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V^SST J A N
FEDERAL RESERVE BANK
1
/
OF RIC
ary 1953
26
19 5 S
Federal Reserve Bank of Richmond
F
BANK
if t h
D
is t r ic t
T
r e n d s
COTTON CONSUMPTION
DEBITS
November witnessed the first sizable drop in adjusted indexes of
bank debits, with a decline of 5 % from October. Debits in N ovem
ber were at the same level as November 1951.
The drop was ac
companied by a similar drop in department and furniture store sales.
Cotton consumed in the mills of the District during November on
an adjusted basis was down 1 % from October but 6 % ahead o f a
year ago. A s a result of a loss of tire cord business to rayon, cot
ton consumption does not indicate the extent to which the industry
has recovered. Loom operations are on a full time basis.
— •—
— • -..—
DEPARTMENT
BITUMINOUS COAL PRODUCTION
STORE SALES
Novem ber’s adjusted output was up 4 4 % from the strike-ridden
month o f October, but the m onth’s output failed by 11% to equal
that of November 1951.
Outlook for domestic consumption is im
proved but the export outlook is poor.
Adverse weather conditions were in large part responsible for a
5 % , seasonally adjusted, drop in department store sales from Octo
ber to November and for the 4 % drop below a year ago. A s a con
sequence, inventories at the end of November were up 2 % from Oc
tober on an adjusted basis to 7 % ahead of a year ago.
D epartmentally, the decline was general.
BUSINESS FAILURES
LIFE INSURANCE SALES
Failures rose 1 8 % in November as compared with October but
were 5 % under November 1951.
The level of failures continues
extraordinarily low by historical comparison, and the November rise
is not particularly significant.
Much the same influence that caused a reduction in trade levels
was responsible for an adjusted drop of 4 % in sales o f life insurance
during November, but relative to a year ago these sales were up
9% .
This indicates that a strong inducement still exists to adjust
life insurance protection to the high price level.
-{ s- 1-
January 1953
The Aircraft Industry in the Fifth District
ducing aircraft parts and specialized equipment, such as
electrical apparatus, sub-assemblies of various kinds, and
radar and other electronic equipment. For the most
part, these plants serve as suppliers and subcontractors
for the twro large aircraft companies in Maryland as wrell
as for similar plants outside the District.
A major problem is that of devising ways of en
abling aircraft companies to develop airframes and en
gine models concomitantly with scheduling production
for a greatly expanded output. T w o techniques were
employed during W orld W ar II that drew on personnel
and facilities of outside industrial plants: subcontract
ing, in which the manufacture of parts and sub-assem
blies was let out to outside companies, and licensing,
under which an outside firm undertook the responsibility
for making a complete unit, such as an airframe or
engine. Licensing agreements were particularly im
portant in the engine field, accounting for almost onehalf of the total horsepowrer output, while subcontract
ing accounted for about 30% of the total airframe weight
production of the war.
A t present the District’s twro large aircraft makers are
relieving the pressure of rapid expansion by placing
orders writh almost 1,000 suppliers and subcontractors
located in the Fifth District, principally in Maryland, as
well as with a much larger number located outside this
area. Comparatively fewT of the major suppliers for
the two companies are located in the District— in large
part a consequence of the restricted nature of the Dis
trict’s durable-goods manufacturing structure.
h e war baby of just a fewT years ago has reached
the full stature of an industrial giant. Growing at
a faster clip than any other major industry, the aircraft
plants of the nation are employing about 700,000 per
sons— far more than the postwar low of 225,000 in
1948 and almost 25% more than just a year ago. By
next Spring aircraft and parts producers will have close
to 800,000 people on their payrolls and may reach the
million mark by the close of the year.
Automobile manufacturing is, in fact, the only single
industry now employing more workers than aircraft.
Apart from steel works, blast furnaces, and rolling mills,
which together employ about the same number as air
craft, no other individual industry within the major
manufacturing groups— food, chemicals, textiles, ma
chinery, and the like— is furnishing employment to as
many workers as aircraft and parts.
The production of aircraft is less important in the
economy of the Fifth District than in the nation’s, since
over the nation roughly one out of every 25 manufactur
ing employees is currently employed by aircraft and
parts manufacturers while in this five-state District only
about one in every 40 manufacturing employees is sim
ilarly employed. The comparison does not belittle the
importance of aircraft manufacture in this District. A l
though the large number of aircraft and parts subcon
tractors, suppliers, and specialized equipment makers
precludes an accurate count of the number of workers
in the District’s aircraft industry, it is likely that the
total is at least 45,000. This exceeds, for example, Dis
trict employment by cigarette manufactures, paper mills,
fabricated metal products companies, or the machinery
industry.
Although the Fifth District is not marked by the
heavy concentration of aircraft producing plants found
on the Pacific Coast and Long Island, its tw^o large
plants, Fairchild at Hagerstown and Martin at Balti
more, account for a sizable share of the nation’s aircraft
business.
It is estimated that their current output
amounts to around 8-9% of the total airframe business.
During the past year at least 90% of the two companies’
shipments was on Government orders. It is likely that
very soon practically 100% of their business will be with
Uncle Sam.
The last census of manufactures classified producers
of aircraft and component parts on the basis of their
major activity and divided them into four separate in
dustries : aircraft, aircraft engines, aircraft propellers,
and aircraft equipment. The industry in the Fifth Dis
trict, since the primary activity of the largest plants is
manufacturing airframes and assembling complete air
craft, falls into the first category. The rest of the "in
dustry” in the District, accounting for but a small per
centage of total aircraft employment, is engaged in pro
T
i
Push-Button Products
In September 1951 the A ir Force announced the for
mation of its first pilotless bomber squadron— to be
equipped initially with the Martin B-61 Matador. Selec
tion of the Martin weapon points up the leading posi
tion of the District industry in the expanding field of
special weapons— guided missiles, rockets (that reach
On the Cover
The photographs are reproduced through the
courtesy of Fairchild Engine and Airplane Corp.
and The Glenn L. Martin Co. Top row, left to right:
an English Electric-built Canberra jet bomber over
the Chesapeake Bay Bridge. Martin is building a
night intruder version o f this plane at its Baltimore
plant for the USAF. Fairchild’s Hagerstown plant
shortly after the start o f the USAF $7 million ex
pansion o f facilities for production of C-119 planes.
A pilotless b o m b e r, th e M a r tin B-61 M a ta d o r,
launched from its own mobile platform. Middle row:
Flying Boxcar on a test flight near the Fairchild
plant. Destination stratosphere: a high altitude
Martin Viking rocket taking off on a test flight. The
Martin P5M-1 Marlin anti-submarine seaplane. Bot
tom: Fairchild Packets at the final assembly stage
after passing along the production line shown in
photo to right.
3
y
Federal Reserve Bank of Richmond
altitudes of over 100 miles at maximum velocities of
more than 3,500 miles per hour), jet-propelled drones,
and electronic systems and devices of a bewildering
variety. The production of special weapons and elec
tronic gear has become, in the last two years, a major
enterprise of the two large Maryland companies, al
though actual missile production of one of the companies
is carried on at a special plant outside the District.
The vital part of electronics in the production of mod
ern aircraft has removed it from the category of aux
iliary equipment and has given it a status equal to that
of designing and building the aircraft itself. Navy night
fighters in W orld W ar II, for example, were equipped
with an intercept radar system that weighed 182 pounds,
cost $4,000, and contained 75 electronic tubes. Now,
Navy night fighters take off with a radar system that
weighs 650 pounds, costs $100,000, and requires 300
electronic tubes. It is obvious that electronics has been
undergoing a tremendous expansion, and it is a signifi
cant part of the description of the aircraft industry in
this District to note the leading positions held in this
field by local companies.
M u lti-M illio n Dollar Local Expenditures
The strength of the impact on the local, and state,
economy resulting from the operations of the aircraft
industry in this District is indicated by the estimate
that the two major plants at Hagerstown and Balti
more spent at least $130 million in Maryland during
the past year. In addition to this direct flow of funds
into local and state trade channels, an indirect flow of
income is generated within the same areas as a conse
quence of what is technically termed the “ employment
multiplier.” Changes in the employment rolls of local
industries selling the bulk of their output in other than
local markets are generally accompanied, with a lag, by
changes in employment in retail trade, residential con
struction, service industries, and other activities serving
primarily the local market. The increase in total em
ployment in the areas of the Martin and Fairchild plants
resulting from an increase of almost 80'7c in the aircraft
firms’ employment over the last three years has undoubt
edly added many dollars to the local income streams.
line, such as draftsmen, designers, engineers, and scien
tists, whose wages and salaries are higher than those
of production workers. It has been estimated that the
proportion of employees classified as other than “ pro
duction workers” to total employment in all durable
goods manufacturing industries has been about 1 to 6,
while in the aircraft industry it has been running better
than 1 to 4.
The Other Side of the Picture
Like everything else, the aircraft industry has un
favorable offsets to the advantages it affords commu
nities in which it is located. The principal disadvantage
to the locality is the risk of having too many eggs in
one basket, since it has been demonstrated that the bot
tom of the aircraft basket tends to drop out every now
and then. The memory of the drastic cancellations of
Government orders shortly after the close of W orld
W ar II and the large reduction of labor forces is still
a painful one to aircraft plant communities and pro
ducers. By the end of 1949 aircraft employment in
Maryland had fallen 62% under what it had been at
the close of 1943. Such severe fluctuations— upward
as well as downward— create problems even for large
metropolitan areas like Baltimore, but they play havoc
with a community the size of Hagerstown having a very
high proportion of its labor force employed by the air
craft company.
Fortunately, Government orders for Fairchild’s “ Fly
ing B oxcar” enabled the Hagerstown plant to avoid
curtailing postwar operations as much as most of the
industry and to retain its skilled personnel. Hence it
has not been faced with the substantial build-up that
has confronted other airframe companies since the out
break of the Korean W ar. It does have the common
difficulty of spot shortages of engineers, tool designers,
and other technicians, but it is in a much more favor
able position than during the early part of W orld W ar
II when it was building up from a small operation at
the terrific rate of growth imposed by an all-out war.
Not only does the aircraft industry, as an “ export"
industry selling its output in national and international
markets, contribute heavily to a favorable “ balance of
payments” for the areas of its location, but it is also
an industry which, with a relatively high ratio of skilled
production workers, pays relatively high wages. The
latest data show that average weekly earnings of aircraft
production workers amount to $79.84, as compared with
an average of $67.80 for all manufacturing industries
and $72.92 in all durable goods manufacturing estab
lishments.
The situation is much different with most large air
craft producers located in metropolitan areas, where
acute shortages of labor extend downward from engi
neers and skilled craftsmen to unskilled job classifica
tions. Having suffered large reductions in their labor
forces after W orld W ar II, many of these companies
had to start almost from scratch again in manning their
plants with sufficient workers to meet suddenly and
tremendously expanded orders. In one respect the la
bor problem is more difficult than it was during the
war. At the outset then there were substantial pools of
unemployed workers to be tapped— a much different
condition than the full employment that has marked
most of the postwar period.
The aircraft industry, moreover, employs a relatively
large number of persons not directly on the production
Turnover, although averaging slightly less than dur
ing the war, has been a delaying factor, as has the ab
January 1953
sence rate, now running as high as double the preKorea rate but still well under the W orld W ar II figure.
though its output had not reached the volume upon
which the policy was predicated.
Once again women are being hired in increasing num
bers, and at present they make up about one-fourth of
total aircraft employment in the District as compared
with almost one-third in 1943. The problem of rapidly
expanding the labor force has required the re-institu
tion of training programs for different classes of skills.
Refresher courses have been set up for new employees
with previous aircraft production experience. Special
training courses have been instituted to meet the de
mands of the great increase in the amount of electronic
installations in the latest aircraft models. All this re
quires the allocation of plant space and personnel other
wise devoted to production. Indicative of the size of
the programs is the fact that in 1951 the training schools
of one of the District plants processed more than 12,000
new employees.
Such problems, pointing up the great difficulty, or
seeming impossibility, of financing a fair proportion of
capital outlays and increased working capital require
ments from internal sources, must be considered also
against the background of the recent postwar period.
While most other industries were able to expand pro
duction facilities and maintain satisfactory current posi
tions, in part by drawing on retained earnings, the air
craft companies did not have this opportunity. Conse
quently they entered the present emergency without
adequate finances or facilities for handling a rapidly
expanding military business.
Aircraft companies have been forced, therefore, to
effect their current facilities expansion with assistance
from military agencies, a good part of which has taken
the form of facilities contracts and certificates of neces
sity. The action taken by Congress on the current A ir
Force budget providing for financing average lead time
of two years for aircraft manufacturing enabled the A ir
Force to extend to the industry a relatively firm basis
for scheduling production over the next few years.
A Plethora of Problems
The aircraft industry seems to be characterized by
contrary and conflicting situations and developments.
Consider, for example, the long period of time that
must elapse between initiation of a new model and its
quantity production. This “ lead time” may be as much
as seven years for combat planes. But once the green
light is given to the production lines, output rolls at
phenomenal speed. And well it must since the pro
ducers are given military production schedules to meet
that require the impossible in an impossibly short time.
Bank loans have been the other major source of funds
to the aircraft companies. In view of the instability of
the industry, its feast and famine experience, it would
be expected that the capital structures of the individual
companies would be models of conservatism, emphasiz
ing equity funds for permanent investment in fixed
assets and regular working capital. But efforts in this
direction in “ normal” times are badly upset in times of
emergencies. W orking capital needs become so great
that normal financing sources and facilities cannot meet
them, and long-run financial programs give way to
whatever expedient measures can be effected to enable
the producer to get on with the job. Little wonder is
it that so many aircraft companies fail to differentiate
between needs for facilities expansion and for working
capital. It would be difficult to think of an industry in
which capital budgeting poses more problems and faces
more vicissitudes than it does in the aircraft business.
Geared for mass production, which requires a high
degree of standardization and an uninterrupted flow of
production lines, the aircraft industry is none the less
subject to receiving changed specifications for models
in production and even cancellations of orders for ap
proved models because of new requirements of their
military customer.
Another troublesome set of factors includes the
lengthy lead time plus the high rate of obsolesence of
aircraft models and the requirements of continuing de
velopment and research. During the long period of
time that must elapse before quantity production of a
new model is achieved, millions of dollars are tied up
in inventories and expended for labor and other ex
penses. These outlays are based on subsequent largescale production of the model being evolved. This pro
duction may be curtailed abruptly by rapid obsolesence
due to new research developments or new requirements
in the field.
For the time being, however, risks of unemployment
and lack of business are not problems of the aircraft
industry. A t the beginning of 1952 aircraft companies
in this District had backlogs amounting to over $615
million, and it is likely that this did not include all the
orders that might be received under the $16 billion ap
propriated for aircraft procurement in fiscal year 1952.
Nor did it include any orders stemming from a similar
amount appropriated for the current fiscal year. Cur
rent backlog figures for the companies in the District
are not available, but it is reasonable to assume that
they are substantially in excess of the preceding amount.
It seems that the aircraft industry will almost certainly
be a major element of strength in the economies of
Baltimore and Hagerstown for the next few years.
There is still another angle to the problem of achiev
ing a high volume of production. It has been pointed
out that profit margins allowed under military contracts
are rationalized by procurement agencies on the basis
of high volume of production during the present re
armament program. According to one aircraft company
official, his company was affected by this policy even
5y
Federal Reserve Bank of Richmond
“Average” Fifth District Member Bank Reports
Loan/Assets Ratio Down
the sharp increase in the volume of loans
outstanding, loan portfolios of the “ average” Fifth
District member bank assumed a lesser importance rela
tive to assets in 1952. This seeming contradiction is
explained by three factors. First, total assets were
considerably higher in 1952 than in 1951, and only part
of the increase in assets went into loans. Second, loan
expansion was generally concentrated in larger banks,
which strongly influence the dollar totals but do not
influence figures of the “ average” bank any more than
the smaller banks do. Third, in order to approximate
asset distribution throughout the year, figures for the
“ average” bank were com
puted from averages of
year-end, m id -y e a r and
Fall call reports. Much of
the 1952 loan expansion
occurred after the Septem
ber 5 ca ll, and w as ex
cluded from computations
of “ average” bank data.
D
ed from 6.1% to 6.8% of total assets in 1952. The
increase was most pronounced in W est Virginia, wThere
the issue of bonds to finance the veterans’ bonus rein
forced the incentives given by tax advantages. Only
in South Carolina was a decline in this ratio reported.
e s p ite
Ratios of the “ average”
bank a re c o m p u te d fo r
each individual bank and
then averaged, so that each
bank is given equal weight
regardless of size. The re
sultant ratios are more
nearly representative of an
“ average” bank than are
data computed from all
bank dollar totals, which are strongly influenced by the
larger banks. The operating ratios of the “ average”
bank are more useful in looking at the operations of
banks as individual businesses; dollar aggregates are
more useful in evaluating the impact of banking develop
ments on general business conditions. A more com
prehensive study of operating ratios will be published
when tabulations of 1952 earnings data become avail
able.
The movement away from liquid assets and Govern
ment securities and into higher yielding assets, which
began in 1945, was repeated in 1952. However, the
shift in the composition of portfolios took a substantial
ly different form in 1952. In all other postwar years,
most of the increase in assets went into loans, with nonGovernment securities showing a consistent but smaller
increase. Post-Korea tax increases made the tax-exempt
feature of state and municipal bonds more attractive,
leading member banks to acquire a substantially larger
volume of these securities, particularly in the last half
of 1951. Holdings of non-Government securities jump
Loans dropped from 32.6% to 32.2% of assets in
1952, the first declines since the end of W orld W ar II.
This change was more closely related to size than to
location of banks. This ratio was up slightly for banks
with deposits of $5-$25 million and deposits of more
than $50 million. Banks in the $25-$50 million group
(whose loans had jumped sharply relative to assets in
1950 and 1951) reported
a substantial decline in this
ratio, as did the smaller
banks.
The minor decline in the
ratio of Governments to
total assets (from 35.1%
to 3 5 .0 % ) was fairly uni
form, with the notable ex
ception of banks in the
$25-$50 m illio n g r o u p ,
which increased Govern
ments portfolios in almost
the same degree in which
they reduced the share of
assets held in loans.
The s m a lle r sh a re o f
cash a ss e ts (d o w n fr o m
25.1% to 24.9% of assets)
was mainly due to the tight money market of most of
1952; bankers were keeping a closer eye on reserves.
Capital ratios were slightly lower in 1952, as the
growth of assets and deposits outpaced new capital and
retained earnings. Capital accounts as a ratio to assets
and as a ratio to deposits fell off slightly, the first de
cline since 1946, with capital accounts in 1952 at an
average of 8.0% of assets and 8.8% of deposits. The
ratio of capital to “ risk” assets (total assets less U. S.
Government securities and cash assets) has fallen con
tinuously since 1945, as holdings of loans and non-Gov
ernment securities have grown much more rapidly than
total assets. This ratio declined again in 1952, from
21.5% to 20.9% of “ risk” assets.
The ratio of time deposits to total deposits, which
rose to a postwar peak of 34.2% in 1950 and dropped to
33.0% in 1951, eased off to 32.9% in 1952. The only
large decline was in the $25-$50 million group, where
time deposits dropped from 24.3% to 20.4% of total
deposits. In contrast, this ratio increased substantially
at banks with deposits of more than $50 million.
«{ 6 1-
January 1953
A Review of Loan Trends in the Fifth District
n November 26, 1952, total loans of member banks
in the Fifth District stood at $2,255,034,000— the
highest level attained up to that time. Loans outstand
ing have increased in every month of 1952 except Jan
uary, when repayments exceeded new loans by $31.6
million. Increases through June were moderate, amount
ing to only $59.2 million for the six months, but were
contrary to the decline which is generally expected over
that part of the year. After June the rate of increase
quickened considerably bringing the total increase from
June through November to $148.2 million— an average
monthly increase of about $30 million.
The increase during November in total loans out
standing at the District’s
member banks was $20.7
million — 1% . Last year
the November in c r e a s e
was only $6.5 million—
0.3%. The t o t a l 1952
growth, however, has not
equalled the rapid loan ex
pansion which occurred in
the half-year following the
outbreak of the Korean
W ar. From June through
December 1950 loans out
standing at Fifth District
member banks increased
by $214 million— 12.4%.
The increase from June
through December of 1951
was only 1.6% , while that
from J u n e th r o u g h N o
vember of this year has
been 7.0% . The accompanying chart provides a basis
for comparing 1952 with other years and makes possible
a comparison of loan growth in the District with that in
the United States as a whole.
O
In spite of unusual growth in the last half of 1952,
the District’s member banks have fallen behind the aver
age for all member banks in the nation. Using the
average amount outstanding from 1947 through 1949
as a comparison base, the District’s loans outstanding
had increased by 55% at the end of November 1952.
For all member banks in the nation, the increase was
65% through November. The District’s growth from
the base period fell below the nation’s in November 1950
and has remained below it since then. During the last
half of 1951 the District’s growth was much less than
the national average and by the end of December the
District’s index stood at 140.8 while the United States
figure was 152.2. Since then the District’s loan expan
sion has been at a more rapid pace than the nation’s
but its index of loans is still about 10 percentage points
below the U. S.
Current D evelopm ents
Fifty of the District’s member banks report loan
changes by principal types of loans weekly thus pro
viding more recent data which are fairly representative
of over-all changes in the area. The weekly reporting
banks, which on the last call date, September 5, 1952,
held almost 60% of total loans outstanding in the Dis
trict, had loans outstanding totaling $1,363 million on
December 17, an increase of only 0.4% since the end of
November. These banks showed increases in total loans
outstanding of 1.5% dur
ing November, 2.1% dur
ing O c t o b e r and 2.9%
during September. The in
dication is that the Decem
ber increase will be less
than would normally be
expected by comparison
with the immediately pre
ceding months.
The chart on page 8
compares each of the prin
cipal categories of loans
made by F ift h D is t r ic t
member banks with those
made by all member banks
in the United States. The
basis for comparison is the
average amount outstand
ing fr o m 1947 th r o u g h
1949. The condition re
ports provided by member banks on call dates gives
loans outstanding by principal categories, thus provid
ing complete data for the District and the U. S. on
those dates. The District’s weekly reporting banks’
figures are also shown on this chart for 1951 and 1952
in order to show more current changes and to indicate
how closely the weekly reporting bank series parallels
the series for the District as a whole.
The only category in which the District growth in
1951 and 1952 was greater than that for the country
as a whole is “ Loans for Purchasing and Carrying Se
curities,” a relatively insignificant item accounting for
only 4 % of total loans in the District at the September
5 call report date. In all other categories, although the
District has lagged behind the nation over the past two
years, the growth over the base period, 1947-49, has
been significant. Outstanding loans to individuals at
Fifth District member banks in September were 77%
greater than the average amount outstanding from 1947
Federal Reserve Bank of Richmond
through 1949. Real estate loans outstanding were 31%
greater; commercial and industrial loans, 38% ; and ag
ricultural loans, 55% .
Slow er Loan G row th in D ecem ber
Business loans of the weekly reporting banks, which
accounted for 70% of the
District’s total on the last
call date, experienced a
moderate decline during
the first half of 1952 and
reached their lowrest level
of the year on July 23.
This corresponds closely
with the changes as shown
on the call report dates.
From July 23 through De
cember 3 these loans main
tained a p e r s is te n t and
sharp rate of increase, con
tinuing the movement ex
perienced by all member
banks in the District be
tween June 30 and Sep
tember 5, the two most re
cent call report dates for
which data are available.
1952 than real estate loans. During the week ended
December 3, 1952 repayments slightly exceeded new
loans, calling a halt to the rapid rate of growth up to
that date. In the following week new loans just about
equalled repayments, and the amount outstanding re
mained unchanged. During the week ended December
17 a small excess of new
loans raised the total out
standing to $371 million,
just equal to the amount
outstanding at the end of
November.
Loans to individuals and
commercial and industrial
loans together make up
over 60% of total loans
h eld by the D i s t r i c t ’ s
member banks. Real estate
loans account for approx
imately 28% of the total.
W hat h a p p e n s to th ese
loans, therefore, will give
significant r e f le c t io n of
economic developments in
the District. The first two
categories e x p e r i e n c e d
spirited growth during the
past year, commercial and
industrial loans beginning
to increase about mid-year
and loans to individuals
rising throughout the en
tire year. In both catego
ries figures of the weekly
reporting banks in d ic a te
that this rapid growth was
checked early in Decem
ber, and a m o u n ts out
standing h ave c h a n g e d
very little since then. Real
estate loans, on the other
hand, have shown a steady
b u t slower g r o w t h
throughout the entire year.
It should be remembered
that “ no change” indicates
a continuing high level of
activity— new loans are be
ing made at a rate suffi
cient to offset repayments.
It is only when repayments
show a continuing tenden
cy to outweigh new loans
that a deflationary influence is indicated— a portion of
the nation’s income is being used to retire debt rather
than to purchase goods and services.
Business loans declined
during the week ended De
cember 10— the first week
ly decline since July 23 of
this y e a r — but re s u m e d
their upward trend during
the week ended December
17. The latter rise, how
ever, wras not sufficient to
offset the decline of the
previous week, and busi
ness loans outstanding on
December 17 were still be
low the level at the begin
ning of the month.
T h e a m ou n t o f rea l
estate loans outstanding at
the w e e k ly r e p o r t in g
banks has increased stead
ily throughout 1952, close
ly paralleling the change
reflected in the condition
reports of all the District’s
member b a n k s on ca ll
dates and indicating a con
tinuation of the trend ex
perienced by these banks through September 5.
Until December, outstanding loans to individuals at
the weekly reporting banks increased more rapidly in
^8 y
January 1953
Business Conditions and Prospects
of Fifth District business activities in Novem
ber either remained at the seasonally adjusted levels
of October or showed a moderate rise. Trade levels how
ever, were easier, in part because of inclement weath
er. Employment in manufacturing industries continued
at peak levels, while construction activities receded
somewhat more than is seasonally normal. Two new
plants involving substantial capital outlays have been
scheduled for the District, one to manufacture nylon
and the other aluminum. The labor market has tighten
ed considerably in the past month, but most cities of
the District continue to show moderate to substantial
labor surpluses. Only the Aiken, South Carolina area
is classed as having a labor shortage, while seven of the
larger cities are classed as areas of balanced labor sup
ply. Expansion in bank credit has been persistent this
Fall with very few interruptions in the rising trend.
Perhaps the most outstanding development in the Dis
trict has been the substantial recovery in the produc
tion of hosiery. Based on the prospects of the District’s
major industries, the outlook is for a further rising of
activity during the coming months, very likely continu
ing in some industries into the second quarter.
L
evels
Banking
Although the seasonally adjusted figures of Fifth Dis
trict banks’ debits for November dropped 5% from Oc
tober to the same level as November 1951, this was
largely a result of the temporary setback in trade levels.
The banking situation as a whole continues to evidence
rising business activity. Loans of all member banks
rose 0.9% during November to a point 12.3% ahead
of a year ago. Holdings of Government securities rose
3% to a level 2.8% above last year. Total demand de
posits were up 2.6% and 5.1% ahead of a year ago.
Withdrawals of Christmas savings deposits caused time
deposits to drop 1.2% during the month, but these de
posits remained 6.2% ahead of November 1951. The
tight money situation found reflection in unusually
heavy borrowings from the Federal Reserve Bank, both
to replenish reserves and to repay borrowings from oth
ers. Total borrowings at the end of November were 46%
higher than a month earlier and 4.3 times higher than
a year ago.
Textiles
Consumption of cotton in the District’s mills in No
vember dropped 1% on an adjusted basis from October
but was 7%> ahead of a year ago. The price of cotton
dropped more than two cents in November and an
additional drop of about the same amount has occurred
thus far in December. This price drop slowed new
bitsiness within the cotton textile industry and had the
further effect of moderately reducing prices of some
cotton goods constructions. The price structure as of
<*Y
late December appeared to have steadied, considerably
brightening the new business prospect. Print cloth con
structions are fairly well sold for the first quarter of
1953 and some of the larger mills have sold well into
the second quarter. Industrial goods, which had been
lagging, have been placed under contract in larger
amounts and the entire industry, with the exception of
bag sheeting, duck, and osnaburg, faces a bright pros
pect for the first quarter of 1953.
The output of broad woven goods in the third quarter
of 1952 of 2,323 billion yards was up 3% from the pre
ceding quarter and 2% ahead of the third quarter of
1951. Tire cord and fabric in the third quarter drop
ped 24% from a year ago, with cotton showing a drop
of 76% and rayon and nylon a gain of 26%.
Output of hosiery on a nationally adjusted basis in
October was 3% ahead of September and 15% ahead of
October last year. Year-end figures are certain to show
a new high record of output; in fact, the first ten months
showed total shipments of the industry within 17 mil
lion dozen pairs of equalling the full year of 1951. In
the first ten months, full-fashioned shipments were up
5% and circular knit shipments were up 9%. In spite
of the industry’s high level of sales, however, there has
been no improvement in the price structure. Some drop
in yam prices has benefited the circular knitters but the
full-fashioned industry is still concerned over its low
price level.
Some slackening in the rate of circular knit opera
tions occurred in the first two weeks of December but
the industry expects a resumption of full operations
after the holidays and anticipates that it will continue
through the first quarter.
Bituminous Coal
November output in the District rose 44% on an ad
justed basis from October, reflecting in part the resump
tion of operations following the strike, but was 11% un
der November 1951. For the first eleven months out
put was down 13%. This compares with a drop of 14%
nationally. Through December 6, overseas exports of
coal totaled 25 million tons compared with 31 million
tons a year ago, with current figures running less than
one-half those of last year.
Domestic consumption in October was 22% ahead of
a year earlier, but the first ten months of the year
showed a drop of 9.4%, with all consuming industries
except electric utilities sharing in the decline. The cur
rent trend of consumption, however, is upward and the
Winter and Spring outlook points to an improved de
mand at the domestic level. Bituminous prices, which
had risen 6% from the Summer low as a result of the
miner’s wage contract, showed further slight strength
ening during November. The present coal price is at
a competitive disadvantage with fuel oil, and this shows
Federal Reserve Bank of Richmond
up in the consumption of coal by electric utilities, which
is up less than their KWH output.
Trade
Department store sales in November were down 5%
after seasonal adjustment from October and were 3%
below the relatively good November of 1951. Decem
ber trade got off to a slow start but in the two weeks
prior to Christmas gains appeared to be sufficient to
bring the month well ahead of last year. The Christ
mas trade, however, did not appear to be quite as exu
berant as merchants had anticipated and January clear
ances will probably be larger than a year ago. Depart
ment store stocks in November rose 2% on an adjusted
basis to a level 10% ahead of a year ago and it seems
likely that final December figures will show a further
stock rise. Despite the fact that adjusted outstanding
orders at the end of November dropped 27%, they con
tinued 13% ahead of a year ago.
Preliminary departmental figures showed women's
and misses' ready-to-wear sales in November 9% 1)elow
a year ago, with coats and suits down 12%, dresses
down 5%, men's clothing down 12%, furniture and
furnishings down 5%, floor coverings down 3%, major
appliances down 5%, and radios, televisions, and musical
instruments down 6%.
Furniture store sales were affected much the same
as department store sales during November. Adjusted
sales dropped 8% during the month but continued 7%
ahead of a year ago. The drop was mainly in cash
sales, as credit sales were well sustained and continued
to run ahead of a year ago. Although accounts re
ceivable, adjusted, declined 1% during the month, they
were 17% ahead of last year, indicating a slowing down
in collections. Stores continued a conservative inven
tory policy, with November showing a reduction of 3%
on an adjusted basis and 4% under last year. House
hold appliance stores showed a somewhat more than
seasonal drop in sales during November, with the level
3% under last year.
With the exception of drugs and paper, wholesalers
in this District showed adjusted sales losses during No
vember and all lines except drugs show November sales
smaller than a year ago.
F if t h D is t r ic t Ba n k in g
DEBITS TO INDIVIDUAL ACCOUNTS
(000 omitted)
Nov.
11 Months
Nov.
1951
1952
1952
Dist. of Columbia
Washington ------- $ 928,104 $1,139,653 $11,874,566
Maryland
Baltimore ---------- . 1,247,787 1,260,047 14,289,185
26,272
288,654
20,996
Cumberland
22,228
22,730
252,319
Frederick ---------36,805
33,342
395,275
Hagerstown ------North Carolina
59,927
681,533
61,586
Asheville
352,972
3,857,854
347,370
Charlotte
139,762
. 135,684
1,450,350
Durham
108,103
1,203,396
Greensboro ---------. 115,250
28,847
306,667
29,629
Kinston ------------192,773
174,196
2,030,405
Raleigh
42,948
42,059
508,013
Wilmington ------45,954
50,226
326,642
Wilson ______ 194,882
1,985,828
Winston-Salem — . 195,928
South Carolina
73,969
908,758
81,389
Charleston
138,543
1,619,317
Columbia----------- . 142,845
109,692
1,170,498
105,121
Greenville
74,284
780,254
68,243
Spartanburg------.
Virginia
Charlottesville ---- .
27,939
308,057
27,730
54,888
454,000
Danville
62,877
Lynchburg ---------.
50,022
47,648
515,781
46,916
47,709
534,376
Newport News —.
228,899
2,697,927
Norfolk ________ „ 233,131
26,840
313,659
28,664
Portsmouth ____
584,578
617,523
6,568,272
Richmond ---------122,228
1,279,920
Roanoke ----------- „ 116,335
West Virginia
40,995
53,408
523,103
Bluefield _______
162,490
Charleston ---------.. 157,785
1,851,551
Clarksburg ---------.
31,722
34,051
385,618
Huntington ------- .
67,301
71,899
790,527
Parkersburg------- .. 28,545
30,829
334,071
District Totals ____45*292,743 $5,555,355 $60,486,376
11 Months
1951
$11,843,477
13,622,259
283,054
235,398
356,334
654,540
3,744,711
1,277,915
1,116,390
290,733
1,854,874
471,989
374,846
1,887,781
828,601
1,406,232
1,210,000
759,021
299,050
422,431
504,242
472,291
2,412,918
276,875
6,370,001
1,270,406
524,190
1,684,563
375,932
734,541
341,366
$57,906,961
ITEMS
s t a t is t ic s
50 REPORTING MEMBER BANKS
(000 omitted)
Change In Amount from
Dec. 17,
Nov. 12,
Dec. 12,
1952
1952
1951
Total Loans _______ _
$1,346,940**
Bus. & Agrie. ___ ___ __ 637,257
Real Estate T/uins
260,080
All Other Loans___________ 465,483
Total Security Holdings______ 1,869,151
U. S. Treasury Bills ............. 256,160
U. S. Treasury Certificates — 140,796
U. S. Treasury Notes
292,658
U. S. Treasury Bonds
957,781
Other Bonds, Stocks & Secur. 221,756
Cash Items in Process of Col. _ 303,621
Due From Banks ------------------ 180,559*
Currency and Coin___________
87,955
Reserve with F. R. Banks____ 598,275
Other Assets _______________
54,648
Total Assets .
4,441,149
+ 24,695
+ 9,635
+ 3,249
+ 11,757
+ 7,775
9,603
387
+
2,093
+ 24,813
—
5,729
62,861
___ 34,422
+ 3,492
+ 39,040
—
2,457
- 24,238
+147,141
+ 54,365
+ 18,838
+ 75,170
+
9,102
— 46,925
+ 14,289
— 15,518
+ 39,548
+ 17,708
+ 8,669
— 17,979
+ 2,644
+ 12,463
— 1,509
+160,531
Total Demand Deposits______ 3,421,841
Deposits of Individuals ____ 2,535,491
Deposits of U. S. Government 128,776
Deposits of State & Local Gov. 159,464
Deposits of Banks_________ 536,555*
Certified & Officers* Checks „
61,555
Total Time Deposits
653,505
Deposits of Individuals_____ 574,073
Other Time Deposits_______
79,432
Liabilities for Borrowed Money
63,600
All Other Liabilities_________„
38,103
Capital Accounts____________„ 264,100
Total Liabilities______
-$4,441,149
— 39,616
— 15,007
+ 2,563
— 23,195
— 14,145
+ 10,168
— 10,151
— 10,422
+
271
+ 23,300
+ 2,727
— 498
— 24,238
+
+
+
—
♦Net figures, reciprocal balances being eliminated.
♦♦Less losses for bad debts.
i io y
89,701
36,999
76,594
38,189
+ 6,606
+ 7,691
+ 23,733
+ 16,803
+ 6,930
+ 29,800
+ 6,188
+ 11,109
+160,531
January 1953
F if t h d is t r ic t s t a t is t ic a l , d a t a
SELECTED FIFTH DISTRICT INDEXES
Avg. Dally 1935-39=10fr—Seasonally Adjusted
BUILDING PERMIT FIGURES
Nov.
11 Months
Nov.
1951
1952
1952
% Chg.—
Nov.
1952
---487
145
521
58
Oct.
1952
176
458
Nov.
1951
152
485
163
467
61
266
145
119
374
155
196
384
Latest
Prev.
Mo.
+23
—•5
Automobile Registration*
Bank Debits
Bituminous Coal Production
101
Construction Contracts____
549
Business Failures—No. ____
49
Cigarette Production
247
Cotton Spindle Hours ______
159
—1
Department Store Sales** __
114
120
—5
Electric Power Production__
398
—1
Manufacturing Employment* .
159
0
—7
Retail Furniture: Net Sales
207
Life Insurance Sales_______
—4
864
380
♦Not seasonally adjusted.
**1947-1949=100.
Back figures available on request.
WHOLESALE TRADE
Sales in
Nov. 1952
compared with
Nov.
Oct.
LINES
1951
1952
—30
—19
Auto supplies (7) —
Electrical goods (8)
—19
—11
—14
—22
Hardware (20) -----Industrial supplies (7)
—18
+ 4
—6
Drugs & sundries (13)
—1
Dry goods (14)
—18
—25
—12
Groceries (50) —7
—9
Paper & products (6) .
-1 5
—14
Tobacco products (10) .
+ e
—14
Miscellaneous (92) ____
—8
District Totals (227)
—8
—15
Mo.
Yr.
Ago
—1
0
±1 ±i
±1Se
+ 8
-- 3
-- 6
-- 9
Stocks on
Nov. 80, 1952
compared with
Nov. 30, Oct. 81
Number of reporting firms in parentheses.
Source: Department of Commerce.
DEPARTMENT STORE OPERATIONS
(Figures show percentage changes)
Other
Rich. Balt. Wash. Cities
Sales, Nov. *52 vs Nov., *51 — 4.8 — 7.8 — 8.8 — 1.0
Saks, 11 Mos. *52 vs 11 Mos.
*51 ___________________ + 3.1 + 2.1 — 2.3 + 5.0
Stocks, Nov. 30, *52 vs *51 - + 1.0 + 7.7 + 2.4 + 7.0
Outstanding Orders
Nov. 80, *52 vs *51.......... + 9.1 +12.8 +15.6 + 8.7
Open account receivables Nov. 1
32.5
collected in Nov. '52 ----47.6
44.1
41.9
Instalment receivables Nov. 1
collected in Nov. *52 ----14.4
12.6
14.0
18.9
Md. D.C. Va. W.Va. N.C.
Sales, Nov. *52 vs Nov. ’51 —7.5 —8.8 —2.8 —5.6 —0.6
Dist.
Totals
— 5.4
+ 2.0
+ 5.0
+12.9
42.5
14.4
S.C.
+3.2
11 Months
1951
Maryland
Baltimore ___ $ 4,889,655 $ 4,219,590 $ 52,826,045 $ 77,408,845
800,650
13,075
Cumberland _
586,906
2,044,828
107,050
747,186
2,190,952
2,808,041
Frederick ----136,000
92,450
Hagerstown _
1,506,758
8,948,070
Salisbury ___
70,175
69,937
1,875,215
1,520,495
Virginia
Danville
224,158
4,571,205
187,707
8,630,779
167,525
190,985
2,860,842
2,908,684
Lynchburg __
Newport News
58,774
403,374
6,593,310
1,997,521
828,780
19,236,988
Norfolk - . 1,966,828
21,893,701
Petersburg —
64,000
193,518
1,960,372
3,188,975
233,290
Portsmouth _
143,525
6,756,985
5,804,377
1,277,378
18,517,172
26,020,051
Richmond ___ 1,063,217
841,200
Roanoke ------421,277
9,375,405
15,132,920
West Virginia
Charleston __
367,320
370,142
11,378,965
5,864,443
Clarksburg __
70,975
74,840
1,201,630
1,172,893
165,995
725,781
6,907,974
7,927,843
Huntington _
North Carolina
279,243
Asheville____
118,791
3,853,272
6,393,035
Charlotte____ 2,885,867
1,015,749
19,331,525
19,553,845
Durham_____
282,821
1,771,685
9,106,698
9,093,557
Greensboro__
369,050
7,925,584
6,986,519
14,469,833
High Point _
867,190
184,785
3,355,915
3,005,354
Raleigh _____
955,950
1,947,492
15,986,858
12,374,246
Rocky Mount 140,088
177,103
2,567,290
8,736,685
214,252
307,299
Salisbury____
2,104,812
1,879,837
10,887,275
Winston-Salem
524,806
294,979
13,902,874
South Carolina
96,440
95,284
Charleston __
1,765,940
1,653,946
Columbia____ 1,118,883
857,237
9,937,109
11,388,532
Greenville ____
695,073
480,850
9,108,599
8,756,275
Spartanburg _
52,901
84,565
1,927,887
2,518,780
Dist. of Columbia
Washington _ 2,353,587
49,558,204
4,075,940
58,821,117
District Totals —$20,881,242 127,883,889 8298,892,672 $850,169,742
RETAIL FURNITURE SALES
Percentage comparison of sales in
periods named with sales In same
periods in 1951
STATES
November 1952 11 Mos. 1952
Maryland (6) ______________
+10
+6
— 8
—7
Dist. of CoL (7) -----------------Virginia (18) _____________
+ 3
+8
West Virginia (10) -------------+ 2
North Carolina (18) ________
— 18
South Carolina ( 6 ) --------------+ 8
District (60) _____________
— 2
+8
INDIVIDUAL CITIES
+10
+6
Baltimore, Md. (6) _________
Washington, D. C. (7) ---------— 8
—7
Richmond, Va. (6) _________
+ 4
+7
Charleston, W. Va. (8) -------+ 31
+26
Number of reporting firms in parentheses.
i u y
Federal Reserve Bank of Richmond
National Summary of Business Conditions
(Compiled by the Board of Governors of the Federal Reserve System)
Employment
production, employment, and incomes in
creased somewhat further in November and Decem
ber, and Christmas retail sales were in record volume.
Wholesale prices of agricultural commodities declined
further, while industrial commodities continued to show
little change. Consumer prices in November increased
slightly and were back at their August high. Bank
credit expansion continued after mid-November, and
common stock prices rose further.
I
n d u s t r ia l
Seasonally adjusted employment in nonform estab
lishments rose again in November and was at a new
high of 47.5 million. Average hours of work at factor
ies were close to the high October level, and average
hourly and weekly earnings continued to rise. Unem
ployment was little changed in November and at 1.4
million was close to the postwar low reached in October.
Distribution
Industrial Production
The Board's industrial production index rose 4 points
in November to a postwar record of 233% of the 193539 average. Output of both durable and nondurable
goods expanded moderately further, and minerals pro
duction recovered sharply to the high September level.
Industrial production in December was maintained at
about the November rate and was about 7% above a
year ago.
Activity in machinery industries generally expanded
further in November. Output of household appliances
and radio and television showed substantial gains, with
television output continuing at unusually high levels in
December. Despite some interruptions owing to model
changeovers, passenger auto assembly during November
and December was maintained at advanced rates. Steel
production continued at peak rates. Output of nonferrous metals except aluminum expanded further in No
vember, and lumber production showed much less than
the usual seasonal decline.
Nondurable goods production rose somewhat further
in November to a level 5% above a year ago and close
to earlier highs. Activity in the textile, shoe, paper, and
rubber products industries increased and was substan
tially greater than in the same period last year. Out
put of industrial chemicals and petroleum products rose
to new record levels. Production of meat and other
manufactured food products was maintained in large
volume.
Coal output recovered in November following the
work stoppages in late October, and crude petroleum
production rose somewhat further. In early December,
however, output of mineral fuels declined moderately.
Iron ore production since August has been in record
volume for this season.
Seasonally adjusted sales at department stores in No
vember were a little below their high October level but
rose again in December. For the Christmas season,
department store sales were at a record and considerably
above a year ago. Sales of automobiles continued un
usually large for this time of the year and dealers’ stocks
increased only moderately in November.
Commodity Prices
The average level of wholesale prices continued to de
cline in December, reflecting mainly decreases in prices
of foodstuffs. Lead prices were raised, while prices of
other industrial materials and finished goods generally
continued little changed.
The consumer price index in November rose very
slightly to return to its August peak. Further increases
in rents and prices of services in November were large
ly offset by decreases in apparel.
Bank Credit
Construction
Business, consumer, and real estate loans at commer
cial banks continued to increase in the latter part of No
vember and the first half of December. Banks also
added to their holdings of U. S. Government securities,
largely through purchase of tax anticipation bills in the
latter part of November.
Member bank reserve positions tightened further in
late November and early December, due principally to
a seasonal flow of currency into circulation and an in
crease in required reserves. Member bank borrowings
averaged above $1.5 billion during the period. The Fed
eral Reserve also supplied some reserves through pur
chase of Government securities, including some securi
ties acquired under repurchase agreements with dealers.
In mid-December, reserve positions temporarily became
somewhat easier as a result of the usual large preChristmas expansion in Reserve Bank float.
Value of contract awards declined slightly in Novem
ber, reflecting decreases in most types of awards for
private construction. Total new construction work put
in place declined less than seasonally from the advanced
October level. Housing starts were at a seasonally ad
justed annual rate of 1,160,000, about the same as in
October and substantially higher than a year ago.
Common stock prices advanced during the first three
weeks of December to their highest level since October
1929. Yields on high-grade corporate bonds and long
term Government securities rose somewhat. Treasury
bill rates increased sharply and reached 2.23% on the
new issue awarded on December 22.
Security Markets
«12)»
@FedFRASER