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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