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FEDA t A/0RESERVE B A N K j6f)r!C H M 0N D
-
Ju ly 1955
CONSTRUCTION OUTLAYS IN PERSPECTIVE
Billions of Dollars
•40
Total
Private
Actual
Adjusted
A s%of
GNP
D 1929
Actuol
Adjusted
Private
Residential
Total
Public
A s% o f
GNP
Actual
Adjusted
As % of
GNP
Actual
Adjusted
As % of
GNP
All Other
Private
Actual
Adjusted
A s% o f
GNP
C l 1954
Note: Construction and GNP data adjusted for price and population changes Comparisons are of adjusted data.
Source: U. S. Department of Commerce.
utlays for new construction in the first half
of 1955 rose to an all-time high of $19.1 bil
lion. These amounts need to be adjusted, how
ever, for increased construction costs, for popula
tion gains, and for the growth of the economy to
put the boom in proper perspective. The cover
chart compares recent outlays with those in 1929,
and the article on page 3 discusses important
aspects of current construction activity.
O
Also In This Is s u e
-----------
Fifth District Trend C h a rts_________
Page
2
Page
8
Business Conditions and Prospects
Page
9
Fifth District Statistical Data ______
Page 11
Recent Developments
in Farm Real E s ta te ___________
Federal Reserve Bank of Richmond
F ifth
D ist r ic t
T r en d s
BANK DEBITS
DEPARTMENT STORE SALES
200
200
150
150
160
160
125
125
'20
120
100
100
80
80
40
75
40
(Sea >onally Adjusted)
(I9< 7-1949= 100)
■
1947
1948
1949
1950
1951
1952
1953
1954
!
0
0
1947
1955
Bank debits of Fifth District reporting banks continues to in
dicate an active business situation. May figures, seasonally adjusted,
were 5 % higher than April, 14% higher than a year ago; and the
five month’s accumulation is up 10% .
1948
1949
1950
1951
1952
1953
195 4
1955
An active trade level during May is indicated by a rise in de
partment store sales after seasonal correction of 1% from April.
While May was the second poorest month last year the increase
from May to May was 13% and in the first five months of the
year a gain of 9% was recorded.
BITUMINOUS COAL PRODUCTION
RETAIL FURNITURE STORES NET SALES
isor
150
125
125
100
100
75
75
( Seosonolly Adjusted)
(1947-1949= 100)
0
1947
Vigorous recovery in
underway in May when
average daily basis over
In the first five months
1948
1949
1950
1951
1952
1953
1954
1955
Furniture stores showed a moderate reduction in sales from
April to May after accounting for seasonal factors, but this was a
moderate drop and does not signify a turn of events. May sales
dropped 2 % from April. They were 7% ahead of a year ago and
the first five months shows an increase of 13% .
the output of bituminous coal was still
Fifth District production rose 4 % on an
April to a level 35% ahead of a year ago.
of the year output is up 28% .
ACTIVE
TOTAL CONSTRUCTION CONTRACT AWARDS
COTTON SPINDLE HOURS
wo;
140
120'
\
I
V'
100:
f
120
f J
100
V
V
80L
80
I
60!
60
,
(Seo« onolly Adju sted)
0
1947
Total construction awards are still in boom area during May 1955,
but after seasonal correction they were down 26% from April.
Relative to a year ago total awards were up 7 % and in the first
five months of the year, they record a gain of 56% .
i 2 y
<
(194 7- 1949= 1C30)
1948
1949
1950
1951
1952
1953
1954
1955
Cotton spindle hours and cotton consumption in the mills of the
Fifth District both showed a good rise on an adjusted basis from
April to May, but shifts in the constructions from heavy to lighter
weight yarns required more expansion in the hours operated by
spindles. In May these were 6% higher than in April on an
adjusted basis, 15% higher than a year ago with the first five
months up 8% . The May adjusted level reached the all-time war
peak established in 1942.
Ju ly 1955
Construction—A Reappraisal
A
lthough
recent years is not the rip-snorting, record-breaking
boom it appears to be.
it seemed like a case of staring down
the throat of a gift-horse, the high and rising level
Eliminating the effect of increases in costs, for e x
of construction activity has had an uneasy acceptance—
ample, deflates considerably the dollar volume of post
especially during the 1953-54 recession, when it was
war expenditures. Last year’s $38 billion outlay, in
the brightest spot in the economic picture. Record-set
1947 prices, is reduced to about $29 billion. Making
ting outlays for contsruction and of increasing contract
costs a neutral factor surely has a marked effect on
awards when announced drew frequent statements that
a downturn might be in the offing.
comparisons of prewar and postwar spending for new
construction. Actually the 1954 dollar total was
Such misgivings were based largely on the construc
tion industry’s traditional role of prince or pauper. Its
three and one-half times larger than the $11 billion
history has certainly been marked by alternating peaks
spent in 1929, but in constant dollars (corrected
of high activity and periods of idle capacity. T o many,
for cost increases) was only half again 1929’s simi
construction activity which had been rising sharply and
larly adjusted $19 billion.
steadily since 1946 could
This type of deflating is
not be expected to go on
even more striking in the
rising forever. W asn’t resi
case of private construction.
NEW CONSTRUCTION
dential building outrunning
Outlays of $26 billion for
household
formation ?
private projects in 1954
Hadn’t industrial building
seem to overshadow the $8
already turned down? Cer
billion spent in 1929, but
tainly the impetus given by
when costs are equalized
the migration to the suburbs
the comparable amounts be
must soon begin to peter
come $20 billion and $15
out. These and other in
billion.
dications caused many ana
Another adjustment to
lysts to envisage the end of
the raw dollar figures aid
almost a decade of rising
ing better appraisal of the
outlays for construction.
current construction pic
Rather t h a n declining,
ture is allowing for obvious
however, construction ex
ly rapid population growth.
penditures continued to ex
Other things being equal,
pand and became a major
the current volume should
force in the vigorous 1954be much larger than the
55 recovery. In turn, this led to renewed insistence in
1929 total with 43 million more people and about 18
many quarters that construction has reached the boom
million more households on the demand side of the
stage— with a you-know-what-follows-a-boom implica
equation.
tion.
Adjusting, then, dollar outlays in terms of constant
As far as the dollar amount of outlays for construc
(1947) population further deflates the boom size of
tion is concerned— both the current volume and the
recent construction outlays. Whereas unadjusted ex
spectacular increase over the past decade— there is no
penditures last year were three and one-half times the
gainsaying the zooming boom. From 1950-54 expendi
1929 outlays, corrected for population changes, the 1954
tures for new construction averaged $32 billion per
figure
is only two and one-half times as large as the
annum. Last year the total rose to $38 billion, and
1929
amount.
And if other major divisions of con
this year the $42 billion mark may be reached. These
struction are so treated, a similar narrowing of numeri
are stratospheric heights compared to the $12 billion
spent in the first postwar year and the $8 billion spent
cal differences is achieved.
in 1939.
Adjustments for up-changes both in costs and popu
lation take much of the zoom out of the current con
struction boom. As shown by the solid curve on the
accompanying graph, the real volume of new construc
tion in 1954 was only a little larger than the adjusted
volume in 1929— a very different picture from that
painted by the unadjusted dollar amounts which were
245% greater in 1954 than in 1929.
Put in Perspective
If these figures were accepted as the whole story,
they would present a distorted record of real construc
tion activity. They need to be whittled down by al
lowances for increased construction costs, for popula
tion growth, and for the growth in the economy as a
whole. W hen this is done, construction activity in
{
3 J*
Federal Reserve Bank of Richmond
Clearer Picture
initial explanation of today’s grandiose construction
activity. That building boom came to a close over a quarter-century ago, and in the interim the volume of private
construction was cut to the bone first by the Great
Depression and next by W orld W ar II. W hile effec
tive demand was drastically reduced, needs continued
in their inexorable way, and backlogs of construction
projects piled up to the point where a decade of appli
cation by a greatly expanded industry has not erased
them.
A completely different picture is obtained if the ad
justed figures are related to aggregate economic activ
ity. One indication of the existence and extent of a
construction boom is the relative importance of the con
struction industry in the economy. A s shown in the
bar chart on the cover, recent construction activity is
relatively of considerably less importance than it was in
the boom-and-bust year of 1929!
Although construction expenditures have been in
creasing steadily for the last 10 years, adjusted outlays
Added to that have been the vast construction re
in 1954 were still only 9.7% of aggregate economic ac
quirements of an economy experiencing a decade of
tivity (represented by gross national product adjusted
unprecedented growth— more recently manifesting an
to constant 1947 population and prices). In 1929, the
earlier intense replacement demand as competition and
final year of the previous peacetime construction
technical im p r o v e m e n ts
boom, they were 14.3%.
shortened the economic life
A s shown in the bar
of
the old.
chart, construction activity
CONSTRUCTION CONTRACTS AWARDED
in every major category last
Breathing
life into these
(December 1952* 100)
year was still short of the
building requirements has
heights reached in 1929 re
been a prosperity-high-andlative to total economic ac
rising flow of income. A s
tivity. Despite the second
a consequence, there has
highest number of starts in
probably been a narrower
the nation’s history last
gap in the last ten years be
year, private non-farm resi
tween needs and effective
dential b u ild in g o u tla y s
demand for construction
than in any previous dec
were only 3.5% of the gross
ade.
national product, as compar
ed to almost 5% in 1929
Most impressive aspect
(dollar amounts adjusted as
of the postwar construction
indicated in the chart).
story has, therefore, been its
Spending f o r residential
relatively restrained nature.
It is no wonder that aggregate outlays have reached
building in 1929, however, was well below the 1926 peak.
Outlays for all other private construction projects dur
such large amounts; the real wonder is that current
ing the “ Roaring Twenties” peaked in 1929 and ac
levels are not much higher than they are.
counted for over 6% of G N P. Such expenditures last
In some respects too much restraint has been ex
year— for all the new supermarkets, motels, utilities, and
ercised. In many instances, “ too little— too late” has
office buildings— amounted to only a little more
characterized spending by state and local governments
than 3 % .
for expansion and improvement of schools, highways,
The fact that the real (adjusted) volume of current
and intracity expressways. As did everyone else, many
construction is short of the heights (relative to aggre
public planners underestimated the ability of the econ
gate output) reached during the booming Twenties is
no proof that construction activity still has lots of
omy to continue expanding at the rate it has and con
growth ahead or that there are no weaknesses in the
sequently set their requirements too low. Even those
picture.
requirements have not always been approved by the
Adjusting construction expenditures for changes in
public for many proposed bond issues to finance needed
costs and population and comparing current activity
public
projects have been rejected by the voters. In
with that in a previous boom-year may help to place
dignation expressed over the back fence about inade
the current situation in clearer perspective.
Clue:
quate educational facilities, traffic jams, and water
Backlogs
shortages is not always carried to the polls or the point
Earlier reference was made to 1929, final year of the
last peacetime construction boom. Therein lies the
where the necessary money is provided.
i 4y
July 1955
Nonresidential Construction Still Strong
The argument that the nation is overbuilding ought
to get short shrift with respect to nonresidential con
struction. In most lines, public and private, the high
levels of demand appear to be solidly based, and there
is little indication that current activity is borrowing
from the future. Although there are differences of
opinion as to how to finance expanded highway-build
ing, there is virtually no disagreement as to its need;
substantially larger outlays in the near future are
practically certain.
railroad and other transportation companies will be
added to expenditures by commercial and financial
firms, hospitals, religious and other institutions as ex
pansive forces in nonresidential construction.
Prize performer in this category so far this year has
been industrial building. After declining for three
years, investment for this purpose turned upward at
the close of last year and is still increasing. The F.
W . Dodge Corporation reports that for the first five
months of this year (latest data available) contract
Similarly, increased spending for schools cannot be
awards for construction of manufacturing plant ran
avoided. Preliminary reports of a “ Survey of School
44% higher than they did in the same period a year
ago. This was the second largest percentage gain of
Facilities” by the United States Office of Education
any of the components of
indicate that in order to
nonresidential construction
meet accumulated and cur
(public works
increased
rent requirements by the
RESIDENTIAL CONSTRUCTION EXPENDITURES
6 5 % ) and well above the
Fall of 1959, the nation
Billions ol Dollors
23% increase for the total,
will have to step up and
including public works and
maintain for the next four
utilities.
years classroom building at
a rate 73% above the cur
F ifth D istrict Ahead
rent level.
o f N ation
All told, non-federal out
lays of $200 billion will be
Both of these gains were
required in the next 10
bettered in three of the Fifth
years for highways, schools,
District states. Contract ahospitals, and other state
wards reported by Dodge in
and local capital projects.
Maryland increased 156%
This total, estimated in a
for manufacturing build
joint survey by the U. S.
ings and 69% for total non
* Adjusted for chonges in construction costs and population (1947 dollors)
Departments of Commerce
residential c o n s t r u c t i o n .
and Labor, would entail
W est Virginia had gains of
average a n n u a l outlays
319% and 2 9% , and North
more than double this year’s spending for such pur
Carolina 159% and 83% . Virginia with an increase of
poses.
51% and the District of Columbia with 150% also
A s unlimited as public construction requirements ap
surpassed Dodge’s 37-state gain of 23% for total non
pear to be, the private sector has been the pace-setter
residential construction awTards. In each of the major
so far this year. Here, nonresidential construction has
divisions of nonresidential construction— commercial,
been having a record-setting year even though it is not
manufacturing, educational, public works, utilities—
as spectacular as that of residential building. For the
contract awards in the Fifth District as a whole in
first five months, outlays on private projects other than
creased substantially more than they did in the nation
residential amounted to $5 billion— 10% greater than
in this period.
<
in the comparable period of 1954.
A major force behind the rise in nonresidential con
One of the most significant developments so far this
struction— the movement of population to the suburbs
year has been the turn-around in spending for new
— should continue to exert strong upward pressure.
plant and equipment. After declining for six consecu
The centrifugal migration is still going on and will
tive quarters, such outlays turned upward in the second
obviously
call forth new shopping centers, supermarkets,
quarter of this year, and it is estimated that they will
banks,
and
other commercial and financial projects as
equal in the current quarter the previous peak reached
well
as
religious,
social and recreational facilities which
in the third quarter of 1953. Thus, increased construc
have lagged behind.
tion outlays by manufacturing, mining, public utility,
5 Y
Federal Reserve Bank of Richmond
Residential Construction—How Abnormal?
Is the residential building industry sound and healthy
or is it engaged in a wild uneconomic spree which will
shortly show up in unemployment and idle equipment?
There has been a flood of articles and speeches at both
lay and professional levels. Many express uneasiness
in terms of, “ this cannot go on much longer,” “ we are
borrowing from the future to support an unhealthy
growth now,” “ builders are saturating the market,” or
“ we cannot ease mortgage lending terms indefinitely
and this stimulus to demand has about reached its limit.”
Others counter with “ the level of construction is normal
for the level of population and of prices we now have,”
or “ we are in a period of new attitudes and new tech
niques— current levels of ac
tivity cannot be judged by
what has happened in the
RESIDENTIAL
past.”
Billions of Dollar*
economic changes, even perhaps lagging behind other
periods of rapid expansion.
What factors tend to support the continuation of
residential building at these high levels? Each of the
following influences should be carefully considered in
appraising the future:
1.
The availability and the terms of mortgage credit.
2.
The high and rising level of personal income.
3.
Migration of the population: from rural to
urban; from central city to suburban; from region
to region.
The formation of new households.
5. Changes in h o u s in g
s ta n d a r d s — the wide
spread
desire for better
MORTGAGE DEBT
housing.
6. The rising trend toward
Figures on r e s id e n tia l
home ownership— of all
construction are indeed star
occupied
dwellings, only
tling— when considered in
41%
were
owned by
isolation or in direct com
their occupants in 1940;
parisons with the past. In
in 1950, 53% were own
each of the past six years
er occupied. The current
over one million homes were
figure is probably close
s ta r te d . 1955 looks like
to 60% .
another million-plus yea r;
7. The condition of the ex
over the first five months of
isting stock of houses—
the year privately financed
a large proportion is of
work was begun on 547,300
i n f e r i o r q u a lity and
new homes. If current rates
many are removed each
continue, private housing
year because they no
starts for 1955 will equal or
* Adjusted for chonges in construction costs and population (1947 dollors)
longer meet the mini
exceed the previous record
mum standards for resi
of 1,352,200 set in 1950.
dence.
Over $6 billion was spent on
O f these seven factors, the first has been singled out
residential construction from the first of the year
as a possible harbinger of disaster. The remaining
through May. The U. S. Departments of Commerce
six represent basic economic and psychological factors
and of Labor estimate a total of $14.6 billion for the
which should be encouraged in the promotion of ever
full year, putting expenditures for 1955 at $1.3 billion
rising standards of living and which, in any event, can
(nearly 1 0 % ) above 1954 and $2 billion (over 15% )
not be directly controlled in a free society. Likewise,
above 1950, the record year.
the availability of mortgage credit is the result of numer
The accompanying charts on residential construction
ous economic factors, which can be influenced by gen
expenditures and residential mortgage debt portray cur
eral monetary policy, but which are not subject to direct
rent figures as giants when compared directly with the
control in a free enterprise system. Mortgage funds
booming Twenties. Since that prosperous decade, how
are now provided by numerous and varied financial
ever, construction costs have increased two and a quar
institutions, such as, savings and loan associations, in
ter times and the nation’s population is two-fifths great
surance companies, commercial banks, and mutual sav
er. These adjustments are shown in the charts, and the
ings
banks. The amount of funds made available for home
comparison with the 1920’s becomes much less unfavor
financing by these institutions is influenced by the total
able than with the actual dollar figures.
amount of funds available to each of them for investment,
In this perspective current residential construction
the existing distribution of their assets among the vari
activity can hardly be considered an unstable, specula
ous types of investments, and the current rates of return
tive spree, which, because it is out-of-line with other
that can be realized in each of the different fields of in
developments, is doomed to disastrous collapse. It ap
pears more as a normal growth accompanying other
vestment, one of which is the home mortgage field.
4.
-{ 6
y
July 1955
/ fo n fflA / J ^ o h c u a
mortgage commitments. The condition of the financial
institution which holds the mortgage would today have
no bearing on this ability, whereas, in earlier years, it
was frequently a deciding factor.
The terms on which mortgage credit is extended,
however, have been attacked as the weak spot in the
residential construction picture. Some maintain that
exceedingly easy terms have induced an unsustainable
volume of mortgage debt. The contention is supported
primarily by comparison of the spectacular growth in
residential mortgage debt outstanding since the end of
W orld W ar II (see the solid line in the accompanying
chart) with the level and the rate of growth in earlier
years. Such a direct comparison, just as in the case of
construction expenditures and housing starts, is apt to
be misleading. Adjusting the dollar amount of mortgage
debt outstanding for price and population changes gives
a more reasonable perspec
tive.
The accompanying
chart shows the adjusted
dollar figure to be higher
at the end of both 1953 and
1954 than in any year since
1929. The difference from
earlier periods, however, is
not nearly as startling as the
actual figures would indi
cate.
Is it a sign of weakness
that the dollar amount of
mortgage debt, adjusted for
p r ic e
and
p o p u la tio n
changes, is greater now than
at any time since 1929? It
is sometimes stated that it
would be more difficult to
carry today’s mortgage debt
“ burden” in the event of a
major general economic de
cline such as occurred from 1929 to 1933. There are a
number of factors in today’s debt structure, however,
which will mitigate to some degree the effects of eco
nomic adversity. Undoubtedly, a very important factor
currently is the contractual monthly amortization, wide
spread today but relatively scarce in the 1920’s. Rela
tively few borrowers today would be faced with refusal
to renew a mortgage loan whose short term had run its
course as was fairly typical in the period from 1929 to
1933. Today’s mortgage borrower could not be faced
with more than the amount of his current monthly pay
ment. Consequently, borrowers whose incomes are
maintained, even at lower levels, could still uphold their
A second attribute of today’s mortgage debt structure,
reducing the effect of an economic decline, is the exist
ence of Government insurance and guarantee. O f the
$75.9 billion of mortgage debt outstanding on 1- to 4family properties at the end of 1954, 42% carried such
insurance or guarantee. Consequently, an increase in
defaults would not have the same effect on the financial
institutions carrying this debt as it had in the last great
depression.
Perhaps the more ap
propriate criticism of to
day’s huge personal debt
structure, including all con
sumer credit as well as that
based on home mortgages,
lies in the commitment of
current income. Declining
economic activity, reducing
personal incomes, may not
necessarily lead to a wave of
loan defaults— but it will
certainly reduce the amount
of funds available for cur
rent expenditures. A large
portion of current income
will flow to debt repayment
while the flow into new ex
penditures from new debt
being contracted may de
cline so that a net reduction
in personal expenditures follows. This could lead to
a cumulative deflationary process. The detrimental
effects, therefore, can be said to stem from the factors
affecting personal incom e; not from the level of person
al debt. The existence of a large personal debt may
tend to enhance a downward movement in economic
activity— but the preferable cure lies in the maintenance
of a high and stable level of personal income, not in a
reduction in the debt structure. A s a matter of fact,
any conscious attempt to reduce the debt structure may
well have such repercussions on personal income as to
bring about the decline in economic activity that it is
sought to avoid.
i
7
Y
Federal Reserve Bank of Richmond
Recent Developments In Farm Real Estate
T T ' i f t h D i s t r i c t farm real estate prices weakened
J- slightly during the winter of 1954-55 but still lay
between the level a year earlier and the post-W orld W ar
II high recorded two years ago. Recent price weakness
in the Fifth District differed from the national situation
— the United States index increased from 124 in N o
vember 1954 to 125 in March 1955 (1 9 4 7 -4 9 = 1 0 0 ),
while the District index dipped from 130 to 129. A
year ago the District index stood at 127 and the United
States index at 122.
of farm income were important factors in the past year’s
decline.
The number of farms listed for sale was about the
same as a year earlier except in Virginia where a slight
increase occurred. Demand generally seemed slightly
weaker although active interest continues in small acre
ages suitable for part-time farming. Another factor in
the lower level of farm real estate activity has been
some apparent tightening of funds for farm mortgages
on newly acquired farms. W hile interest rates have
generally held firm to slightly higher, reports show a
Maryland and North Carolina Prices
more conservative trend both in appraisals of farm land
at Record Levels
and in screening prospective borrowers. Despite these
W ithin the District the largest land value decline
(about 3 % ) occurred in
developments, in d ic a t io n s
Virginia where the index
are that an increasing share
fell three points to 130. A
of farm transfers now in
VALUE OF FARM REAL ESTATE PER ACRE
two-point decline (from 112
volve credit in one form or
Dollars
to 110) occurred in W est
another.
Virginia. In South Caro
Mortgage Recordings
lina the index slipped from
Increase
115 to 114. In North Car
State data are not avail
olina and Maryland the in
able on mortgage record
dex remained at 138 and
ings, but in the two Farm
128, respectively.
In both
Credit Administration Dis
of these states land prices
tricts which include Fifth
currently are at their allDistrict s t a t e s both the
time peak, and elsewhere in
number and total amount of
the District they are only
farm mortgages recorded
moderately below the peak
by all lender groups was
levels reached in 1952 or
larger in 1954 than in 1953.
1953— in puzzling contrast
Readers a r e cautioned
with the decline in farm
against assuming that mort
Source: U. S. Department of Agriculture.
prices and in net farm in
gage recordings bear a par
come taking place during
ticularly close relationship
to land transfers. Actually
this period.
farmers borrow against real estate mortgages for vari
The actual level of farm real estate prices among
ous reasons, the purchase of land being but one. W hile
states is not evident from the above-mentioned index
recent information is not available for banks, data for
numbers. The accompanying chart, however, shows
other institutional farm-mortgage lenders show that re
the average dollar value per acre in each District state
financing of existing debt is now a more important
for 1940 and annually from 1950 to 1955 (prices as of
reason for borrowing than the purchase of farm land.
March 1 for the years indicated). The weighted aver
age price of farm land and buildings for the entire Dis
In a 1954 study of Federal Land Bank loans, 60%
trict is not shown since it corresponds closely to the
of the money borrowed was to refinance existing debts,
price in Virginia.
13% was to buy farm real estate, and 27% was for all
other purposes, including the purchase of livestock and
Volume of Sales
machinery and the making of farm and home improve
During the year ended March 1, 1955, the number of
ments. This is substantially in line with the reasons for
voluntary sales and trades of farm real estate was higher
borrowing from Federal Land Banks in other recent
than the year before for the country as a whole. This
years. Recently published data of leading insurance
pattern also applied to Maryland and W est Virginia,
companies in the farm-mortgage lending field revealed
but the other states in the District showed a decline.
that 46% of the funds loaned on farms went to refinance
In North Carolina the rate of voluntary transfers was
farm real estate mortgages and other debts, 35% was
the lowest since 1933, while in Virginia the rate was
for the purchase of farm real estate, and 19%was for
the lowest since 1936. Drought and the lower level
all other purposes.
i 8 }*
/f m
M
/$ m & c u L
July 1955
Business Conditions and Prospects
siderably lower inventory than has prevailed in the last
several years.
of the vigorous expansions thus far
has been the trade level, which still shows con
siderable strength although the trend appears to be
leveling off. Construction contract awards moved
down somewhat from their exceedingly high perch but
clearly remained at boom-time levels. The bituminous
coal industry continued its strong revival, with average
daily output in May exceeding every month since A u
gust 1953.
ellw eth er
Retail furniture store sales fell 2% on an adjusted
basis from April, but were 7% higher than a year ago.
Sales in the first five months of 1955 were 13% ahead
of last year. Inventories in May rose 6 % from April,
after seasonal correction, but were still 4 % under a year
ago.
C onstruction
In the important textile sector, cotton spindle hours
in May were a thumping 15% ahead of May ’54 and
equaled their record high achieved in war-time July
1942.
Construction has been labeled the bellwether of re
covery since it had nothing to recover from— it continu
ed to rise throughout the recession and, though hesitat
ing recently, is still in the super-boom area. Contract
awards in May, on an adjusted basis, were down 26%
from April but still 7% ahead of a year ago. For the
first five months of the year, total awards were a whop
ping 56% ahead of a year ago.
One-and two-family houses were the only types of
construction to show an increase of more than seasonal
proportions from April to May. These awards were
up 12% in that period, 51% ahead of a year ago and
63% higher during the first five months of the year.
Awards for public works and utilities (adjusted) drop
ped 64% from April to May. They were 15% under
a year ago, but in the first five months were up 63% .
Awards for factory buildings dropped 31% (adjusted)
from April to May, but were 56% higher than a year
ago. In the first five months of the year the gain was
103%. Commercial construction awards dropped 9%
on an adjusted basis from April to May but were 29%
higher than a year ago and 57% higher in the first
five months.
Manufacturing activity in the Carolinas, which had
leveled off in the first four months of 1955, achieved a
vigorous upturn during May. Manufacturing employ
ment moved up in April and area labor market reports
imply still further rises in the May figures when avail
able.
Total loans and investments of Fifth District member
banks declined moderately during May with rises in
loans and holdings of other securities being more than
offset by reductions in Government security holdings.
All types of bank deposits declined slightly but bank
debits showed an adjusted increase of 5% to a level of
14% higher than a year ago. In May, deposits of
mutual savings banks in Maryland rose 4.9% over a
year ago, the smallest percentage increase for any month
this year or last.
Purchases of Series E & H savings bonds in the
District during May were 4% smaller than in April,
although a hearty 21% higher than last year. Redempt
ions, however, rose 1% from April to May and were
17% higher than a year ago. Slower rates of saving
and declines in bank deposits undoubtedly were related
to the high level of trade activity.
M anufacturing
Manufacturing man-hours for the District were off in
April 2.7% from March but stood 5.1% ahead of a year
ago. Only May data available are for the Carolinas,
but they indicate that the District’s April loss will be
more than offset, with man-hours in all manufacturing
up 3.4% from April and at a level 10.8% higher than
a year ago. Durable goods industries man-hours in
May were 5.4% ahead of April and 14.6% ahead of a
year ago. In the District totals for April, a 1% decline
from March was shown, but April was 6.1% ahead of a
year ago. In non-durable goods industries in May
the Carolinas were up 2.7% from April and 9.6% from
a year ago. April man-hours in total District non
durable goods industries were off 3.8% from March
but 4.6% above April 1954.
Trade
Leveling off of the high trade plateau of recent
months is shown in the case of motor vehicles and, to
some extent, in furniture, floor coverings, and draperies.
M ajor appliances, on the other hand, continued in strong
demand through the month of May.
Department store sales during May (average, daily
adjusted) were 1% higher than in April and 13%
higher than a year ago. In the first five months of the
year, sales volume was up 9 % from last year. Depart
ment store inventories (adjusted) declined 3% during
the month, but were 1% higher than a year a g o ; out
standing orders rose 4 % to a level 21% ahead of a
year ago. Interestingly, an increased volume of major
household appliance sales is being effected with a con
All major industrial classifications in the Carolinas
showed increased man-hours from April to May with
the exception of machinery and chemicals. Prominent
A
9
y
Federal Reserve Bank of Richmond
in the April-M ay rise were cigarettes, furniture and
fixtures, lumber and wood products, stone, clay and
glass, seamless hosiery, and apparel, particularly in
North Carolina.
Cotton consumption by Fifth District mills rose 3%
(adjusted) from April to May to a level 12% ahead
of a year ago. In the first five months of the year con
sumption was 7% higher than in those months last year.
May cotton consumption, adjusted, was within a frac
tion of a per cent of the level established in December
1954. Spindle hours operated in May rose 6% from
April (seasonally adjusted) to a level 15% ahead of a
year ago and tied the record high of July 1942.
Total rayon and acetate shipments of domestic pro
ducers moved down 9 % from April to May but re
mained 11% ahead of a year ago. All types of ship
ments showed declines during the month with the ex
ception of viscous high tenacity.
Cigarette production in the District (available only
for A pril) was down an adjusted 9% from March and
3% under April a year ago. For the first four months,
however, the totals were 4 % above last year. In May,
according to the Richmond Chamber of Commerce,
cigarette production in Virginia was 6.7% ahead of a
year ago.
and were 14% over a year ago. For the first five months
the gain was 10% .
B anking
In April, railroads, retail dealers, and bunker fuel
users were the only consumer types showing smaller
consumption than a year ago. All other users had in
creases ranging from 17% for electric power companies
to 259% for beehive coke ovens— by-products ovens in
creased 2 8% , cement mills 8 % , and other industrial
concerns 7 % .
Total loans and investments of the member banks of
the Fifth District declined $26 million from April 27 to
May 25. Loans increased $25 million in this period
and other securities rose $1 million. These, however,
were more than offset by a decline of $52 million in
holdings of Government securities.
Total deposits of the District member banks declined
$76 million from April 27 to May 25. Time deposits
declined $1 million while demand deposits declined
$75 million, inter-bank deposits were off $50 million
and other demand deposits $60 million.
Borrowings of the member banks rose $13 million
during the month, with borrowings from the Federal
Reserve Bank up $7 million and from others up $6
million.
Changes from May 26, 1954, to May 25, 1955, were
as follow s: loans and investments up $455 m illion;
loans up $362 m illion; holdings of Government securi
ties up $42 m illion; and holdings of other securities up
$51 million. Deposits were up $406 million, with de
mand deposits up $247 million and time deposits con
tributing $159 million.
Bank debits of the reporting banks in the District in
creased 5% (seasonally corrected) from April to May,
Loans of the weekly reporting banks continued their
unusual rise during June. Part of this was due to
income tax borrowing, but continued sharp rises in
real estate and consumer loans have little to do with tax
payments and are indicative of continuing expansion in
those areas.
U nem ploym ent
Insured unemployment in the Fifth District during
the week of June 11 totaled 111,600, a decline of 4.5%
from a month earlier and 45.1% from a year ago.
Nationally, insured unemployment on June 11 had de
clined 12% from the previous month and 40.8% from
a year ago.
Bitum inous Coal
Average daily output of bituminous coal from Fifth
District mines rose 4 % from April to May and 35%
over May 1954. In the first five months output was
up 28% from those months of last year. This is a sub
stantial rise and, importantly, has made no contribution
to increased stocks in the p eriod ; in fact, stocks are
down 5 million tons from a year ago.
A griculture
The moisture situation has been considerably better
in the Fifth District this year than in the past two years.
The growing season thus far has been generally quite
favorable. Farm prices in May were varied— Virginia
and W est Virginia showed small declines during the
month, but North Carolina and South Carolina had
small increases. Relative to a year ago, May farm prices
were down 4.1% in Maryland, 0.8% in Virginia, and
9.4% in W est Virginia. They were up 0.7% in North
Carolina, and unchanged in South Carolina. These
figures compare with a decline in United States farm
prices of 1.2% during May and 4.3% from a year ago.
Cash farm income in the District during April rose
8% from March and was 2% higher than a year ago.
In the first four months, however, it totaled 7% less
than last year.
{ io y
July 1955
F if t h
D is t r ic t S t a t i s t i c a l D a t a
F U R N IT U R E SAL ES*
(Based on Dollar Value)
Percentage change with correspond
ing period a year ago
May 1955
5 Mos. 1955
STATES
Maryland _________________
+ 6
+11
+ 14
+ 16
Dist. of Columbia _______
Virginia __________________
+ 7
+ 1
+25
+ 32
West Virginia ___________
North Carolina __________
+ 3
+11
+ 13
+26
South Carolina ___________
+12
D istrict_________________
+12
IN D IV ID U AL CITIES
+11
Baltimore, Md. _______-------------------Washington, D. C.
-------------------+16
— 3
Richmond, Va. _______........................
+ 8
Charleston, W . Va. .„-------------------Greenville, S. C. ____ ------ -------------+11
*Data from furniture departments of department stores
furniture stores.
+ 6
+ 14
+ 13
+ 7
as well as
W H O L E S A L E TRADE
LINES
Auto supplies _______________
Electrical, electronic and
appliance goods __________
Hardware, plumbing and
heating goods __________
Machinery equipment sup
plies ______________________
Drugs, chemicals, allied
products ________________
Dry goods __________________
Grocery, confectionery,
meats ____________________
Paper and its products
Tobacco products __________
Miscellaneous ____________
District Total ____________
Sales in
May 1955
compared with
May
Apr.
1954
1955
+ 18
— 2
+
Stocks on
May 31, 1955
compared with
May 31, Apr. 30,
1954
1955
NA
NA
1
-1 1
— 1
— 2
+24
+10
+
6
+ 15
+
+ 3
—
1
— 1
+20
+ 18
+
5
0
+ 33
— 19
— 2
—28
+ 3
+20
NA
+ 14
+ 15
0
— 37
NA
+ 2
+ 2
+ 4
NA
NA
+ 7
+ 7
+ 1
NA
NA
+ 6
+ 5
6
N A Not Available.
Source: Bureau of the Census, Department of Commerce.
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 changes)
Other
Rich. Balt. Wash. Cities
Sales, May ’55 vs May ’54 _ + 1 3
Sales, 5 Mos. ending May 31,
’55 vs 5 Mos. ending May
31, ’54 ____________________
+10
+
6
Stocks, May 31, ’55 vs ’54 _
+ 5
+ 4
+ 2
Outstanding Orders
May 31, ’55 vs ’54 ______
+21
+ 31
Open account receivables May
1, collected in May 1955 ..
Instalment receivables May
1, collected in May 1955 _
Md.
Sales, May ’55 vs May
’54 __________________
+ 6
—1
+10
— 3
+ 8
0
+23
+11
+ 23
43.4
11.5
14.4
14.1
D.C.
+ 7 + 10
Dist.
Total
+ 11
48.2
39.9
16.4
Va.
W .V a.
N.C.
+ 10
+ 10
+14
May
1955
May
1954
5 Months
1955
5 Months
1954
$ 4,400,960
54,025
65,075
57,025
43,368
$ 43,595,882
801,691
1,168,175
1,330,885
1,032,599
$ 23,727,835
223,925
471,767
926,604
914,206
250,110
461,954
319,544
549,181
237,274
1,682,681
164,000
298,975
2,446,657
980,510
168,300
2,020,609
234,246
731,738
143,252
404,890
177,481
571,364
173,300
153,854
4,774,854
705,157
129,470
567,211
3,342,021
7,155,082
1,610,707
4,095,798
850,026
6,065,359
1,567,400
1,549,815
9,445,765
5,087,353
1,369,355
5,291,565
996,593
4,092,259
672,329
2,451,597
1,421,047
6,275,148
853,400
3,762,534
12,388,760
5,206,624
564,640
3,271,262
709,178
185,151
529,355
716,266
108,343
438,251
2,890,149
858,464
2,021,226
3,412,115
1,316,510
1,932,275
North Carolina
Asheville
Charlotte
Durham _____
Greensboro
High Point ._
Raleigh _____
Rocky Mount
Salisbury
Wilson ______
Winston-Salem
247,790
3,609,029
564,116
1,009,319
674,290
2,107,865
369,934
125,695
189,100
1,638,613
270,425
1,821,183
914,121
641,256
925,322
946,766
263,482
115,445
149,800
960,980
1,324,077
13,570,975
6,151,989
4,627,424
3,787,019
9,343,879
1,652,645
506,163
1,670,775
6,589,017
1,677,464
8,125,573
2,394,650
4,868,676
2,017,264
5,668,592
1,438,989
785,297
1,023,550
5,900,842
South Carolina
Charleston
Columbia
Greenville
Spartanburg
507,404
1,105,826
1,101,598
39,255
131,348
1,416,832
279,175
69,016
1,282,625
3,788,940
3,376,746
870,700
892,643
4,780,086
3,044,820
1,426,442
Maryland
Baltimore
$16,046,590
Cumberland
148,400
Frederick
471,970
Hagerstown _
615,865
Salisbury
62,432
Virginia
Danville ___
Hampton
Hopewell
Lynchburg
Newport News
Norfolk _____
Petersburg
Portsmouth .
Richmond
Roanoke
Staunton
Warwick
West Virginia
Charleston
Clarksburg
Huntington
Dist. of Columbia
Washington .... 5,067,360
5,870,004
28,447,620
26,406,832
District Totals ..$46,705,930
$29,425,285
$188,119,911
$145,333,150
F IF T H D IS T R IC T IN D E X E S
Seasonally Adjusted: 1947-1949 = 100
+10
30.9
B U IL D IN G P E R M IT F IG U R ES
+10
41.6
14.0
S.C.
{ ii
May
1955
New passenger car registra
tion* ____ ___________________
Bank debits ______ __________ ._ 176
Bituminous coal production* .. 101
Construction contracts . . ..
206
Business failures— number
151
Cigarette production ________
Cotton spindle hours ________
124
Department store sales ______
130
Electric power production
Manufacturing employment* ._ ___
Furniture store sales ___ . .
117
Life insurance sales** ________ 193
* Not seasonally adjusted.
Back figures available on request,
r Revised.
** Series Revised.
y
Apr.
1955
194
167
97
279
183
90
117
129
179
107
119
177
May
1954
148
154
75
193
180
102
108
115r
162
104
109
160
% Chg.—
Latest Mo.
Prev.
Yr.
Mo.
Ago
+ 5
+ 5
+ 4
—26
— 17
— 9
+ 6
+ 1
0
+ 1
— 2
+ 9
+ 30
+ 14
+ 35
+ 7
— 16
— 3
+ 15
+ 13
+ 8
+ 3
+ 7
+21
Federal Reserve Bank of Richmond
<}
F ifth
D ist r ic t
B a n k in g
D E B IT S TO D E M A N D D E P O SIT A C C O U N T S *
(000 omitted)
May
1955
Dist. of Columbia
Washington ___ - .$1,331,990
Maryland
Baltimore _______ - 1,640,070
Cumberland ______
27,352
24,021
Frederick ________
45,442
Hagerstown . - __
Total 4 Cities __ . 1,736,885
North Carolina
Asheville _________
62,817
Charlotte ________ . 407,719
Durham __________
81,436
Greensboro
.
144,469
48,333
High Point** __
Kinston __________
21,487
Raleigh __________ - 185,209
Wilmington __ __
50,898
Wilson ______ ....
19,034
Winston-Salem __ - 167,326
Total 9 Cities __ . 1,140,395
South Carolina
Charleston ______
82,443
181,744
Columbia ________ .
Greenville
_____ .
124,236
Spartanburg _____
63,922
Total 4 Cities __ . 452,345
Virginia
Charlottesville ___
37,309
Danville _________
36,210
Lynchburg _______
52,731
Newport News __
57,139
Norfolk _________ . 288,839
Portsmouth ______
36,586
637,604
Richmond ________ .
Roanoke „
.
131,204
Total 8 Cities
_ 1,277,622
West Virginia
Bluefield
_______
43,369
Charleston _______ .
165,157
34,907
Clarksburg _______
Huntington ______
73,832
Parkersburg ______
32,238
Total 5 Cities __ .
349,503
District Totals . __ $6,288,740
50 R E P O R T IN G M E M B E R BA N K S
(000 omitted)
May
1954
5 Months
1955
5 Months
1954
$1,075,463
$ 6,567,237
$ 5,716,091
1,485,993
23,182
22,054
33,241
1,564,470
7,672,741
120,717
114,238
211,852
8,119,548
7,101,035
111,007
111,404
175,574
7,499,020
Total L o a n s ____________________ $1,635,202**
58,389
338,146
89,966
115,909
41,849
18,770
170,222
44,077
16,082
136,091
987,652
327,563
2,005,464
395,967
716,296
246,054
111,057
1,057,238
258,612
101,350
835,028
5,808,575
296,132
1,736,899
425,461
579,472
209,050
99,809
907,354
224,930
87,836
726,718
5,084,611
73,982
158,192
105,543
58,698
396,415
413,905
877,875
629,330
326,199
2,247,309
361,722
835,571
534,737
308,971
2,041,001
31,927
30,699
46,490
44,126
239,466
29,885
554,763
114,548
1,091,904
179,778
191,887
261,789
270,547
1,403,764
178,463
3,180,598
628,241
6,295,067
153,726
170,043
238,730
229,719
1,260,425
155,863
2,905,232
570,034
5,683,772
34,047
168,410
26,326
67,241
29,533
325,557
$5,441,461
214,994
844,071
175,514
362,776
156,056
1,753,411
$30,791,147
193,025
863,774
155,642
343,226
149,117
1,704,784
$27,729,279
* Interbank and U. S. Government Accounts excluded.
** Not included in District totals.
S ta tistic s
ITEMS
June 15,
1955
Change in Amount from
May 11,
June 16,
1955
1954
+
29,551
+244,588
+
+
+
5,693
6,639
17,260
+117,462
+ 50,737
+ 81,017
Total Security Holdings ............ 1,744,268
U. S. Treasury Bills _________
74,181
U. S. Treasury Certificates _
22,458
U. S. Treasury N o t e s ______
364,919
U. S. Treasury B o n d s______ 1,014,107
Other Bonds, Stocks & Secur.
268,603
Cash Items in Process of Col. _
371,880
Due from Banks _______________
180,703*
Currency and Coin ____________
75,986
Reserve with F. R. Banks ____
511,776
Other Assets ...................................
67,216
Total Assets _________________ $4,587,031
—
+
—
+
—
+
+
+
25,710
12,643
28,219
273
12,227
1,820
54,621
16,333
— 21,776
— 21,725
— 120,842
+ 58,930
+ 32,771
+ 29,090
+ 58,145
— 35,164
— 4,667
— 20,719
— 3,984
+ 45,425
+
737
— 33,301
+
3,255
+216,484
Total Demand Deposits _______ $3,463,217
Deposits of Individuals _____ 2,632,443
Deposits of U. S. Government
90,973
Deposits of State & Local Gov.
214,716
458,872*
Deposits of Banks ___________
Certified & Officers’ Checks ....
66,213
+ 73,742
+ 88,002
— 20,859
— 2,800
+
3,557
+
5,842
+165,729
+143,557
+
8,107
+ 13,117
— 3,263
+
4,211
Total Time Deposits ___________
Deposits of Individuals _____
Other Time Deposits ________
—
+
—
1,047
2,685
3,732
+ 35,983
+ 44,532
— 8,549
— 22,300
— 6,489
+
1,519
+ 45,425
+
6,100
— 8,296
+ 16,968
+216,484
Bus. & A g r i c ._______________
Real Estate L o a n s ____________
All Other Loans _____________
731,999
321,735
603,682
760,392
682,143
78,249
Liabilities for Borrowed Money
16,000
All Other Liabilities ___________
38,540
Capital Accounts ______________
308,882
Total Liabilities _____________ $4,587,031
* Net figures, reciprocal balances being eliminated.
** Less losses for bad debts.
i 12 y
@FedFRASER