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RESERVE BANK/ fRICHMOND O M £U t JULY 1951 VISITS PAID TO FIFTH DISTRICT INDUSTRIES BY EUROPEAN DELEGATIONS, February 1 4 9 - July 1951 9 COUNTRIES VISITING STATES VISITED Maryland West Virginia Virginia North Carolina South Carolina L'Kiinr map above indicates the extent to which productivity teams of foreign representatives of labor and management have visited factories, farms, and other industrial installations through out the Fifth District. The article on page 3 dis cusses E C A ’s Technical Assistance Program and the part played by Fifth District industry as host to over 1,000 visitors in this unique method of ex changing industrial know-how. h e T Also In This Issue - - Fifth District Trend Charts______________Page 2 M o r t g a g e L e n d e r s : Mutual Savings B a n k s______________________________ Page 6 Barometer of Business Loans Falling____ Page 8 Business Conditions & Prospects________Page 9 Statistical Data_________________________ Page 11 FEDERAL RESERVE BANK OF RICHMOND F if t h d is t r ic t T r e n d s ELECTRIC POWER PRODUCTION CIGARETTE PRODUCTION Extent of recessionary trend in business activity in this District is shown in the electric power production to be very moderate indeed. This moderate reaction has followed the period of nearly two years when growth in use of electric power has been more rapid than at any other time in the history of this District. May adjusted output was up 7% from April and 2 % over a year ago. Cigarette export market has improved moderately, but is still well below its level of several years past. Facilities expansion in the industry projected in Richmond, Virginia, and a new research lab oratory for Charlotte, North Carolina. DEPARTMENT STORE OUTSTANDING ORDERS DEPARTMENT STORE STOCKS Department stores continue to purchase on a conservative basis with adjusted outstanding orders in May 12% under April but still 12% ahead of a year ago. Combination of outstanding orders and inventories shows a dollar drop of 7% from April compared with a sales gain of 11 % . May improvement in department store sales found its reflection in a drop in store stocks. These fell 2 % , adjusted basis, from April to May. Inventories continued 21% ahead of a year ago. W ith the ex ception of a handful of departments, store stocks can only be con sidered high in relation to current depressed sales. WHOLESALE DRUG SALES WHOLESALE The independent drug business must be good because drug whole salers’ sales are running at the highest level in history. Although sales in May adjusted were 8 % lower than in April, they were still 28% ahead of a year ago and well ahead of all previous records. PAPER AND PRODUCTS SALES Wholesalers of paper and paper products have found very little slackening in their trade levels this spring. The current level of sales, though in a moderate recessionary trend, are nevertheless 43% ahead of a year ago. i 2y JULY 1951 MONTHLY REVIEW Productivity Teams— An Experiment in International Cooperation of officials of the United States’ Economic Cooperation Administration sat down one day in 1948 with British Chancellor of the Exchequer Sir Stafford Cripp to discuss the problem of economic re covery in Europe. During the exchange of ideas on boosting production, reference was made to the high level of labor productivity in the U. S. and the flood of goods pouring from its factories. A group workers, tools, and machines more productive, repre sentatives of that industry should observe at first-hand the techniques, management and worker skills utilized by American factories in turning out shoes. P R O D U C T IV IT Y Number of Teams “ One look is worth a lot of description,” remarked Sir Stafford, “ I wish we could see how your American factories do it.” Maryland 37 Virginia 28 West Virginia 8 North Carolina 15 South Carolina 8 “ A ll right,” spoke up E C A Administrator Paul H off man, “ let’s bring your people over, and we’ll show them how.” That was the beginning of a series of pilgrimages which have brought more than 3,000 workers, techni cians, union representatives, and management officials from fifteen Western European countries to the United States in quest of industrial and agricultural “ know how.” Grouped into what are called productivity teams, they have crisscrossed the U. S. under the auspices and administration of the Technical Assistance Division of E C A and have studied factory and agricultural organi zation, administration, production methods, labor-management relations, and, in fact, almost the whole gamut of American industry in its physical as well as person nel aspects. Am ong the 72 teams visiting the Fifth District have been British groups studying rayon production in V ir ginia and North Carolina, men’s clothing in Maryland, and fertilizer plants in Maryland and Virginia. Bel gium has sent teams to observe coal mines in W est V ir ginia and foundries in V irginia; Denmark’s hosiery in dustry has sent representatives to North Carolina mills, and a Danish team examined power supply facilities in Maryland and W est Virginia. A French cotton spin ning and weaving group had a look at South Carolina’s modern mills; Norwegian teams have been through shoe factories in Maryland and Virginia and pulp and paper plants in Virginia, and a Swedish team studied woodworking practices in North Carolina. E C A ’s Technical Assistance Program was created because it was recognized that in helping the warravaged countries of Europe to regain their economic strength, it would not be enough to replace destroyed plant and equipment and provide additional tools and machines of the latest types. M ore important, E uro pean agriculture and industry needed to make better use of the men and machines they already had. It was agreed that in general American industry is more efficient than European industry— that with a given amount of labor and capital, its factories and farms out-produce their European counterparts. In or der to help, say, the Norwegian shoe industry make its Fifth District 72 TEAM V IS IT S TO Number of Visits F IF T H Number Number of Coun- of Indus ries Rep- tries Repsented sented 61 46 31 44 12 8 20 202 D IS T R IC T Number of Persons 4 17 14 5 7 5 352 303 92 138 131 14 22 1,016 5 8 The factories and farms of the Fifth District have been the classrooms for many of the lessons learned by technical assistance groups. A s shown in the accom panying table, 72 productivity teams from 14 European countries have visited facilities in the Fifth District during the past two years. Many members of these teams have indicated that the fundamental ideas and objectives of the Technical Assistance Program are be ing grasped and taken back to Europe for discussion, application and further dissemination. In point is a statement by a member of a French productivity team, here to study handling and stevedoring in American ports. This man, a docker back in his native France, remarked while inspecting port facilities in Newport News, “ Oh yes, the equipment you have is fine— a big help, and we could use it. But,” (with a characteristic Gallic shrug) “ it isn’t the whole story; some of it is in the mind— here in your country there’s a different at titude, something that gets more work done.” This emphasis upon the importance of intangible fac tors in productivity has received increasing recognition. Technical assistance does not consist solely of supplying technical know-how and making heavy capital outlays; an important part of the problem deals with attitudes and ways of doing business. The point has been made by R. M. Bissell, Jr., in the April 1951 Foreign Affairs: “ It will not require enormous sums of money— even of European capital— to achieve vaster increases in pro duction. But it will require a profound shift in social attitudes, attuning them to the mid-twentieth century.” The Selection of Productivity Teams The French team above referred to was composed of interesting and interested individuals, an earnest, hard working group. O f the 14 members from nine Metro politan French ports and two French Africa ports, eight represented managements of eight different firms, one was a union representative, and five were w orkers: two dockers, a chief of foremen, a foreman, and a crane op erator. A ll had been subjected to a careful selection i3 y FEDERAL RESERVE BANK OF RICHMOND eon or dinner— is borne entirely by the host company. In many cases companies have cooperated with civic groups, labor unions, and individual workers in en abling the visiting teams to see how Americans live, what their houses are like, and how they spend their non-working hours. W hen expenses are mentioned, it should be under stood that Uncle Sam does not pick up the tab for the entire cost of productivity team visits. E C A pays only the dollar costs involved: transportation within the United States and a per diem per team member which varies, depending on the region visited, from $6 to $12. All other costs (non-dollar expenses) are the obliga tion of the countries involved and include the expense of a pre-sailing review' of the team’s industry, visits to representative plants in the team’s own country when time permits, and the costs of ocean transportation. Another substantial expense borne by the foreign countries arises when returning teams compile detailed reports which are distributed widely in the country of origin and other participating countries. Such reports are extremely important because they tie in directly with one of the most difficult problems of the T A program— the application of ideas and knowledge gained from visits to American industries to those sectors of the foreign economy with the greatest need for technical improve ment and in which added technical know-how will do the most good for the economy as a whole. Netherlands Enamelware Productivity Team members watch an operation in a plumbing fixtures plant in Balti more. Courtesy EC A. process and a thorough screening before their mem bership was finally approved. The decision to send this team to the United States originated with the trade associations of this French in dustry. After invitations for team membership had been sent to all companies in the industry, and selections made, the team project passed through a series of re views and approvals by the French Productivity Center (a body supervised by a board representing manage ment, labor, and various ministries), the EC A mission in France, and E C A in Washington. The French Port Handling and Stevedoring Team landed in New Y ork on May 21, 1951 for a five-week study-tour. Its itinerary was worked out by the project manager assigned by E C A to accompany this team while it was in this country. Am ong the difficult tasks of this individual is the selection of plants and installa tions engaged in work similar to that of the team mem bers’ companies. W hen this French team visited a lead ing port in the Fifth District, some time was spent in showing the piers and equipment used for loading ships with coal. “ V ery interesting,” remarked one of the team, “ but we do not export coal; we are more con cerned with seeing facilities for discharging coal and other cargo from ships.” After consulting trade associations within the par ticular industry and checking with labor advisers to get their views on plants most suitable for inclusion in the itinerary, the project manager gets on the telephone and contacts the individual companies chosen. Rarely does he get a refusal, and most of the companies go out of their way to make certain that the team will have a worth-while visit and to make the members feel as wel come as possible. The expense of taking a team through a plant— and more often than not, of giving it a lunch T h e A p p lication o f Ideas Although one of the requirements imposed upon pro ductivity teams is to hand in an extensive report of what they have seen and what they have learned, the wide spread dissemination of that report and, more impor tant, the implementation of the lessons learned are some thing else again. United Kingdom Cotton Team inspects a picker machine in a North Carolina cotton mill. Courtesy ECA. -in MONTHLY REVIEW JULY 1951 A significant point with respect to the productivity team visits to the Fifth District is the fact that they have not been concentrated merely in plants of the three or four leading industries. On the contrary, factories, mills, warehouses, and other facilities representing 22 different industries have been requested to open their doors to foreign teams. This is a compliment to the widespread high level of technical efficiency in the in dustrial structure of the District. The British apparently are cognizant of the problem. A t its final briefing meeting before leaving England, the British Hosiery and Knitwear Productivity Team was told, “ . . . once you get back the prime purpose that you have after the preparation of your Report is to see that the dissemination of the knowledge you get, the spread of 'know-how’ is carried out to the nth degree.” Such a goal is not easily accomplished— take, for e x ample, the case of a worker who had been a member of a French team visiting this country. Upon his return he gave one lecture to a group of workers’ delegates in his plant which evoked a very lively and controver sial discussion— including charges by the Communist delegates that the “ American imperialists” had let him see only what they wanted to show him on the team’s trip and implied that he was in the pay of the Am eri cans. After this one meeting, the worker went back to his old job where he had no further opportunities to apply what he had learned. There have been, of course, more favorable experi ences. A survey of the results of another French team’s trip to this country pointed out that one of the worker representatives was freed from his job for extended periods in order that he might wander around his plant talking to employees about productivity as he had seen it in the United States. Many companies that have been hosts to productivity teams are in the dark as to what information and ideas were gained by the groups, what use they were being put to in foreign industries, and what the nature is of follow-up programs after the teams have returned home. Generally, these companies realize that some time will have to elapse before tangible results appear, but in the interim, and as information becomes available, they would welcome knowledge of the more immediate re sults of the time they spent in conducting teams through their plants. Careful Choice of Host Plants As indicated earlier, the selection of individual com panies for the itineraries of productivity teams is not a haphazard choice. Most of the companies included in the totals shown in the accompanying table were se lected because they achieved high productivity and could show visiting teams something out of the ordinary in technique, planning, or equipment. Illustrative of the above is the very effective organi zation of labor-management relations which has caused many teams to visit one of this District’s leading com panies. Another firm in the District was asked to co operate in the program because it had devised a highly efficient method of handling and distributing raw ma terials within its factory. One of our small local manu facturing firms was told by the Technical Division of E C A that it had been requested to show its plant to a foreign team because its production methods for a cer tain product were among the most advanced in this nation-wide industry. A Successful Selling Job Foreign groups have apparently found it well worth their time to inspect the industry of the Fifth District— and have also found it to be a particularly pleasant part of their visit to this country. One of the project man agers who has taken teams all over the country recently summed it up as fo llo w s: “ I can’t say enough in appre ciation of the warm and sincere welcome that the teams I’ve been with received from the people in your Dis trict. Believe me, it makes a lot of difference to the suc cess of this program, and I know that for a fact from the favorable comments I get from team members every time we swing through your region.” If the good-will created by this program and the suc cess it has had in “ selling” America to Europeans could be measured in dollars and compared with the expendi tures made, there is little doubt that the “ profits” would appear tremendous. Aside from the fundamental objec tives of increasing production and enabling Western Europe to devote part of its energies to rearmament without sacrificing post-war gains in standards of liv ing, the T A program is widely accepted as one of the most successful advertising and selling jobs ever done. The T A program has encountered formidable oppo sition from Communists who have tried to label pro ductivity as a “ speed-up for higher profits and lower purchasing power for the worker.” Difficulties have also arisen from long-standing traditions and attitudes inimi cal to progressive ideas and changes on the part of both labor and management. European workers have been prone to regard productivity gains as potential sources of unemployment— that to increase output per man-hour might be to work themselves out of a job. Many con tinental employers have traditionally divorced their in terests from those of their workers, and they have found it difficult to accept the compatability of high wages and high profits. However, the ideas behind the T A program and its objectives are so sound and desirable to both the United States and W estern Europe that successful results are mounting and definite inroads are being made on atti tudes and production methods that have hitherto checked production gains and higher standards of living. A pro gram of this nature needs time to register its full im pact, but it is sowing the seeds of better living for Eu ropean workers, and a crop will be harvested if it is not destroyed by the feet of marching armies— or if the United States does not withdraw its support of the pro gram prematurely. 45 y FEDERAL RESERVE BANK OF RICHMOND Mortgage Lenders—The Mutual Savings Banks Recent developments in the field of credit have served to focus attention on the lending activities, not only of commercial banks, but other lending institutions as well. This is the third in a series of articles designed to review briefly characteristic operations of leading lenders outside the commercial banking field. savings banks are currently among the more important long-term credit providers and savings tury to provide a place where the then new wage earn ing class could deposit small savings. Consequently, deposits are generally restricted to savings accounts of depositaries in the United States. Their mortgages total individuals and nonprofit institutions. Time deposits three-fourths as much as Federal Reserve member of businesses, which cannot be classified as savings ac banks’ holdings and equal 60% of the combined mort counts in the true sense, are in general not accepted, al gage portfolio of all insured commercial banks. In 1950 though permitted by law in some states, including M ary these banks recorded more than $1 billion of non-farm land. Some savings banks (including two in Maryland) mortgages of $20,000 or less— 7% of the total. More regularly accept demand deposits; most issue demand than one-third of the time deposits of all American banks instruments such as officers’ checks. The total of these are held by mutual savings banks. Extent of their fi demand obligations is about 0.1% of total deposits of nancial activities is particularly impressive when it is recalled that nearly all of the 530 mutual savings banks mutual savings banks in the United States. A s most of the funds of are located in New England savings banks are invested and the Middle Atlantic in fairly non-liquid assets, States; almost t w o - t h ir d s SELECTED ASSETS, U: S. MUTUAL'£AVfNGS BANKS 4 (in line with historically are located in two states— proven deposit s t a b i l i t y ) , M a s s a c h u s e tts and New £’v .. York. and as s u b s ta n tia l w it h jiyV.V.;; Since February, when the drawals by individual de positors might cause serious last wave of scare buying by consumers subsided, mutual disturbance to their invest savings bank deposits have ment schedules, most sav shown a consistent rise, re ings banks prescribe a maxi suming the growth which mum that any person may MORTGAGE LOANS has been typical of these in deposit. In some states this f ONLY i stitutions since 1942. Data maximum is prescribed by for May 31 show deposits at law. Maryland law does not M I-, ..i .. I9-J4 1946 .Vj :)l& $ .1 9 4 ? an all time high of $20,234 limit the size of accounts, : SOURCE 'kw> or rtut, i?«o - i»«9, *Hntu*L hcivrt or] rcoinii. oercsir i^uRA ^ce million, up $72 million dur and each bank makes and £1*0 OF'MOfltH, APRIL 1990 • »miL ttONTHLY BULLETIN i;M AT'L « » * , • W/T »A«<QS BANK* ing the month. Mortgage enforces its own rules. It loans are at a record peak should be noted that legal of $8,761 million and have been growing at an increas or policy restrictions on the amounts which may be de ing rate despite credit restrictions. Below-par prices posited do not prevent a depositor from opening an ac have slowed up their sales of Governments; 60% of the count in the name of another member of his family or increase in mortgages during April and May was met establishing an account with more than one bank. by reduced cash holdings and increased deposits. Savings deposits are evidenced by entries on pass M u tu al ills In the Fifth District mutual savings bank activity is concentrated in Maryland, where nine banks, eight of which are located in Baltimore, are chartered. Despite their small number, savings banks account for a con siderable part of total banking activity in the District. Their savings deposits are considerably larger than time deposits of all member banks in Maryland and a third as large as the total time deposits of all member banks in the Fifth District. The eighth largest bank in the Fifth District is a mutual savings bank located in Balti more, and this bank, third oldest mutual savings bank in the United States, has been in operation for a cen tury and a third. A s the name implies, mutual savings banks are co operative institutions wholly owned by the depositors. Most of them were organized during the nineteenth cen books and withdrawal notice ranging from one week to six months may be required. Maryland law permits banks to require ninety days’ notice. In practice with drawal notices are waived and deposits may be with drawn on demand. Depositors, as the sole owners of savings banks, are subject to risks of ownership, and share in all earnings of the business. Consequently, these banks pay divi dends (o r interest) which are not determined in ad vance, but depend on the earnings of the bank during the period. Like other dividend-paying institutions, savings banks try to maintain a set rate. Although the depositors have full claim on the earnings of mutual savings banks, interest-dividends do not necessarily ex ceed interest rates paid by other types of savings insti tutions, although they average about twice that paid on i61 * JULY 1951 MONTHLY REVIEW tual savings banks. W ider membership is discouraged by the fact that the mutuals feel that the insurance premium is relatively high in the light of their long safety record. Independent insurance systems are main tained by some states (although not by Maryland). Many banks carry no deposit insurance, though cur rently all but three Maryland mutual savings banks are insured by FD IC . Only thirty mutual savings banks (none in M ary land) have joined the Federal Home Loan Bank Sys tem, which offers the privilege of borrowing from the Federal Home Loan Banks and of rediscounting resi dential mortgages. Similarly, membership in the Fed eral Reserve System has not appealed to many mutual savings banks; only three— two in W isconsin and one in Indiana— are currently members. savings accounts in commercial banks. Savings banks usually make substantial transfers to a “ guarantee fund” or surplus; conservative investment policies lead to rela tively low yields on assets. In recent years dividends have averaged slightly less than 2 % , although some banks pay appreciably more. Since mutual savings banks have no paid-in capital, they build up substantial guarantee funds to serve as a cushion against withdrawals and asset deterioration. In Maryland the guarantee fund must be increased by at least of 1% of deposits annually to a minimum level of 3% of deposits. Dividends may be paid only out of net incom e; the guarantee fund may not be drawn on for dividend payments. A t year end 1950 this fund equaled 4.8% of deposits; undivided surplus amounted to 7.0% of deposits. Although depositors own mutual savings banks, they have no voice in the management which, in most states is vested in a self-perpetuating board of trustees or di rectors. Original trustees are selected by the organ izers of the banks. W hen a vacancy occurs, the remain ing trustees select a successor. Most states (not includ ing Maryland) prohibit trustees from receiving sal aries or fees for attendance at board meetings. Loans and Investm ents Mutual savings banks’ investments are usually pre scribed by law. Some states permit more discretion than others as to bank investments, but “ legal lists” usually include the follow in g: first mortgages on im proved real estate; U. S. Government bonds; bonds of states, municipalities and other political subdivisions; certain high grade bonds of railroads and public utili ties ; and in certain instances, bonds of strong industrial corporations. Maryland law permits savings banks considerably more freedom in their choice of investments than do most states. The only statutory restrictions are that no loans may be made to officers, employees, or directors, and that investments must be “ on good security” at the discretion of the directors of the bank. In addition to the legal restrictions on their iirvestments, mutual savings banks are subject to supervision by state banking departments. Examinations are made at intervals prescribed by the statutes of the various states. In Maryland, the bank commissioner is charged with seeing that “ sound banking practices” are followed, and the savings banks are required to submit to the com missioner at year end a detailed list of all investments. In addition, a more abbreviated statement of condition is required at midyear. Examinations are conducted twice each year. Mutual savings banks are eligible for membership in the FD IC , the Federal Home Loan Bank System, and the Federal Reserve System, providing specific state laws do not prohibit such membership. (Membership is not prohibited by Maryland statute.) A t the end of 1950, 194 mutual savings banks with $15.9 billion in assets were members of the FD IC . These 194 banks represent approximately 70% of the assets of all mu More than a third of the assets of mutual savings banks are held in mortgage loans. A t year end 1950 they held more than $8 billion of real estate loans as compared with holdings of $16.1 billion by life insur ance companies, $10.5 billion by Federal Reserve mem ber banks, and $2.9 billion by insured nonmember com mercial banks. The shortage of mortgages, coupled with wartime Government borrowing and a substantial increase in savings accounts, led mutual savings banks to make heavy purchases of Government securities during the Second W orld W ar. Despite their sales of Govern ments in the postwar period such securities are still the most important type of asset held. A t year end 1950 almost half of their assets (4 8 .5 % ) were in Govern ment securities, as compared with 36.2% of total as sets of Federal Reserve member banks. A n interesting difference between savings and com mercial banks is seen in the maturities distribution of their Governments portfolios. Commercial banks, in terested in maintaining a liquid position to meet pos sible withdrawals of demand deposits, hold compara tively few long-term Government securities, and more short-term maturities. Savings banks, on the other hand, do not anticipate large withdrawals at any one tim e; they do not need to maintain as liquid a position as commercial banks, because of the nature of their de posits. Their holdings of Government securities are heavily concentrated in longer maturities. A t year end 1950, over 80% of the Government securities held by commercial banks were due or callable in five years, while less than 10% of those held by mutual savings banks were due or callable within five years. Next to mortgages and Government securities in im portance are “ Other Securities” , representing a sub stantial portion of savings banks’ assets. A t year end 1950 all mutual savings banks in the United States held 10.5% of their assets in non-Government securities. Non-mortgage loans are of only minor importance, ac counting for 0.6% of total assets at year end 1950. On the same date cash assets amounted to 3.5% of the total. 4 7 y (Continued on page 1 1 ) FEDERAL RESERVE BANK OF RICHMOND Barometer of Business Loans Falling h e organization and beginning operation of the V o l untary Credit Restraint Program has focused the attention of Fifth District bankers and businessmen on the current course of business loans in the District and in the nation. The main barometer of business loans— the so-called “ commercial, industrial, and agricultural loans” of weekly reporting member banks— has been falling fair ly rapidly in the Fifth District and much more slowly in the United States since its high mark in mid-April. In mid-June, “ business” loans of 51 weekly reporting member banks in the Fifth District totaled $575.6 mil lion, which represents a decline of $29.1 million, or 4.8% , since mid-April. By contrast, there was a de cline of only $177 million, or 0.9% , in such loans of all weekly reporting member banks in the United States. through this new window at the falling barometer of business loans reveals several interesting facets of the recent drop. 1. The decline in business loans is definitely sea sonal in character; loan contraction, both in the District and in the United States, is attributable to a continued seasonal decrease in loans to com modity dealers and to processors of agricultural products. Fifth District loans in this category shrank $13 million in the eleven-week period ended June 13, compared with a net decline of $19 million in total commercial, industrial, and agricultural loans of all weekly reporting member banks in this District. Similarly, in the United States, there was a cumulative decrease of almost $600 million during this same eleven-week period in loans to commodity dealers and processors of agricultural products. Changes in Commercial, Industrial, and Agricultural Loans By Industry and Purpose Selected Banks in Fifth District and United States1 March 28-June 13, 1951 (Amounts in millions of dollars) ll-weelc period ended June 13 5th Dist. U. S. Net change in commercial, industrial, and agricultural loans ____________________ — 19 Classified by business of borrower: Manufacturing and mining ___________ Food, liquor, and tobacco _____________ 8extiles, apparel, and leather _________ Metals and metal products ___________ Petroleum, coal, chemicals, and rubber Other manufacturing and mining __ Trade— wholesale and retail ____________ Commodity dealers ________ _____ ________ Sales finance companies ________________ Public utilities and transportation _____ Other business _________________________ Unclassified 2 ____________________________ Classified by purpose of loan; Defense contracts _______________________ Defense supporting activities3 _________ Plant and equipment ________________ All other ______________________________ Non-defense activities __________________ Inventory and working capital ---------Plant and equipment _________________ Retirement of non-bank debt -----------All other ______________________________ Unclassified2 ____________________________ — 9 — 6 — 2 + — — + — + + + 1 1 1 o 7 5 2 2 — 12 + 2 n.a. n.a. n.a. — 14 — 14 + 2 — 0 — 2 — 7 2. For all reporting banks in the United States, this seasonal decline in commodity and processors’ loans (primarily for inventories and working capital purposes) has been partly offset— and more than offset in the week ended June 13— by an upsurge in defense loans. However, for Fifth District reporting banks, this upsurge has been negligible thus far. Reporting banks in the United States which classified loans registered a $191 million increase in defense loans in the elevenweek period ended June 13, while banks in the Fifth District classifying loans reported an in crease in defense loans of only $2 million. 4-week pe riod ended June 13 5th Dist. u. s . -117 -18 — 148 + 146 -219 h 90 -189 - 41 - 45 - 54 -377 + 34 + 107 + 38 -119 - 5 - 2 - 2 + o - 1 - 0 - 2 - 3 - 0 + 1 + 1 + 86 — 95 + 36 + 111 + 5 + 29 — 52 — 131 — 35 + 40 + 20 — 76 + 191 n.a. n.a. n.a. -129 -161 + 91 - 13 - 46 -179 -1 0 b - 1 2 2 0 -1 1 -1 0 + 1 - 0 - 2 -1 0 3. The data on all reporting banks in the United States indicate substantial increases in loans to textile, apparel, and leather manufacturing com panies during the eleven-week period ended June 13. In contrast, a slight decline was registered in the Fifth District. + 76 + 89 + 69 + 20 — 233 — 239 + 30 + 4 — 28 — 80 4. Loans to wholesale and retail trade expanded through mid-May, both in the District and in the United States, but then receded through midJune. The increase in these loans in the earlier part of the reporting period (A pril 4 to M ay 9 ) was attributed by the Board of Governors of the Federal Reserve System to “ the delivery of mer chandise ordered on an expanded scale during the abnormally high sales period which ended before Easter and intense sales promotions by manu facturers.” 1. Reports classifying business loans by industry and purpose from large banks accounting for approximately 65-75% of the total dol lar volume of such loans. 2. Change in commercial, industrial, and agricultural loans for weekly reporting member banks not classifying loans. 3. Classification of loans for defense supporting activities was not used prior to May 10, 1951. A t the request of the Voluntary Credit Restraint Committee, the Federal Reserve Banks recently have started to collect additional detailed data weekly on the business loans of selected member banks accounting for a large proportion of these loans. The Board of G ov ernors of the Federal Reserve System has labeled these data, which show a breakdown of business loans by in dustry and purpose, a “ new window” on the lending operations of commercial banks. Although the data collected thus far are necessarily fragmentary, a look 5. Similarly, loans to sales finance companies in creased from early April through mid-May, but subsequently declined through mid-June. Again, the Board of Governors attributed the early in crease in part to a rise in holdings of wholesale and automotive paper and in part to a rise in other types of business loans of finance companies. i8 y JULY 1951 MONTHLY REVIEW W ith regard to the demand for business credit to add to plant and equipment, the latest joint survey by the Department of Commerce and the S. E. C. points out that business outlays on new plant and equipment this year may exceed the record $24 billion level previously estimated. Banks will be called upon increasingly to fi nance this industry expansion program. However, the Voluntary Credit Restraint Committee has already called for postponement of these loans if not defense or defense supporting. The Board noted that: “ Like all other lenders, sales finance companies have been asked by the Federal Reserve Board to abide by the principles of the Voluntary Credit Restraint Program.” 6. Loans to public utilities, including transportation, have shown a steady rise nationally since early April, but have remained at approximately the same level in the Fifth District. As noted in the June R eview , several factors have added to the seasonal downturn in the business loan barometer, including the recent developments in the Government securities market, the increase in reserve requirements earlier in the year, and the newly operat ing Voluntary Credit Restraint Program. However, a number of factors in the current outlook, operating in an opposite direction, indicate a rising barometer of business loans in the last half of 1951. O f major im portance are the scheduled speed-up in the defense pro gram and the corollary growing demand for business credit to add to plant and equipment which will serve to reinforce the normal seasonal upturn in business loans accompanying fall marketing and the usual fall upturn in business activity. In addition, the current rate of defense spending is scheduled to increase sharply by year-end, with re sultant increased demand for bank credit; recent legis lation also permits a broadening of commercial bank participation in the V -loan program. Although cutbacks in production of civilian goods, the growing impact of Government controls, and ad herence to the Voluntary Credit Restraint Program un doubtedly will act as brakes, there is a distinct possi bility of a rise in business loans by year-end— with its well-known influence on the money supply and, hence, on the old, but ever new, problem of inflation. Business Conditions and Prospects levels in the major industries of the Distrist continue to show mixed trends. The cotton part of which is a belated seasonal move. Total ex penditures, as represented by bank debits, were at the same level in May as in April and 17% ahead of a year ago. P r o d u c t io n textile industry recovered moderately in May from the April level, despite continuing strikes in numerous mills. Bituminous coal output dropped sharply from lack of demand. Lumber and furniture industries are experiencing a considerable letdown. Rayon and syn thetic mills, on the other hand, are still running at ca pacity levels, and shipyards and aircraft factories are expanding output in vigorous fashion. The full-fash ioned hosiery industry is continuing production on a nearly full time basis, while the seamless branch of the industry is running about half time. Employment levels in the Fifth Federal Reserve Dis trict continue to move upward despite some setback in the manufacturing segment. Largely responsible for this rising trend are Governments, transportation equip ment industries, and construction. The construction in dustry continues as a strong element in the District’s economy, with industrial, military facilities and public works more than offsetting a recessionary trend in resi dential building. Trade levels in soft goods lines continued to rise through May, whereas the hard lines continued to show weakness, although furniture stores showed a better than seasonal improvement. Wholesale trade volumes are improving slightly and all lines, except electrical goods, show substantial gains over a year ago. The trend of bank loans is moderately downward, Construction Total construction contract awards in May were nearly five times larger than in April, after adjustment for normal seasonal variation, and nearly six times larger than in May a year ago. These figures were greatly augmented during the month of May by the awarding of a $600 million contract for the Savannah River Atom ic Energy Plant. Even if this $600 million were eliminated from the total contract awards in May, there would still have been a 12% gain over a year ago. Commercial construction adjusted (due to substantial curtailment through controls) dropped 55% in May from April though this level was 63% below May 1950. Industrial construction, due to the afore-mentioned Atom ic Energy contract, was 29 times larger in May than April and 56 times larger than a year ago. Residential construction continued its down trend with sizeable declines in multiple structures as well as in one- and two-family houses. Public works and utilities gained 13% more than seasonal from April to May and were 42% higher than a year ago. The rising con struction level has contributed substantially to the tight labor market in important areas of the District. There is some question whether industrial construction can continue throughout the year at present levels, because 19y FEDERAL RESERVE BANK OF RICHMOND of shortages of materials. Industrial concerns show no lack of willingness to erect new facilities or expand old ones. “ Peace fears” may temporarily moderate expan sion plans but can hardly alter the underlying factors which have promoted this construction. Trade District department store sales rose super-seasonally 2 % from April to May and stood 4 % ahead of a year ago. From January to June, total sales were 7% above the same period in 1950— or just about the average price increase. Soft goods lines accounted for most of the rise, though furniture and floor coverings, televi sion, etc., also exceeded last year’s figures, while the chief offset was in major household appliances. Indi cations in late June are that much the same trend has continued in soft goods with practically all of the hard goods turning easier. Interestingly, the heavy inventory accumulation of de partment stores is mainly in the home furnishings de partments, though some soft goods departments also have inventory accumulation. These are mainly in women’s and children’s shoes, corsets and brassieres, woolen dress goods, and cotton wash goods. Most other departments have what might be termed rather full in ventories. Furniture stores in the District improved their sales from April to May by 7 % , after seasonal adjustment, but the totals were 6 % smaller than a year ago. This loss can probably be accounted for by reduced sales of m ajor household appliances rather than furniture, since department stores indicated an improved level of fur niture sales. Sales of household appliance stores rose 8 % from April to May, or less than the normal seasonal im provement. Sales of these stores in May were 24% below a year ago. This performance adds further evi dence to the statement that the furniture stores sales’ drop from a year ago was caused by household ap pliances. Wholesalers’ sales in paper, automotive supplies, and drugs during May were moderately smaller than in April, after seasonal correction. A ll other lines show moderate gains. W ith the exception of electrical goods, all lines of wholesale trade are running at very high levels and well in excess of a year ago. Textiles Improvement was shown in the cotton textile indus try during May despite the fact that numerous strikes were still under way. Cotton consumption in May ex ceeded the normal seasonal change from April by 9% and stood at a level 14% ahead of a year ago. Even though May consumption is 7% under the adjusted peak established in December, it remains at a very high level. Indications are that the June level will not be materially different from that of May, though moderate reduction may occur in July and August, not from the lack of business but for lack of raw cotton. New orders should begin to accumulate this month and a high level of mill operations may well occur in the fall and winter. It is interesting to note that the export market in both cotton manufactures and semi-manufactures has risen very sub stantially thus far this year. Furniture Latest information on the furniture industry is for April when shipments were at a very high level, though moderately below the previous month. New orders (ad justed), however, declined 45% from March to a level 24% under a year ago and unfilled backlog (adjusted) declined 22% in A pril from March though still 15% ahead of a year ago. The figures seem to indicate that shipments of the industry will point downward for the next few months. The Summer Merchandise Mart in Chicago has been a quiet affair saleswise, and the re tailers’ inventory positions are clearly the cause. In the Fifth District, furniture store inventories in May ad justed, though 5% lower than in April, were neverthe less 24% ahead of a year ago, while store sales were 6 % under a year ago. Even assuming that the furniture business increased 4 or 5% from a year ago during May, inventory is still high. Furniture factories have made some moderate price reductions at the Chicago Marts for promotional purposes, but no general price reduction has been made. For the remainder of the year, it appears reasonable to suggest fuller production in the soft goods industries resulting from a rise in the trade level of the country as a whole. The trade recession between January and May has been what stock market analysts would term “ a technical reaction.” This decline has apparently bal anced out the December-January rise with a resulting level commensurate with the change in the disposable income of the American people. The future income level should continue to rise and, in turn, create a ris ing level of retail trade. i 10 ^ JULY 1951 MONTHLY REVIEW Mortgage Lenders —The Mutual Savings Banks Continued from page 7 Interesting divergencies exist between the assets dis tribution of Maryland mutual savings banks and the distribution of assets held by savings banks in the en tire United States. Despite the lack of legal restrictions on investments in Maryland, data reported indicate a relatively conservative policy. M ore than two-thirds of total assets of Maryland mutual savings banks were in Government securities at year end 1950 as contrasted with the national average of slightly less than half of assets. Holdings of non-government securities were about the same in Maryland as in the country as a whole. Maryland mutual savings banks have been relatively less active mortgage lenders than their counterparts in other states. A t year end 1950 mortgages accounted for less than 14% of the assets of Maryland mutual savings banks as compared with more than 35% for all mutual savings banks. Non-mortgage loans are relatively more important in Maryland, accounting for three times the share of total assets represented by these loans at all mutual savings banks. “ Other assets” account for twice as large a share of total assets in Maryland as in the United States, while cash assets are about the same as for all mutual savings banks. D E B IT S TO I N D IV ID U A L AC C O U N T S 51 R E P O R T IN G M E M B E R B A N K S — 5TH D IS T R IC T (000 omitted) (000 omitted) May 1951 Dist. of Columbia Washington Maryland Baltimore Cumberland Frederick Hagerstown May 1950 5 Months 1951 5 Months 1950 $1,059,355 $ 915,581 $ 5,288,769 $ 4,016,931 1,265,547 24,925 6,157,577 122,495 159,120 4,909,827 104,957 84,934 131,122 32,031 1,109,017 22,419 18,665 27,104 South Carolina Asheville Charlotte Durham Greensboro Kinston Raleigh Wilmington Wilson W inston-Salem 59,543 326,330 98,518 100,554 15,421 147,510 42,755 14,835 159,525 49,978 257,193 83,806 83,431 12,204 138,256 32,698 12,185 135,411 294,666 1,692,747 486,684 506,987 79,109 778,126 207,404 91,944 814,504 76,451 128,618 106,391 61,189 60,548 103,732 85,179 47,294 369,894 622,182 557,110 334,823 Virginia Charlottesville Danville Lynchburg Newport News Norfolk Portsmouth Richmond Roanoke 27,492 25,460 44,581 44,709 216,333 24,357 545,818 117,214 23,706 22,052 37,679 28,946 213,551 20,745 483,271 95,981 133,449 148,133 232,904 207,500 1,057,249 123,949 2,677,409 560,086 114,683 116,867 187,832 140,158 1,046,468 101,852 2,341,260 460,653 West Virginia Bluefield Charleston Clarksburg Huntington Parkersburg 45,061 159,615 35,035 67,888 32,127 42,665 128,964 29,793 59,039 25,066 233,941 754,288 173,378 333,050 150,501 192,072 606,946 140,386 276,789 122,770 District Totals $5,127,198 $4,406,159 $25,451,198 $20,517,779 101,220 c ^ — 16,788 — 18,107 — 686 + 2,074 — 34,313 — 7,064 — 7,698 — 19,715 + 164 — 2,045 +58,292 + 4,639 +25,625 + 1,157 +36,567 +233,814 +153,817 + 10,766 + 72,187 — 179,989 + 37,316 — 126,697 + 93,185 — 192,109 + 8,316 + 15,193 + 54,657 + 6,577 + 81,416 + 861 +212,529 Total Demand Deposits ---------- 3,033,540 Deposits of Individuals -------- 2,291,207 93,195 Deposits of U. S. Govt----------178,182 Deposits of State & Loc. Gov. 418,929* Deposits of Banks ----------------52,027 Certified & Officers’ Checks— 608,066 Total Time Deposits ___________ 551,942 Deposits of Individuals -------56,124 Other Time Deposits -----------1,800 Liabilities for Borrowed Money 25,940 All Other Liabilities --------------248,136 Capital Accounts --------------------Total Liabilities ------------------- $3,917,482 301,108 505,175 422,449 239,569 22,010 Change in Amount from May 16, June 14, 1951 1950 Total Loans ___________________ $1,179,511** 575,557 Business & Agricultural Real Estate Loans --------------- ... 240,564 377,610 All Other L oan s_____________ Total Security Holdings ---------- 1,571,206 118,895 U . S. Treasury Bills ------------0 U . S. Treasury Certificates — U. S. Treasury Notes ---------367,675 920,045 U . S. Treasury Bonds ----------Other Bonds, Stocks & Secur., 164,591 Cash Items in Process of Col. — 266,537 225,734* Due from Banks --------------------74,447 Currency and Coin ___________ 544,078 Reserve with F. R. Banks .... 55,969 Other Assets ---------------------------Total Assets ___________________ $3,917,482 239,749 1,303,732 391,551 394,253 62,267 671,997 159,505 69,479 660,438 South Carolina Charleston Columbia Greenville Spartanburg June 13, 1951 +49,328 + 69,133 — 37,118 + 7,006 +13,305 — 2,998 — 412 — 1,012 + 600 — 12,400 — 1,540 + 1,591 + 36,567 +202,927 + 135,707 + 17,043 + 15,037 + 28,393 + 6,747 — 10,305 — 19,781 + 9,476 + 825 + 5,319 + 13,763 +212,529 0 * Net figures, reciprocal balances being eliminated. ** Less losses for bad debts. o 9 i li Y FEDERAL RESERVE BANK OF RICHMOND S E L E C T E D F IF T H D IS T R IC T B U SIN E S S IN D E X E S AVERAGE 1935-39 = 100— S E A S O N A L L Y D A IL Y Automobile Registration1 ------------------------------------------------Bank Debits ______________________________________________ Bituminous Coal Production ------------ -------------------------------Construction Contracts Awarded ------------------------------------Business Failures— No. ----------------------------------------------------Cigarette Production -------------------------------------------------------Cotton Spindle Hours ___________________________________ Department Store Sales _________________________________ Electric Power Production ______________________________ Employment— Manufacturing Industries1 ----------------------Furniture Manufacturers: Shipments ---------------------------Life Insurance Sales ____________________________________ AD JU STE D Apr. 1951 430 134 2773 45 249 162 331 289 M ar. 1951 May 1950 213 430 176 558 62 233 149 326 332 150 339 281 May 1951 217 432 145 502 70 225 366 158 484 220 244 148 318 299 139 320 299 166 297 337 154 349 290 102 % Change—-Latest Month Prev. Mo. Year Ago — 2 0 0 + 17 — 15 +473 — 56 + 2 + 9 + 4 + 12 + 7 + 14 — 3 — 24 + 397 — 27 + 7 + 9 + 2 — 1 — 3 — 3 + 3 1 Not seasonally adjusted. Back figures available on request. W H O LESALE TRADE B U IL D IN G P E R M IT F IG U R E S Sales in May 1951 compared with May Apr. 1950 1951 LIN ES Auto supplies (9) ______ Electrical goods (4) ------Hardware (13) --------------Industrial supplies (5) __ Drugs and sundries (13) .. Dry goods (15) __________ Groceries (47) ___________ Paper and products (4) .. Tobacco and products ( 8 ) Miscellaneous (94) ______ District Totals (212) __ — 9 + 7 + 6 + 66 +14 — 2 + 12 + 49 + 32 — 3 + 5 Stocks on May 31, 1951 compared with May 31 Apr. 30 1950 1951 + + + — + 5 Months 1951 5 Months 1950 $ 6,722,420 250,395 91,075 113,710 218,325 $ 35,071,145 377,485 810,635 845,600 874,544 $ 39,639,140 591,790 1,229,950 774,580 633,917 Virginia Danville 519,797 Lynchburg 287,558 Newport News 100,393 Norfolk 750,275 Petersburg 769,614 Portsmouth 237,405 Richmond 1,440,548 Roanoke 1,104,546 275,943 362,415 84,423 1,357,845 221,228 296,125 2,721,868 1,333,156 1,245,722 1,852,928 697,529 9,375,708 1,557,108 3,669,515 8,519,252 7,857,898 1,476,352 1,611,595 878,266 6,597,205 1,738,695 1,462,909 9,628,571 8,847,507 388,178 151,880 1,044,042 721,071 297,050 615,102 2,232,436 464,490 3,510,594 7,616,313 778,273 2,566,296 North Carolina Asheville 661,388 Charlotte 1,183,284 Durham 362,079 Greensboro 807,482 High Point 299,325 Raleigh 1,529,305 Rocky Mount 179,980 Salisbury 152,246 Winston-Salem 1,079,220 191,073 2,447,346 696,900 1,230,595 490,941 1,040,750 177,509 197,258 1,195,330 3,421,188 10,547,411 2,601,503 3,731,096 1,544,714 6,181,525 1,424,186 691,591 5,184,424 1,940,296 11,688,060 9,005,287 4,994,286 1,728,572 8,045,641 2,249,886 1,640,346 4,942,571 South Carolina Charleston Columbia Greenville Spartanburg 214,873 740,125 3,244,670 164,050 595,245 980,733 667,400 1,188,241 802,459 5,170,452 6,122,229 526,240 1,479,183 5,373,796 3,131,929 1,702,947 + 1 2 7 — 8 1 8 8 4 io May 1950 + 2 + 10 — May 1951 Maryland Baltimore $ 6,949,930 Cumberland 53,550 Frederick 277,095 Hagerstown 202,415 Salisbury 152,066 Dist. of Columbia Washington 6,633,774 District Totals $31,681,093 6,282,038 $33,063,510 30,181,998 $157,093,605 29,041,183 $173,035,342 25 + 2 + 5 + + 31 + 20 + 13 + 32 + 19 — 13 -- 5 11 + 24 + 35 + 30 + Number of reporting firms in parentheses. Source: Department of Commerce. West Virginia Charleston Clarksburg Huntington R E T A IL F U R N IT U R E SALES Percentage comparison of sales in periods named with sales in same periods in 1950 May 1951 5 Mos. 1951 STATES Maryland (7) ________ ________________ ____+ Dist. of Col. (7) _____________________ ____— Virginia (18) ---------------- --------------------------— West Virginia (10 ___________________ ____• — North Carolina (16) __________________ ____— South Carolina ( 6 ) __________________ ____— District (64) _________________ ____— — 2 2 10 2 14 20 5 + 10 2 — 4 — 5 — IN D IV ID U AL CITIES Baltimore, Md. (7) __________________ ____+ 2 Washington, D. C. (7) ______________ ____— 2 Richmond, Va. ( 6 ) __________________ ____— 11 Charleston, W . Va. (3) _____________ ____■ — 5 Charlotte, N . C. (3) _________________ ____— 16 12 — — 17 Number of reporting firms in parentheses. ADDITION TO PAR LIST D E P A R T M E N T ST O R E O P E R A T IO N S (Figures show percentage change) Rich. Sales, May ’51 vs. May ’50 .------ + 4 Sales, 5 Mos. ’51 vs. 5 Mos. ’50 + 1 2 + 34 Stocks, May 31, ’51 vs. ’50 Orders outstanding, May 31, ’51 vs. ’50 _____....... + 3 4 Current receivables May 1 28 collected in May ’51 Instalment receivables May 1 13 collected in May ’51 _____ Md. Sales, May ’51 vs. May ’50 ------ + 9 Sales, 5 Mos. ’51 vs. 5 Mos. ’50 + 1 0 The Port City Bank, North Charleston, South Carolina, a nonmember bank located in the terri tory served by the Richmond Head Office, has agreed to remit at par, effective June 29, 1951, for checks drawn on it when received from the Fed eral Reserve Bank. The combined A .B .A . transit number-routing symbol of the bank is 67'502- Other District Cities Total b 4 + 2 - 9 + 8 -23 + 19 +10 + 10 +25 Wash. b 3 - 9 -23 + 30 - 2 49 46 36 41 15 19 18 17 Balt. D.C. + 3 + 9 + 8 Va. W .V a. N.C. + 3 + 2 — 3 + 11 + 1 2 + 4 + 14 513 S.C. + 6 + 8 •I 12 Y