View original document

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

M

O

I

T

I

L

Y

K

t

V

I

I

H

FEDERAL RESERVE BANK OF RICHMOND
J A N U A R Y 31, 1 9 4 8

R I C H M O N D 1 3, V I R G I N I A

Business Conditions
IFTH District business indicators for December, in
the main, showed moderate improvement over No­
vember after allowance for the usual seasonal tenden­
cies ; exceptions being the volume of bank debits, bitu­
minous coal production, and wholesale sales of automo­
tive supply and drug concerns. The drop in bituminous
coal output was not substantial and represented mainly
an extension of holidays around the year-end. Thus the
expansionary trend of business in evidence since late
summer has continued through December. Furthermore,
it looks as though the trend would continue upward
through the first quarter of the year for those factors
measured in dollars, and remain steady or rise slightly
for those measured in physical quantities.
There is little further room for much increase from
this level in the physical volume of production, since
most industries are operating as fully as they can with
current manpower and material supplies. There is some
possibility that the rapid increase in the cost of living
might have the effect of increasing the labor force in
some areas in order to augment family income, i.e., more
women might be drawn into the labor force in some areas
in some cotton textile or fabricating factories. Not too
much should be expected, but here and there a plant
might be able to fill out a second shift or add a third in
this manner. But if this is undertaken it will probably
be done in the first three months of the year. Beyond
March the consumer demand outlook will have to show
more improvement than is yet in evidence, if prices at the
retail level by April reflect the sharp increases shown at
the wholesale level since November, in order to make a
market for the current rate of production.
New orders placed by department stores of the Fifth
District fell during December by about the same amount
as they did a year earlier, and if this is indicative of the
purchasing trend of stores throughout the country, it
would seem to indicate that there would be no further
retail inventory accumulation, seasonal factors consid­
ered, in physical units. Since most of the products manu­
factured in the Fifth District have shown fairly sharp
price rises in the past two months, the drop in new orders
in December may even indicate some contraction in phy­
sical quantities of inventories.
A year ago retail stores the country over did not have
adequate inventories of cotton goods and many of the
products made from them. Now their stocks are well
rounded. Retail merchants in general are wary of the
price structure in cotton goods and their finished pro­

F




ducts. It is not likely that they will get far from shore in
their inventory purchasing policies. Therefore, despite
the substantial forward sales by manufacturers of some
types of grey goods, the retail demand beyond March
may be lower than current production levels because of
rising prices. Exports of cotton goods have been falling
according to the latest record, and this tendency has
continued up to the present time according to trade in­
formation.
Cotton consumption in the Fifth District in December
rose 6 per cent from November on a seasonally adjusted
basis. This brought the level to within one per cent of
that of a year ago. There has been a substantial shift in
looms from heavy weight construction to lighter weight
construction since December 1946 and, in terms of
yardage, production in December 1947 is considerably
higher than a year earlier.
Production levels of the durable types of goods, par­
ticularly of the metals and products, of greatest im­
portance in Maryland and West Virginia, are not likely
to show much change in the first half of the year, unless
the current uncertainty in the bond market results in a
sharp contraction of capital formation. Even in this con­
tingency the iron and steel industry will receive consid­
erable bolstering from exports under the Marshall plan
even if it is reduced substantially in amount.
We no longer have regional figures of lumber produc­
tion, but trade sources seem to indicate that the lumber
output of Fifth District states is continuing at a high
level after seasonal correction. In both November and
December, however, weather conditions adversely af­
fected logging operations in South Carolina. The drop in
southern pine prices last spring, furthermore, caused
some of the smaller mills to go out of business before
prices again recovered. It is not believed that these mills
had much effect on total production. Lumber prices are
inordinately high and many in the trade anticipate some
reductions by summer, owing to a balancing of demand
and production.
Construction volumes have made a better record in
areas outside the Fifth District than has been the case
in the Fifth District. Construction contract awards in
the District in the latter part of the year were somewhat
above the summer low level. Commercial buildings, mul­
tiple structure dwellings, public works, and utilities have
been the chief elements of strength since midyear. It is
not known whether there will be a tightening of bank
credit as it affects real estate loans in the months ahead,

FEDERAL RESERVE BANK OF RICHMOND

but if there should be it would have adverse repercus­
sions on residential construction that probably would
not be offset by insurance company and savings and loan
institution lending.
Furniture buyers at the Chicago market in January
backed away from the low-end goods when they found
prices marked up from 10 to 20 per cent. They had been
expecting a rise of about 5 per cent, and with the mark­
ups as they were buyers say there is too little difference
in the prices of low-end goods and the better qualities. If
prices hold on low-end goods and retail consumers ac­
cept them, larger orders may be placed later on. If the
retail buyers do not accept them, some of the southern
factories may reduce employment levels. Quality furni­
ture is still in good demand and production levels are
likely to hold or expand somewhat during the first half
of the year.
Trade levels were good in December. The Fifth Dis­
trict seasonally adjusted index of department store sales
rose 4 per cent over November and 10 per cent over last
year. The December sales level, however, has not given
evidence that the broad trend has changed; this trend
still remains flat in dollar terms, which means a down­
ward trend in unit sales in many departments. House­
hold appliances and home furnishings which have not
shown substantial price rises are still the “ bellwethers”
of sales. There are indications that sales of some of the
household appliances are beginning to level off, radios
being the outstanding one.
Wholesalers’ sales in the District were moderately
higher in December than in November on a seasonally

adjusted basis, exceptions to the contrary already noted.
The small amount of the rise indicates that small retail
stores are exercising the same conservative inventory
policy as the larger ones. It is interesting to note that dry
goods wholesalers’ sales in December were unchanged
from those of November. This must have represented a
considerable drop in unit sales, for important segments
of dry goods rose considerably between November and
December.
AVER AGE D A IL Y T O T A L DEPOSITS* OF
MEMBER BANKS
Last half of Nov.
% of
$ thousands U.S.
Maryland
Reserve city banks
Country banks
District of Columbia
Reserve city banks
Country banks
Virginia
Reserve city banks
Country banks
West Virginia
North Carolina
Reserve city banks
Country banks
South Carolina
Fifth District
United States (millions)

Last half of Dec.
% of
$ thousands U.S.

1,024,014
.95
654,905
.61
369,109
.34
898,324
.83
876,782
.81
21,542
.02
1.23
1,325,583
310,512
.29
1,015,071
.94
.54
586,935
851,088
.79
377,284
.35
473,804
.44
437,041
.40
5,122,985
4.74
108,060 100.0

1,029,230
.95
661,053
.61
.34
368fl77
911,006
.84
889,954
.82
21,052
.02
1,307,768
1.20
.28
300,326
1,007,442
.92
586,221
.54
853,871
.78
379,762
.35
474,109
.43
438,308
.40
5,126,404
4.71
108,899 100.0

♦Excluding interbank demand deposits.

BUSINESS IN D E X E S— FIFTH FEDERAL RESERVE DISTRICT
Average Daily 1935-39 = 100—Seasonally Adjusted
Dec.
Nov.
Oct.
Dec.
_______________________1947
1947
1947
1946

121

Automobile Registration*........ ............................
Bituminous Coal Production*...............................
Building Contracts Awarded...............................
Building Permits Issued...................................... ...............
Business Failures— No......................................... ...............
Cigarette Production............................................
Cotton Consumption............................................
Department Store Sales................................ ....... ...............
Department Store Stocks....................................
Electric Power Production................................ ..
Employment— Mfg. Industries*........................
Furniture Orders......... ................. -........ -............
Furniture Shipments...................................... -....
Furniture Unfilled Orders....................................
...............
Gasoline Consumption..........................................
Life Insurance Sales........................... ................
Wholesale Trade:
Automotive Supplies**.................................... ...............
Drugs ............. ............................... ..................... ...............
Dry Goods .......................................................... ........... .
Electrical Goods**............................................ ..... .........
Groceries ............................................................
Hardware.................................... ....................... ...............
Industrial Supplies** ....................................... ..............
Paper and Its Products.................................... .
Tobacco and Its Products**............................. ...............
♦Not seasonally adjusted
**1938-41 = 100




170
352p
33

318
180
331
280
52
234
145
310
310
234
136
234
267

125
313
144
317
338

1
1

271

246

252
150
297
281
246
135
324
227
914
270
178
257

289
253
237
94
270
135
422
213
116

308
268
236
92
264
126
398
196
105

332
296
243
98
294
132
366
179
114

153
322
323

1010
293

302

140
281
135
266
195
4

% Change
Dec. 1947 from
Nov. 47
Dec. 46
3
6

+ 10
+ 26

- f 26
— 37

4-81
+725

154
294
319
213
134
406
303
690

+
+
+

6
4
4

— 1
+ 10
+
1

261

—

3

164
209

+ 12

4 - 10

+'*30

—
—

6
6

+

6

0
+ 2
+ 2
+ 7

+
+
—
+
+
+
—

23
34
1
13
57
20
7

220

272
252
193
70
274
119
268
178
125

—
—

+
+
+

6
9

io

0

MONTHLY REVIEW

JANUARY 1948

Parity Prices - What They Are and How They Evolved1
Parity was first defined in legislation nearly 15 years
ago. Parity as an idea has a much longer history. Opinion
varies widely on the subject of “ parity for agriculture.,,
Illustrative of one extreme is a statement by Stephen
Pace, Congressman from Georgia. He recognized that
one might attack some part of the formula, but added,
“ I think the parity principle is as fine, is as sound, as
proper, as the Ten Commandments. What is parity?
Parity is simply saying that the farmer shall receive for
his commodity a price which will give him a purchasing
power comparable with the other groups.” Feeling at the
other extreme runs about equally as strong, but no simi­
larly forceful statement of that position comes to mind.
Both the Senate and the House Agricultural Commit­
tees have announced that they are working on a longrange farm program, and extensive hearings have been
held by both committees. Much has been apparent in the
press about the use of parity and possible modifications
in the parity formula. Interest also is aroused in “ parity
prices and what they are” by current discussions concern­
ing the extent, if any, to which agricultural price sup­
ports, based on parity prices, are contributing to the gen­
erally upward movement of prices. Looking ahead a little
further, bankers, farmers, and others are many times
not clear on what prices are supported, and what legisla­
tive basis there is for such supports both now and follow­
ing the expiration of the Steagall support period on De­
cember 31,1948.
This article makes no pretense of discussing all of
these problems. Its purpose as the title suggests is to con­
sider parity prices from two standpoints— what they are
and how they evolved.
Early History
The history of this country is full of accounts of the
depressed conditions in agriculture and mass dissatisfac­
tion and unrest. Though by no means alone in the sup­
port o f various pieces of proposed legislation, farmers
had an important voice in the passage of such legislation
as the land acts, the railroad acts, the anti-trust acts, the
agricultural credit acts, and finally the agricultural ad­
justment acts. Underlying each of these classes of legis­
lation was the desire on the part of farmers and their
leaders to more nearly achieve “ equality for agriculture.”
In times o f depression farmers have seen the prices
of their products drop faster and farther than the prices
of things they bought. This, plus the fact that at the be­
ginning of any given market season the farmer considers
his production fixed and his income consequently a direct
result of an average price per unit, made farmers very
conscious of the prices of the commodities they produced.
The crash in agriculture in 1920 and 1921 was just
another instance in which the farmer felt that he had
1
This is the first o f a series o f articles on certain aspects o f Governm ent
agricultural program s. It is believed that there is a desire on the part of
bankers and others, including people in agriculture, fo r m ore in form a ­
tion on these im portant topics, and these articles are intended to help
satisfy this need.




been put through the wringer. In the early years of the
1920’s there were a number of publications dealing with
this situation either in its entirety or piecemeal. Among
these were Prices o f Farm Products in the United State’s
by George F. Warren in 1921, Equality fo r Agriculture
by George N. Peek and General Hugh S. Johnson in
1922, The Agricultural Situation, Economic Effects o f
Fluctuating Prices by George F. Warren and Frank A.
Pearson in 1924, The Economics o f Farm Relief by E.
R. A. Seligman in 1929, and Agricultural Reform in the
United States by John D. Black in 1929. This was also
the period of discussion of the McNary-Haugen Bill and
the passage of the Agricultural Marketing Act of 1929.
Warren in his bulletin on prices of farm products had
developed an index number of prices paid to farmers
based on 31 commodities. The base period for this index
was August 1909-July 1914, a sixty-month period. W ar­
ren stressed the need for looking at the purchasing power
per unit or per acre rather than at just the price itself.
Although he realized the shortcomings of using the Bu­
reau of Labor Statistics’ Index of Wholesale Prices in
arriving at the purchasing power of farm products, he
had no practical alternative. As a result he and others
during most of the decade of the 1920’s used the Index
of Wholesale Prices in getting a measure of the pur­
chasing power of farm products. Peek and Johnson fol­
lowed the same general mechanics in their thinking but
advocated as a base period the use of the ten years 19061915.
In recognition of the need for a more suitable index o f
prices paid than the Index of Wholesale Prices, Dr. O.
C. Stine and colleagues in the Bureau of Agricultural
Economics developed an Index of Prices Paid by Far­
mers in Local Markets for Goods Used in Family Living
and Production, using as a base the five calendar years
1910-1914. This index was first published in 1928. From
that time to date the comparison between prices received
for the main agricultural commodities, both individually
and when combined into an index of prices received by
farmers, and this index of prices paid by farmers (with
some slight modifications) has been the generally ac­
cepted measure of the purchasing power of farm pro­
ducts.
Legislation
Reference already has been made to the McNary
Haugen Bill. Although this bill was passed on two occa­
sions, it was vetoed each time. However, the agricultural
situation was so critical by the spring of 1933 that the
stage was set for the passage of the Agricultural Adjust­
ment Act of 1933. It was approved on May 12 of that
year. Section 2 of this act states “ It is hereby declared to
be the policy of Congress— (1 ) to establish and maintain
such balance between the production and consumption
of agricultural commodities, and such marketing condi­
tions therefor, as will reestablish prices to farmers at a

FEDERAL RESERVE BANK OF RICHMOND

level that will give agricultural commodities a purchasing
power with respect to articles that farmers buy, equiva­
lent to the purchasing power of agricultural commodi­
ties in the base period. The base period in the case of all
agricultural commodities except tobacco shall be the pre­
war period, August 1909-July 1914. In the case of to­
bacco, the base period shall be the post-war period, Au­
gust 1919-July 1929.” This variation from the base
period established for other commodities was attributed
to the fact that tobacco consuming habits of the entire
world had changed since W orld War I and the prewar
conditions of production and demand no longer accu­
rately represented the condition of the tobacco industry.
On August 24, 1935 the 1933 Act as amended was
further amended by the addition of a Section 8 (e) “ In
connection with the making of any marketing agreement
or the issuance of any order, if the Secretary finds and
proclaims that, as to any commodity specified in such
marketing agreement or order, the purchasing power
during the base period specified for such commodity in
section 2 of this title cannot be satisfactorily determined
from available statistics of the Department of Agricul­
ture, the base period, for the purposes of such marketing
agreement or order, shall be the post-war period, August
1919-July 1929, or all that portion thereof for which the
Secretary finds and proclaims that the purchasing power
of such commodity can be satisfactorily determined from
available statistics o f the Department of Agriculture/'
After the Hoosac-Mills Decision of January 6, 1936
which rendered the 1933 Act unconstitutional, Congress
quickly enacted the Soil Conservation and Domestic A l­
lotment Act (February 29, 1936). According to an an­
nual report of the Agricultural Adjustment Administra­
tion, “ In the production-adjustment programs of 193335, parity between prices of farm commodities and the
commodities farmers buy was a principal objective. Un­
der the Soil Conservation and Domestic Allotment Act
this objective has been replaced by one which is some­
what broader and more flexible— parity of income.
“ As defined by the soil act, parity of income for agri­
culture means an income that will restore the pre-war
ratio between purchasing power of net income for per­
sons on farms and that of the income of those not on
farms.”
The specific legal provision in Section 7 (a) of the
Act calls for “ reestablishment, at as rapid a rate as the
Secretary of Agriculture determines to be practicable
and in the general public interest, of the ratio between
the purchasing power of the net income per person on
farms and that o f the income per person not on farms
that prevailed during the 5-year period, August 1909July 1914, inclusive, as determined from statistics avail­
able in the United States Department o f Agriculture,
and the maintenance of such ratio.”
In the Agricultural Marketing Agreement Act of 1937
a number o f provisions of the Agricultural Adjustment
Act of 1933, as amended, which were not involved in the
adverse court decision were reenacted. These included
the statement of the parity price objectives. The 1937
Act also directed the Secretary, prior to describing any




4

term in any marketing agreement or order or amend­
ment thereto relating to milk or its products to take
parity objectives into account and also “ the price of
feeds, the available supply of feeds and other economic
conditions which affect market supply and demand . .
The Agricultural Adjustment Act of 1938 also con­
tains a number of provisions relating to parity for agri­
culture. According to the declaration of policy which
comprises Section 2 “ It is hereby declared to be the
policy of Congress to continue the Soil Conservation and
Domestic Allotment Act, as amended, for the purpose of
conserving national resources, preventing the wasteful
use of soil fertility, and of preserving, maintaining, and
rebuilding the farm and ranch land resources in the na­
tional public interest; to accomplish these purposes
through the encouragement of soil-building and soilconserving crops and practices; to assist in the market­
ing of agricultural commodities for domestic consump­
tion and for export; and to regulate interstate and for­
eign commerce in cotton, wheat, corn, tobacco, and rice
to the extent necessary to provide an orderly, adequate,
and balanced flow of such commodities in interstate and
foreign commerce through storage of reserve supplies,
loans, marketing quotas, assisting farmers to obtain, in­
sofar as practicable, parity prices for such commodities
and parity of income, and assisting consumers to obtain
an adequate and steady supply of such commodities at
fair prices.”
Under Title III of the Agricultural Adjustment Act
of 1938 are a number of pertinent definitions— “ Sec. 301
(a) (1 ) ‘Parity’, as applied to prices for any agricul­
tural commodity, shall be that price for the commodity
which will give to the commodity a purchasing power
with respect to articles that farmers buy equivalent to
the purchasing power of such commodity in the base
period; and, in the case of all commodities for which the
base period is the period August 1909 to July 1914,
which will also reflect current interest payments per
acre on farm indebtedness secured by real estate, tax
payments per acre on farm real estate, and freight rates,
as contrasted with such interest payments, tax payments,
and freight rates during the base period. The base period
in the case of all agricultural commodities except to­
bacco shall be the period August 1909 to July 1914, and,
in the case of tobacco, shall be the period August 1919
to July 1929.
“ (2 ) ‘Parity’, as applied to income, shall be that per
capita net income of individuals on farms from farming
operations that bears to the per capita net income of in­
dividuals not on farms the same relation as prevailed
during the period from August 1909 to July 1914.”
On November 22, 1940 the definition of parity price
as defined in the 1938 Act was amended to change the
base period for flue-cured and burley tobacco to the five
years, August 1934-July 1939.
Such a discussion as this would be incomplete without
some mention of “ comparable prices.” In certain cases
the Congress has provided that comparable prices can
be calculated which shall in effect be substituted for the
parity prices as calculated according to the regular me­

MONTHLY REVIEW

thod. Comparable prices can also be calculated for com­
modities having no data for either of the two generally
prescribed base periods.
This authority is contained in the so called “ Steagall
Amendment” or Section 4 (a) of Public Law Number
147 approved July 1,1941 and in Section 3 of the Emer­
gency Price Control Act as approved January 1, 1942.
According to the Steagall Amendment, “ the comparable
price for any . . . commodity shall be determined . . . if
the production or consumption of such commodity has
so changed in extent or character since the base period
as to result in a price out of line with parity prices for
basic commodities.”
The purpose back of the Steagall Amendment requir­
ing the calculation of comparable prices was to provide
the basis for administering the minimum support prices
established by that act. Similarly in the Emergency Price
Control Act, comparable price data were considered ne­
cessary as a means of administering wartime price con­
trol. The latter act required that the Secretary of Agri­
culture establish comparable prices “ after investigation
and public hearing.”
Mechanics of Parity Computations
Let us now turn our attention to the actual mechanics
of parity computations. In brief there are three steps to
be covered: (1) a base price is determined, (2 ) an index
of prices paid by farmers is determined, and (3 ) the
base price of the individual commodity is adjusted by
the index of prices paid by farmers.
(1 ) Base Prices: Where satisfactory data are avail­
able the base price is determined by averaging the prices
received by farmers for the sixty months, August 1909July 1914. In the case of cotton, for example, the aver­
age price during this period was 12.4 cents per pound.
As noted above, the base period for some commodities is
all or a part of the ten year period, August 1919-July
1929. Flue-cured and burley tobacco are the only pro­
ducts with a base period, August 1934-July 1939. O f
the 157 commodities for which parity or comparable
prices are now calculated and published by the United
States Department of Agriculture, only 47 remain on
the 1909-14 base. However, these 47 commodities make
up approximately 80 per cent of the total farm income.
(2 ) Index o f Prices Paid: At the present time the
basis for the index of prices paid used in determining
parities for commodities on a 1909-14 base are the prices
of 86 items used in family living, 94 items used in farm
production, interest per acre on farm mortgage in­
debtedness, and taxes per acre on farm real estate. These
are combined into a weighted index with weights based
on the estimated average annual expenditures per farm
in the six-year period 1924-29. In the case of those com­
modities on other than a 1909-14 base, the index used in
the computation of parities is the index of prices paid
for commodities used in family living and production. In
other words, it differs from those on a 1909-14 base by
the exclusion of interest and taxes. In December 1947
the index of prices paid, interest and taxes was 245 (cal­
endar years 1910-14=100).




JANUARY 1948

(3 )
Calculation o f Parity Prices: The final calcula­
tion of a parity price is done by adjusting the base period
price of the individual commodities by the index of prices
paid. In other words after the base period is selected
changes in parity prices from one month to the next re­
sult from changes in the prices paid by farmers. In the
case of cotton which is on a 1909-14 base the December
parity price is determined by multiplying the base period
price of 12.4 cents by the index of prices paid, interest
and taxes, which was 245 in December and dividing by
100 (12.4 x 245 -r- 100=30.38 cents).
This means that since the base period, prices of things
the farmer buys have risen so much that in December it
took $2.45 to buy as much as $1.00 would have purchased
in the base period. Consequently, for a pound of cotton
to have the same purchasing power in terms of the things
farmers buy as it had in 1909-14 the price of cotton also
would need to be 2.45 times as high as in the base period.
Proposals for Modification
In more recent years repeated efforts have been made
to enact legislation which would revise the parity for­
mula. One proposal would modify the formula by in­
cluding farm wage rates. Two different ways of doing
this have been advanced: one, to give labor the weight
of hired labor, or a weight of about 7.8 per cent of the
final index if based on 1937-41 relationships. The other
would give labor the weight of all labor including unpaid
family labor. The latter would give labor a weight of
about 25.8 in the revised index assuming 1937-41
weights. Under price relationships prevailing in Decem­
ber, parity prices of commodities on a prewar base under
these two methods would be raised about 4 per cent and
17 per cent respectively. From this it is evident that the
net effect of including wages in the parity formula would
currently be to raise the parity prices of all commodities
on a given base by some uniform proportionate amount,
since the unchanged base period prices would merely be
adjusted by using a higher index of prices paid.
Considerable can be said in favor of including wage
rates in the index of prices paid. Hired labor comprises
an important cost to large numbers of farmers. In 1935
the average farm wage rate was 103 per cent of what it
was in 1910-14. To have included wages, along with in­
terest and taxes, at that time would have been to lower
the index for commodities with a prewar base from 130
to 126. The fact that inclusion of wage rates would, at
the time the formula was written, have had the effect of
lowering the parity price of the commodities on a prewar
base probably accounts for wages being omitted. Senti­
ment did not develop for the inclusion of labor until
wage rates relative to the items in the index had risen
enough to be an index raising factor instead of an index
depressing factor.
The Department of Agriculture recently made recom­
mendations as to how the parity formula might be modi­
fied in an attempt to overcome certain generally admitted
shortcomings, such as variations in base periods and the
freezing of price relationships between commodities. The

FEDERAL RESERVE BANK OF RICHMOND

Department proposal consists of three changes in the
existing formula.
In the first place, they propose that the index of prices
paid by farmers be modified by changing the weight
given the items in the index. At present, the weights used
were those that prevailed in American agriculture dur­
ing the six years 1924-29. Many important changes, such
as those arising out of farm mechanization and the great­
er use of electricity, have occurred in the past 20 years.
Their proposal is that 1937-41, a recent period not too
much affected by war, should be used in determining the
weights given to different items in calculating the index.
Their second proposal for modification would be to
include wage rates in the index of prices paid, giving it
the weight of hired farm labor. This proposal is the same
as the one that already has been discussed.
The third Department proposal is intended to revise
the relationship between parity prices of various agri­
cultural commodities. This relationship is now considered
to be seriously out of line. Present parity prices freeze
relationships that existed in the base period. The extent
to which individual prices have changed, relative to prices
for all farm products between the periods 1910-14 and
1937-46, is evidenced by the fact that wool has increased
22 per cent; lambs, 20 per cent, beef cattle, 18 per cent;
milk, 12 per cent; chickens, 11 per cent; and butterfat
has increased 9 per cent. On the other hand, eggs and
corn both declined 12 per cent; cotton, 15 per cent;
wheat, 19 per cent; and peanuts declined 24 per cent.
The Department proposed use of a ten-year moving
average as a method of bringing parity prices into a more
realistic relationship. This device lines up the commodi­
ties into the relationship they had to each other during
the period of the moving average. It is called a moving
average because each year the oldest year is dropped and
a new year added. It has no effect on the over-all parity
relationship. It moves some prices up and some down,
but the general average of parity prices is unchanged.
Under the Department’s proposal the recent ten-year
average price of a commodity would be adjusted to a
1910-14 basis dividing by the national index of prices re­
ceived by farmers. This adjusted price would then be
multiplied by the current month’s index of prices paid
by farmers, including interest, taxes, and wages. For
example, the average price of flue-cured tobacco (types
11-14) for the ten years, 1937-46, was 31.8 cents per
pound. Since the index of prices received by farmers in
this ten-year period was at a level of 152, compared with
the pre-World War I period, the 1937-46 price, adjusted




to a 1910-14 level, was 20.9 cents a pound (31.8 -r- 152
x 100= 2 0.9). This figure, when adjusted by the index
of prices paid by farmers, including interest, taxes and
wages of 256 (using existing weight relationships be­
tween items already in the index) would result in a
parity price of flue-cured tobacco in December, 1947, of
53.5 cents per pound (20.9 x 256
10 0 = 5 3 .5 ). This
would compare with a current parity price of 47.9 cents.
While parities for tobacco and a number of other pro­
ducts would be raised by the new formula proposed by
the Department of Agriculture, parities of cotton, pea­
nuts and certain other products would be lowered.
O f course, these are merely proposals for modification
of the parity formula. The national farm organizations
and other groups also are working on proposals. Whether
or not Congress will revise the present formula remains
to be seen. In the meantime, it remains unchanged inas­
much as it is a matter of law.
Conclusion
In conclusion it is well to go behind the legal termi­
nology that was introduced above as a means of giving
the exact wording of certain important passages of law
to the interested reader. W e have seen that Congress has
written into law definitions of both parity price and pari­
ty income. Both are parts of our national agricultural
policy as written into law by Congress. Both can ap­
propriately be thought of as yard sticks or thermometers,
with the use of which certain aspects of the relative posi­
tion of agriculture and the rest of the economy can be re­
lated to one another.
In discussing what parity prices do and do not stand
for, H. R. Tolley, while Chief of the Bureau of Agricul­
tural Economics, stated: “ The parity principle is simply
an exchange•ratio between prices paid by farmers and
prices received. It applies only to those items for which
the farmer pays cash and for which prices and rates can
be rather easily determined, and to those items that the
farmer sells for which prices can be easily determined.
“ The current parity formula does not attempt to mea­
sure cost of production in any of the usually accepted
senses in which that term is used. Nor does the current
parity formula endeavor to give farm and non-farm
families an equal standard of living. Instead, so far as it
applies to standards of living, it is devised to give farm
families an income that has the same relative purchasing
power when compared with the incomes of non-farm
families as existed in the base period 1910-1914.”

6

MONTHLY REVIEW

JANUARY 1948

The Rising Tide of Business Failures
Two outstanding characteristics of failure experience
heavy mortality characteristic of new firms. It is felt
in the United States during 1947 appear to have been the that such a relationship was reflected in the sharp rise
continuation of a very low rate of failures relative to the of manufacturing failures during 1946.
pre-war years and the sharp rise in current liabilities
The rise in the rate of failures in retail trade, how­
that carried the total for the year above the 1939 figure.
ever, was negligible during 1946, a consequence to a con­
An explanation of the latter development will be made
siderable extent of the fact that entries of new firms
in a subsequent section of this article, but it is desirable
during 1944, 1945 and the first six months of 1946 were
to consider some fundamental factors influencing the first not sufficient to completely offset the number that had
characteristic before discussing in detail the trends and gone out of business during 1942 and 1943. Thus, in
developments in business failures during the past year.
June 1946 the number of retail concerns was still some­
The Department of Commerce has estimated that what lower than it had been in September 1941. Such
during 1945 and 1946 about 1 million new concerns en­ conditions, as the Department of Commerce has pointed
tered the economy. Such a tremendous influx of new out, explain to a considerable extent the low discontinu­
enterprises would ordinarily have led to a rash of fail­ ance rate for retail trade that has prevailed during the
ures during 1946 and 1947 inasmuch as mortality rates post-war period.
among infant concerns are usually very high. To the
Failures In The United States
contrary, however, actual failures were at very low
Beginning in 1939 an ebb tide in commercial failures
levels, amounting in 1946 to less than 8 per cent of the
set in that continued uninterruptedly to 1946. The de­
number in 1939 and, despite a sharp rise, to less than 25
cline was swift and extensive; whereas 14,768 failures1
in 1947. The principal reason for the divergence from
normal expectations is found in the unusually favorable occurred in 1939, in 1945 only 810 failures in the United
States were recorded by Dun & Bradstreet, a total that
conditions under which business in general has operated
during the post-war period. Among other contributing was less than the monthly average for each of the years
1939,1940, and 1941. The opening months of 1946, how­
factors might be mentioned the extent to which the lives
of many new small business concerns have been pro­ ever, witnessed the reversal of the long downward trend,
longed through the use of the war-time accumulated sav­ and by the end of the year 1,130 failures had occurred
as against the record low of 810 established during the
ings of their owners.
There is another important factor in this connection preceding year.
The new trend was sharply accelerated early in 1947
that should not be overlooked; to a large extent entries
of new firms during 1945 and early 1946 were serving when failures during January and February greatly ex­
to replenish the number of concerns in fields that had ceeded the usual seasonal gains and, contrary to the his­
experienced discontinuances far in excess of new entries torical seasonal decline in March, continued upward to
during the war. The Department of Commerce has esti­ reach a total for the first quarter of 694. Failures during
mated that between September 1941 and December 1943 May 1947 were the heaviest in number of enterprises
there was a loss of 560,000 firms, 300,000 of which oc­ involved since March 1943 (the amount of current lia­
curred in retailing, 100,000 in services, and about 100,000 bilities involved reached the highest level for any month
in construction.1 Other industries had much smaller since 1938) and swelled the second quarter total to 938.
Although the number of firms that failed during the
losses, and the number of firms in manufacturing re­
third quarter fell off from the post-war peak of the pre­
mained virtually unchanged during this period.
It might be expected, then, that the rate of failures ceding quarter, current liabilities of failures rose to a
would be lower than would ordinarily be associated with new level. In fact, one has to go back to the depression
the large volume of new businesses that came into exist­ year of 1932 before finding a month of July in which
ence during 1945 and the first half of 1946. That such pliabilities of failed firms exceeded the volume of losses
in the comparable month of 1947.
was the case is clearly shown by the failure experience
Estimated failures for the final quarter o f 1947 in­
during 1946 in the retail and manufacturing divisions.
dicate that the upward trend was resumed in October
During 1944, 1945, and the first six months of 1946 the
number of firms in manufacturing rose by 60,000, but with a new post-war peak of about 1,030 failures for
unlike other industries, with the exception o f mining and the quarter being added to those of the preceding nine
quarrying, manufacturing had not experienced a net months to bring the total for the year to about 3,540. The
loss in firms in operation during the war period up to preliminary estimate of current liabilities of failed con­
December 1943. The result was, of course, a large net cerns during the fourth quarter indicates only a small
addition of new firms to the manufacturing field. His­ decline from the third quarter peak, setting the dollar
torically, there has been a close relationship between a figure at about $56,500,000 and raising the total for the
year to about $214,382,000.
high rate o f entries in a given industry and the rate of
Thus, although there was a sharp rise in the number
discontinuances therein as a consequence mainly of the
o f failures during 1947 producing a total for the year
l “ The P ostw ar Business P o p u la tio n /’ Survey o f Current Business, Janu­
ary 1947. The discussion presented above on the relation between business
entries and failures was drawn largely from this excellent article.




lA failu re is defined as a concern which is involved in a court proceeding
or a voluntary action which is likely to end in loss to creditors.

FEDERAL RESERVE BANK OF RICHMOND

that exceeded that of each of the preceding four years,
the total of 3,500 failures was far below the figures of
14,768 in 1939,13,619 in 1940, 11,848 in 1941, and 9,405
in 1942. The amount of current liabilities involved, how­
ever, experienced a much greater advance. As shown in
chart I, the $214 million of current liabilities of failed
concerns in 1947 was well above the highest figure of any
year covered in the chart, being over 6 times the amount
in the record-low year of 1945 and about 17 per cent
higher than the 1939 peak of $182 million.

Chart

FAILURES

IN T H E

I

UNITED

STATES

I N D U S T R I A L Q COMMERCIAL
No. of Failures
Thousands

Liabilities
Millions of Dollars

S o u rc e s of d a ta : Dun and B ro d s tre e t , In c., e xcept for 4th q u orte r which woe
estim ated on b a sis of Dun and B ra d stre e t data on follu re s os r e p o rte d w eekly

the number of mortalities is increasing rapidly and is an
indication that the unusually favorable business milieu
of the post-war period is rapidly becoming history.
It should be noted that the rate of failures through the
third quarter of 1947 grew at a faster pace in the District
than in the United States. This was due largely to a rela­
tively higher rate of retail failures in the Fifth District.
Similarly, the percentage increase during the first nine
months of 1947 in liabilities of failed firms was much
greater in the District than it was throughout the United
States. In the Fifth District the number of failures in the
third quarter of 1947, on an annual basis, were 28 per
cent of the 1939 total, while for the country as a whole
they were but 24 per cent of the 1939 figure. With re­
spect to the liabilities of failed enterprises the reverse
relationship held; that is, liabilities throughout the coun­
try in the third quarter, expressed on an annual basis, had
climbed to 136 per cent of the 1939 total while liabilities
of failed firms in this District for the same period were
115 per cent of the 1939 amount.
In view of the relatively small number of failures, the
amount of current liabilities involved appears to be very
large. It should be recognized, however, that an impor­
tant factor here is the large rise in prices since 1939. In
an article in the December 1947 issue of the Survey of
Current Business (U . S. Department of Commerce) it
was estimated that when rough correction is made for
this factor, the annual rate of current liabilities o f failed
firms in the last half of 1947 is at least 30 per cent less
than it was in 1939.

by The Jo u rn o l of C o m m e rc e .

C hart It

FAILURES

Number and Current Liabilities of Failures in the
Fifth District
In 1939 575 enterprises failed in the Fifth Federal
Reserve District. During 1946 only 26 businesses had to
close their doors with resulting losses to creditors. In the
intervening years failure experience in the District was
similar to that of the country as a whole with the excep­
tion that whereas the trend of failures in the United
States continued downward to a low in 1945, the bottom
level was reached in the District in 1944 and an upward
trend established during 1945. In the latter year, how­
ever, District failures were, as shown in chart II, still at
negligible levels, amounting to only 21. Similarly, cur­
rent liabilities of failed concerns were low relative to pre­
war levels but were double the amount involved in 1944
due mainly to the failure during 1945 of a construction
company with $750,000 of current liabilities— 46 per
cent of the total of all failed concerns in the District.
During 1946 the number of failed concerns increased
to 26, but the current liabilities of these firms were less
than half the amount of the preceding year. However,
1947 witnessed a very sharp rise in the rate of failures
and liabilities in the District. From an annual rate of 32
failures in the final quarter of 1946 there was an increase
to 84 in the first quarter of 1947, to 100 during the second
quarter, and to 160 for the third quarter, the latest period
for which District data are available. Thus, although the
current rate is still well below that of the pre-war period,




IN THE

INDUSTRIAL

3

FIFTH

DISTRICT

COMMERCIAL

No. of Failures
Number

Liabilities
Millions of'Dollars

600
500
400
300
200

100

0

1940
S o u rc e

1942

1944

1946

of d a t a t Dun’ s S ta t is t ic a l Review.

Failures by Industrial Groups
During 1946 the largest rise in failures in the United
States occurred in manufacturing, and for the first time
in our history failures in this field outnumbered those in
retail activities. Thus, whereas prior to the war less than
20 per cent of all failures were accounted for by manu­
facturing concerns, in 1946 manufacturing was responsi­
ble for 41 per cent of the total defaults. Within this di­
vision of industry, and reflecting largely the difficulties
of reconversion, failures were heaviest in machinery and

T T
8

MONTHLY REVIEW

JANUARY 1948

transportation equipment businesses, accounting together
for over half the total losses involved in manufacturing
failures.
Another unusual trend was the continuation in the
country generally of the relatively small number of fail­
ures in retail trade. The 304 failures in this group consti­
tuted about one-fourth o f all failures in 1946 as com­
pared with over 60 per cent prior to the war. Although
failures in wholesale trade showed the second sharpest
rise during 1946, they accounted for a smaller proportion
of total failures than was characteristic of the pre-war
period.
During the first six months of 1947, failure experience
continued to be dominated by the relatively greater fre­
quency of failures among manufacturing concerns than
was the case prior to 1945. Although the percentage of
total failures accounted for by manufacturing fell off
slightly during the first two quarters of 1947, the propor­
tion of total current liabilities ascribed to manufacturing
concerns rose to over 70 per cent during the second quar­
ter. In the third quarter, the latest for which such in­
formation is available, both the number of manufactur­
ing failures and the current liabilities involved declined,
the latter falling off sharply to account for only 47 per
cent of current liabilities of all failed firms. This is still,
of course, a relatively high concentration and accounts in
large part for the prevailing high level of current liabili­
ties. As is shown in table I average current liabilities of
manufacturing failures greatly exceed, by reason of the
larger scale of operations, the comparable figure com­
puted for all industry. When we take into consideration
also the growth in the average scale of operations o f most
other businesses and the sharp rise in prices since the
end of the war, we have a substantial explanation of the
tremendous rise in current liabilities of failed enterprises
during the past year to the point where the losses of the
average failure have reached the highest point in our
history.
Table I
NUMBER AND AVERAGE CURRENT LIABILITIES OF FAILURES
IN MANUFACTURING COMPARED WITH ALL INDUSTRIES
1939 to September 1947
Average current liabilities of
failures per firm _____
No. of failures in
mfg. as % of all
All industries
Manufacturing
failures
($0 0 0 )
($0 0 0 )
U- S.

Fifth
Dist.

U. S.

Fifth
Dist.

U. S.

Fifth
Dist.

1939
24
19.8*
13.9
26
12
11
1940
18.0
12.7
14
23
48
12
107
1945
32.5
23.8
38
78
56
1946
40.0
22
83
19.2
62
48
1947: Jan.-Mar.
113
38.0
23.8
63
59
111
Apr.-June 38.9
100
1 2 .0
56
37
49
103
July-Sept. 34.5
12.5
71
46
95
Jan.-Sept. 37.5
93
15.1
63
46
102
♦Including mining.
Sources: Survey of Current Business, Dec. 1947 and Dun & Bradstreet.

One o f the outstanding developments during 1947 was
the heavy mortality among manufacturers of machinery.
An increasing rate of failure in this industry had ap­
peared in 1945 and was continued during 1946 when a
total of 128 firms failed with current liabilities of $11
million, but this rate was stepped up sharply during the
past year, reaching an all-time peak in May with 38 fail­
ures. For the first three quarters of 1947 such failures
totaled 215 and involved current liabilities amounting to



$29 million— 67 per cent greater than the f ull-year total
in 1946. Here again is another reason for the sharp rise
in total current liabilities of all failed firms inasmuch as
the average amount of current liabilities of failed ma­
chinery manufacturers during the first three quarters of
1947 was $136,000 as compared with $63,000 for all in­
dustry.
Failures of retail firms during 1947 continued at a low
level, relative to pre-war standards, notwithstanding sub­
stantial increases in such failures from the 1946 level.
The unique situation that had held during 1946 and the
first half of 1947 of a larger number of failures in manu­
facturing than in retail trade was reversed during the
third quarter of 1947 when the number of failures in the
latter field exceeded slightly the number in manufactur­
ing. The amount o f current liabilities involved in failures
of retail firms during the first nine months of 1947, ex­
pressed as a per cent of current liabilities of all failed
businesses, rose slightly from 9 per cent in 1946 to 10
per cent, still far below the 1939 distribution of 37 per
cent.
Another development in the 1947 history of business
failures that might be noted was the tremendous rise in
current liabilities of failed firms in the field of commer­
cial service during the third quarter of the year. From
an average of a little over $2 million during the first two
quarters of the year current liabilities of failed firms in
this field swelled to over $21 million in the third quarter.
This was due to the failure during July of three trans­
portation companies in New York with current assets
totaling over $19 million.
When we turn to the business experience of the Fifth
District during 1947 we note that the outstanding de­
velopment in the increasing trend of failures was the
tendency for the distribution of current liabilities to
more closely approximate the pre-war pattern, as re­
flected by 1939 data, than was the case for the country
as a whole. For example, current liabilities of manufac­
turing firms that failed in the District during 1946
amounted to 41 per cent of current liabilities of all fail­
ures; for the first three quarters of 1947 this proportion
declined to 30 per cent thus moving closer to the 1939
distribution of 33 per cent. A similar movement occurred
in the retail trade area. Here current liabilities, again ex­
pressed as a per cent of current liabilities of all failures,
rose from 32 per cent in 1946 to 46 per cent in the first
nine months of 1947 to more closely approximate the
1939 figure of 42 per cent.
Table II
NUMBER AND CURRENT LIABILITIES OF FAILURES
BY INDUSTRIAL GROUPS IN FIFTH DISTRICT
January-September, 1947
Number
Mining and manufacturing
Wholesale trade
Retail trade
Construction
Commercial service
Total
Source: Dun & Bradstreet

Current liabilities

13

$1,214,000
266,000
1,841,000
260,000
410,000
$3,991,000*

8

49
7
9
86

It will be noted that these developments in the Fifth
District during 1947 were the reverse of the trends in
the entire country. There current liabilities of failed
manufacturing firms rose from 55 per cent of current

9

FEDERAL RESERVE BANK OF RICHMOND

liabilities of all failures in 1946 to 61 per cent in the first
three quarters of 1947. Thus, manufacturing failures
continued to dominate the trend of losses arising from
all failures despite the equivalence achieved during the
third quarter in the number of manufacturing and retail
failures.
Breakdown by Fifth District States
As might be expected, there is apparently no logical
pattern of distribution of failures among the states of
this District for the first nine months of 1947. As shown
in table III, Virginia suffered the greatest number of fail­
ures with 25. Although North Carolina had only one less
failure, current liabilities of the 24 concerns involved
were almost three times as large as those of the Virginia
enterprises and comprised the largest total of all the
states. Maryland had an enviable record of only two
failures with current liabilities of only $37,000. This is
a surprising performance in view of the sharp rise in the
rate of failures during the past year for the entire coun­
try.
Table III
NUMBER AND CURRENT LIABILITIES OP FAILURES
IN STATES OF FIFTH FEDERAL RESERVE DISTRICT
January-September, 1947
Current liabilities
Number

Total

Average
per firm

$ 18,500
$ 37,000
2
Maryland
59,154
769.000
13
District of Columbia
20,360
25
509.000
Virginia
20,733
311.000
15
West Virginia*
24
1,460,000
60,833
North Carolina
920.000
131,430
7
South Carolina
♦Includes 6 counties (with at least one failure of $15,000) not in District.
Note: A breakdown by industries on a state basis is not available.
Source: Dun & Bradstreet

It will be noted that average current liabilities per
failure were highest in South Carolina. This was due to
the occurrence of two failures during July with current
liabilities o f $745,000. Similarly, a few large failures ac­
counted for the high rate of average current liabilities in
North Carolina and in the District of Columbia. In the
former, three failures during March accounted for $570,000 or 39 per cent of the total current liabilities of all
failures in this state during the 9-month period. During
July four failures were recorded that involved current
liabilities totaling $454,000. The average in the District
of Columbia was influenced principally by two relatively
large failures in January with current liabilities of $321,000 and by two retail failures in April with current lia­
bilities o f $276,000.
Conclusion
The foregoing notes contain some implications with
respect to future trends of business failures that might
be considered briefly. By June of 1946 the bulk of the
deficit of firms in operation stemming from the net ex­
cess of discontinuances o f the war period had been
erased. By the end of the year it may be assumed that
the basic peace-time patterns of the business enterprise
structure had been generally reestablished. It may be ex­
pected, then, that the heavy rate of entries of new busi­
ness firms during the last half of 1946 and through 1947
will be reflected in a sharply rising trend of failures from
now on.
Furthermore, it is likely that the need for new con­
cerns has been over-met in certain fields. For example,



there has been a flood of newly established firms in the
appliances and radio business since the end of the war.
In fact, this line ranked first in the retail division in rate
of new concerns in 1944 and in 1945 and second during
the first half of 1946. As long as this business was char­
acterized by a tremendous backlog of deferred demands,
new concerns could be absorbed with relatively low
risks, but as the sellers’ market began to decline and the
more urgent demands were satisfied, new firms began to
find out that there was more to the business than merely
opening their doors and ringing up sales. This is borne
out by the shift of appliances and radio dealers in the
rank of business discontinuances in retail trade from
fifth place in 1945 to first place during the first six
months of 1946.
The same thing may be said of certain lines in manu­
facturing. O f all manufacturing industries, machinery,
other than electrical, ranked first in 1944 in rate of entry
of new firms. In 1946 and again in 1947 this industry
ranked first among manufacturing industries in rate of
failures. The relatively high rate of manufacturing fail­
ures during 1947 stemmed largely from the high rate of
entries; it may be expected that this factor, augmented
by less favorable business conditions in general than have
prevailed to date, will continue to produce a high level
of manufacturing failures.
In summary, it has been pointed out that the sharp in­
crease in the number of failures during the past year was
a consequence for the most part of the rapid expansion
in the number o f firms in operation during the post-war
period rather than a result of adverse business condi­
tions. In fact, failures have remained relatively low be­
cause of favorable business conditions of a high level
of demand supported by progressively rising prices.
There are numerous indications that less favorable con­
ditions are now prevailing and will become progressively
marked over the course of the current year. Reports
from the field indicate that marginal businesses in many
lines are becoming over-extended financially and finding
it increasingly difficult to raise funds and to maintain
earlier rates of sales and collections. With break-even
points in general at very high levels, even a gradual de­
terioration in business conditions will result in a marked
acceleration of the presently increasing rate of business
failures.
It should be pointed out also that in view of the very
large number of new concerns and inexperienced extrepreneurs in business, the effects of reductions in general
demand are likely to produce a higher proportion of fail­
ures than would be indicated by the pre-war relationship
between reductions in gross output of goods and services
and business failures.
Finally, in view of the relatively large expansion of
business and industry in this District during the war
years and the probability (tested affirmatively in a re­
cent survey by the Department of Commerce) that the
average life span of business firms in the South is some­
what shorter than it is in the country as a whole, there is
a possibility that a downturn in business activity and a
reduction in personal incomes would be accompanied by
a higher rate of failures in southern states than the aver­
age for the country.
1
0

MONTHLY REVIEW

JANUARY 1948

FEDERAL RESERVE BANK OF RICHMOND
(All Figures in Thousands)
Chg. in Amt. From
Jan. 14,
1 -15-47
12 1-17-47
1948
ITEMS
— 42,196
Total Gold Reserves.................. ........... $1,072,931
+ 9,720
25,415
Other Reserves .......................... ...........
+ 10,203 — 2,198
Total Reserves ...................... ........... 1,098,346 — 31,993
+ 7,522
554 — 2,740
7,099
Bills Discounted ........................ ............
+
22
12
—
22
Industrial Advances ................ ...........
+
Gov. Securities, Total................ ........... 1,422,013
+ 8,560
+ 47,414
+ 173,020
Bonds ...................................... ........... 219,512
+ :L17,612
10,273
97,283
Notes ...................................... ...........
+ 75,357
Certificates ............................. ........... 405,053 — 95,046 — 50,404
189,413
Bills ........................................ ............ 700,165
+ 35,121
Total Bills & Securities............. ........... 1,429,134
+ 5,842
+ 47,956
Uncollected Items .................... ........... 257,146 — 94,991
+ 35,377
38,480
Other Assets ........................... ...........
+ 16,244 — 8,805
Total Assets....................................... 2,823,106 — 62,784
+ 39,936
Fed. Res. Notes in Cir................ ........... $1,710,329
Deposits, Total .......................... ........... 866,341
Members' Reserves............................ 774,966
67,267
U. S. Treas. Gen. Acc.......... ...........
18,453
Foreign ...............................................
5,655
Other Deposits ...................... ...........
Def. Availability Items............. ........... 210,087
988
Other Liabilities ........................ ..........
35,361
Capital Accounts........................ ...........
Total Liabilities .................... ........... 2,823,106

47,662
+ 47,492
16,561
+
+ 28,987
1,583
+ 3,527
— 61,448
—
322
—
844
— 62,784
—

42,505
+ 52,863
+ 36,394
+ 30,436
15,680
+ 1,713
+ 28,041
268
+
+ 1,269
+ 39,936

—

CONDITION OF REPORTING MEMBER BANKS—5th DISTRICT
(All Figures in Thousands)
Jan. 14,
Chg. in Amt. From
1 -15-47
1948
12 -17-47
+ 323,561
Total Loans .....................................
$ 801,693
+ 5,158
+ 138,325
2,809
386,659
Bus. & Agri..................................
173,909
Real Estate Loans........................
+ 5,868
+ 93,906
2,099
241,125
All Other Loans..........................
+
+ 91,330
+ 355,825
Total Security Holdings..................
1,780,032 — 14,341
29,685
U. S. Treasury Bills ....................
+ 8,629
+ 8,720
155,979 — 6,773 — 37,746
U. S. Treasury Certificates .........
728
109,202
U. S. Treasury Notes ..................
+
+ 17,968
17,828
+ 331,342
1,365,111
U. S. Gov. Bonds..........................
812
Other Bonds, Stocks & Sec........
120,055
+
+ 35,632
Cash Items in Process of Col.........
224,818 — 20,382
+ 67,027
217,184* 4- 30,913
Due frcm Banks..............................
+ 68,995
66,337 — 3,091
Currency & Coin.............................
+ 25,133
+ 164,173
515,669
Reserve with F. R. Bank...............
+ 9,426
676 — 20,099
52,605
Other Assets ...................................
+
+ 984,615
3,658,336
T 3 tal Assets ............................. .
+ 8,359
$2,813,787
Total Demand Deposits..................
Deposits of Individuals ...............
2,119,237
33,993
Deposits of U. S. Gov..................
170,418
Deposits of State & Local Gov.....
Deposits of Banks ........................
442,481*
47,658
Certified & Officers’ Checks.......
Total Time Deposits........................
607,299
587,535
Deposits of Individuals................
19,764
Other Time Deposits.....................
1,500
Liabilities for Borrowed Money. .
All Other Liabilities.........................
24,921
210,829
Capital Accounts ............................
3,658,336
Total Liabilities ...........................
*Net figures, reciprocal balances being eliminated.

__

374
+ 15,161
+ 5,133
8,783
— 6,681
— 5,204
+ 3,402
+ 3,446
44
— 700
+ 6,285
— 254
+ 8,359

+ 774,275
+ 684,921
— 27,546
+ 56,541
+ 45,843
+ 14,516
+ 214,170
+ 211,608
+ 2,562
+ 1 ,000
— 67,713
+ 62,883
+ 984,615

CONSTRUCTION CONTRACTS AWARDED
% Chg.
% Chg.
Nov.
from
from
STATES
1947
Nov. 1946 11 mos. '47 11 moa. *46
— 10
— 6
$252,273,000
Maryland .................
$21,234,000
+ 23
Dist. of Columbia.....
+ 51
70,300,000
5,838,000
176,910,000
Virginia ......... ......... ...... 13,485,000
+ 56
+ 1
— 4
61,695,000
— 7
West Virginia .........
2,582,000
+ 96
151,480,000
— 11
19,872,000
No. Carolina ...........
So. Carolina............. ......... 7,035,000
— 57
59,339,000
— 47
$70,046,000
— 11
Fifth District .....
+ 12
$771,997,000
Source: F. W. Dodge Corp.

DEBITS TO INDIVIDUAL ACCOUNTS
omitted)
% Chg.
from
Dec.
1947
Dec. 1946

(0 0 0

District of Columbia
Washington ..................... $ 774,374
Maryland
Baltimore ......................... 1,078,157
24,460
Cumberland .....................
Frederick .........................
19,726
Hagerstown .....................
27,821
North Carolina
Asheville ...........................
55,769
241,716
Charlotte .........................
107,071
84,270
Greensboro .......................
Kinston .............................
14,477
112,173
Wilmington .....................
33,994
Wilson ..............................
21,307
Winston-Salem ................
132,478
South Carolina
Charleston .........................
58,957
Columbia .........................
94,920
Greenville .........................
84,030
55,104
Spartanburg.....................
Virginia
Charlottesville .................
26,072
Danville ...........................
38,126
Lynchburg .......................
44,151
Newport News ................
32,875
199,052
Norfolk ............................
22,534
Portsmouth .....................
503,101
Richmond .........................
94,009
West Virginia
Biuefield ..........................
51,681
Charleston .......................
167,916
Clarksburg .......................
38,882
Huntington .....................
67,403
Parkersburg .....................
28,676

% Chg.
from
mos.
1947 12 mos. *46

12

+ 3

$ 7,915,705

+ 15
+ 9
+ 10
+ 9

10,784,552
253,050
217,636
296,911

+ 9
+ 9

+ 17
+ 12
+ 13
+ 37
— 16
+ 19
+ 5
+ 3
+ 15

548,006
2,466,286
1,344,661
776,135
201,113
1,204,977
402,734
277,105
1,412,985

+ 15
+ 14
+ 6
+ 19
+ 30
+ 3
+ 6
+ 18

— 5
+ 9
+ 25
+ 37

607,191
1,002,721
848,335
514,338

+ 14
+ 20
+ 23

+
+
+
+
+
+
+
+

254,657
363,933
426,193
358,908
1,968,549
224,876
5,010,289
912,811

— 4
+ 9
+ 16
+ 22
+ 18
+ 8
+ 6
+ 16

+
+
+
+
+
+

District Totals.....................$ 4,335,282

7
21

18

10

16
15
12

17
41
19
27
22
11

13

446,224
1,484,254
344,931
600,165
302,693
$43,772,924

+

6

+20
+ 10

0

0

+
+
+
+
+

24
15
15
17

+

11

22

COTTON CONSUMPTION AND ON HAND—BALES

Fifth District States:
Cotton consumed ..............
Cotton Growing States:
Cotton consumed ..............
Cotton on hand Dec. 31 in
consuming establishments..
storage and compresses....
United States:
Cotton consumed ..............
Cotton on hand Dec. 31 in
consuming establishments..
storage and compresses ,
Spindles active, U. S.............

Dec.
1947

Dec.
1946

Aug. 1 to Dec. 31
1946
1947

371,610

360,888

1,902,800 2,029,300

660,391

672,693

3,324,430

3,730,574

776,350 3,777,169

4,263,419

1,855,897 1,899,210
5,420,555 5,917,463
753,406

2,153,547 2,230,258
5,478,623 5,984,417
21,412
21,691

COTTON CONSUMPTION—FIFTH DISTRICT
In Bales
MONTHS
N. Carolina S. Carolina
Va.
December 1947........... .......... 196,467
158,766
16,377
November 1947..................... 205,608
157,827
17,862
December 1946..................... 186,987
156,384
17,517
12 Months 1947................... 2,495,208
1,987,307
216,248
12 Months 1946................... 2,539,177
1,924,562
211,807

Dist.
371,610
381,297
360,888
4,698,763
4,675,546

Source: Dept, of Commerce
PRICES OF UNFINISHED COTTON TEXTILES

Average, 17 constructions
Printcloths, Average ( 6 ) ......
Sheetings, average (3)...........
Twill (1) ...............................
Drills, average (4)................
Sateen ( 1 ) ................. ...........
Ducks, average (2)................

.
..

Dec.
1947
95.88
134.78
80.23
79.86
69.36
97.61
62.88

Nov.
1947
92.76
131.59
75.73
79.86
64.74
97.61
61.91

Dec.
1946
79.66
96.72
70.64
75.61
65.90
97.61
62.54

COMMERCIAL FAILURES
Number Failures
Total Liabilities
Dist.
District
MONTHS
U.S.
U.S.
December 1947..............
$ 25,499,000
15
317
$ 165,000
17
November 1947..............
313
392,000
16,345,000
141
175,000
December 1946..............
2
17,105,000
3,476
12 Months 1947............
123
$4,639,000
$221,048,000
1,130
579,000
70,348,000
12 Months 1946............
26

Note: The above prices are those for the approximate quantities of cloth
obtainable from a pound of cotton with adjustments for salable
waste.

Source: Dun and Bradstreet

Total Deposits ......... ..........




DEPOSITS IN MUTUAL SAVINGS BANK
8 Baltimore Banks

r 11 1

Dec. 31, 1947
$389,933,193

Nov. 30, 1947
$388,799,340

Dec. 31, 1946
$379,018,153

FEDERAL RESERVE BANK OF RICHMOND

BUILDING PERMIT FIGURES
Dec. Valuation Figures
1946
1947
Maryland
Baltimore ................$ 3,318,360 $ 1,905,585
,
68,575
Cumberland ............
42,450
32,525
Frederick ................
48,075
40,880
Hagerstown ............
63,545
66,193
Salisbury .................
236,365
Virginia
210,175
Danville ...................
302,602
52,080
162,642
Lynchburg ..............
190,400
Norfolk ...................
579,010
16,600
Petersburg ..............
103,409
10,462
Portsmouth ............
32,759
648,658
Richmond ................ 2,481,782
504,893
Roanoke ..................
496,548
West Virginia
Charleston ..............
415,205
158,483
Clarksburg ..............
39,638
47,245
Huntington ..............
167,587
113,025
North Carolina
Asheville .................
86,060
277,171
Charlotte ..................
882,435
470,610
431,900
200,450
Durham ...................
Greensboro .............. i 886,297
745,315
High Point ..............
335,780
164,945
Raleigh ...................
233,784
153,300
Rocky Mount ..........
133,300
119,850
58,800
23,700
Salisbury .................
Winston-Salem ....... 1,357,623
193,466
South Carolina
118,523
66,307
Charleston ................
Columbia ................
295,705
415,490
Greenville ................
83,200
37,850
342,099
28,535
Spartanburg ..........
District of Columbia
Washington ............
4,348,109
2,385,339

WHOLESALE TRADE—199 FIRMS

Annual Valuation Figures
1947
1946
$ 45,186,665 $ 50,121,905
610,893
998,005
509,694
967,235
1,700,264
2,045,977
1,486,157
1,853,288
4,112,696
3,483,134
15,639,415
2,064,529
1,332,171
16,343,053
7,468,255

3,324,018
1,315,873
3,289,114

2,858,017
10,495,106
5,611,382
8,614,211
2,802,826
5.442.416
2,152,250
1,009,639
6,046,547

1,630,379
9,302,240
4,355,090
3,635,625
2,382,648
3,201,931
1,669,775
1,256,369
2,959,850

1,878,336
5,193,736
1,880,365
1,887,631

1,546,541
2,509,993
1,309,495
1,448,554

51,028,309

LIN ES

2,055,448
2,339,442
4,904,365
740,257
1,520,521
16,555,355
5,532,382

6,565,972
1,457,750
4.663.416

40,016,093

Miscellaneous (76)* ....
District Avg. (199)*
Source: Dept, of Commerce
♦Number of reporting firms.

RETAIL FURNITURE SALES
Percentage changes in Dec. and 12 mos. 1947
__
Compared with Compared with
STATES
Dec. 1946
12 mos. '46
Maryland (5)* ............................
-{-2 2
+ 12
Dist. of Columbia ( 6 )*..............
+ 12
— 1
Virginia (18)* .............................
-j- 2 0
+13
-j-36
+11
West Virginia ( 1 0 )*...................
North Carolina (15)*..................
+13
+15
South Carolina ( 1 0 )*.................
+25
+16
+20
+10
Fifth District (64)*...............
Individual Cities
Baltimore, Md., (5)*..................
+22
+12
Washington, D. C. ( 6 )*..............
+12
__ 1
Richmond, Va., ( 6 )*...................
+19
+14
Charleston, W. Va. (3)*............
+43
+ 2
Charlotte, N. C., (4)*..............
+13
+14
Columbia, S. C., (3)*..................
— 15
+ 2

District Totals ...... $18,083,592 $10,338,107 : $221,082,332 $173,230,271
SOFT COAL PRODUCTION IN THOUSANDS OF TONS
Dec.
1947
REGIONS
14,631
West Virginia........
Virginia .................. 1,912
155
Maryland ................
Fifth District ..... 16,698
United States ..... 55,368
30.2
% in District.......

Dec.
1946
10,844
1 ,2 2 1

190
12,255
42,320
29.0

%

Chg.
+ 35
+ 57
— 19
+ 36
+ 31

mos.
1946
139,894
16,556
2,048
158,498
528,790
30.0

mos.
1947
169,031
20,260
1,951
191,242
618,760
30.9

12

12

♦Number of reporting stores

%
Chg.
+21
+ 22

DEPARTMENT STORE TRADE

— 5
+21

Richm ond

+ 17

Dec.
1947
Smoking & Chewing tobacco
13,169
(Thousands of lbs.).........
Cigarettes (Thousands) .......24,798,714
446,719
Cigars (Thousands)
2,514
Snuff (Thousands of lbs.)....

— 8
+ 9
— 4
— 23

mos.
from
1947 12 mos. ’46

12

199,231
335,963,594
5,624,763
39,279




Other Cities

District

Percentage chg. in stocks on Dec. 31, '47, compared with Dec. 31, *46:
*
+ 6
— 5
+ 9
— 1

— 6
+ 5
— 4
— 1

Percentage chg. in outstand’g orders Dec. 31, ' 4 7 , from Dec. 31, '46:
*
— 1
+26
+ 5
+ 2
Percentage chg. in receivables Dec. 31, 1947, from those on Dec. 31, 1946:
*
+19
+29
+21
+24

AUCTION TOBACCO MARKETING

STATES
No. Carolina (Flue-cured) ..
(Burley) .....
Virginia (Flue-cured) .......
(Fire-cured) .......
(Burley) ............
(Sun-cured) .......
District Total, December....
S. C. entire season.... V .......
N. C. season to 12-31........
Va. season to 12-31............
District, season to 12-31....

W ashintogn

Percentage change in 12 mos. sales 1947, compared with 12 mos. in 1946 :
+ 10
+ 3
+ 4
+ 2
+ 5

% Chg.

from
Dec. 1946

B altim ore

Percentage chg. in Dec. 1847 sales, compared with sales in Dec. 1946:
+ 20
+10
+ 14
+12
+14

TOBACCO MANUFACTURING
% Chg.

Net Sales
Stock
Ratio Dec.
Dec. 1947
Dec. 31, 1947
collections
compared with
compared with
to acc’ ts
Nov. Dec. 31 Nov. 30 outstand'g
Dec.
1946
1947
1946
1947
Dec. 1
0
+ 19
+38
98
+ 6
— 3
+ 2
125
+ 11
+ 11
+ 12
— 25
+ 38
88
+ 3
+ 64
+ 45
109
+ 6
+ 5
— 7
— 1
+ 12
+ 7
169
+ 27
— 4
+ 86
+ 13
97
+ 64
— 2
+ 36
— 1
100
—- 3
+ 24
97
+ 3
— 4
— *5
167
+10
+ 28
0
+ 7
105
+ 1
— 2
+ 14
+ 31
114
+ 1

Price per
Producers’ Tobacco Sales, Lbs.
Hundred
Dec. 1947
Dec. 1946
1947
1946
32,004,621
............ $35.99
............
8,014,387
5,534,674
42.50 $40.71
18,239,878
............ 35.07
..............
3,359,498
2,471,020
27.53
31.53
8,515,671
6,374,076
46.30
39.74
546,558
435,306
26.81
28.42
70,680,613
14,815,076
37.26
38.40
133,593,928
150,954,510
41.78
48.74
877,042,030
835,821,417
42.48
50.68
148,256,273
133,387,595
39.46
47.05
1,158,892,231 1,120,163,522
42.01
49.99

Percentage of
*

current receivables as of Dec.
47
41

1

collected in December:
51
45

^Percentage of instalment receivables as of Dec.
*
30
30

1

collected in December:
35
30

Maryland

N. Carolina

Dist.of Col.

Virginia

W. Virginia

S. Carolina

Percentage chg. in Dec. 1947 sales from Dec. 1946 sales by States:
+ 10
+14
+18
+20
+12
+14
Percentage change in 12 mos. sales 1947 from 12 mos. sales 1946:
+ 8
+ 8
+ 5
+ 3
+ 3________ + 4

r 1 21

♦Data not yet available.

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