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RESERVE BANKJ 'RICHMOND June 1955 REVIVAL IN MANUFACTURING Thousand Wan Hours Thousand Man Hours 12,000 10,5001 Maryland 10,000 Thousand Man Hours Thousands Man Hours 18,500 North Carolina West Virginia 4,500 Thousand Man Hours 9 ,5 0 0 r ~ Thousand South Carolina Federal Reserve Bank of Richmond Arithmetic Of Business Recovery business recovery or back to the B o o m ! Nearly everybody’s talking about it. Some view it com placently, others with a growing concern that assumes it’s too fervid to last. Those who are unemployed would aver that business is terrible while those working full time or even over-time, and getting periodic wage raises, think business is fine. The fact is that in the economy as Q Recession and revival are, however, very real terms and measure the total or average performance of indi vidual industries or the economy as a whole. In this sense, they picture a recession which took place in the Fifth District as well as the nation from the Spring of 1953 until the Spring of 1954. In the overall, there has been sharp revival from the lowest levels; the amount of decline and the amount of recovery are the subjects of the following discussion. harp T EX T ILE MILL PRODUCTS Thousand Man Hours A clearer perspective can be obtained from the recession-revival process that has occurred since 1953 if the phenomenon be segregated into major divisions of pro duction and distribution or service such as manu facturing, agriculture, mining, construction, and trade, transportation and services including government. FIFTH DISTRICT Manufacturing There are very few measures at the regional level of either volume or physical volume of production or sale of manufactured products. It is necessary, therefore, to utilize such information as is available and these are the man-hours in manufacturing industries. If the pro duction process always remained the same and if work ers always did their job with equal diligence, man-hours and production would show identical changes from one period to another. a whole, at almost any time and in any number of in dividual industries or segments, the same degree of vari ability is to be observed. Department store operations in the Fifth Federal Re serve District offer a good illustration of variable eco nomic performance. In the first quarter of 1955, sales of all department stores reporting to the Federal R e serve Bank rose 8% over the first quarter of 1954 but some stores showed increases in sales in this period of more than 50% while some showed losses running as high as 5% . T o those stores whose sales were under a year ago, recovery is something that hasn’t yet hap pened ; to the others, operations are pleasant indeed. Business recovery in the sense used here has no rela tion to the claiming of a by-product in the production process or to reclaiming for further use materials only partially spent in production processes. Recovery, in the sense here used, implies something from which to recover— before revival there must have been a reces sion. It would be difficult to say the construction in dustry had revived when, as a matter of fact, it hasn’t had anything to revive from in many years— it has just kept on not running, but sprinting, up hill on the econ omists’ charts. The bituminous coal industry, on the other hand, has much to revive from and, despite the substantial percentage recovery of recent months, is still not a healthy, flourishing industry. W hen farmers look at their cash income from marketings they are justified in asking, “ What recovery ?” On the other hand, bank ers, looking at their earning assets, can very well ask, "R ecovery from what?” A Change, however, is the essence of progress and manhour input into the production process is known from historical experience to come forth with a greater prod- A PPA R EL Thousand Man Hours FIFTH DISTRICT uct as improvements are made in either the machine out put or the more efficient scheduling of labor input. This is known as a gain in the efficiency of labor and by the amount that labor input becomes more efficient, man-hours fail to measure the full impact of production 2 y June 1955 /fo n M fy $O M 6C U L changes. W ith this in mind and recognizing that changes in man-hours from one period of time to the next may overstate a cyclical recession and may under state a cyclical revival, we will proceed to tell you what has happened to man-hours in manufacturing industries in the Fifth Federal Reserve District. PRIM ARY M ETALS Thousand Man Hours FIFTH DISTRICT Man-hour figures are not adjusted for seasonal varia tion and for this reason rather than taking the highest month of 1953 and the lowest month of 1954 we are comparing March 1955 with March 1954 and with March 1953. These three periods, in a general way, will approximate the peak of activity in 1953, the low of the recession in 1954 and currently so that the recession and recovery can be measured without influence of seasonal factors. from 1953 to 1954 of 10.1%. From 1954 to 1955, 70% of that loss was recovered; in March 1955 it was only 2.4% under the March 1953 level. In Maryland the 1953-54 decline amounted to 8.6% , the amount of re covery from 1954 to 1955 has been 14% of that loss. March 1955 man-hours in Maryland, though 1.3% higher than in 1954, remained 7.4% lower than in 1953. The 1953-54 decline in Virginia was 8.6% . By March 1955, 42% of that decline had been recovered, with man-hours in that month standing 3.9% higher than in 1954 but 5% under 1953. In the durable goods industries of the Fifth District, the 1953-54 recession produced a decline of 9.8% , with W est Virginia shrinking most (1 5 % ) and North Caro lina least ( 6 % ) . Thirty-seven per cent of the decline experienced from 1953-54 had been recovered by March 1955, but this level was still 6.1% under March 1953. Nondurable goods manufacturing industries showed a man-hour loss of 8% in the 1953-54 recession; be tween March 1954 and March 1955, 72% of that loss had been recovered, though the total was still 2.3% under March 1953. The 1953-54 recession affected the manufacturing in dustries of the Fifth District in rather variable fashion. The lumber and timber products industries showed a 14% decline in man-hours between March 1953 and March 1954— largest decline of any of the major in dustries in the District. Transportation equipment in dustries, next in line, showed a decline of 13.9%, furniture and fixtures 13.8%, tobacco 11.5%, textile mill products 11.2%, primary metals 11.1%, machinery, excluding electrical, 9.5% , stone, clay and glass 8.6% , fabricated metals 7.8% , apparel 5.6% , chemicals 5.0% , and paper 4.4% . Food and kindred products were up 0 .2 %. Man-hours in all manufacturing industries of the Fifth District (excluding the District of Columbia) de clined 8.8% from March 1953 to March 1954. By March 1955, 56% of that decline had been recovered and total man-hours were within 4% of the 1953 level. There was, however, some variability among the states of the District. South Carolina showed a decline of only 5% between March 1953 and March 1954, and by March 1955 that state’s man-hours in manufacturing industries was at a new high level. The rise from March 1954 to March 1955 was 136% of the amount of the decline from March 1953 to March 1954, and total man-hours in that state’s manufacturing industries in March 1955 were 2% higher than in March 1953. M ACHIN ERY EXCLUDING E L E C T R IC A L Thousand Man Hours W est Virginia showed the largest decline in manhours of all manufacturing industries between March 1953 and March 1954 (1 1 .8 % ). This state has also shown one of the smallest recoveries from March 1954 to March 1955. Only 20% of the loss has been re covered and that state’s industries were still 9.4% below March 1953. The paper, apparel and primary metals industries of the District have shown a larger gain from March 1954 to March 1955 than was lost between March 1953 and March 1954. Man-hours in the paper industries dur ing March 1955 had more than recovered recession North Carolina also showed an above-average decline FIFTH DISTRICT " { 3 1* Federal Reserve Bank of Richmond losses, and stood 0.4% higher than in March 1953. The recovery in primary metals was more than the recession loss, and in March 1955 man-hours in these industries were 0.5% higher than in March 1953. Apparel in dustries likewise recovered more, up to March 1955, than their recession losses, with man-hours 0.2% higher than in March 1953. from the same months in 1954 and 28% from 1953. W ith acreage reductions in major cash crops, the Dis trict would require either a very high yield or a con siderable rise in price to show an improvement in farm income this year, compared with last. M ining Mining in the Fifth District is dominated by the bituminous coal mines mainly in W est Virginia and Virginia. Coal production in the first quarter of 1955 amounted to 36.5 million tons in Virginia and W est V ir ginia, an increase of 19.8% over the first quarter of 1954 and 4.3% over the first quarter of 1953, but a decline of 27.6% from the first quarter of 1947. Em ployment in these mines has averaged 16.6% smaller than in the first quarter of 1954 and 32.9% smaller than in the first quarter of 1953. These are startling changes, particularly when related to coal production— in the first quarter of 1955 production per man in W est Virginia was 17% higher than in the first quarter of 1954 and 27% higher than in the first quarter of 1953. TOTAL NON-MANUFACTURING ds EMPLOYMENT - f i f t h district C onstruction The construction industry as a whole not only did not contract between the first quarter of 1953 and the same quarter of 1954 but actually rose 2 % . This, how ever, was due to residential construction contract awards which rose 26% in the period and more than offset declines of 10% in nonresidential construction and 20% in public works and utilities. Cyclical re vival, therefore, has occurred in the nonresidential sec- Machinery, excluding electrical, and fabricated metals industries, instead of recovering between March 1954 and March 1955, have shown a further decline. And food and kindred products industries, which had shown a fractional rise between March 1953 and March 1954, showed a small decline between March 1954 and March 1955. Machinery industries, excluding electrical, had declined 9.5% between March 1953 and March 1954; from March 1954 to March 1955 a further decline of 8.2% occurred, leaving the latter level 16.9% under that of 1953. M EM BER BANK LOANS Million Dollors FIFTH DISTRICT The fabricated metals industries of the District showed a man-hour loss in the recession of 1953-54 of 7.8% ; from March 1954 to March 1955, a further drop of 1.5% has taken place, so the March 1955 level was 9.2% under March 1953. A gricultu re Agriculture in the Fifth District is one of the soft spots where no recovery has been witnessed thus far in 1955 and a further decline has taken place. Cash receipts from farm marketings in the first two months of 1955 are 11% smaller than in those months of 1954, and 18% smaller than in the same month of 1953. In come from livestock and products has declined some what less than income from crops. Livestock and prod ucts income (first two months of 1955) were off 10.9% from the same months of 1954 and 11.4% from the first two months of 1953— in other words, very little further decline in farmers’ income from livestock and livestock products occurred between 1954 and 1955. Income from crops (first two months of 1955) was down 12% { tors, and in public works and utilities. Sharp expansion, not revival, is the best description for nonresidential con struction for in the first quarter of 1955 it was 61% higher than in the first quarter of 1953, while public works and utility awards were only 2% higher than in the same period. The decline from the first quarter of 1953 to 1954 in nonresidential construction contract 4 Y June I955 awards was due wholly to factory awards and to all other awards, except commercial and educational. Com mercial awards and educational awards showed no de cline from 1953 to 1954, in the first-quarter comparisons. Residential construction contract awards in the first quarter of 1955 were a gaudy 119% higher than in the same quarter of 1953. Awards for apartments and hotels in this same period were up 49% , one- and twofamily houses zoomed up 133% and other residential up 53% . Commercial contract awards from 1953 to 1954 (first quarters) rose 3.8% and from 1953 to 1955 rose 63% . Awards for factory buildings declined 46% from 1953 to 1954, but rose 50% from 1953 to 1955. Educational buildings from the first quarter of 1953 to 1954 rose 9 % , and from the first quarter of 1953 to 1955 rose 36% . Other nonresidential construction, which de clined 15% in the 1953-54 period, rose 88% from 1953 to 1955. Public works and utilities awards were down 20% from the first quarter of 1953 to the same quarter of 1954; by the first quarter of 1955, however, the entire loss had been recovered and a 2% gain posted over the first quarter of 1953. Construction placed under contract has clearly been an element of great strength in the District’s economy, and one with potentially more stimulus. On a season ally adjusted basis, however, contract awards in most types of construction made their high point in October 1954 and have been trending downward irregularly but sharply since that time. Despite the down-trend, how ever, the latest monthly level is still well above average awards of the past five years. Trade Available trade level data indicate the recession be tween the first quarter of 1953 and the first quarter of 1954 was fairly sharp when compared with the decline in other segments of the economy. The only available series to withstand the recession was household appli ance stores, sales of which from the first quarter of 1953 to the first quarter of 1954 were up 4.3% . The de partment stores in this same period showed a sales de cline of 7.6% . Retail furniture sales were off 10.9%, new passenger car automobile registrations declined 8.8% , and new commercial car registrations 16.3%. Household appliance stores, by the first quarter of 1955, had risen 19% above the first quarter of 1953. New passenger automobile registrations had recovered more than three times the previous loss, with new reg istrations in the first quarter of 1955 18% ahead. Dis trict department stores by the first quarter of 1955 had more than regained the 1953-54 loss and stood 1.4% higher than in the first quarter of 1953. Retail furni ture stores, with a 10.9% loss in the recession of 195354, had recovered 93% of the loss by the first quarter of 1955 when sales stood within 0.8% of the first quarter of 1953. New commercial car registrations, however, in the first quarter of 1955 showed a further loss from the first quarter of 1954 and stood 19.5% under the first quarter of 1953. Employment— Non-manufacturing Employment in the District other than in agriculture and manufacturing declined 82,100 in the recession of March 1953-March 1954. By March 1955, 16% of this loss had been recovered with employment levels up 13,200 from a year ago. Employment in mining indus tries during the 1953-54 recession declined 24,100, and has declined an additional 11,700 between March 1954 and March 1955. Despite the large gains witnessed in the construction industry, employment in contract construction between March 1953 and March 1954 declined 22,700 and from March 1954 to March 1955 an additional 2,900 loss has occurred. Employment in the transportation, communication and public utilities fields declined 15,400 from March 1953 to March 1954 and has declined an additional 4,500 from March 1954 to March 1955. Trade firms in the District reduced their employment by 12,900 from March 1953 to March 1954 but increased the number by 7,100 from March 1954 to March 1955, a recovery of 55% of the loss. Employment in service and miscel laneous industries showed no decline for the District as a whole, though some states had moderate losses be tween March 1953 and March 1954. In the District as a whole there was a gain of 6,800 from March 1953 to March 1954, and an additional 5,200 were added to the payrolls in these industries to March 1955. Em ployment by Federal, state and local governments drop ped 20,800 from March 1953 to March 1954, with the District of Columbia accounting for most of the decline. From March 1954 to March 1955 government payrolls expanded 18,000 to recover 87% of the year earlier decline. Increases were largely in state and local gov ernment offices. In all District states March 1955 was higher than March 1953. Only in the District of Columbia was this March lower than last or in 1953. ^5 V Federal Reserve Bank of Richmond Toll Roads—Expensive and Effective h e first four months of 1955 saw a pause in the pro cession of securities for the financing of new turn pikes. The lone issue appearing in the period was the relatively small $34 million offering for the New Jersey Turnpike expansion. The absence of other turnpike bonds has been partic ularly surprising because a major feature of the muni cipal market at the close of 1954 was the tremendous volume of toll road issues scheduled for the 1955 market. Postponements of various kinds arose to delay financing, so that a substantial volume of such securities now over hang the market. If all the issues in the prospective stage were to roar into the market around the same time, the result would be an avalanche. This is highly un likely, but it is certain that this type of financing will bulk large in the activities of the next twelve months. Turnpike issues aggregating more than one billion dollars are in prospect by m id-1956, and a rush to the market may occur as soon as several pending issues clear legal and political road-blocks which have held them up. The more “ iffy” issues should take tangible shape if and when the controversial Federal program for overcoming the nation’s highway deficiencies becomes definite. The cessation of toll road financing in early 1955 should not be interpreted as reflecting a declining inter est in this development. Presently plans are reported for toll roads in Maryland, Virginia, and North Carolina, and in eight states outside the Fifth District, ranging from Connecticut to Texas and Washington. Legal approval has just been given to the $74-million MiamiFort Pierce turnpike in Florida; and the $58.5-million Dallas-Fort W orth, Texas, turnpike bonds will be of fered on June 14. T of 1950 a 14-mile turnpike was opened in New Hamp shire, built at a cost of $7,500,000. Since the construction of these roads, more than a thousand miles of toll roads have been put into opera tion in 11 states. Total cost of all toll roads in service at the beginning of this year has been more than $1.8 W e s t V ir g in ia T u rn p ike C o m m issio n — The B e n d e r B rid g e , h ig hest b rid g e e a st o f the M ississip p i R ive r, is n a m e d in ho n o r o f C o n g re s sio n al M e d a l o f H o n o r w in n e r S e r g e a n t S ta n le y Be n d e r. The e n tra n ce to the M e m o ria l Tunnel is sh o w n in th e b a ck g ro u n d . billion. About 1,250 miles of toll roads are now under construction at an estimated cost of $2 billion. A ver age cost per mile has increased from about $1.3 million on the roads in service to $1.6 million on the roads under construction. Turnpikes are an old story in this country. In the first era, roughly from the Revolution until the develop ment of steam railroads, toll turnpikes were constructed and operated by private companies to meet the trans portation needs of the new country. W hen railroad competition strengthened, most of the turnpikes were absorbed into the public road system of each state. In their book, Toll Roads, W ilfred Owen and Charles L. Dearing said, “ The unique characteristic of a toll facility is that the money spent for it goes to build and maintain a specific project for which there is a need and prospective willingness to pay the cost.” The traffic and engineering studies, conducted prior to issuing the revenue bonds, should determine the loca tion of a new toll road and whether its construction in this location is justified by the traffic expected. The “ second” turnpike era began with the opening of the Pennsylvania Turnpike in 1940. During W orld W ar II, the Merritt Parkway, which had been built as a free road by Connecticut, became a toll road, and the revenue was used to finance the W ilbur Cross Parkway. Beginning in April, 1945, toll collections were permitted on two parkways in Westchester County, New York, as an additional source of revenue to finance maintenance and improvements on other county roads. The first postwar toll road was the 44-mile Maine Turnpike. In 1946 $20 million in bonds were sold, and the road was opened in late 1947. In the Summer Criticism has been voiced of the whole concept of toll roads, as well as of particular toll projects. The Am eri can Automobile Association, for example, has consist ently opposed toll roads as representing double taxa tion, since users must also pay gasoline and vehicle taxes. A system of lower tolls for state residents, as proposed in Maryland, would meet this criticism. The A A A and similar organizations have also been critical of the continued collection of tolls on some facilities as a source of revenue long after the costs of construction have been covered. Plans for individual projects have brought forth criticism of their economic justification as First and Second Turnpike Eras i 6y /fofiM fa/ /(OH6U^ well as stout opposition from owners of motels, restau rants, and filling stations who stood to lose customers from a diversion of traffic. Other criticisms are that toll roads duplicate facilities already provided on parallel free roads and that the cost is too high for the limited mileage. T o minimize dupli cation and permit integration with state and national highway systems, turnpike authority boards usually have officials of the state highway department as ex officio members. Revenue bonds for toll roads carry higher interest rates than general obligation bonds of the same state. Wherever possible, state credit has been used to back revenue bonds to obtain lower interest rates. A public referendum or change in the state con stitution is necessary to permit this in Fifth District States. Link with the Midwest There has been much discussion about toll roads in the Fifth District and several states have passed legis lation creating authorities or permitting issuance of toll revenue bonds. T o date, however, the only one actually financed and built is the W est Virginia Turnpike, com pleted in 1954 at a total cost of $133 million. Much of the original 88-mile section is only two-lane, although allowance was made in construction for paving two additional lanes. Plans are now being considered for extensions of this road, northward to connect with turn pikes in Pennsylvania and Ohio and southward to link up with proposed turnpikes in western Virginia and North Carolina. W hen finished this route is expected to be an important link between the Great Lakes area and the increasingly industrialized Southeast. The Old Dominion Turnpike Authority was created in 1954 by the General Assembly to construct and operate V ir ginia section of this turnpike system. The Pennsylvania legislature is considering proposals for an extension of that state’s turnpike to the W est Virginia line to meet the northern extension of the W est Virginia Turnpike. June 1955 this restriction, and a route passing through both cities is now being considered for this turnpike. N o authorities have been created in Maryland to con struct highways and bridge and tunnel projects, though the state may charge tolls on all or any designated part of such projects. Under the 12-year plan proposed in 1952, $330 million of a total cost of $568 million may be borrowed. Recently Maryland’s General Assembly approved the proposal of the State Roads Commission to build, at a cost of $29.5 million, a 48-mile expressway from Baltimore to the Delaware line near Wilmington. This would accomplish more quickly part of the 12-year plan’s construction. The commission has considered charging lower rates for Maryland users and making up the difference from state gasoline and motor vehicle taxes. In North Carolina road bonds are included in the general-obligation debt of that state, but they are backed by specific gasoline and motor vehicle taxes distributed between state and county roads. The State Turnpike Authority is empowered to construct and operate turn pike projects subject to the approval, as to location, of the State Highway and Public W orks Commission. The authority may issue revenue bonds, and neither the state nor the authority is obligated to pay the interest or prin cipal except from these revenues. T O L L RO AD S P A R A L L E L IN G T H E IN T E R S T A T E S Y ST E M Miles In Service:* Merritt and Wilbur Cross Parkways, Conn. ____________________ ___________ Kittery-Portland, Me. --------------------------Seabrook-Portsmouth, N. H. ----------------New Jersey Turnpike --------------------------New York Thru way ----- ------- -------------Tulsa-Oklahoma City, Okla. -----------------Pennsylvania Turnpike -------------------------Total in Service ..................................... In 1952 the Virginia Highway Commission gained the authority to construct, maintain and operate turnpike projects, and to issue revenue bonds payable solely from tolls and other charges collected. The law provides that when funds are available for the retirement of bonds issued for a specific highway project, that turnpike be comes a part of the state system to be maintained by the Highway Commission free of tolls. $ 38.0 21.6 7.5 285.0 490.0 38.0 211.5 $1,091.6 Financed or Under Construction: Greenwick-Killingly Expressway, Conn. Indiana East-West Turnpike --------------Kansas City-Topeka-Wichita- Oklahoma line --------------------- -------------------------------Louisville-Elizabethtown, Ky. _ ----------Portland-Augusta, Me------ ----------------------Weston-West Stock bridge, Mass........ ~ New Jersey, link to Pa. Turnpike ------New York Thru way -------------------------------New York Thruway _ .. _ _ ............ - -----Ohio East-West Turnpike --------------------Tulsa-Missouri line, Okla. --------------------Total Financed or Under Construc tion — ---------------- - — ------------------ In 1954 the Virginia General Assembly passed acts creating the Old Dominion Turnpike Authority and the Richmond-Petersburg Turnpike Authority. The latter authority was established specifically to construct a toll road between a point north of Richmond and a point south of Petersburg, to connect with routes 1, 301, and 460. Until 1954 the state could not construct or operate toll turnpikes within towns and cities of 3,500 popula tion or over. Another act passed last year removed 67 47 15 118 396 88 327 1,058 Cost (in millions) 130 157 $ 398.0 280.0 234 40 66 123 6 30 133 240 88 160.0 38.5 55.0 239.0 27.2 110.0 300.0 326.0 68.0 1,247 $2,001.7 A T en -Y ea r National H igh w a y Program , A R eport to the President, January, 1955. Source: ♦In addition to the above list of toll roads in service, E ngineer ing N ew s-R ecord, December 30, 1954, listed over 400 miles of turnpikes costing about $750 million which are not on the in terstate system. i 7 1* Federal Reserve Bank of Richmond North Carolina created the Carolina-Virginia Turn pike Authority in 1953 to cooperate with Virginia’s Coastal Turnpike Authority in building a toll road from Virginia Beach to Nags Head. N o date has been set for a bond offering. Up to the present time no plans have been made for a turnpike in South Carolina. Unless a large scale highway program is contemplated, the state does not need to resort to revenue bond financing. The limit on general obligation debt for highway purposes was set at $70 million in 1950, and the net highway debt out standing on June 30, 1954 totaled $46.6 million. Federal Policy on Turnpikes The Federal Government has long been opposed to toll roads. The Federal-Aid Road Act of 1916 stated “ that all roads constructed under the provisions of this act shall be free from tolls of all kinds.” This was re stated in the Federal Highway A ct of 1921, with the additional of the word “ reconstructed.” A n exception to this policy occurred in 1927 when legislation was passed permitting Federal aid for state-owned toll bridges. Federal aid outside the regular program was also given to the Pennsylvania Turnpike Commission to as sist in building the original section of that road. The Public W orks Administration granted $28,250,000 to the commission, and the original bond issue was sold to the Reconstruction Finance Corporation. In the report on a National Highway Program pre sented in January, the President’s Advisory Committee proposed a plan for giving credit to states building new highways, free or toll, on the interstate system. Credit would be allowed only on roads meeting the new stand ards, and only up to 40% of the cost of roads built between 1947 and 1951, 70% of the cost of roads built before December, 1955, and the full construction cost of roads built at a later date. The credit should be used only in constructing other highways. The advisory committee felt that the Federal Govern ment “ should not enter into toll road construction nor provide funds for deficit financing of otherwise non-self supporting projects.” The Case for the Turnpike The new turnpikes have typically been new roads placed on right-of-ways determined by modern high way engineering standards. A s a result they have pro vided users with more than just limited-access roads that reduce crossing worries for they usually incorporate moderate grades and curves, median strips for greater safety and night-driving comfort, and attractive road sides with severely limited commercial establishments. The attraction to private passenger travel has thus gone beyond economies of operation. For the commercial user turnpikes offer savings in fuel, tires, and time that are frequently important. Truckers indicate that they check carefully the costs and gains of using toll facilities over free roads and in some instances the older highways win out. On the other hand, the New Y ork Thruway Authority recently cited figures to support the case for using the New Y orkBuffalo Thruway instead of parallel free roads. Tests were conducted by the General Electric Corporation on runs between its Schenectady plants and Williamsville, near Buffalo. Use of the Thruway reduced the distance by 38 miles and gas consumption by 14.2 gallons. Drivers had to shift gears 298 times less on the Thru way, saved 142 brake applications, and eliminated 69 full stops. For a round trip, an average of four and one-half hours were saved. Clearly this provides an economic basis for the added cost of toll roads so far as this user is concerned. Trucks played an important role in the early success of the Pennsylvania Turnpike and are generally counted upon as heavy users of all new toll roads. The rapid growth of the trucking industry highlights this type of use; if trucks in use actually triple in number (to 30 million by 1975) as forecast recently by a spokesman for the manufacturers, their role as users will obviously become yet more important. The committee estimated that economically feasible toll routes in 28 states, coinciding with the interstate system, total over 8,500 miles, out of 40,000 miles for the whole system. (Interstate toll routes completed or under construction are shown in the accompanying table.) It is obvious that toll financing can meet only a small portion of the nation’s highway needs. -I 8 V June 1955 Banking In the First Quarter A demand deposits of the District’s member banks fell $254,000, 000 (4 .6 % ) between January 1st and April 11th, 1955*, this decline was $100,000,000 less than the amount lost in the comparable period in 1954. Last year the period was one of moderately de clining business activity in contrast to the strongly flowing currents in the first quarter of this year. Since demand deposit changes are the result of over-all bank ing activities, the first quarter’s demand deposit loss provides a convenient focal point through which other operations may be brought into perspective. What are the causes of demand deposit declines at the member banks? Several well defined and funda mental influences work toward this en d : 1. W hen bank customers call for currency and coin, demand deposits decline. The customers make pay ment for the currency and coin they receive from the banks by surrendering demand deposit balances. 2. W hen customers transfer demand balances over to savings deposit accounts, demand deposits decline. 3. W hen customers make payments to the banks themselves by checks drawn against their accounts, the banks’ liability in the form of demand deposits is re duced. For example, when a loan is repaid or when some security is purchased by a customer, the banks experience a reduction in their deposit liabilities. 4. The banks themselves may reduce the amount of funds carried on deposit with other banks. Since de posits due to banks are included in total demand de posits, such withdrawals reduce the total figure. 5. W hen the banks’ customers make payments to the U. S. Treasury by checks drawn against their de mand deposit accounts, these accounts and the Treas ury’s account at the Federal Reserve Bank or at com mercial banks increase. There may be a temporary offsetting change in this case— a transfer from a private account to the Treasury’s T ax and Loan Account at the group of banks considered. However, this would be short-lived since the Treasury eventually transfers bal ances from the commercial banks to the Treasury’s ac count at the Federal Reserve Bank. 6. W hen customers of District member banks make payments by checks to the customers of banks outside the District or of nonmember banks in the District, demand deposits decline at this group of banks. lthough The First Quarter Demand Deposit Decline 2. 3. The calling down of interbank balances held by outside banks or by nonmember banks in the area, Payments by checks to customers of banks located outside the area or of nonmember banks in the area. These drains on District demand deposits were larger than the net deposit decline by the amount of those transactions which tended to add to demand deposits, notably the return of currency and coin to the banks, the increase of bank loans outstanding and net Treasury ex penditures in the District. During the first quarter this year, currency and coin in circulation declined, that is, currency and coin were redeposited in the commercial banks. Customers’ needs for currency and coin, therefore worked to increase de mand deposits in this period. Savings and time deposits at the District’s member *April 11, 1955 is the date of the most recent Call Report. For con venience the period from January 1 to April 11 will be referred to as the first quarter of the year. banks increased by $47,000,000 (2 .7 % ) over the period covered and may be said to account for this much of the net reduction in demand deposits. True, deposits to savings accounts are frequently in the form of currency and coin, but the action which made the currency and coin available for this use, caused a reduction in demand deposits at that time. Repayments on loans to District member banks dur ing the first quarter of the year were at records levels— but new loans extended by the banks were greater, with the result that total loans expanded by $72,000,000 ( 2 . 7 % ) . Lending activities of the banks, therefore, add ed to rather than subtracted from demand deposits. The fourth of the above listed causes for demand de posit declines is the change in interbank deposits. Actually this factor accounted for approximately onethird of the total demand deposit decline over the first quarter of the year. Nonmember banks in the Fifth District and commercial banks in other districts reduced the amount of balances carried at District member banks by $82,000,000 between January 1 and April 11, 1955. Payments to the U. S. Treasury were noted as a fifth factor influencing the level of demand deposits. In the period under review, however, direct Treasury ex penditures from the General Account at the Federal R e serve Bank of Richmond exceeded Treasury receipts here and the effect of this was to increase, not decrease, demand deposits in the District. There remain payments made by the member banks’ customers— to the customers of banks located outside the Fifth District or of nonmember banks in the District. Interdistrict Settlement Fund data reveal a sizable net flow of funds from the District for commercial and fi nancial transactions in this period. The preponderance of the net deposit loss over the first quarter of the year, therefore, is found to be due to the geographical patterns of payments established by the member banks’customers. Purchases of goods and services and a multitude of other financial transactions between District residents and those outside the area resulted in a net loss of de mand deposits. In summary, the demand deposit decline at District member banks in the first quarter of 1955 was caused by : 1. A transfer of funds to savings and time deposits, *{ 9 y Federal Reserve Bank of Richmond Business Conditions and Prospects conditions in the Fifth District in April showed— as usual— strength, weakness and stabil ity at the same time. The trade level continued to dis play its strength but shifts were evident in its composi tion. Construction contract awards, after trending down ward since October, experienced a sharp rise in April with the emphasis on sectors other than residential. Although cash income from farm marketings was 10% under a year ago in the first quarter, seasonal im provement was noted in March as a result of expanded livestock slaughter. Bituminous coal mining rose sharp ly during April, part of which was probably due to the L & N strike. Loans of member banks rose unseasonally but the trend of bank debits leveled off. W hile the number of GI home loans guaranteed and insured de clined moderately from February to March, they stood 64% ahead of a year ago and in the first quarter an amazing 80% . Confidence in the business outlook remained strong, as evidenced by a 26% increase in new incorporations during the first quarter of the year compared with last year. Production of electric power was off 2 % , Feb ruary to March (adjusted), but up 7% from a year earlier; the first quarter was up 9 % . In the first two months of 1955, sales of electric energy to ultimate consumers in the South Atlantic region were 10.4% higher than in the first two months of 1954. Industrial utilization showed the largest increase, 12.2%. Resi dential usage was up 10.5%, commercial up 9.9% , and other utilization off 5.8% . u s in e s s Trade Department store sales in April, after correction for the shift in Easter and seasonal factors, rose 1% from March to a level 6% ahead of a year ago. Strength was shown in adjusted sales in South Carolina and W est Virginia, but elsewhere they were somewhat behind March. Retail furniture store sales (preliminary and ad justed) spurted 6% in April to a level 23% ahead of a year ago. April was just short of the all-time peak. Furniture store inventories (adjusted) rose 4% during April but were still 6% under a year ago. Household appliance store sales (unadjusted) were down 5% from March to April to the same level as a year ago. For the first four months they were 10% ahead of 1954. Latest complete District data on new passenger car registrations (M arch ) show an increase of 27% from February, 33% from March 1954, and first-quarter registrations up 29% . District figures are about the same as national. April registrations of new passenger automobiles for North Carolina and the District of Columbia were up 2% over March and 47% over a year ago; the District of Columbia figure increased 15% during the month, while North Carolina declined 2 % . New commercial car registrations (all Fifth District States— M arch) were at February’s level and 8 % under March 1954. The first quarter was off 5% from a year ago. In the District of Columbia, W est Virginia, and North Carolina registrations were 11% above March and 12% over a year ago, with W est Virginia and North Carolina showing increases in both periods while the District of Columbia showed losses in both periods. In Richmond, Virginia, April registrations of new passenger automobiles were down 20% from March but 26% ahead of a year ago, and the first four months’ registrations were up 31% . C onstruction Construction contract awards in the Fifth District, after trending downward on an adjusted basis between October and March, rose 27% in April to the third highest monthly record in history. This was due mainly to a 209% increase in public works and utilities awards, a 91% increase in factory buildings and a 55% increase in commercial awards. Residential awards were down 3 % , due mainly to a 41% decline in apartments and hotels and a drop of 1% in one- and two-family houses. In contrast to the 27% adjusted rise in total awards from March to April, building permits in the principal cities of the District showed a 41% drop in valuation on an adjusted basis in this period— meaning that awards were principally made outside corporate limits. Although the number of GI loans guaranteed and insured in Fifth District States slipped 6 % between February and March, they were 64% ahead of a year ago and the first quarter was up 80% . Value of loans was also down 6% from February to March, but March was 87% ahead of a year ago and the first quarter was up 104%. M anufacturing Man-hours in all manufacturing industries of W est Virginia and the Carolinas declined 4% from March to April but April was 5.8% higher than April 1954. Durable goods showed a 2.1% decline in man-hours from March to April, with the Carolinas down and W est Virginia up. In each State, man-hours in April were higher than a year earlier, with not much deviation from the average increase of 7.7% . Man-hours in the nondurable goods industries in April were 4.8% under March, but 5.1% over a year ago. Textile mill products man-hours in April in the Car olinas were down 5.9% from March, with broad-woven fabrics down 3.4% , yarn and thread mills down 6.2% , and knitting mills down 14.4%. Since cotton consump tion in District mills after seasonal correction was 1% higher in April than in March, it is apparent that in cotton the decline in man-hours was about seasonal. *{ 10 1- June 1955 Other textile products appear to have declined some what more than seasonally. banks rose $12 million during the month of April and stood $508 million above a year ago. During the month, loans increased $31 million while reductions in security holdings were $19 million. Loans were $337 million and security holdings were $171 million above a year ago. Agriculture Cash income from farm marketings in April was 10% higher than in February, as a result of a 14% increase from livestock and products; this more than offset a de cline of 1% in crop income. Relative to a year ago, March cash income was down 6 % , with crop income down 5% and livestock and products income down 6 % . In the first quarter of 1955, total cash income from farm marketings was down 10% from a year ago, with crop income down 10% and livestock and products income off 9 % . Farm prices during April declined from March in three States and held even in two others. Relative to a year ago, all States of the District except W est V ir ginia showed farm prices about even. W est Virginia’s decline was 8 % . Total deposits of member banks increased $56 mil lion during April, with demand deposits increasing $57 million and time deposits declining $1 million. Total deposits were $510 million higher than last year, with demand deposits up $343 million and time deposits $167 million. Member bank reserve balances increased $22 million during April, and member bank borrowings were reduced $21 million during the same period. Member bank borrowings, however, were $17 million higher at the end of April than a year earlier. Bank debits in District reporting banks during April were 1% higher than March, after seasonal correction, and 8% higher than April 1954. The first four months showed an increase of 9 % . Banking Loans and investments of Fifth District member F if t h D is t r ic t B a n k i n g S t a t is t ic s 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 1955 50 R E P O R T IN G M E M B E R B A N K S (000 omitted) April 1954 4 Months 1955 4 Months 1954 $1,252,680 $ 5,235,247 $ 4,640,628 Baltimore _______.... 1,508,119 1,425,792 6,032,671 Cumberland ____ 24,398 22,394 93,365 Frederick _______ 23,209 24,690 90,217 Hagerstown ____ 43,622 33,875 166,410 Total 4 Cities ,... 1,599,348 1,506,751 6,382,663 North Carolina Asheville ________ 64,810 57,844 264,746 Charlotte ________ .... 381,440 334,554 1,597,745 Durham _________ 78,601 84,363 314,531 Greensboro . ....... .... 140,871 113,065 571,827 High Point** __ 50,578 41,084 197,721 Kinston ______ . 21,324 19,032 89,570 Raleigh _________ ... 212,026 167,206 872,029 Wilmington ____ 54,285 44,858 207,714 Wilson __________ 19,272 16,279 82,316 Winston-Salem ....... 159,882 141,064 667,702 Total 9 Cities . .... 1,132,511 978,265 4,668,180 South Carolina Charleston ______ 87,731 72,732 331,462 Columbia__ ____ .... 195,614 181,916 696,131 Greenville . .127,881 106,927 505,094 Spartanburg ___ 63,640 60,273 262,277 Total 4 Cities ...... 474,866 421,848 1,794,964 Virginia Charlottesville __ 35,637 31,027 142,469 Danville ________ 36,732 32,559 155,677 Lynchburg ______ 53,731 49,918 209,058 Newport News ... 55,137 47,488 213,408 Norfolk _________ ... 276,556 249,957 1,114,925 Portsmouth _____ 34,703 32,108 141,877 Richmond _______ ... 612,917 599,686 2,542,994 Roanoke ______ .... 125,543 115,924 497,037 Total 8 Cities ... 1,230,956 1,158,667 5,017,445 West Virginia Bluefield ________ 42,415 37,887 171,625 Charleston ______ ... 164,799 171,193 678,914 Clarksburg ______ 34,909 30,939 140,607 Huntington _____ 73,648 66,565 288,944 Parkersburg _____ 32,898 30,549 123,818 Total 5 Cities ..... 348,669 337,133 1,403,908 District Totals ____...$6,047,736 $5,655,344 $24,502,407 5,615,042 87,825 89,350 142,333 5,934,550 Total Loans _______________ ___ .$1,605,651** Bus. & Agric_______________ 726,306 Real Estate Loans ______ _ __ 315,096 All Other Loans _____________ 586,422 + + + + 237,743 1,398,753 335,495 463,563 167,201 81,039 737,132 180,853 71,754 590,627 4.096.959 Total Security Holdings _______ U. S. Treasury Bills ________ _ Dist. of Columbia Washington ___ M a ry la n d 1,261,386 * Interbank and U. S. Government Accounts excluded. ** Not included in District totals. 287,740 677,379 429,194 250,273 1,644,586 121,799 139,344 192,240 185,593 1.020.959 125.978 2,350,469 455,486 4,591,868 158.978 695,364 129,316 275,985 119,584 ITEMS May 11, 1955 1,769,978 61,538 Change in Amount from April 13, May 12, 1955 1954 27,313 10,487 5,800 10,942 +208,191 98,159 + + + 46,113 68,519 U. S. Treasury Certificates _ 50,677 U. S. Treasury Notes _______ 364,646 U. S. Treasury Bonds ............ 1,026,334 Other Bonds, Stocks & Secur. 266,783 Cash Items in Process of Col. .. 317,259 Due from Banks _______________ 164,370* Currency and Coin ____________ 80,653 Reserve with F. R. Banks _____ 532,495 Other Assets __________________ 71,200 Total Assets __________ $4,541,606 70,566 — 35,735 — 17,575 — 3,395 — 4,936 — 8,925 — 13,935 — 1,710 — 666 + 38,471 2,374 + - 18,719 102,627 + 139,856 + 35,029 + 29,123 + 22,895 28,653 ■ 2,171 + 11,081 6,670 + +261,694 Total Demand Deposits _______ $3,389,475 Deposits of Individuals ______ 2,544,441 Deposits of U. S. Government 111,832 Deposits of State & Local Gov. 217,516 Deposits of Banks __________ 455,315* Certified & Officers’ Checks __ 60,371 36,698 36,081 5,728 + 12,555 — 28,521 9,621 + + 169,462 + 113,272 + 45,031 + 15,218 10,328 6,269 + Total Time Deposits __________ Deposits of Individuals ______ Other Time Deposits _________ — + + + 761,439 679,458 81,981 Liabilities for Borrowed Money 38,300 All Other Liabilities ___________ 45,029 Capital Accounts ......................... 307,363 Total Liabilities _____________ $4,541,606 * - 3,214 1,111 2,103 + 16,970 2,569 + 1,654 + — 18,719 Net figures, reciprocal balances being eliminated. ** Less losses for bad debts. 4 11 1* — + 39,339 62,042 49,696 43,916 5,780 30,900 4,554 + 16,190 +261,694 + _ Federal Reserve Bank of Richmond F if t h d is t r i c t s t a t is t ic a l B U IL D IN G P E R M IT F IG U R ES F U R N IT U R E SA L E S* (Based on Dollar Value) Percentage change with correspond ing period a year ago April 1955 4 Mos. 1955 STATES + 17 + 5 Maryland ------------13 + 17 Dist. of Columbia 8 + 15 Virginia — 22 + 30 West Virginia — 14 + 17 North Carolina +10 South Carolina _ +11 + 17 +U District ------------------------ April 1955 IN D IV ID U AL CITIES + 17 Baltimore, Md. -----+ 17 Washington, D. C. + 14 Richmond, Va. +46 Charleston, W . Va. Greenville, S. C. — + 7 ♦Data from furniture departments of department stores furniture stores. + 5 + 13 +11 + 15 + 7 as well as W H O LE SA LE TRADE Stocks on April 30, 1955 compared with Apr. 30, Mar. 31, 1954 1955 NA NA Sales in April 1955 compared with Apr. Mar. LINES 1954 1955 Auto supplies ----------------------- + 5 + 6 Electrical, electronic and appliance goods --------------+13 — 1 Hardware, plumbing and heating go od s------------------- + 6 — 5 Machinery equipment sup plies ______________ - ----------- + 2 0 Drugs, chemicals, allied products ---------------------------- + 2 0 — 1 Dry goods ---------------------------- + 8 —19 Grocery, confectionery, meats ------------------------------— 10 — 8 Paper and its products ------- + 7 5 +21 Tobacco products ----------------NA NA Miscellaneous ------------------------ + 2 — 9 District Total ----------------- + 7 — 5 0 + 1 — 9 +12 + 2 + 2 NA NA — — 5 — 17 NA + 6 10 — 16 NA + 8 — 1 — 2 ST O R E O P E R A T IO N S v percentage changes) Other Wash. Cities Rich. Balt. + 2 + 7 + 4 + 4 + 4 + 7 Stocks, April 30, ’55 vs ’54 .. + 5 + 2 + 10 _ 1 + 2 + + 6 4 +46 + 6 —7 9 30.7 47.0 42.5 39.5 40.8 Instalment receivables April. 1, collected in Apr. 1955 ~ 15.1 14.4 14.5 15.8 14.7 Md. D.C. Va. — 2! + + 2 5 W .V a. + 8 Virginia Danville______ Hampton ____ Hopewell _____ Lynchburg ___ Newport News Norfolk ___ __ Petersburg ___ Portsmouth .... Richmond ____ Roanoke _____ Staunton_____ Warwick _____ 703,531 868,097 291,492 960,614 118,391 984,951 89,500 280,930 2,466,223 1,265,184 193,775 686,272 West Virginia Charleston ___ Clarksburg ___ Huntington 561,515 181,118 440,923 North Carolina Asheville ____ Charlotte ____ Durham ______ Greensboro ___ High Point .... Raleigh ______ Rocky Mount .. Salisbury ____ Wilson ________ Winston-Salem N.C. S.C. + + 7 4 Months 1954 $ 19,326,875 169,900 406,692 869,579 870,838 175,033 536,365 121,111 528,541 888,049 2,883,523 243,600 495,176 1,348,797 1,924,370 109,530 1,095,735 3,091,911 6,693,128 1,291,163 3,546,617 612,752 4,382,678 1,403,400 1,250,840 6,999,108 4,106,843 1,201,055 3,270,956 762,347 3,360,521 529,077 2,046,707 1,243,566 5,703,784 680,100 3,608,680 7,613,906 4,501,467 435,170 2,704,051 981,050 387,246 552,855 2,180,971 673,313 1,491,871 2,695,849 1,208,167 1,494,024 355,972 1,535,750 694,484 982,125 638,611 666,828 299,266 131,060 171,500 1,006,482 635,986 1,825,706 317,534 1,343,220 302,275 1,442,905 353,879 102,450 174,350 787,840 1,076,287 9,961,946 5,587,873 3,618,105 3,112,729 7,236,014 1,282,711 380,468 1,481,675 4,950,404 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 South Carolina Charleston ___ Columbia _____ Greenville ____ Spartanburg .. 236,338 663,012 820,350 330,477 374,119 1,038,669 648,950 213,745 775,221 2,683,114 2,275,148 831,445 761,295 3,363,254 2,765,645 1,357,426 Dist. of Columbia Washington .... 3,265,493 4,384,658 23,380,260 20,536,828 $31,641,772 $141,413,981 $115,907,865 Apr. 1955 Open account receivables Apr. 1, collected in Apr. 1955 _ Sales, Apr. ’55 vs Apr. ’54 ___________________ 7,781,235$ 4,572,715 $ 27,549,292 224,483 97,000 653,291 209,750 96,900 696,205 221,785 189,130 715,020 209,150 468,760 970,167 Dist. Total — 3 + 4 Months 1955 F IF T H D IS T R IC T IN D E X E S Seasonally Adjusted: 1947-1949 = 100 + 5 Sales, 4 Mos. ending Apr. 30, ’55, vs 4 Mos. ending Apr. 30, ’54 ___________________ + 10 Outstanding Orders April 1954 Maryland Baltimore ____ $ Cumberland .... Frederick ____ Hagerstown .... Salisbury ____ District Totals ____$30,536,667 N A Not Available. Source: Bureau of the Census, Department of Commerce. Sales, Apr. ’55 vs Apr. ’54 .. Da t a 9 New passenger car registra tion* ----------------- -------- ----- Bank debits ------------ - ---------Bituminous coal production* ..... Construction contracts -----Business failures— number .. €igarette production ------- Cotton spindle hours -----------Department store sales --------Electric power production Manufacturing employment* . . FTirniture store sales ---------Life insurance sales -------------- 167 97 279 183 117 129 119 181 * Not seasonally adjusted. Back figures available on request. r Revised. i 12 y Mar. 1955 185 166 84 220 224 99 116 128 179 106 112 194 Apr. 1954 149 155 68 150 262 93r 108 122 165 104 97 160r % Chg.— Latest Mo. Yr. Prev. Mo. Ago. +28 + 1 + 15 +27 — 18 + 3 + 1 + 1 — 2 0 + 6 — 7 +33 + 8 + 43 + 86 — 30 + 4 + 8 + 6 + 7 + 1 +23 + 13