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FEDi

'RESERVE BANK

ICHMOND

O M £ U fi
June 1954

PRIVATE CONSTRUCTION

OUTLAYS

UNITED STATES - JANUARY - APRIL, 1953-1954
(Billions of Dollars)

Source: Joint estimates May 4, 1954 of Department of Labor and Department of Commerce.

Also In This Is s u e
A

record stream of spending on new construction has been providing a real source of

strength for an adjusting economy.

Some of the

features of the “ construction boom” and its pros­
pects for the immediate future are examined in
the article beginning on page 3.




------------

Fifth District Trend C h a rts____________ Page
The April Call Report— Implications
are Favorable for ’5 4 _________________ Page
Treasury Financing— Expanded
A ctivity is in P r o sp ec t________________ Page
Business Conditions and P r o sp ec ts_____ Page
Fifth District Statistical D a ta ___________ Page

2
6
7
9
11

Federal Reserve Bank of Richmond

F ifth

D istr ic t

T r en d s
WHOLESALE

BUSINESS FAILURES

Although business failures dropped 13% in April from March on
an adjusted basis, they were 168% higher than a year ago. Except
for four postwar months they are the highest since the Summer
of 1940.

PAPER AND PRODUCTS SALES

The paper business has been one of the strong factors in the
economy of this District, and sales of wholesale paper dealers tend
to confirm this fact. Adjusted sales in April were 2 % higher than
in March and 15% ahead of a year ago.

CIGARETTE PRODUCTION

NEW COMMERCIAL CAR REGISTRATIONS
400

400

( Seosonolly Adjusted)
(1935- 1939= 100)

320
240
160
80
(Not Seasonally Adjusted )
(1935-1939* 100)

1946

1947

1948

1949

1950

1951

1952

1953

1954

All Fifth District states in March showed new commercial car
registrations up 14% from February but 12% under a year ago.
Three states and the District of Columbia for April showed regis­
trations 19% under a year ago, and for the first four months they
were down 17%.

March figures— the latest available on cigarette production in this
District— showed output adjusted for seasonal variation up 6% in
March from February but 10% under March 1953. In the first
quarter of the year output in the District was down 11% from last
year.

LIFE INSURANCE SALES

BANK DEBITS

(Seasonally Adjusted)
(1935* 1939 s 100)

( Seasonally Adjusted)
(1935-1939=100)

1946

1947

1948

1949

1950

1951

1952

1953

1954

Sales of life insurance in the Fifth District were down 5 % after
seasonal correction in April over March, but April was still 3%
ahead of April 1953. After an almost uninterrupted three-year
rise to a peak in December 1953, life insurance sales have given
some indication of leveling off. First four months’ sales gained
1% over a year ago.




1946

1947

1948

1949

1950

1951

1952

1953

1954

The adjusted index for bank debits for the Fifth District de­
clined 7 % between July and October last year. This index has been
rising consistently since October. In April it was 1% higher than
March and 1 % ahead of a year ago and within 1.5% of the July
1953 peak.

June 1954

The Private Construction Boom—
Happy Anomaly
cultural employment, may well be providing the neces­
face of America— particularly the suburban face
sary margins of employment and income needed to off­
of urban America— is in process of rapid and dras­
set the effects of declines in other major lines of activity
tic change. New concepts and new attitudes, presum­
observable in recent months.
ably spawned from the desperate economy of the 1930’s
Contracts awarded for total construction in the first
and the war-restricted economy of the early ’40’s, are
four months of 1954, as compiled and reported by the
now firmly rooted in the minds of home buyers, home
F. W . Dodge Corporation, reached $5.6 billion. This
builders, and home lenders. Home buying is no longer
is the highest figure ever reported by Dodge for this
a process of patient waiting and painful saving. Tra­
ditional frugality is being relegated to the past, and
period of the year. Awards in Fifth District states
“ Buy! Live! and Pay as you g o !” are the attractive
generally account for 8 % to 10% of the 37-state total
reported by this source. The record level of awards
slogans of the present era. Apparently, all major groups
so far this year gives promise of a record or near-rec­
involved vote aye. The home buyers like it. The
ord volume of expenditures this year, both in the Fifth
home builders like it. The mortgage lenders like it.
District and the nation.
The ultimate savers, who
In the Fifth Federal R e­
supply the funds, add their
serve District, according to
approval as well as their
the Dodge reports, con­
savings to the unmistakable
tracts awarded for home
merry whirl of construction
construction in the first
activity.
quarter of 1954 were 26%
Industrial production dip­
larger in amount than in the
ped in late ’ 53 and early ’ 54.
same quarter l a s t year.
Did it mean “ recession” for
Thus, indications are that
the home builders? Hardly.
in this District as well as in
They are still going strong
the nation, home construc­
and the construction boom
tion will continue to hum
proceeds in this year with
along this year at the un­
undiminished vigor. 1953
usually high level character­
was the fifth year in succes­
istic of the past five years.
sion in which over a million
W ill the nation’s builders
new homes were started.
find enough home buyers to
1954 looks like the sixth
01_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i_________ i
maintain a firm market for
straight year. T h r o u g h
1915
1917
1919
1924
1923
1925
1927
1940
1942
1944
1946
1948
1950
1952
all these new houses? The
April of this year, construc­
Source: Survey of Current Business February 1954, March 953, August 1951, and the 1953 Supplement to the
Survey of Current Business, U S Department of Commerce.
question focuses attention
tion had started on 341,400
immediately on financing.
private homes, just 4,100
Since most home purchases involve borrowed money,
short of the number started in the same period last year.
two queries arise: (1 ) W ill the mortgage lenders
If this rate continues throughout the year, over 1,100,make sufficient money available to finance the homes
000 new dwellings will be added to the nation’s stock of
that must be sold this year? (2 ) W ill prospective
houses.
home buyers avail themselves of these funds, permit­
If it be true, as many believe, that ‘‘Y ou can’t have
ting builders to redeem their investments and thus clear
a depression as long as the construction industry is
the decks for further projects? It’s safe to say that
busy,” then the American economy doesn’t require
builders will provide homes so long as there is reason­
some of the tears being shed, despite some weak spots
able expectation that buyers can be found. Theoret­
as compared with last year. Private construction ac­
ically, the builders are on the right track if for no other
tivity in recent months has been boomingly busy— in
reason than the basic fact that nearly half of all Am eri­
the aggregate, construction expenditures are running
can families are still not home owners. In any event,
slightly ahead of last year. And the comparison is with
demand is today the principal factor in the prosperity of
the home building industry— and financing is a crucial
a period when an all-time record was in the process of
factor in the shaping of this demand.
being established.

T

he

The construction boom may be an anomalous feature
of the recession, but it is a highly significant irregularity.
Construction activity, accounting for over 7% of the
gross national product and about 5% of total nonagri


Mortgages are currently an attractive outlet for long­
term investment funds. Interest rates on alternative
outlets for such funds began declining last July and had
reached a point by the first of the year which gave the
3 }
-

Federal Reserve Bank of Richmond

return on mortgage loans (which remained relatively
is residential building. Whereas total private construc­
unchanged over this period) a distinct competitive ad­
tion outlays in the United States for the first four
months of this year were only 3.4% greater and resi­
vantage. Since the first of the year many lenders have
been actively seeking new mortgage loan outlets.
dential building only 0.6% greater than in the com­
Accompanying this increased availability of money
parable period last year, expenditures on nonresidential
for home purchases has been a congealing of new atti­
projects were up a sturdy 10% . (T h e Departments of
tudes of lenders. New norms have been gaining ac­
Labor and Commerce, collaborating in new construc­
ceptance as to the appropriateness of lending terms—
tion estimates, separate private construction into five
twenty-five years ago they would have been widely
major categories: residential (nonfarm ), nonresiden­
dubbed as extremely imprudent. Today, mortgage
tial, farm construction, public utilities, and “ all other
maturities of twenty-five years and down-payments as
private” — distinctions which are here followed.)
low as 5% are becoming normal. Some loans are being
The nonresidential sector is currently accounting for
made to home buyers with no equity in the property and
over 25% of all outlays for private construction and
with up to thirty years to repay their indebtedness. In
around 19% of the total for private and public. Com­
many cases, the choice between renting and owning no
mercial building has been the star performer— spending
longer rests on financial
for new office buildings and
consideration. Buyers fre­
warehouses was up 44%
quently find their monthly
while outlays for stores,
PRIVATE CONSTRUCTION ACTIVITY
installments no larger than
restaurants, and garages
rental payments.
were 38% greater than they
UNITED STATES
A re prospective home
were in the first f o u r
buyers willing to a v a i l
months of 1953. Other non­
themselves of the flood of
residential categories that
funds being diverted to this
have shown sharp increases
industry? Available figures
are religious building with
reveal no reluctance on the
a gain of 2 2% , educational
part of home buyers to play
24% , and social and recrea­
their role in the beneficent
tional projects topping all
revolution. Applications for
increases with a gain of
guarantee of mortgages by
52% . The only category of
the Veterans Administra­
tion were higher in March
nonresidential building for
and April of this year than
which spending declined in
in both 1953 and 1952. T o ­
the first four months of this
tal applications in the first
year was industrial. R e­
1946
1947
1948
1949
1950
1951
1952
1953 *
1954*
four months of the year
Source: Joint estimates - U S Deportment of Labor and Department of Commerce
flecting an earlier decline
Note: * 1954 estimate from above source
compare favorably with the
in contract awards, outlays
similar period in immediate
for industrial facilities were
past years. Mortgages of $20,000 or less recorded in the
12% less than they were a year earlier.
first quarter of 1954 exceeded in total amount those
These construction gains are in sharp contrast to de­
recorded in the same period in the last two years.
clines in other major fields of activity from peak levels
W ith builders eager and money available, there is
reached last year. The boom in commercial building
little reason to doubt that 1954 will chalk up another
and in the other nonresidential lines noted are also ad­
spectacular year for home construction. Current trends
justments to previous conditions, but unlike other major
imply that personal incomes will remain at their present
adjustments so far this year, those occurring in non­
high level, or even rise moderately as the year pro­
residential building are upward rather than downward.
gresses. In this event, it is expected that the optimism
Construction of commercial facilities has been on a
generated by high and stable incomes will influence
roller-coaster throughout the postwar period. Away
large numbers of people to avail themselves of the ready
up in 1946 following the abandonment of wartime re­
sources of mortgage funds to secure that tangible ex­
strictions on building, outlays for commercial building
hibit of the world’s highest standard of living, a modern
dropped the following year as limitations were reim­
Home, Sweet Home— complete with gadgets.
posed on the use of scarce building materials in accord­
ance wth the Veterans’ Emergency Housing Program.
Removal of these controls led to another rise in 1948
only to be followed by another decline the next year.
The rise in 1950 continued into 1951, but reimposition

Nonresidential Construction—
A Different Kind of Adjustment
Private nonresidential building is currently exceeding
the comparable year-ago volume by a wider margin than



* 4
{

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June 1954

first four months of this year than for the same period
last year. The Departments of Commerce and Labor
have jointly estimated that actual outlays in this cate­
gory would decline 2% this year. They estimated also
that expenditures for commercial building would in­
crease about 10% in 1954, but for the first four months
contract awards as reported by Dodge were running
27% ahead of the 1953 period.

of construction controls as a consequence of the Korean
W ar produced a downturn that ran through the last
half of 1951 and early 1952. The gradual relaxation
of restrictions in the second half of 1952 on the avail­
ability of steel, copper and aluminum, and the removal
of credit restrictions under Regulation X set the stage
for the present uptrend. This start-and-stop pattern
of postwar expenditures on commercial building un­
doubtedly produced a backlog of projects contributing
generously to the current commercial building boom.

Despite considerable store and office building activity
in Baltimore, Washington, D. C., and Charlotte, con­
tracts awarded for commercial building in the Fifth Dis­
trict in the same period were only 2.4% ahead of a
year ago. (Figures given here for commercial build­
ing and, below, for industrial building in the Fifth Dis­
trict include the six W est Virginia panhandle counties
in the Fourth Federal Reserve District. Data are not
available to permit adjustments for these counties.)
Dodge reports of contract awards for commercial build­
ing lump together private and public projects for office
buildings, warehouses, and garages. It is believed,
however, that the percentage gain cited is applicable to
private awards. Similarly, private awards for religious,
educational, recreational, and other nonresidential build­
ing are thought to be ahead of the pace indicated by the
earlier forecasts for 1954.

Analysts frequently point out that commercial build­
ing tends to follow residential building activity. This
tendency has been accentuated in recent years by the
pronounced growth of suburban areas and the wider
geographical shifts of the population. Adding to the
strength of demand so originated is the trend toward
larger and more expensive retail outlets— larger super­
markets and elaborate shopping centers with under­
ground truck tunnels, covered walkways, parcel pickup
stations, and other costly innovations.
Indications of the strength of projected activity in
this field were noted at the recent annual convention of
the Supermarket Institute. A survey of the member­
ship disclosed that almost half (4 7 % ) of the operators
plan to build new supermarkets this year, and 29% plan
to carry out major remodeling of existing properties.

The slight decline forecast for this year in private out­
lays for nonresidential building was based mainly on
an anticipated reduction of 14% in industrial building.
The principal factor here is the declining volume of
construction for defense purposes. Stimulated by the
issuance of certificates of rapid tax amortization, indus­
try greatly expanded its investment in additional capac­
ity after Korea. Up to the end of the first quarter of
this year about $30 billion of projected plant expan­
sion had been covered by tax amortization certificates.
The Office of Defense Moblization recently estimated
that over two-thirds of this amount had been expended
by the end of 1953.

Am ong the less essential types of building hit hardest
by construction controls, office buildings and ware­
houses have lagged behind most other forms of private
building. W here, for example, a company had to as­
sign priorities to its building needs, warehouses have
generally played second fiddle to production facilities.
One of the factors accounting for the relative delay in
office building has been the lag of rental charges behind
new construction costs. This discouraged construction
of new office structures and frequently led to provision
of additional office space by conversion of former resi­
dential quarters that had become casualties of the resi­
dential trek to the suburbs. However, as vacancy rates
continued to remain low, as the business population
grew, and as the demand for office space in suburban
areas rose, a pressure for new office buildings developed
that is now being reflected in the increase in outlays
noted earlier.

Figures are not available showing contract awards
for private industrial building, but the latest Dodge re­
ports for private and public industrial awards show a
decline of 27% for the first four months of this year as
compared with the same period last year. Preliminary
reports for May, however, indicate a decided pickup
over the preceding month in contracts let for industrial
projects. District awards for industrial building (first
four months of this year) lagged even more and were
42% behind the comparable 1953 period. Important
factors here were the relatively early completion of the
postwar expansion of the textile industry, the District’s
leading industry, and the relatively small amount of de­
fense-related industrial projects in the District covered
by certificates of necessity.

No Early Slump in Sight
In view of its late start and intensity, the end of the
boom in nonresidential construction does not appear to
be on this year’s calendar. Contract awards for pri­
vate nonresidential building (D odge reports for 37 east­
ern states) were 20% greater in dollar value for the




* 5
{

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Federal Reserve Bank of Richmond

The April Call Report—
Implications Are Favorable for ’54
total amount called down from balances with other
banks was one-third less than for last year’s comparable
period. Currency and coin held by the banks increased
slightly in the 1954 period whereas they declined by al­
most 6% last year.

banking figures reflect the strength underlying the high though moderately declining level of
business activity during the first three and a half months
of 1954. Total assets of District member banks fell
over the period, but by no more than seasonal expecta­
tions. The accompanying charts compare this year’s
changes from December 31 to the April call with those
in the similar period last year.
is t r ic t

LOANS AND DISCOUNTS

DEMAND DEPOSITS

Loans over the first three and a half months of this
year were increased by only one-tenth as much as in the
similar 1953 period, but the amount maintained on the
banks’ books is at a record high. Consumer loans and
loans to commercial and industrial firms declined this
year whereas they increased moderately in the 1953
period. Real estate loans have grown more rapidly
this year than last.

8 Corporations

The decline in demand deposits was smaller this year
but exhibited a pattern quite similar to that of the com­
parable 1953 period. The slight shrinkage was pre­
dominantly in demand deposits of individuals, partner­
ships, and corporations while the reduction in interbank
deposits was almost identical in the tw'o periods. De­
posits of Federal, state and local governments fell mod­
erately in both years.

GOVERNMENT SECURITIES

CASH AND BANK BALANCES

Government securities holdings exhibited a decidedly
different pattern of change this year. Bill holdings were
reduced by only half as much while bond holdings in­
creased by more than 15% compared with last year’s
decline. This development was more than offset by a
30% reduction in combined holdings of certificates of
indebtedness and notes.

A s a consequence of the smaller deposit decline, cash
accounts were reduced by a smaller amount this year
than last. Balances with the Federal Reserve declined
more than in the similar period last year, although the



{ 6y

f &
/

f l /M

/$ O M £ C U L

June 1954

Treasury Financing—Expanded Activity Is In Prospect
expenditures will again exceed budget re­
ceipts when the Treasury’s current fiscal year ends
on June 30. Recent official estimates place the deficit
at $3.5 billion, $200 million above the January budget
projection. Should there be a shortfall in receipts not
matched by reductions in expenditures during the final
quarter of the fiscal year the figure would again rise.
In the period July 1953 through March 1954 Treasury
receipts ran $1.4 billion below Treasury estimates for
the first three quarters of the fiscal year, but this de­
cline was offset by a similar reduction in expenditures.
u d g et

W ith the refunding in May of $7.3 billion Treasury
certificates and bonds and the raising of $2.2 billion in
cash, the Treasury completed financing operations for
the current fiscal year. During this fiscal year the
Treasury undertook five refunding operations (not in­
cluding the weekly rollover of 91-day bills) involving
$46.6 billion in maturing debt, and in four of these five
exchanges some progress was made in the Treasury’s
announced goal of extending the maturity distribution
of the public debt. The most successful debt-lengthening operation took place in February 1954, when in re­
funding some $20.8 billion of securities, the Treasury
was able to place about $11 billion in issues not due until
1961. Cash redemption on the entire fiscal 1954 re­
fundings totaled $1.2 billion or about 2.5% . This com­
pares with refundings of $34.1 billion in fiscal 1953 on
which cash redemption amounted to a little over 6 % .
Since December 1953 the Treasury has been able to
refund maturing debt at constantly declining interest
rates. The l % % paid for one-year certificates in the
May refunding was the lowT
est rate for this length se­
curity since 1949, and was less than half the rate paid
for one-year money in the June-September 1953 period.
Last month the Treasury’s four-year nine-month notes
bore the same rate (1 % % ) as that paid for one-year
money in December 1953.
In addition to the refundings accomplished in fiscal
1954, the Treasury went into the market for about $13.4
billion in new money. Net cash realized from these
operations, however, was quite small. O f the $10.2 bil­
lion securities offered in the first three quarters of the
fiscal year to raise new money, the Treasury realized
net cash of only $2.7 billion. Receipts from the new
securities were offset by redemption of two issues of
tax anticipation bills totaling $6.7 billion, by net redemp­
tions of nonmarketable debt, and attrition on exchanges
of marketable securities. In the fourth quarter of the
fiscal year there have been two issues for cash totaling
$3.2 billion, but in this quarter net cash realized will
again be small because the Treasury experienced over
a half billion attrition on the May refunding operation,
and two issues of tax anticipation securities amounting
to $2.5 billion must be redeemed in June.



« 7 ]*
{

The first half of fiscal 1954, July-December 1953, pro­
duced a budget deficit of $9.1 billion which was partially
offset by a surplus of $6.8 billion in the January-March
1954 quarter. The resulting $2.3 billion deficit for the
first three quarters was met, and the General Fund bal­
ance of the Treasury built up almost $1.7 billion above
the level at the beginning of the fiscal year, by an in­
crease in the public debt of just over $4 billion.
Treasury Needs in Fiscal 1955
Although the budget document presented to Congress
in January forecast a deficit of $2.9 billion for fiscal
1955, it is now widely thought that the shortage will be
somewhat larger than this. Excise tax reductions,
effective in April, are expected to add at least $1 billion
to the deficit figure, and the business decline of recent
months with its resulting loss in income tax receipts
may add still more. These estimates of an increased
deficit in fiscal 1955 do not take into account the possi­
bility that Congress may make tax reductions in excess
of those recommended by the President or that defense
spending might be stepped up as a result of recent de­
velopments in Southeast Asia.
Because of the Mills plan, with its concentration of
corporate income tax payments in the first half of the
calendar year, the burden of financing the Treasury’s .
needs for fiscal 1955 will fall in the first half of the new
fiscal year, July-December 1954. During this period
only 10% of all corporate taxes due on 1953 income re­
main to be paid, and the prospects are that it will be
necessary for the Treasury to raise a minimum of $10
billion in new money simply to finance its cash operat­
ing deficit through December. In addition it must re­
finance a minimum of $24.4 billion in maturing securi­
ties and roll over weekly about $1.5 billion in 91-day
Treasury bills. The accompanying chart shows mar­
ketable securities maturing or callable during fiscal 1955.
The Treasury’s new money needs in the July-December period must take into account not only the heavy
Fall borrowing arising from the unequal distribution of
tax receipts, but also the financing of a possible “ cash”
deficit for the fiscal year as a whole. W ith the $2.9 bil­
lion budget deficit originally forecast for fiscal 1955, it
was anticipated that there would be a small “ cash” sur­
plus. A ny increase in the deficit above this figure would
produce a corresponding shortage in the cash position.
The “ cash” budget differs from the conventional budget
primarily in that Trust Fund operations are included
in the cash budget figures. Since these trust accounts
are now receiving more money from the public than
they are disbursing, this excess cash accumulated is
made available to the Government.
A ny net redemption of nonmarketable debt and any
cash attrition on refunding operations that the Treas­

Federal Reserve Bank of Richmond

ury experiences will increase the amount of new money
certificates of interest in a pool of its price support loans.
to be raised. O f the $24.4 billion maturing issues to
Although this action had no effect on the public debt,
be refunded, something over $16 billion are held out­
it did relieve the drain on the Treasury cash balance.
side the Federal Reserve System and the Government
Finally, in November the Treasury issued gold certifi­
investment accounts. Some attrition on these securi­
cates against $500 million of the free gold in the Gen­
ties is to be expected. Between now and the end of
eral Fund and used these certificates to purchase and
calendar 1954, a large block of F and G Savings bonds
retire notes held by the Federal Reserve System. This
will be maturing, and some of these will be redeemed
reduced the public debt by $500 million but did not
for cash. In May 1952 these two series were replaced
affect the Treasury’s working balance. These steps
by series J and K bearing higher interest rates. Holders
enabled the Treasury to slide by the end of 1953 with
of F and G bonds maturing in calendar 1953 were given
the debt at $274.7 billion.
an opportunity to exchange them for a long-term mar­
In the second half of the 1955 fiscal year the Treas­
ketable bond, but holders of those maturing after Jan­
ury’s financing schedule will be considerably lighter than
uary 1, 1954 have been offered the option of exchanging
in the July-December period. Issues of securities matur­
them only for other series savings bonds or redeeming
ing or callable from Jan­
them for cash. Although re­
uary through June amount
demptions of all series of
TREASURY SECURITIES
to about $19 billion, some
savings bonds (at issue
MATURING OR CALLABLE
FISCAL 1955
price) have exceeded sales
$6 billion less than in the
Billions of Dollars
Billions of Dollars
first half of the fiscal year.
in the first ten months of the
SECOND HALF
current fiscal year, this has
Moreover, a portion of this
been largely the result of net
debt can be met by the cash
redemptions of F and G
surplus of several billion
bonds. Sales of series E
dollars expected in the first
8%C
bonds have been above re­
half of calendar 1955.
demptions (at issue price)
Financing requirements
0 I >2%Notes
in each month since O cto­
of the magnitude scheduled
ber 1953.
Since February
for the Treasury in the J ulythe trend has been toward
December 1954 period will
net sales for all series com­
put considerable pressure on
bined which gives hope that
the money market, especial­
cash needs from this source
ly since this is the time of
can be minimized during the
year in which private credit
remainder of calendar 1954.
demands rise as a result of
A t the end of October the
sale of Treasury savings
notes w a s discontinued.
Since that time $827 million of the $6.3 billion outstand­
ing at the end of October have been redeemed either
for cash or in payment of taxes. As of April 30, $5.5
billion were still outstanding, and some part of this
amount will doubtless be used for taxes or redeemed
for cash during the remainder of the calendar year.
In view of size of the Treasury’s financing job in the
period July-December, some action on the present $275
billion legal debt limit can probably be expected. At
the end of the current fiscal year only about $5 billion
of borrowing authority will remain, and even with the
use of devices similar to those employed in the Fall of
1953 to avoid piercing the limit, it is extremely unlikely
that the Treasury could squeeze by another year end un­
der the present restriction. In the final quarter of calen­
dar 1953, as the public debt rose dangerously close to
the $275 billion limit, the Treasury suspended the sale of
savings notes. In the same month the Commodity
Credit Corporation began selling to commercial banks



the seasonal expansion in
business activity. Beginning
in May 1953 the Federal
Reserve System, through open market operations and
a reduction in reserve requirements for member banks,
supplied a substantial amount of reserves to the banking
system in order to prevent the combination of the au­
tumnal loan expansion and the Treasury financing needs
from causing undue tightness in the money market. Dur­
ing the second half of calendar 1953, however, the usual
Feb

Mar

April

May

June

seasonal rise in business activity failed to materialize and
as a result, money rates fell sharply.

Precise effects of

Treasury operations of such magnitude on the money
market during the coming six months cannot be fore­
told.

They obviously depend on the future business

level and the total demand for loans, governmental and
private, and on flotation of new issues by business en­
terprises and state and local governments, in relation to
the supply of funds available to the nation’s lending in­
stitutions.
< 8 1
*

(/O H £ W

June 1
954

^

Business Conditions and Prospects
stabilize in most states of the District, but they con­
tinued to decline in Maryland. Farm income in the
District in March was down 9 % from a year ago and
the first quarter showed a reduction of 8 % .

A

turnabout in the business situation in both the District and the nation hinges heavily on the retail
trade level. Here April figures for the District lend
encouragement. Department store sales continued to
inch up after seasonal and Easter adjustments. New
passenger automobile sales in the states reporting thus
far were even with April a year ago. Household appli­
ance stores showed an increase of 10% over a year ago
and furniture store sales showed a smaller loss than in
any other month this year. Sales of wholesalers in the
District showed increases in seasonally adjusted sales
from March to April in five lines and reductions in
three.

Trade
Dollar sales of department stores in the Fifth District
during April were 8% higher than a year a g o ; average
daily figures, seasonally adjusted and corrected for the
Easter shift, rose 2% from last year’s high level. Com­
bined March and April sales were 1% under those of a
year ago, but this level compares with a decline of 3%
in the first four months of the year. Prominent in the
April sales gain over last year were silverware and
jewelry up 12%, women’s accessories up 18% , women’s
and misses’ dresses up 14% , men’s clothing up 8 % ,
major household appliances up 15% , radios, televisions,
phonographs, etc., up 16% . Poorer performance than
anticipated was witnessed in women’s and misses’ coats
and suits, but these departments still showed a 4% gain
over last year. Furniture and bedding and domestic
floor coverings did poorly during April, with declines
of 14% and 8 % , respectively.

Other encouraging trends include the construction in­
dustry wr
here April contract awards (adjusted) were
up 4% from March although 6 % under a year ago.
Bank debits continued the upward trend of several
months by rising 1% on an adjusted basis between
March and April and were 1% ahead of a year ago.
Bituminous coal output made a small recovery in
April compared with March, but was still 18% under
a year ago. March cigarette production was also en­
couraging, having risen 6% after seasonal correction
from February, though still 10% below a year ago. In
cotton textiles adjusted consumption was up 1% in
April from March, although spindle hours were down
1% . Business failures dropped 13% from March to
April, on a seasonally adjusted basis, but were sharply
higher than a year ago. Insured unemployment (week
of May 8 ) at 187,500 was 5.4% below a month earlier.
This favorable development was due largely to a sub­
stantial decline in the state of Virginia.

Furniture store sales (adjusted) in April eased off
4% from March to a level 8% under a year ago. April
adjusted sales returned to the January level after having
shown some moderate increase between those months.
Although furniture store inventories rose 10% from
March to April, on an adjusted basis, they were 6%
under a year ago and about in line with sales. Store
receivables have leveled off (A pril was only 2% under
a year ago) while collections declined 5% from a year
ago.
New passenger car registrations for all states of the
District in March were down 8% from a year ago.
April reports from four states showed new passenger
car registrations even with a year a g o ; three of the
states, however, showed decreases ranging from 4 % to
13%, and one state a gain of 15% . This sales level
was achieved by sharp cuts in dealers’ profit margins.

On the adverse side, inventories were still being liqui­
dated and production levels slipping. During April,
man-hours in all manufacturing industries of the Carolinas declined 2.7% from March to a level 8.6% below
a year ago. The only major industries in these two
states to show gains both from March and from April
a year ago were food and kindred products— interesting
evidence that in this District, as well as the nation, peo­
ple continue to eat well.

Favorable April sales levels in department stores of
major household appliances were reflected also in the
household appliance store sales. These stores showed
an unadjusted increase between March and April of
12% to a level 10% ahead of a year ago.

On the financial side, loans of all member banks in
the District (A pril 28) were $2 million higher than a
month earlier, and $64 million higher than a year ago.
On the same date, loans of the weekly reporting banks
were up $4 million from last year, due in large part to
gains in consumer loans and real estate loans. Com­
mercial loans in the weekly reporting banks reached a
peak around the middle of March, and declined $35
million between that date and May 19. Last year, busi­
ness loans reached their peak in the week of April 8
and by May 20 had declined only $5 million.

Am ong the wholesale trades of the District, automo­
tive supplies showed a seasonally adjusted rise of 10%
from March to April, but these sales were still running
12% under a year ago. Drug sales rose 2% from
March to April, adjusted, and were 4 % ahead of a year
ago. Grocery wholesalers showed a sales rise of 3 % ,
adjusted, in April over March and the same percentage

Farm prices in the first quarter of 1954 tended to



i 9

y

Federal Reserve Bank of Richmond

increase over last year. Hardware wholesalers showed
an adjusted increase of 20% in sales from March to
April, but these still ran 21% under last year. Paper
wholesalers’ sales were up 2 % , adjusted, in April and
15% above a year ago. Although wholesale dry goods
declined 3 % , adjusted, from March to April and were
6% under a year ago, there is some evidence of sta­
bility. Industrial supply wholesalers showed a further
drop of 1% in April adjusted sales to a level 34%
under a year ago. The trend of these sales is still
downward.
Manufacturing
A s previously noted, man-hours in all manufacturing
industries of the Carolinas (only states for which April
figures are available) were down 2.7% from March and
8.6% below April 1953. Declines in the lumber in­
dustry from March were 2.8% and 16.1% from a year
ago. Furniture factories showed man-hours in April
8 % below March and 11.4% below a year ago. Ma­
chinery industries, excluding electrical, showed a de­
cline of 1.3% in man-hours from March to April and
5.1% from a year ago. Food and kindred products in­
dustries rose 3.2% from March to April and 2.4% from
a year ago. Textile mill products showed a man-hour
decline from March to April of 3.2% and 9.9% from a
year ago. Yarn and thread mills continued to show up
poorer than broad woven fabrics with April man-hours
down 3.6% from March and 15.7% from a year ago.
Broad woven fabrics showed a decline in man-hours of
2.8% from March to April and 10.4% from a year ago.
Apparel industries were off 5.1% in man-hours from
March to April and 8.5% from a year ago. Chemical
industries showed a man-hour reduction of 3% from
March to April but a gain of 1.7% from a year ago.
Cotton consumption, average daily seasonally ad­
justed, rose 1% from March to April but was 6% un­
der a year ago. Cotton spindle hours declined 1% on
a seasonally adjusted average daily basis and were 5%
under a year ago. Forward coverage of important
broad woven fabrics was substantial during May and
strengthens the feeling that the industry’s operations
will at least continue at current levels for some months
to come. Although the amount of yardage sold was
substantial, and has filled the production schedule of
several concerns on a full-time basis for the remainder
of the year, it has been selective and by no means covers
the entire full-time output of the industry. Prices of




the constructions purchased in May firmed moderately
during the buying period.
Rayon and acetate shipments declined 1% from
March to April and were 13% below a year ago.
Filament yarn shipments were 23% under the previous
year, but staple and tow shipments rose 20% . High
tenacity filament yarn shipments declined 4 % from
March to April to a level 24% under a year ago.
Construction
Construction contract awards, seasonally adjusted, in
April rose 4 % above March, but were 6% under April
1953. The gain during the month was in the nonresi­
dential sector and the decline from a year ago was also
in this area. Residential construction contract awards,
seasonally adjusted, dropped 1% from March to April
but were a sharp 18% ahead of a year ago. Much of
this gain represents speculative building activity— and
a selling problem is created, though this should not be
particularly difficult if the hundred per cent mortgage
becomes accepted practice.
Agriculture
A bird’s-eye view of leading District crops— as of late
May— reveals the follow in g: Flue-cured tobacco is re­
portedly off to one of the earliest and best starts in sev­
eral years. Cool, wet weather has hurt cotton in many
areas, causing poor stands and resulting in some re­
planting. Small grain, hay and pastures are in gen­
erally good condition.
For the first quarter of 1954 cash farm income was
off 8% in the District, with crop income down 15% and
livestock income down 3 % . Cash income in March was
9% under last year, but the breakdown shows crop in­
come down 35% and livestock income up 4 % .
Cash farm income in Maryland during March was
down 7% and for the first quarter down 11%. In V ir­
ginia, March income declined 1% from last year while
the first quarter was down 10%. In W est Virginia,
March income was up 4 % and the first quarter was up
1%. In North Carolina, March income was down 15%
and the first quarter was down 6 % . In South Caro­
lina, March income was down 23% and the first quar­
ter was down 7% .
For the first four months of 1954 farm prices in all
District states were down from a year earlier— M ary­
land was off 9.8% , Virginia 8.4% , W est Virginia 7.9% ,
North Carolina 3.4% , and South Carolina 1.8%.

/tfofijMjfy/

June 1954

F if t h

D is t r ic t

s t a t is t ic a l

SE L E C T E D IN D E X E S

B U IL D IN G P E R M IT F IG U R E S
April
1954

Avg. Daily 1935-39 = 100— Seasonally Adjusted
% Chg.—

Latest Mo.
Apr.
Mar. Apr.
Prev.
Yr.
1954
1954
1953
Mo.
Ago
New Passenger Cars1 _________ _____
198
217
+ 27
— 8
Bank Debits — _________________ 492
488
486
+
1 + 1
Bituminous Coal Production2
,®
70
65
72
+
8
— 3
Construction Contracts _ _ _ _ _ _ 499
479r
533
+
4 — 6
Business Failures— N o .________ 126
144
47
— 13
+1 6 8
Cigarette Production_________ _____
238
229
+ 20
— 6
151
158
— 1 — 5
Cotton Spindle H o u r s ________ 150
Department Store Sales2 _____
122
118
120
+
3 + 2
Electric Power Production ...............
426
415
+
2 + 5
105
llOr
— 1 — 5
Manufacturing Employment1,2 ___
Retail Furniture: Net Sales2 _
96
100
104
— 4 — 8
Life Insurance Sales __________ 398
417
388
— 5 + 3
1 Not adjusted.
2 1947-1949 = 100.
3 Not seasonally adjusted.
Back figures available on request.

W H O L E SA L E TRADE

LINES
Auto supplies (7) --------------Electrical goods (5) ______
Hardware (10) ___________
Industrial supplies ( 1 1 ) __
Drugs and sundries (11) _
Dry goods (15) ________ —
Groceries (47) _____________
Paper and its products ( 6 )
Tobacco products (12) ____
Miscellaneous ( 9 9 ) ________
District totals ( 2 2 3 ) _____

Source:

data

Sales in
April 1954
compared with
Apr.
Mar.
1954
1953
— 18
— 5
—21
— 8
— 6
+ 13
— 17
— 7
— 2
+ 4
— 14
— 9
— 2
+ 8
— 5
+ 1
— 10
— 9
— 6
— 7
— 4
— 5

Stocks on
April 30,1954
compared with
Apr. 30,, Mar. 31.
1954
1953
— 3
— 1
— 1
+ 1
— 7
— 5
— 4
— 4
— 5
— 1
— 4
— 6
— 2
+ 4

__

—23
0
— 3

— 1
+ 3
0

4 Months
1954

4 Months
1953

Maryland
B altim ore___„$ 4,572,715
Cumberland __
97,000
Frederick ____
96,900
Hagerstown __
189,130
Salisbury ____
468,760

S 8,737,535
57,075
133,840
107,000
193,802

19,326,875
169,900
406,692
869,579
870,838

$ 24,666,860
187.900
929,297
1,023,263
405,926

Virginia
Danville _____ _
175,033
Hopewell_____
121,111
Lynchburg ___
528,541
Newport News
888,049
N o r fo lk ______ _ 2,883,523
Petersburg ___
243,600
495,176
Portsmouth __
Richmond _____ 1,348,797
Roanoke _____ 1,924,370
Staunton_____
109,530

243,453
365,425
327,015
173,853
1,329,054
354.500
191,955
1,176,795
1,159,256
98,110

762,347
529,077
2,046,707
1,243,566
5,703,784
680,100
3,608,680
7,613,906
4,501,467
435,170

1,766,029
1,153,137
1,180,916
741,487
7,311,560
706.900
962,165
5,298,368
3.780.756
476,435

981,050
387,246
552,855

652.774
133,307
472.500

2,695,849
1,208,167
1,494,024

2,635,218
1,171,893
1,680,574

North Carolina
Asheville _____
635,986
Charlotte_____ 1,825,706
D urham ______ 317,534
Greensboro ___ 1,343,220
High P o in t___
302,275
Raleigh ______
1,442,905
Rocky Mount _
353,879
Salisbury _____
102,450
W ils o n _____ _
174,350
Winston-Salem
787,840

481,239
2,912,957
395,662
1,085,653
499,675
11,332,625
320,982
117,290
432.775
1,013,160

1,407,039
6,304,390
1,480,529
4,227,420
1,091,942
4,721,826
1,175,507
669,852
873,750
4,939,862

1,026,453
12,102,510
2,475,432
4,445,983
1,793,483
14,350,670
2.129.757
567,371
915,565
2,842,132

South Carolina
Ch arleston___
374,119
Columbia____ _ 1,038,669
Greenville____
648,950
Spartanburg __
213,745

1,013,867
771,090
777,250
82,455

761,295
3,363,254
2,765,645
1,357,426

1,847,979
2,237,517
2,243,200
326,143

West Virginia
Ch arleston___
Clarksburg ___
Huntington _ _

Dist. of Columbia
Washington __

parentheses.
Bureau of the Census, Department of Commerce.

April
1953

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
+ 13
+ 7
+ 7
Sales, Apr. ’54 vs Apr. ’53 + 1 1
Sales, 4 Mos. ending Apr. 30,
’54 vs 4 Mos. ending Apr.
0
0
— 3
— 6
30, ’53 ___ ________________
Stocks, Apr. 30, ’54 vs ’53 _
Outstanding Orders
Apr. 30, ’54 vs ’53 ________

+ 8

— 4

— 5

— 5

—28

— 14

+

— 16

— 11

31.3

Instalment receivables Apr. 1
collected in Apr. ’54 _____

46.5

42.0

35.3

39.8




11.6

14.2

13.7

15.9

Md.
Sales, Apr. ’54 vs Apr.
’5 3 ___________________

D.C.

Va.

W .V a.

N.C.

S.C.

+13

+7

+

+10

+

7

+ 10

7

20,536,828

20,213,119

$109,843,293

$125,595,998

STATES
Maryland
Dist. of Columbia _
Virginia _________
West Virginia __
North Carolina__
South Carolina __
District _______

— 3

— 6

1

4,862,967
$42,006,896

Dist.
Totals

0

Open accounts receivables Apr.
1 collected in Apr. ’54 ___

4,384,658

District Totals -$30,009,672

13.9

i 11

F U R N IT U R E S A L E S*
(Based on Dollar Value)
Percentage change with correspond­
ing period a year ago
April 1954
4 Mos. 1954
—

-1 3
— 7
—24
— 13
— 3

—
12

2

— 9

—
10
— 18
— 14

+ 1
— 9

IN D IV ID U AL CITIES
Baltimore, Md....................................
— 8
— 2
Washington, D. C. ..........................
— 13
— 9
— 14
— 14
Richmond, V a ........................................
Charleston, W . V a . ________ _
— 17
— 10
* Data from furniture departments of department stores as
as furniture stores.

Federal Reserve Bank of Richmond

fift h

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)
April
April
4 Months
4 Months
1954
1953
1954
1953
Dist. of Columbia
$ 4,640,628 $ 4,128,643
Washington _____ $1,252,680 $1,034,086
M aryland
Baltimore .._______ 1,425,792
1,395,668
5,615,042
5,530,620
Cumberland _______
22,394
25,484
87,825
101,384
Frederick
______
24,690
23,373
89,350
92,514
Hagerstown ___ 33,875
38,958
142,333
147,156
North Carolina
Asheville _ 1___ _
_
_
57,844
58,649
237,743
242,171
Charlotte _ 1_____ .
_
334,554
354,563
1,398,753
1,448,670
Durham ___________
84,363
82,884
335,495
340,069
Greensboro ________
113,065
124,218
463,563
470,734
High Point ...______
41,084**
N A 167,201**
NA
19,032
18,666
81,039
80,369
Kinston ___ ...______
Raleigh ____I______ _
167,206
180,762
737,132
798,777
Wilmington ______
44,858
45,673
180,853
179,685
Wilson _____ .______ _
16,279
15,044
71,754
67,361
W in ston -Salem ____
141,064
138,746
590,627
578,865
South Carolina
Charleston ________
72,732
78,394
287,740
322,068
Columbia _______ _
181,916
166,545
677,379
632,781
Greenville _________
106,927
111,555
429,194
450,227
Spartanburg ___ ...
60,273
62,366
250,273
260,708
Virginia
Charlottesville ____
31,027
28,058
121,799
101,029
Danville _ ____ _
_
_
32,559
36,997
139,344
151,435
Lynchburg ________
49,918
48,840
192,240
192,806
Newport News ___
47,488
48,486
185,593
195,396
Norfolk ___________
249,957
262,640
1,020,959
1,020,461
Portsmouth ______
32,108
32,191
125,978
122,260
Richmond _________
599,686
612,290
2,350,469
2,419,352
Roanoke __________
115,924
120,123
455,486
477,405
West Virginia
Bluefleld __________
37,887
42,574
158,978
175,878
Charleston ________
171,193
164,329
695,364
658,112
Clarksburg___ ____
30,939
32,784
129,316
138,517
Huntington ______
66,565
69,957
275,985
285,802
Parkersburg ______
30,549
30,702
119,584
117,290
District Totals ______ $5,655,344 $5,485,605
$22,287,818 $21,928,545
*
Interbank and U . S. Government accounts excluded.
**
Not included in District totals.
N A Not Available.

S ta tistic s

50 R E P O R T IN G M E M B E R B A N K S
(000 omitted)
Change in amount from
May 12,
April 14,
May 13,
Items
1954
1954
1953
Total Loans _____________ __ ...___$1,397,460** — 3,598
_
— 1,070
Bus. & Agric. ________________
628,147
— 16,468
— 18,664
Real Estate Loans ___________
268,983
+
2,624
+
9,711
All Other Loans ____________
517,903
+ 10,348
+
9,235
Total Security Holdings ______ 1,730,639
U. S. Treasury Bills _________
123,580
U. S. Treasury Certificates ..
153,304
U. S. Treasury Notes ________
224,790
U. S. Treasury Bonds ______
991,305
Other Bonds, Stocks & Secur.
237,660
Cash Items in Process of Col. _
294,364
Due From Banks _______________
193,023*
Currency and Coin ____________
78,482
Reserve with F. R. Banks ____
521,414
Other Assets ___________________
64,530
Total Asses __________________ 4,279,912

+
5,968
+
7,133
+
1,591
— 3,352
—
294
+
890
— 2,838
— 6,446
— 1,969
— 14,345
+
1,542
— 21,686

+
+
+
—
+
+
—
+
—
—
+
+

45,928
12,901
33,735
60,620
50,034
9,878
18,198
19,952
3,473
41,236
5,658
7,561

Total Demand Deposits ______ 3,220,013
Deposits of Individuals _____ 2,431,169
Deposits of U. S. Government
66,801
Deposits of State & Local Gov. 202,298
Deposits of Banks ___________
465,643*
Certified & Officers’ Checks ..
54,102
Total Time Deposits ___________
711,743
Deposits of Individuals _____
635,542
Other Time Deposits _________
76,201
Liabilities for Borrowed Money
7,400
All Other Liabilities ___________
49,583
Capital Accounts _______________
291,173

—
+
—
—
+
—
+
+
—
+
+
+

—
—
—
+
+
—
+
+
—
—
+
+

6,487
9,532
15,025
10,990
15,581
8,501
36,403
39,581
3,178
49,300
6,339
20,606

Total Liabilities .....__________ $4,279,912

30,904
11,697
41,634
7,437
10,984
4,514
5,094
5,915
821
25
1,755
2,344

— 21,686

+

7,561

* Net figures, reciprocal balances being eliminated.
** Less losses for bad debts.

Additions To Par List

The Citizens Bank, Marshall, North Carolina,

The Columbus, North Carolina, Branch of the

which also operates tellers’ windows at H ot Springs

Tryon Bank and Trust Company, Tryon, North

and Mars Hill, North Carolina, agreed to remit

Carolina, opened for business on May 18, 1954 and

at par, effective May 24, 1954, for all checks drawn

agreed to remit at par for checks drawn on it when

on it when received from the Federal Reserve

received from the Federal Reserve Bank.

Bank.

bus is in the territory served by the Charlotte

Marshall is located in the territory served

Colum­

by the Charlotte Branch, and the combined A .B .A .

Branch, and the combined A .B .A . transit number-

transit number-check routing symbol of the Citizens

check routing symbol of the Branch of the Tryon

Bank is _6:2776
-

Bank and Trust Company located there is 66~ |
^ 12-

531




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