173,412

Total

Dec. 30
1944

Per Cent

239,345

65,933

38.0

S ou rces: F.D .I.C . Assets and Liabilities, December 30, 1944, Operating
Insured Comm ercial and Mutual Savings Banks.
Mem ber bank call reports, December 31, 1947, as tabulated by
Federal Reserve Bank o f Richm ond.

Real estate loans of the member banks in the District
of Columbia, which increased only 63 per cent over the
three-year period ended December 1947, have increased
less than those of all member banks of the Fifth District.
Business loans expanded $62 million, or 254.6 per cent,
and accounted for 52 per cent of the total net gain for the
District of Columbia. Other loans, although of relatively
minor importance, had an expansion of $8.6 million, or
228 per cent; these loans consist of advances to financial
concerns and other loans not included in the detailed
classification.

Total

21

10,317
45,913
17,477

6,102
74,904
41,914
39
12,360

A m ount

86,667

265

3,525
101,935

222,007

67,691

82.5

16,874

3,425

25.5

23,672
65,061
39,939
114
15,288

19,737
163,903
100,783
1,465
15,882
468,388

—

3,935
98,842
60,844
1,351
594

—

16.6
151.9
152.3
1,185.1
3.9

228,812

95.5

Assets and Liabilities, December 30, 1944, Operating
Comm ercial and Mutual Savings Banks.
bank call reports, December 31, 1947, as tabulated by
Reserve B ank o f R ichm ond.

62,229

254.6

—

244

— 92.1

—

4,215
28,991
24,437
39
8,835

— 40.9
63.1
139.8

120,072

Increase

Per Cent

250.6

Dec. 30
1944
Comm ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
Loans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans
T otal

117.8

S ou rces: F.D .I.C . Assets and Liabilities, December 30, 1944, Operating
Insured Com m ercial and Mutual Savings Banks.
Member bank call reports, December 31, 1947, as tabulated by
Federal Reserve B ank o f Richm ond.

In the loan portfolios of Virginia member banks, busi­
ness loans are a smaller proportion than in the Fifth Dis­
trict as a whole; and during the three years they ex­
panded less than did business loans in any other state of
the District, only 83 per cent. Commodity credit loans to
farmers almost entirely disappeared, but other loans to
farmers increased 77 per cent. Real estate and consumer
loans experienced the largest increases— the former $99
million, or 152 per cent, and the latter $61 million, or
152 per cent. Loans for purchasing and carrying securi­
ties registered a decline that amounted to but 1.7 per
cent of the net gain realized in total loans.




149,744

(A m ounts in thousands o f dollars)

Increase
Dec. 31
1947

24,438

82,053
13,449

L O A N S OF M EM BER B A N K S
W E ST V IR G IN IA (F ifth D istrict)

(A m ounts in thousands o f dollars)

Comm ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
L oans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans

Per Cent

Consumer credit loans, which comprised 28 per cent
of the member banks loan portfolios of West Virginia on
December 31, 1947, registered the most spectacular in­
crease of all categories of loans during the three years—
an increase of 361 per cent. This increase was not as sub­
stantial, relative to the net gain in the total, as was the
increase of $31 million in real estate loans. Business loans
made up about 30 per cent of all loans, and they regis­
tered an absolute increase of $21.6 million during the
period under observation. Loans for the purpose of pur­
chasing and carrying securities and other loans— both of
relatively minor importance— declined, the former by $5
million and the latter by $7 million.

LO A N S OF M EM BER B A N K S
D IS TR IC T OF C O LU M B IA

Dec. 30
1944

A m ount

239,576

T otal
S ou rces: F .D .I.C .
Insured
M ember
Federal

Dec. 31
1947

Dec. 31
1947

A m ount

11,976

33,627

21,651

180.8

1,338

3,118

1,780

133.0

7,177
21,844
7,817

5,171
31,406
28,181
90
—
6,664

— 72.1
143.8
360.5

8^274

2,006
53,250
35,998
90
1,610

— 80.6

58,426

129,699

71,273

122.0

—

P er Cent

S ources: F .D .I.C . Assets and Liabilities, Decem ber 30, 1944, Operating
Insured Comm ercial and M utual Savings Banks.
Member bank call reports, Decem ber 31, 1947, as tabulated by
Federal Reserve Bank o f Richm ond.

In North Carolina, business loans, while increasing
only 95 per cent over the three year period, accounted for
54 per cent of the net gain in total loans of member banks.
Real estate loans, making up about 15 per cent of the
loan portfolio, and consumer credit loans, making up
about 22 per cent, increased by 220 and 235 per cent,
respectively. The great decrease experienced by loans to
farmers was largely caused by the almost complete dis­
appearance of loans guaranteed by the Commodity Credit
Corporation. Total loans showed an increase of $130
million, or approximately 87 per cent, which was the
same percentage increase as that of loans of all member
banks of the Fifth District.

tH ]

FEDERAL RESERVE BANK OF RICHMOND
LO A N S OF MEM BER B A N K S
NOHTH C A R O L IN A
(A m ounts in thousands o f dollars)
Increase
Dec. 30
1944
Com m ercial and industrial
loans
Loans to farm ers (not secured
by real estate)
Loans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans

Dec. 31
1947

A m ount

'24,956

146,478

71,522

95.4
— 56.6

Per Cent

3,087

28,297
13,216
18,512
93
7,956

19,503
42,348
62,059
1,616
5,007

■ 8,794
29,132
43,547
1,523
2,949

— 31.1
220.4
235.2
1,637.6
— 37.1

150,117

Total

7,087

4,000

280,098

129,981

86.6

S ources: F.D .I.C . Assets and Liabilities, December 30, 1944, Operating
Insured Com m ercial and Mutual Savings Banks.
Member bank call reports, December 31, 1947, as tabulated by
Federal Reserve B ank o f Richm ond.

Among the member banks of South Carolina, con­
sumer credit loans made the most spectacular increase
during the three year period ended December 1947, in­
creasing $18 million, or 589 per cent. Business loans, on
the other hand, expanded by $25 million; and this amount
accounted for 54 per cent of the total net gain. The total
figure of loans to farmers registered a decrease because
loans guaranteed by the Commodity Credit Corporation
fell to only 5 per cent of their former level. Real estate
loans expanded from $5.8 million to $19.6 million with a
percentage increase of 239.6. Other loans, which com­
prise only 8 per cent of the loan portfolios of the mem­
ber banks in South Carolina, declined 56 per cent during
the three year period.
L O A N S OF MEM BER B A N K S
SOU TH C A R O L IN A
(A m ounts in thousands o f dollars)
Increase
Dec. 30
1944
Com m ercial and industrial
loans
Loans to farm ers (n ot secured
by real estate)
Loans fo r purchasing and
carrying securities
Real estate loans
Other loans to individuals
Loans to banks
Other loans
T otal

Dec. 31
1947

20,379

45,411

25,032

122.8

10,481

2,318

—

8,163

— 77.9

2,796
5,768
3,053
222
7,727

2,€54
19,587
21,031

—

"57798

142
13,819
17,987
222
1,929

50,426

96,799

A m ount

—
—

46,373

Per Cent

—

5.1
239.6
588.9

— 25"6
92.0

Liabilities, December 30, 1944, Operating
Insured Comm ercial and Mutual Savings Banks.
M ember bank call reports, Decem ber 31, 1947, as tabulated by
Federal Reserve Bank o f Richm ond.

As the above tables have shown, lending has exten­
sively increased in three main categories— business, real
estate, and consumer credit.
The reasons for the increase in business loans are
threefold, and all of them are directly related to the
general economic developments of the period. The in­
creasing volume of physical goods has required increased
working capital for production and distribution; plant
expansion and modernization have required temporary
advances pending longer-term financing; and finally, the
higher prices and cost levels necessitate increased funds
with which to handle even the same volume of goods.
Funds obtained from banks, moreover, added to the vol­
ume of demand for scarce goods and production re­
sources, and in turn helped to bring about the rising
prices which increased financing needs. Loans made be­




cause of these conditions may in some cases result in a
less than proportionate increase in output and in other
cases actually result in diverting goods from markets.
Bankers have been asked to make loans only for pro­
ductive purposes, but recent analysis has indicated that
term loans are increasing, and that many of them are
non-productive under existing conditions of full em­
ployment.
Illustrative of some of the reasons for the expansion
of business loans is the construction industry, in which
tremendous expansion has occurred between the years
1944 and 1947, accompanied by rapidly rising costs. The
following table shows comparable construction figures
in the Fifth District for these two years.
C O N STR U C TIO N C O N T R A C T S A W A R D E D
IN F IFT H D ISTR IC T

Year

Comm er­
cial
Buildings

(Thousand D ollars)
M anu­
N onfa ctu rin g
residenBuildings
tial

Residential

T otal
Construction

1944

20,663

54,763

171,208

157,560

479,785

1947
Percentage
increase

90,308

145,536

309,420

428,631

935,839

337

166

81

172

95

S ou rce: F. W . Dodge C orporation

Inventories of the reporting department stores in the
Fifth District have shown an increase of 56 per cent in
the same period, revealing in part an increased demand
and in part higher prices. This is reflected by increased
demands for working capital and in particular bank loans
for financing inventories.
All classes of real estate loans have experienced in­
creases, which are the result of increased transactions,
higher prices and the accumulated demand for new
homes. The rising cost of farm land is shown by the in­
dex of the value of farm real estate (1935-1939=100),
which has advanced from 151 in December 1944 to 218
in December 1947. It may be noted that in a survey made
by the American Bankers Association, it was revealed
that the paying record on real estate loans at this time
appears to be the most satisfactory of all classifications
of loans and that only 13 per cent of the replies indicated
any sign of slowing up.
There are perhaps two main explanations for the ex­
pansion of consumer loans. First is the increase in the
supply of nondurable and durable consumer goods. Now
that the latter have reappeared on the market, there is
a larger volume to be financed and at higher prices. These
rising prices are another reason for the increase in con­
sumer credit loans. Even though the same amount of
materials were being purchased, a larger sum of money
would be needed to make the purchase; thus larger loans
are requested of the lending agencies. In the consumer
credit line, the sharpest increases have come in retail
automobile instalment loans and other retail, repair, and
modernization loans. This is understandable as 1944 was
still a war year and automobiles and durable consumer
goods were not being manufactured for the consumer
to buy. Bankers are lending support to the use of terms
which are similar to those prescribed under Regulation
W ; however, the opinion has been expressed that com­
petition will force the relaxation of these standards. It

[12]

MONTHLY REVIEW

FEBRUARY 1948

may be noted that in another field of consumer credit
total receivables of 19 department stores in the Fifth
District had, by the end of 1947, increased 107 per cent
over the year-end figure of 1944.
Loans to farmers have shown a decided decline be­
cause of the large drop in loans guaranteed by the Com­
modity Credit Corporation, but in every state other loans
to farmers (not secured by real estate) have increased
over the three-year period ended December 1947 by at
least 50 per cent— and in two states (Maryland and West
Virginia) over 100 per cent. Many of the agricultural
loans made by the banks in the tobacco and cotton areas
in the Fifth District must be carried over this year be­
cause of the lower tobacco prices, poorer cotton and pea­
nut production in some sections, and higher operating
costs throughout the farming sections.

are being used to capacity. Since further expansion of
the productive forces is possible only on a small scale,
any addition to the existing money supply provides a
foundation for additional inflation.
The American Bankers Association, realizing the
problem, has asked the nation’s bankers to embark upon
a voluntary credit control program. The main points of
this program as stated by A B A President Joseph Dodge,
are as follow s:
“ 1. That in the months immediately ahead, com­
modity and inventory loans which are designed to
withhold essential goods from the normal market
channels in anticipation of price rises should not be
made.
“ 2. That mortgage loans for non-essential building
or for construction which can be postponed until
building supplies and labor are in greater abundance
should be discouraged at the present time.

This rapid and substantial expansion of loans carries
with it equally substantial effects upon the lending banks
and upon the economy as a whole. Foremost among
these, from the standpoint of banks, is the change in the
composition of bank assets, with the accompanying ef­
fect upon the earning rate of these assets.
From the end of 1944 through last December, loans
of all commercial banks increased from 20.5 per cent of
total loans and investments to 32.8 per cent, reflecting a
76.6 per cent increase in loans and a 6.9 per cent decline in
investments. Member banks of the Fifth District re­
ported a 4.02 per cent average return on loans during
1947, as compared with a 1.58 per cent return on Gov­
ernments, which comprised the major part of their in­
vestments. If this may be taken as typical of all com­
mercial banks, it then follows that the increase in the
loan portfolios has been accompanied by increased earn­
ings.
It must be borne in mind, however, that a part of this
higher return is received by lending banks as compensa­
tion for risks assumed in making loans; the fact that the
risks do not mature as losses in the period in which the
earnings are collected should by no means obscure this
fact. Banks accepting these added risks should make pro­
vision for the acceptance of the losses that may be ex­
pected to arise at some time in the future from loans
being made now— such provision taking the form of the
earmarking o f earnings for this purpose and, where
necessary, an increase in capital to provide more ade­
quate protection to the funds of depositors.
At this time, purchasing power is high relative to the
available goods and services; in other words, effective
demand exceeds the existing supply. In addition, em­
ployment is at a high level and the factors of production




“ 3. That banks should give priority to loans to those
borrowers who can turn out the supplies and services
needed at home and abroad now, in order that the
machinery for the production of essential goods may
be kept functioning at maximum levels.
“ 4. That there should be a greatly intensified drive
to sell Treasury Savings Bonds to the public and to
promote other forms of savings, such as savings ac­
counts in banks, as a means of absorbing some of the
surplus money in the spending stream which would
otherwise continue to compete for the goods and
services in short supply.”
In the nation as a whole aggregate loans increased $7
billion last year. It has been indicated that a substantial
percentage of these loans was of an inferior quality.
Bankers as a whole seemed especially concerned, par­
ticularly during the latter part of 1947, about the risk
element and the degree of liquidity which a loan has be­
fore it is made. It is to be hoped that the bankers will go
through their loan portfolios and eliminate or reduce
the loans with elements of weakness. This would not
only help to protect the banks from probable loss but it
would offset in some degree deposit expansions result­
ing from new loans.
Under present conditions bankers should examine all
new loan applications carefully as to their purpose and
as to their inflationary nature. There is probably no
single group in the country that has a larger stake in the
successful application of these standards than the bank­
ers who have been asked to apply them.

[13]

FEDERAL RESERVE BANK OF RICHMOND

FEDERAL RESERVE BAN K

OF RICHM ON D

DE B ITS TO IN D IV ID U A L A CC O U N TS

(All Figures in Thousands)
February 18,
ITEMS
1948
Total Gold Reserves............................ $1,054,387
Other Reserves ......................................
21,645
Total Reserves .................................. 1,076,032
Bills Discounted ....................................
22,608
Industrial Advances ............................
46
Gov. Securities, Total ......................... 1,360,126
Bonds ....................................... ........... 362,779
Notes ........................................ ........ 107,385
Certificates .......................................
282,177
Bills .................................................... 607,785
Total Bills & Securities....................... 1,382,780
Uncollected Items ................................ 268,562
Other Assets ................................. ........
39,983
Total Assets ...................................... 2,767,357

Chg. in Amt. From
1-14-48
2-12-47
— 18,544 — 7,507
— 3,770
+
532
— 22,314 — 6,975
+ 15,509
— 4,400
+
24
+
46
— 61,887 — 38,314
+143,267
+316,362
+ 10,102
+ 85,495
— 122,876 — 144,746
— 92,380 — 295,425
— 46,354 — 42,668
+ 11,416
+ 15,588
+ 1,503
— 1,243
— 55,749 — 35,298

Fed. Res. Notes in Cir...................... $1,672,071
Deposits, Total ...................................... 833,951
Members’ Reserves .................. ........ 719,339
U. S. Treas. Gen. Acc......................
93,918
Foreign .............................................
18,008
Other Deposits ..................................
2,686
Def. Availability Items......................... 224,073
Other Liabilities ..................................
742
Capital Accounts ................................
36,520
Total Liabilities ................................ 2,767,357

—
—
—
+
—
—
+
—
+
—

38,258
32,390
55,627
26,651
445
2,969
13,986
246
1,159
55,749

—
+
+
+
—
—
—
+
+
—

(000 om itted)
January

District of Columbia

Deposits o f U. S. G ov....................
Deposits o f State & Local Gov..
Deposits o f Banks ................... ......
Certified & Officers’ Checks......
Total Tim e Deposits.........................
Deposits o f Individuals.................
Other Tim e Deposits.....................
Liabilities fo r B orrow ed M oney....
A ll Other Liabilities.........................
Capital A ccoun ts ..............................
Total Liabilities ..............................

$2,677,271
2,003,696
51,814
185,439
380,957*
55,365
607,587
588,231
19,356
13,050
17,783
212,199
3,527,890

+
+
+
+
+
+
—

+
—

136,516
115,541
17,821
15,021
61,524
7,707
288
696
408
11,550
7,138
1,370
130,446

+
+
+
+
—
—
—
—

+
+
+

JanU8ry 1947

$ 736,173

+

7

963,568
20,390
17,406
27,023

+

3
- 1
5
6

D istrict Totals .......................................

51,695
47,277
26,425
27,626
6,339
435
33,108
153
2,075
35,298

44,022
70,025
45,761
23,033
7,808
4,533
7,964
7,249
715
1,100
2,066
10,024
47,048

% Chg. from

W ashington .......................................
Maryland
B altim ore ............................................
Cumberland .........................................
Frederick ..............................................
H agerstown .......................................
North Carolina
A sheville ..............................................
Charlotte ..............................................
Durham ................................................
Greensboro .........................................
g in sto n ................................................
Raleigh ................................................
W ilm ington .......................................
W ilson ..................................................
W inston-Salem .................................
South Carolina
Charleston .........................................
Columbia ..............................................
Greenville ...........................................
Spartanburg .......................................
V irginia
Charlottesville ...................................
Danville ..............................................
L ynchburg .........................................
N ew port News .................................
N orfolk ................................................
Portsmouth .......................................
Richm ond ............................................
Roanoke ................................................
West V irginia
Bluefield .......................................... .
Charleston .........................................
C larksburg .........................................
H untington .......................................
P arkersburg .......................................

CON DITION OF R EPO RTIN G M EM BER B A N K S — 5th DISTRICT
(A ll Figures in Thousands)
February 18,
Chg. in Am t. From
2 -19-47
1- 14-48
1948
—
373
+ 111,883
$ 801,320
389,966
3,307
Bus. & A gri
+
+ 56,770
1,636
175,545
Real Estate
+
+ 41,635
5,316
235,809
A ll Other L<
+ 13,478
—
— 97,311
1,779,460
572
57,797
U. S. Treasury Bills
+ 28,112
+ 39,094
153,927
2,052
89,938
—
3,543
5,098
104,104
+
— 23,437
1,341,674
59,578
U. S. Gov.
1,903
121,958
9,568
+
+
— 20,778
204,040
+ 20,881
— 15,891
150,811* — 66,373
Due from Banks...
—
3,379
2,663
62,958
C urrency & coin....
+
—
41,970
. 473,699
Reserve w ith F. R.
+ 14,430
55,602
2,999
Other Assets ...........
+
+ 10,393
8,527,890
130,446
T otal Assets .......
+ 47,048
Total Demand Deposits..

1948

$3,950,330

_
+

50,478
240,427
96,005
78,342
i 3>278
94,632
36,566
17,005
121,098

+ 7
+10
— 9
+19
— 18
+ 2
+ 5
— 7
__ 6

58,994
91,410
82,289
51,811

+12
+16
+15
+30

26,412
30,920
41,072
34,371
184,516
21,400
427,770
84,847

+14
__ 21
+15
+14
+24
+13
+ 6
+14

45,383
135,475
33,895
61,132
26,242

+35
+16
+17
+24
+ 2
+

7

COTTON C ON SU M PTIO N A N D ON H A N D — B A LE S
Jan.
Jan.
A ug. 1 to Jan. 31
1948
1947
1948
1947
Fifth District S tates:
Cotton consumed ................
426,425
458,005 2,329,225 2,487,305
Cotton G row ing S tates:
Cotton consumed .................
762,929
836,019 4,087,359 4,566,593
Cotton on hand Jan. 31 in
consum ing establishments 1,895,298
1,925,624
storage and compresses .... 5,057,165
5,159,981
United S tates:
Cotton consum ed ................
860,202
949,994 4,637,371 5,213,413
Cotton on hand Jan. 31 in
consum ing etsablishments 2,222,254
2,270,764
storage and compresses .... 5,116,954
5,228,327
Spindles active, U. S............... 21,450,000 21,919,000

C OTTON

C O N S U M P T IO N -F IF T H

D ISTRIC T

In Bales
M ONTH S
N o. Carolina
January 1948..................
231,668
196,467
December 1947..............
January 1947..................
248,312

So. Carolina
176,319
158,766
189,622

V irgin ia
18,438
16,377
20,071

D istrict
426,425
371,610
458,005

♦Net figures, reciprocal balances being eliminated.
S ou rce: Departm ent o f Comm erce.
C O N STR U C TIO N C O N TR A C TS A W A R D E D
% Chg.
% Chg;
from
from
Dec.
12 Mos. ’ 47 12 Mos. ’ 46
1947
Dec. 1946
S TA TE S
— 9
$18,229,000
$270,502,000
M aryland ....................
+
7
+ 28
8,648,000
+ 101
78,948,000
Dist. o f Columbia........
— 1
191,302,000
14,392,000
— 16
V irgin ia ......................
_
48
— 10
65,585,000
3,224,000
W est V irgin ia ..........
—
6
161,038,000
— 11
9,558,000
N orth Carolina ..........
76,651,000
— 36
+ 133
South Carolina ........ ........ 17,312,000
— 9
$844,026,000
$71,363,000
F ifth D istrict ........
+ 15
S ou rce: F. W . D odge Corp.

C O M M ER C IA L F A IL U R E S
N um ber Failures Total Liabilities
M O N TH S
D istrict
U .S.
D istrict
January 1948..................
6
356
$ 89,000
D ecem ber 1947................
15
317
165,000
January 1947..................
5
202
344,000
S ou rce: Dun and Bradstreet




P R IC E S OF U N F IN ISH E D C OTTON T E X T IL E S
January
1948
Average, 17 constructions......................
P rintcloths, average ( 6 ) ...........................
Sheetings, average ( 3 ) * ...........................
Tw ill (1) ......................................................
Drills, average ( 4 ) .....................................
Sateen (1) ....................................................
Ducks, average ( 2 ) .....................................

94.57
130.48
80.78
79.86
69.69
97.61
63.16

December
1947

January
1947

95.88
134.78
80.23
79.86
69.36
97.61
62.88

83.34
105.88
73.23
75.61
65.90
97.61
62.54

N ote: The above prices are those fo r the approxim ate quantities o f
cloth obtainable from a pound o f cotton with adjustments for
galable waste.

U .S.
$12,965,000
25,499,000
15,193,000

D E POSITS IN M U T U A L SA V IN G S B A N K
8 Baltim ore Banks
T otal Deposits

[ 14]

Jan. 31, 1948
............ $390,743,417

Jan. 31, 1947
$381,241,159

Dec. 31, 1947
$389,933,193

MONTHLY REVIEW

FEBRUARY 1948

B U ILD IN G PE R M IT FIGU RES

W H O L E SA L E T R A D E — 199 FIRM S

Total V aluation
J a n .1948
J a n .1947
Maryland
Baltim ore .......................
Cum berland ...................
Frederick .........................
H agerstown ...................
Salisbury .........................
V irginia
D anville ............................
L yn chburg ........................
N orfolk ............................
Petersburg ..................... .
Portsm outh
...............
Richm ond .....................
Roanoke .......................... ..
W est V irginia
Charleston ........................
Clarksburg ......................
H untington .... ...............
N orth Carolina
A sheville ...... ...................
Charlotte ..........................
Durham
.........................
Greensboro ......................
H igh P oin t ......................
R aleigh ............................
R ocky M ount ..................
Salisbury ..........................
W inston-Salem ..............
South Carolina
Charleston ......................
Columbia ...........................
Greenville ........................
Spartanburg ..................
D istrict o f Columbia

$ 3,976,810
43,260
182,675
42,750
43,970

$ 1,759,075
41,200
64,380
31,590
139,533

211,749
108,715
1,974,120
12,900
147,140
1,026,688
1,002,438

99,700
265,761
336,615
62,800
68,815
1,916,175
100,103

1,011,261
12,665
105,825

1,019,804
33,608
279,640

177,260
900,695
457,090
1,425,810
342,766
702,485
70,450
30,400
299,066

93,618
418,122
211,475
298,570
128,905
415,565
187,600
30,750
308,320

134,789
260,390
281,600
106,100

162,340
211,375
437,700
62,277

5,541,570

2,700,084

$20,633,437

$11,885,500

.
D istrict Totals

SOFT C O A L PR O D U C TIO N IN TH O U SAN D S OF TONS
R EGION S
W est V irgin ia .... .....................
V irgin ia .....................................
M aryland — ................... ..............
F ifth D istrict ....... .........
United States ...................... .
% in D istrict.......... ......... ...

January
1948
15,131
1,839
153
17,123
54,980
31.1

January
1947
15,874
1,887
233
17,994
58,970
30.5

% Change
— 5
— 3
— 34
— 5
— 7

LIN ES
A uto Supplies ( 6) * .............. ..
Drugs & Sundries (1 0)* ..
D ry Goods (9 )* ...................... ..
E lectrical Goods ( 6) * ..........
Groceries (6 5)* .................... H ardware (1 1)* .................. ..
Industrial Supplies (3 )*
Paper & Products (5 )*
..
Tobacco & Products (9 )*
Miscellaneous (7 5 )* .............. Dist. A verage (199)*
-

N et Sales
Jan. 1948
Compared with
Jan.
Dec.
1947
1947
+19
0
+10
+ 16
+, 1
+ 12
+ 39
— 9
+ 2
+ 5
+14
+ 24
— 2
— 10
+ 5
— 1
— 3
— 22
+ 7
+ 7
+ 7
+ 6

Stock
R atio Jan.
Jan. 31, 1948
collections
Compared w ith
to acc’ts
Jan. 31 Dec. 31 outstand’g
1947
Jan. 1
1947
94
+ ’8
0
118
+ 41
+ 18
79
+ 51
+ 6
98
+ 13
153
+ 3
+ 59
89
+ 5
— 5
+ 46
+ 38

100
156
101
108

+ ~6
+ 5
+ 6

S ou rce: Dept, o f Commerce.
♦Number o f reporting firms.

R E T A IL F U R N IT U R E S A L E S
c Change
/c
Jan. 1948
from
Jan. 1947

STATE S
M aryland (5 )* ....................
Dist. o f Col. ( 6) *................
V irginia (1 9 )* ....................
W est V irgin ia ( 9 )* ............
N orth Carolina (1 4 )* ........
South Carolina ( 10)* .......
F ifth D istrict (6 3 )* .....

+ 9
+ 2
+ 1
— 18
—1
0
— 3

0

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

+ 9
+ 2

— 7
— 22
— 25

+ 7

*Num ber o f reporting stores

D E P A R T M E N T STO R E T R A D E
R ichm ond

Baltim ore

W ashington

Other Cities

D istrict

Percentage chg. in January 1948 sales, com pared w ith sales in Jan. 1947:
—

TOBACCO M A N U FA C TU R IN G
January
1948
Sm oking & Chewing tobacco
(Thousands o f lb s .).................
Cigarettes (Thousands) .............
Cigars (Thousands) ...................
Snuff (Thousands o f lb s .).........

15,689
27,278,272
461,398
3,898

January
1947
% Chg.
16,689
28,450,767
510,264
3,434

— 6
— 4
— 10
+14

Rayon
Staple
Rayon
Staple

yarn
fiber
yarn
fiber

shipm ents..... ...........
shipm ents....................
stocks..........................
stocks..... :....................

N ov.
1947
62,200,000
20,300,000
9,300,000
5,300,000

—

2

+6

+2

+2

Percentage chg. in outstanding orders Jan. 31, ’ 48, from Jan. 31, ’ 47:
— 15
— 11
0
+ 3
— 6
P ercentage chg. in receivables Jan. 31, 1948, fro m those on Jan. 31, 1947:
+ 53
+15
+25
+14
+26
Percentage o f current receivables as o f Jan. 1 collected in J an u a ry :
29
50
48
49
44

R A Y O N Y A R N SH IPM EN TS A N D STOCKS
Dec.
1947
62,100,000
22,200,000
7,700,000
4,000,000

2

Percentage chg. in stocks on Jan. 31, 1948, com pared with Jan. 31, 1947:
— 7
+ 8
+ 1
+13
+ 3

Dec.
1946
55,900,000
12,900,000
6,700,000
1,600,000

Percentage o f instalm ent receivables as o f January 1 collected in J a n .:
17
23
18
27
20
M aryland

D ist.of Col.

V irgin ia

W . V a.

N . Carolina S. Carolina

Percentage chg. in January 1948 sales from January 1947 sales by S tates:
Source: Rayon Organon.




—

[15]

2

+6

+2

+4

—

3

0

FEDERAL RESERVE BANK OF RICHMOND

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

Output and employment at factories and mines con­
tinued to show little change in January. Value of depart­
ment store trade declined by more than the usual seasonal
amount in January and the early part of February. Prices
of farm products and foods decreased sharply in the early
part of February, while prices of most groups of indus­
trial products showed little change.

Total shipments of railroad revenue freight early in
January equalled the volume for the corresponding peri­
od of 1947. In the latter part of January and in early
February, however, loadings of most classes of freight
were substantially curtailed as a result chiefly of weather
conditions.
C o m m o d i t y P r ic e s

The general level of wholesale prices declined about
4 per cent from the middle of January to the latter part
of February, reflecting mainly sharp decreases in prices
of farm products and foods. Prices of hides, print cloth,
and some other industrial materials also showed marked
declines. Prices of semifinished steel and worsted fab­
rics, however, were raised and prices of most other
groups of industrial products showed little change.

I n d u s t r ia l P r o d u c t io n

Industrial production was maintained in January at
the level of the preceding two months, and the Board’s
preliminary seasonally adjusted index was 192 per cent
of the 1935-39 average.
Activity in durable goods industries showed a slight
decline in January. The decline reflected mainly some
curtailment in production at steel and automobile plants
in the latter part of the month owing to adverse weather
conditions, which continued in the early part of Febru­
ary. Activity in nonferrous metals industries continued
to increase in January; deliveries of copper and zinc to
fabricators were at the highest level since the spring of
1947. Output of lumber and stone, clay and glass pro­
ducts was maintained at exceptionally high levels for
this season.
Output of most nondurable goods recovered in Janu­
ary from the December decline. Activity at cotton textile
mills reached the highest rate since the spring of 1947.
Production at paperboard mills and printing establish­
ments also increased. Petroleum refining activity rose
further in January under the pressure of exceptional de­
mands for fuel oil. Output of most other nondurable
goods was maintained at the December rate or increased
somewhat.
Production of minerals in January continued at the
December rate. Bituminous coal output was restricted
by weather influences on transportation and was 7 per
cent smaller than in January 1947. Crude petroleum pro­
duction continued to gain and was 14 per cent larger
than a year ago.
E

mploym ent

Employment in nonagricultural establishments was
reduced by 1,100,000 persons from mid-December to
mid-January, mainly because of the usual large sea­
sonal reduction in trade and Federal post office activi­
ties. Construction employment was curtailed more than
is usual in January, owing to exceptionally severe weath­
er conditions. Employment in manufacturing industries
showed about the usual small seasonal decline.

Retail food prices declined about 4 per cent in Febru­
ary from the record level of 210 per cent of the prewar
average reached in January.
B a n k C r e d it

Seasonally large Treasury receipts from tax collec­
tions and sales of savings bonds resulted in a substantial
transfer of deposits from private accounts at commer­
cial banks to Treasury accounts at the Reserve Banks
during January and the first three weeks of February.
Accompanying drains on bank reserves were met out of
excess reserves, from funds received from the postChristmas return of currency and further gold inflows,
and from funds supplied by market purchases of Gov­
ernment securities by the Reserve Banks.
Sale of Treasury bonds by commercial banks and other
investors continued in January and the first three weeks
of February, and the Federal Reserve System purchased
substantial amounts of these issues. Total holdings o f
Government securities by Reserve Banks declined, how­
ever, reflecting sales of bills and certificates in the mar­
ket, as well as Treasury retirements of securities held by
Reserve Banks out of surplus cash receipts.
Government security holdings at member banks in
leading cities declined somewhat in January and the first
half of February as continued sales of Treasury bonds
were offset only partly by purchases of bills. Loans to
businesses showed little further change, but real estate
and consumer loans continued to expand.
Effective on February 27, 1948, the Board of Gov­
ernors raised from 20 to 22 per cent the reserve re­
quirements to be maintained on net demand deposits by
member banks in central reserve cities.

D is t r i b u t i o n

Department store sales showed more than the usual
seasonal decrease in January and the Board’s adjusted
index declined to 282 per cent of the 1935-39 average,
as compared with 303 in December and an average of
285 for the year 1947. Value of sales in the first half of
February was 3 per cent above a year ago.




S e c u r it y M

arkets

Common stock prices, which had moved downward
during most of January, declined more sharply in the
early part of February. Corporate bond prices were
stable; yields on high-grade issues averaged about 2-7/8
per cent.

[ 16]

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