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nnvrnu m review \ /, R ic h m on d® ^ y FEDERAL RESERVE BANK OF RICHMOND RICHM ON D 13, VIRGINIA MAY 31, 194B Business Conditions M P L O Y M E N T levels in the Fifth District, after allowance for seasonal fluctuations and strikes, have shown little aggregate change since January. Tobacco rehandling has declined seasonally, leaving a considerable unemployment in numerous areas that will largely remain until a new crop is again being processed. Food industries continued to employ fewer people in March where ordinarily February is the seasonal low point, Construction employment fell more than seasonally to February and had not moved back in stride until May. The volume of construction work under way is sufficient to expand construction employment to a new seasonal peak this summer, but this employment will not be as broadly distributed throughout the District this year as last year. Poor logging conditions lowered lumber employment in the Carolinas, but did not materially affect workers in other states. Furniture employment has leveled off around 17 thousand in Virginia but had been edging upward to over 25 thousand in North Carolina through March. However, some plants manufacturing case goods at the low end of the price scale are reported to be working on a three-day week basis because of a lack of demand resulting from too little price spread between low-end and quality products. It is said these firms will bring out a new line o f products in July priced at greater different tials with respect to the quality goods. Employment at shipyards in Maryland has risen sharply since the termination of a strike last summer. The current level, however, has not reached that of the spring of 1947, but prospects in the industry are conducive of further improvement. Virginia shipyard employment had been inching upward until March when a small lay off was made. Larger cut-backs had been anticipated for some time, but it is now believed that increased contract awards will probably result in some expansion. Knitting mills and apparel concerns increased employment levels through the spring. Activity should level off until mid-year when some cut-back will probably be experienced unless a marked improvement occurs soon in sales, particularly of knitted goods. Cotton textile employment has shown little change since November in North and South Carolina, but showed some reduction in Virginia in recent months where there is normally a loss o f workers back to farm activities at this time of year. Cotton textile employment both in spinning and weaving mills will be reduced substantially by vacations in the first and second weeks of July. Un- E less there is a marked improvement in the rate of purchase of goods and yarns at present price levels, reduced employment levels will continue beyond the second week of July since few mills are favorably inclined toward inventory accumulation and since costs o f neither labor nor cotton are likely to decline beforehand enough to lower prices sufficiently to make a market for the full output of goods and yarns. It is possible that a demand for export or military purchases may appear to ward off reduced employment in the industry but there are few indications as yet that give support to these potentialities, Employment levels in the paper industry, which held on an even keel through most of 1947, have weakened somewhat this spring despite a continued strong demand for all paper products. This is probably a result of increased labor productivity due to technological improvements. The growth in rayon production last year and up to now has been due mainly to increased labor productivity resulting from technological improvements since very little change in employment in this industry has occurred in this period. Industrial chemicals in West Virginia show a slow but gradual increase in employment levels, while these industries in Virgina show a stable level for nearly a year. Bituminous coal production of the District in April improved from the March level on a seasonally adjusted basis, but still remained 24 per cent below the same month last year. The coal strike did not have any noticeable adverse effect on sales of West Virginia reporting department stores. These have shown a steady rising trend after seasonal correction since January, April sales being at an all time high level for these stores, Cotton consumption in the Fifth District rose 2 per C in April over March on a seasonally adjusted basis, ent but the April level was 2 per cent below that month last year. Hours run by the spindles in the District in April, however, showed a gain of 6 per cent over that last year. Orders on hand for both spinners and weavers are running down, and thus far there has been little disposition of consumers to enter into new purchase agreements in sufficient volume to maintain current production levels. There does not appear to be much question of the maintenance of industrial consumption of cotton textiles, except for bags and tire fabrics, but in the apparel uses the physical quantity of sales at retail is receding and prospects do not justify the expectation of offsets to this reduction, when the loss of demand previously in evi- FEDERAL RESERVE BANK OF RICHMOND dence for building inventories and lower exports is taken into account. Trade levels in the District improved on all fronts in April compared with March on seasonally adjusted fig ures. Retail furniture sales rose 2 per cent; department store sales rose 1 per cent and all lines of wholesale trade, except dry goods, electrical goods and automotive sup plies, rose from 1 to 14 per cent. Wholesale dry goods sales declined 7 per cent and wholesale automotive sup plies declined 1 per cent while wholesale electrical goods held at the same level as in March. As the situation ap pears at this time, the trend of furniture store sales is probably downward, or flat at best; the trend of depart ment store sales is flat; trends of wholesale sales are variable, with drugs and paper and dry goods flat, hard ware, electrical goods, automotive and industrial sup plies rising, groceries and tobacco falling. Department store inventories in April showed no change from the peak level of March on a seasonally ad justed basis. Relative to the 1935-39 base period inven tories in April were up 240 per cent; April sales relative to the same base were up 221 per cent. This inventory level is too high, according to opinions of several store managers, and efforts are being made to reduce it. In fact it will be reduced in the next few months, if sales hold up reasonably well, for outstanding orders at the end of April declined 21 per cent from March, 53 per cent from January and were at the lowest level since 1942. Even so outstanding orders at the end of April were still 12 per cent larger than sales in April. Since there is no upward seasonal move in sales from April to May and June, it is probable that further reductions in orders would be necessary to reduce the inventory level. In April credit sales in 19 department stores of this District accounted for 56.2 per cent of total sales. A year ago credit sales accounted for 52.2 per cent of total sales. Installment sales accounted for 8.3 per cent of sales of these stores in April 1948 and 6.5 per cent in April 1947. Other credit sales accounted for 47.9 per cent of total sales in April 1948 and 45.7 per cent in April 1947. Collections during April 1948 on install ment receivables outstanding at the beginning of the month amounted to 22.5 per cent, and 24.8 per cent in April 1947. Collections during April 1948 on other re ceivables outstanding at the beginning of the month amounted to 44.8 per cent, and in April 1947, 45.1 per cent. It is apparent that as far as department stores are concerned there is no cause for alarm over the credit situation despite the slight lengthening of repayment periods. It is probably true, however, that without the enlarged credit sales, the total level of sales would not be as high as they are at the present time. Continued on page 7 BUSINESS IN D E X E S— FIFTH FEDERAL RESERVE DISTRICT AVERAGE DAILY 1935-39 = 100—SEASONALLY ADJUSTED Automobile Registration* ............................................ Bituminous Coal Production*...................................... Building Contracts Awarded...................................... Building Permits Issued................................................ Business Failures—No................................................... Cigarette Production .................................................... Department Store Sales................................................ Department Store Stocks.............................................. Electric Power Production............................................ Employment—Mfg. Industries* ................................ Furniture Orders .......................................................... Furniture Unfilled Orders............................................ Gasoline Consumption .................................................. Life Insurance Sales...................................................... Wholesale Trade: Automotive Supplies** ............................................ Drugs ............................................................................ Dry Goods .............................................................—Electrical Goods** .................................................. Groceries ...............................................................-..... Hardware ................................................................... Industrial Supplies** ................................................ Paper and Its Products**........................................ Tobacco and Its Products**.................................... Building Contracts Awarded: Apartments and Hotels............................................ Commercial Construction Contracts....................... Manufacturing Construction Contracts................ One and Two Family Houses................................ Public Works and Utilities.................................... . Residential Construction Contracts....................... ♦Not seasonally adjusted **1938-41=100 Apr. 1948 313 102 331 336 40 283p 156 321 340 313 311 1,211 271 261 339 269 171 83 262 142 358 167 99 421 12] Mar. 1948 140 320 91 326r 274 61 248r 153 317 340 265 135 320 307 1,001 265r 246 341 265 184 83 247 140 317 155 87 173 304 498 378 316 290 Feb. 1948 107 313 159 335 236 28 228r 151 306 339 252 134 415 348 912 246r 159 231 286 259 159 88 246 123 265 160 96 681 350 664 347 225 446 Apr. 1947 136 270 134 296 198 17 252 159 299 302 235 133 365 279 1,196 239 173 246 308 268 167 69 278 114 317 200 121 673 386 348 264 336 352 Apr. 1948 from Mar. 48 Apr. 47 — 2 + 12 + 2 + 23 — 34 + 14 + 2 + 1 0 + 16 — 24 + 12 + 70 +135 + 12 — 2 + 7 + 13 — 2 + 1 + 21 + 2 + 6 — 1 + 2 — 7 0 + 6 + 1 + 13 + B + 14 — 14 + 11 + 1 + 13 + 6 + io 0 4" 2 + 20 — 6 + 25 + 13 — 17 — 18 + 45 + '20 MONTHLY REVIEW MAY 1948 Construction The dollar volume of new on-site construction erected in the United States in 1947 of $12.8 billion established an all-time high record for any peacetime year. It was 112 per cent higher than in 1939, 28 per cent ahead of 1946, and came close to equaling the $13.4 billion peak wartime level of 1942. In the first four months of 1948 the total ran ahead of the same months of 1947 by 32 per cent. There was an abnormally high expenditure in 1947 for maintenance and repair of $7 billion which brought the total outlay on construction to $19.9 billion which was a new all-time high record by a wide margin. Outlays for new construction, maintenance and repair for the United States from 1915 to 1947 are shown in the accompanying chart. During this period a substantial increase occurred in construction costs and in the number of workers em ployed in contract construction. In 1939 there were 1,150,000 workers employed in contract construction in the nation; in 1947 there were 1,734,000 or 54 per cent more than in 1939. The Department of Commerce’s composite building cost index in 1947 was 94 per cent higher than in 1939. The above indicates the general nature of the problems confronting the construction industry. First, there is the unprecedented high demand for new construction which, together with an abnormal demand for main tenance and repair, is taxing severely the capacity of the industry. Second, the level of building costs is nearly double pre-war. This tends to raise prices beyond the ability to pay of many people and to restrict the market. Third, the large increase in the number o f construction workers raises many difficult problems regarding labor relations, the training of new workers, and the main tenance of labor efficiency. In light of the changes just mentioned it might be in order to make some comment on the general relationship of construction and employment levels in the entire economy as well as on some of the financial consequences of the currently high-valued new construction. Construction and Economic Activity The value of construction considered only for its con tribution to the production of goods and services does not add to the total in any substantial way. Its relative importance is less now than it was in the previous era of prosperity in the 1920 decade. It was probably of small er importance in 1929 than it was in any of the four pre ceding years though documentary evidence on this point is not precise. In 1947 construction put in place account ed for only 5 per cent of the gross national product; in 1929 it accounted for 8 per cent and in 1939, 4 per cent. The importance of construction to the whole economy, however, has much broader significance than its small contribution to the gross national product. Construc tion is one of the most important components of invest ment expenditures which, together with consumption outlays, determines the levels of income and employ ment. Thus it may be pointed out that if in any given time period investment exceeds savings there will be a tendency for income and employment to rise. Converse ly, if savings exceed investment there is a tendency for income and employment to fall. Also it may be pointed out that construction expenditure, like other capital in vestment, may have a multiple effect on economic activity considerably greater than its original incidence. For example, the increase in consumption outlay, consequent to the original expenditure on construction, may induce further increases in investment and a widespread ex pansion of economic activity. With more specific refer ence to the construction industry itself, employment levels in the industries supplying its materials are widely affected by construction expenditures, and transporta tion is more profitable when these expenditures are ris ing or are maintained at high levels. A clear illustration of the direct multiple effect of the construction expendi tures without vouching for the accuracy of the multiple, is the industry’s saying that for each man on the scaftold there are nine men backing him up. Financial Consequences The construction industry played an important part in the inflationary developments in 1947 because of a mort gage credit situation that supported the volume of de mand for homes even after prices had risen well beyond a stage that under normal financing conditions would have found no buyers. Back of this financial support to the housing market were the liberal guarantees of the Federal Housing Administration under “ Title Six,” and the G.I. loan guarantee of half of the appraised value— or a maximum guarantee of $4,000. These loans per mitted the purchase of houses in which the buyers had little or no equity and will have very little for years. Then, too, in many places it is still cheaper to pay the debt service charges required in home ownership than it is to pay current rental. FEDERAL RESERVE BANK OF RICHMOND It was true there were a great many people who did not have the kind or amount of dwelling space they de sired in 1947 and were, therefore, in the market either to purchase or rent. A housing shortage, however, is not an absolute condition but a relative one; it is relative to the effective demand for dwelling space. Rent ceil ings have permitted occupancy of space by some who under rising rents probably would have doubled up as in former years. Liberal mortgage credit for housing has created a relatively much larger effective demand than prevailed in former years. Actually the number of housing units occupied relative to the population in 1947 was about the same as in 1940. Current Popula tion Reports, “ Housing” series p-70, No. 1, shows in April, 1947 there were 39,016,000 occupied dwelling units in the United States. There were 3.68 persons per occupied dwelling April, 1947 which compares with 3.78 persons per occupied dwelling in April, 1940. This latter figure is based on 34,855,000 occupied dwelling units shown in the 1940 Housing Census Volume 11, Part 1, U. S. Summary Table II, p-3 and the official population figure of 131,699,275. This, of course, does not take into account increased housing needs resulting from geographical shifts in the population, but it does give some support to the proposition that the demand is the factor that is most out of balance, and this is in part the result of easy credit. Liberal credit has created a short-run demand that has been well beyond the construction industry's ability to supply, and nothing is accomplished by maintaining a mortgage credit condition that gives rise to a demand in excess of the current output of the construction industry. As a consequence the price of housing has risen abnor mally relative to prices in general and has placed a higher than desirable burden on those who must in the future pay debts incurred in purchasing housing at present prices. In numerous cases this burden of debt payment could be carried only under conditions of further in creases in personal income. In many instances houses have been purchased where the buyer has very little equity in the property. Also it appears that many buyers will not have an equity for many years sufficient to dis courage them from defaulting under slight adversity. The inordinately large demands for construction rela tive to the industry’s ability to produce, resulting in prices paid for housing well above a level in keeping with a good number of purchasers’ incomes, have not only created an abnormal debt service relative to income, but have drawn heavily on many individuals’ liquid or in vested savings. Such a condition might result in a large number of defaults with only small reductions in the employment level, and this would thereby intensify and prolong any readjustment problem. There are two satisfactory ways of dealing with the construction problem as it exists today. First, changes could be made in building codes and in labor practices that would work toward increasing the supply of con struction relative to the demand, and, second, the demand could be reduced to a point which would be equal to the going supply by restricting housing credit. The problem of moderninzing building codes is one that has plagued the industry for a long time, and not too much can be expected along this line. As a practical problem a re striction in the volume of credit made available for pur chasing housing would be about the only approach that would offer a reasonable chance of success in balancing the demand for housing with the supply. “ Title Six” expired on April 30th, and if not reenacted will probably have the effect of reducing demand through more strin gent credit terms. Fifth District Construction Construction in the Fifth Federal Reserve District did not decline proportionately to total construction in the United States during the depression years of the 1930’s, and as a consequence of this and a larger propor tion of war construction, the District had maintained a rising percentage of the national new construction total all the way from 1930 to the peak year of war construc tion in 1942. Since 1942, however, the Fifth District contribution to the national total has fallen steadily to a lower percentage in 1947 than in 1939 as the table of figures estimated by the Department of Commerce shows: T O T A L N E W C O N STR U C TIO N (M illion dollars) % U nited States 1939 1940 1941 1942 1943 1944 1945 1946 1947 F ifth D istrict* o f U . S. 6,062 6,807 10,308 13,353 7,734 4,073 4,595 10,007 12,825 598 674 1,111 1,462 800 405 402 836 1,048 9.5 9.9 10.8 10.9 10.3 9.9 8.8 8.4 8.2 ♦Includes entire state o f W est V irgin ia The Department of Commerce estimates of total con struction put in place do not go back farther than 1939 on a state basis, but the Fifth District’s proportion of the contract awards for 37 states compiled by the F. W . Dodge Corporation shows a similar rise in importance of the District in this total during the depression years of the 1930’s. There were several causes for the rising proportion of Fifth District construction in the national total. First, a large amount of government building was effected in the District of Columbia. Federal govern ment employment there was notably increased, and this in turn gave rise to demands for residential construction in the Washington area. Second, the employment level in the important consumer goods industries of the Fifth District did not fall as much as the employment level throughout the nation. Third, the early efforts at re covery, concentrated as they were in raising farm income and in creating purchasing power at the consumer level, because of the importance of consumer goods industries in the Fifth District resulted in cyclical recovery in the District better than resulted nationally. Fourth, in the District, even in the depression, there was some expan sion o f manufacturing industries, particularly the rayon industry. This development was contrary to the na tional trend. F41 MONTHLY REVIEW As previously mentioned Department of Commerce estimates of total new construction are not available on a state basis prior to 1939, but the large gain in the Fifth District’s importance in construction activity compared with the late years of the 1920’s can be shown in the construction contract awards compiled by the F. W. Dodge Corporation, and are graphically presented for both residential awards and total awards below the next paragraph. It should be noted that residential construction con tract awards in the Fifth District had again nearly reached the 1928 pre-depression peak by 1939, whereas the 37 state residential contract awards did not regain that level until 1946. O f the total construction contract awards, those in the Fifth District exceeded the 1928 peak by 1940 whereas the 37 state total contract awards did not exceed the 1928 level until 1942. Furthermore the 1942 contract awards, (the all time peak in both the District and nation) exceeded the 1928 level by 140 per cent in the Fifth District, and exceeded the same level by only 23 per cent in the 37 states. MAY 1948 On a per capita basis the value of new construction in the Fifth District had been well below that of the United States prior to 1939. From 1939 through 1944 the value of new construction per capita ran moderately higher in the Fifth District than in the country as a whole, but since 1944 the District level has been moderately lower than the national level. This latter trend again is in keeping with the District’s relative economic position in the nation, as reflected by employment, retail trade, check payments, and income. The per capita value of con struction in both District and nation are as follow s: V A L U E OF CO N STR U C TIO N P E R C A P IT A (D ollars) U . S. 91.15 95.22 93.49 89.63 81.41 65.48 48.21 26.11 17.70 21.81 24.44 36.81 41.20 38.65 46.32 51.58 77.39 99.16 56.66 29.50 32.92 70.86 90.8 I f 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 F ifth D istrict* 47.15 47.68 47.18 51.44 47.71 39.34 26.99 17.06 11.19 19.61 21.58 26.38 32.90 33.53 46.72 53.31 85.37 109.51 60.19 30.60 31.05 62.54 78.40f ♦Figures fo r 1925-1938 based on D istrict’ s percentage o f construction contract awards, adjusted to com parability with subsequent figures. fB ased on 1946 population. There was a considerable expansion in expenditures for factories in the Fifth District in 1946, but the amount dropped substantially in 1947. There is some evidence of a little improvement from 1947 levels in the early months of 1948. The proportion of construction con tract awards for factory buildings in the Fifth District relative to the 37 state total was 7.3 per cent in 1945, 11.0 per cent in 1946, and 7.2 per cent in 1947. There is, therefore, no tendency indicated thus far of a relative improvement in manufacturing facilities that would point to further employment and income growth in the Fifth District relative to the nation. Residential building in the Fifth District is still the dominating factor in the construction volume, but in 1947 it fell to 43 per cent of the total contract awards compared with 46 per cent in 1946. Non-residential building awards dropped from 33 per cent of the total in 1946 to 28 per cent in 1947. Public works and utility contract awards rose both in dollar amount and in per centage of total from 1946 to 1947 as the table shows: C O N STR U C TIO N C O N T RA C T A W A R D S — FIFTH D ISTRIC T The construction level in the Fifth District during the depression of the 1930’s and in the early war years was relatively better than the national construction level and was in keeping with the District’s increasing propor tion of the national income in this period. In fact the District's increased proportion of national construction in the above period was in part responsible for the rela tive increase in income payments. M illion Dollars Per cent o f Total 1945 N on-residential buildings Residential buildings P ublic works & utilities T otal 1946 1947 1945 1946 196 68 125 309 429 198 249 362 237 50 18 32 33 46 21 1947 29 43 28 389 936 848 100 100 100 On a seasonally adjusted basis residential contract awards in the Fifth District weakened substantially in FEDERAL RESERVE BANK OF RICHMOND cept present prices, but sales resistance is increas ing— mortgage money rapidly becoming tighter; shortage of mortgage money for G. I. loans. Area 4. Prospects for residential construction no better than a year ago— Some materials bottleneck still exists—-Buyers inclined to wait for lower prices — no demand for public housing— no shortage of mortgage credit. Area 5. Prospects for residential building not as good as last year— Demand for old houses has weakened and prices of these properties have de clined— Demand for rental properties is very strong — Small 4 and 5 room houses rent for $75-$90 a month— Apartment rentals are high running from $75-$90 for small apartments and these are beyond the reach of those who made no more than $2,500 a year.— An F H A survey indicates a demand for 4,500 additional houses, but that is believed to be an overstatement of needs. March, (our latest figures) after having risen in Feb ruary to the best level since January 1947. These, how ever, will probably rise from the March levels as ex cerpts from a spot survey shown later on indicate. Total contract awards turned down moderately in March and give thus far the impression of a leveling off process. However, these tendencies remain to be confirmed in future months. Current trends can be seen in the two charts which follow: F IFT H D IST R IC T R E S ID E N T IA L CONTRACT AWARDS 193 5-1 939 = 100, S E A S ADJ 50 0 400 300 200 Area 6. Outlook no better than a year ago— Buyers expect prices of old and new houses to come down, prices of old homes already down 20 per cent— No demand here for public housing— Good mortgages readily saleable at slightly increased rates, G. I /s and F H A ’s hard to dispose of, considerable tight ening in other than good mortgages. 100 0 1939 1941 1943 1945 1947 Area 7. Residential construction outlook better than last spring— Construction bottlenecks still exist, but situation improving— Expect prices of houses to come down— no demand for public housing— no shortage of mortgage money. Probably the most illuminating evidence regarding the residential construction situation at this time are excerpts from a spot survey made in eleven cities of the Fifth District late in April as follow s: Area 1. Prospects not as good as a year ago— Pros pective buyers accept present home prices out of necessity— Three-fourths of the purchasers say they are paying more than house is worth, but believe buying now is better than renting and waiting de velopments.— No demand here for public housing— no shortage of mortgage credit, but there is a tight ening of requirements, more selectivity better cred it risks, closer inspections and appraisals on the part o f all lenders. Area 2. Residential construction outlook better than a year ago.— Construction impediments chiefly in skilled labor.— Enough buyers at present prices to keep building at high level— no demand for public housing— Some signs of shortage of mortgage mon ey, particularly for G. I. loans. Area 3. Outlook no better than last year— no serious bottlenecks in evidence now— Buyers forced to ac~ [6] Area 8. Outlook for residential building better than a year ago.— Buyers are expecting prices to fall— no shortage of mortgage money. Area 9. Building outlook better than last year.— Some material shortages still present— Divided opinion on home price outlook— no demand for public housing— no shortage of mortgage money. Area 10. Residential prospects relative to last spring equally as good in small residence field— Large vol ume of Title Six projects under construction, but these are still short of requirements. Some bottle necks now, expected to increase with seasonal rise in activity— Labor situation easier but wage rates have not dropped.— Very much buyer resistance as well as inability to finance in comparison with last year.— Expectations are for some reduction in prices, but not much— Old houses selling at lower prices and both old and new houses moving slower— more attention being given by buyers to quality, marginal of poorly constructed houses more diffi cult to sell.— No demand for public housing— 603 and 608 F H A projects beginning to meet de mand— Mortgage money short at 4 per cent for AV* per cent title II loans, tightening up on other mort gage loans also, building and loan companies pretty well loaned up, borrowers looking more to banks for mortgage credit, banks are lending on a more conservative basis than heretofore. MONTHLY REVIEW MAY 1948 Area 11. Building prospects no better than a year ago for residential construction— many individuals priced out of the market— Large multiple unit pro jects absorbing supply of materials and skilled la bor, making home building by individuals difficult and expensive.— Some materials shortages present; likely to get worse later on— Buyers expect ownerbuilt houses to increase and prices of old houses to rise slightly, $7,500 type house is now in adequate supply— no pressure for public housing— no short age of mortgage money at fair rates of return to investor. The general import of these comments is that the out look for the volume of houses built in the spring and summer of 1948 is about the same as in that period of 1947, with some cities better and some worse. Material shortages exist, but are not indicated to materially im pede construction progress. Consumer resistance is in dicated or implied in most areas, but sufficient demand exists to keep the industry operating at capacity level for sometime yet. No demands or pressures exist for pub licly owned housing. Mortgage money is available in all areas, but weaker risks are no longer financed. Interest rates have firmed, and appraisals have tightened. PRINCIPAL A S S E T S AND L I A B I L I T I E S FIFTH DIS TR ICT M E M B E R BANKS AVERAGE DAILY TOTAL DEPOSITS* OF MEMBER BANKS Last half of Mar. Last half of Apr. % of % oi $ thousands U.S. $ thousands U.S. Maryland 996,366 .94 989,275 .93 Reserve city banks 630,916 .60 628,437 .59 Country banks 365,450 .34 360,838 .34 District of Columbia 917,534 .87 897,779 .85 Reserve city banks .85 895,905 876,636 .83 Country banks 21,629 .02 .02 21,143 Virginia 1,266,977 1.20 1,259,215 1.19 Reserve city banks 288,737 .27 295,379 .28 Country banks 978,240 .93 .91 963,836 West Virginia 590,631 .56 584,559 .55 North Carolina 833,509 .79 .78 824,426 393,017 .37 387,843 .37 Reserve city banks Country banks 440,492 .42 .41 436,583 .41 South Carolina 432,335 .40 428,600 5,037,352 4.76 4,983,854 4.70 Fifth District 105,965 100.0 United States (miilions) 105,774 100.0 ’•'Excluding interbank demand deposits 1941 1 9 43 1945 1947 Business Conditions Continued from page 2 With prices of hosiery and cotton textiles generally soft as a result of consumer resistance it will be interest ing to note the degree of success attained by labor in securing higher wage rates. Without an increase in wage rates, even with full employment in manufacturing, the income of the District will probably be downward this year as a result o f a decline in farm income and its radiated regional effects. FEDERAL RESERVE BANK OF RICHMOND ITEM S F E D E R A L R E S E R V E B A N K OP RICHM ON D (A ll Figures in Thousands) M ay 12, Chg. in A m t. From 1948 4-14-48 5-14-47 DEBITS TO IN D IV ID U A L ACCOU N TS (000 om itted) Total Gold Reserves...............................$1,064,036 Other Reserves ..................................... 18,160 T otal Reserves ................................... 1,082,196 Bills Discounted ................................... 12,623 Industrial Advances ............................ 49-f* Gov. Securities, Total.......................... 1,321,511 407,928 Bonds ........................... ........................ Notes .................................................... 127,083 Certificates ........................................ 270,539 Bills ,....................................................... 515,981 Total Bills & Securities...................... 1,334,183 — 20,565 + 58,937 — 2,017 + 2,564 — 22,582 + 61,501 — 91 — 3,996 3 + 4 9 — 15,904 — 78,209 + 28,975 +362,425 + 1,965 +105,433 — 11,499 — 80,967 — 35,345 — 465,100 — 15,992 — 82,156 U ncollected Items ............................... Other Assets ......................................... Total Assets ....................................... 237,753 25,070 2,679,202 — 21,390 — 2,566 — 62,530 — 288 + 10,113 — 10,830 Federal Reserve Notes in C ir........... 1,614,319 823,871 Deposits, Total ....................................... Members’ Reserves ........................... 724,025 U. S. Treas. Gen. A c c t................... 80,287 Foreign ............................................... 16,890 Other Deposits .................................. 2,669 Def. A vailability Item s........................ 203,308 Other Liabilities ................................... 897 Capital A ccounts ................................. 36,807 Total Liabilities ............................... 2,679,202 — 13,343 — 277 + 2,152 + 5,231 — 3,332 — 4,328 — 47,204 — 94 — 1,612 — 62,530 — + + + — + — + + — 49,331 40,659 5,527 45,338 10,583 377 4,409 167 2,084 10,830 41 R E PO R TIN G M E M B E R B A N K S — 5th D ISTRIC T (A ll Figures in Thousands) M ay 12, Chg. in A m t. From ITEM S 1948 4-14-48 5-14-47 Total Loans .................................. Bus. & A g r i............................... Real Estate Loans................... A ll Other Loans........................ Total Security H oldin gs............. U. S. Treasury Bills ............... U. S. Treasury Certificates ... U. S. Treasury Notes ............. U . S. Gov. Bonds ....................... Other Bonds, Stocks & Sec.... Cash Items in Process o f Col.. Due from B anks........................... Currency & C oin......................... Reserve with F. R . Bank......... Other Assets ................................ Deposits o f Individuals ................. Deposits o f U. S. G ov.................... Deposits o f State & Local Gov.. Deposits o f Banks ......................... Certified & Officers’ Checks......... Total Tim e Deposits......................... Deposits o f Individuals ................. Other Tim e Deposits..... ............... Liabilities fo r B orrow ed Money... A ll Other Liabilities......................... Capital A ccounts .............................. Total Liabilities ................................ $ 820,151 388,981 184,489 246,681 1,711,753 54,393 181,834 75,555 1,276,095 123,876 239,181 165,454* 67,929 480,010 57,454 3,541,932 2,698,830 1,997,291 71,847 214,808 366,291* 48,593 604,518 587,155 17,363 2,000 21,758 214,826 3,541,932 ____ — + + + + + — — — + + + + — 3,393 16,748 4,193 9,162 1,627 4,544 11,776 6,332 6,296 2,065 13,685 480 2,647 673 3,651 8,000 12,092 2,185 3,941 + 13,519 — 6,793 8,891 + — 581 — 82 — 499 — 1,000 4,937 + 736 + 8,000 — ____ — + 125,867 + 53,740 + 45,522 + 26,605 146,956 + ' 34,099 83,467 — 15,334 — 84,895 2,641 + + 36,000 — 2,009 6,037 + — 2,883 6,002 + + 22,058 + + + + ____ — — — + + + 35,161 2,185 344 25,210 1,444 9,554 13,049 10,372 2,677 11,610 1,258 10,298 22,058 *N et Figures, reciprocal balances being eliminated. STATE S C ON STR U C TIO N C O N TRA C TS A W A R D E D % Change March from 1948 M arch 1947 3 Mos. ’ 48 M aryland ...................... $34,640,000 Dist. o f Columbia 12,927,000 V irgin ia .................. ...... 17,531,000 3,782,000 W est V irgin ia ............ N orth Carolina ......... 13,203,000 South C arolina ............ .. 6,616,000 F ifth D istrict ..........$88,699,000 S ource: F. W . Dodge Corporation M ONTHS 17 139 10 39 55 46 20 $ 72,881,000 27,358,000 46,166,000 28,743,000 30,920,000 21,103,000 $227,171,000 17 29 7 66 28 404 477 277 1,654 971 $ 294,000 559,000 358,000 1, 112,000 1,606,000 District o f Columbia W ashington ............... Maryland Baltim ore .................... Cumberland ................. Frederick ..................... H agerstown ................. North Carolina Asheville ....................... Charlotte ..................... Durham ....................... Greensboro ................... + + — + — + + % Change from A p ril 1947 $ 732,797 + 19 4 Mos. 1948 % Change from 4 Mos. *47 $ 2,856,645 + 14 971,029 20,360 19,760 26,649 + — + + 15 2 10 9 3,802,159 78,618 72,057 103,702 46,938 227,747 96,507 74,182 11,253 117,185 33,948 13,928 123,443 + 13 + 20 +14 + 30 + 15 + 36 + 4 + 9 + 17 188,578 906,452 358,285 295,473 46,324 401,501 133,387 54,147 477,056 + 7 + 14 0 + 22 — 7 + 6 + 2 — 5 + 5 51,385 91,715 78,971 48,701 Raleigh ......................... .... W ilm ington ................. W ilson .................... W inston-Salem ......... South Carolina Charleston ................... Columbia ..................... Greenville ................... Spartanburg ............... V irginia Charlottesville ............ Danville .................. Lynchburg ................... N ew port News ........... N orfolk ......................... Portsmouth ................. Richm ond ................... Roanoke ....................... . . W est V irginia Bluefield ....................... Charleston ................... C larksburg ................... H untington ................. Parkersburg ............... + 9 +16 + 26 + 28 212,075 363,456 313,789 191,959 + 9 + 11 + 17 + 21 + — + + 10 2 4 8 21,268 23,923 37,610 26,942 169,534 19,924 444,112 83,100 + + + — + + + + 5 8 15 1 9 10 15 17 85,728 102,549 150,985 122,866 688,973 78,204 1,720,700 326,790 33,692 117,923 28,732 51,918 26,532 + 8 + 10 + 9 + 9 + 11 160,142 510,797 122,671 223,274 101,771 + 22 + 13 + 19 +20 + 7 District Totals ............... .. $3,871,708 + 16 $15,251,113 + 11 + — + + + + + + 5 4 13 10 13 8 10 15 COTTON CO N SU M PT IO N A N D ON H A N D — B A L E S A p ril A p ril 1948 1947 Fifth D istrict S tates: Cotton consum ed .................... 420,429 430,183 Cotton G rowing S tates: Cotton consumed .................... 731,266 772,399 Cotton on hand A p ril 30 in consum ing establishments.. 1,809,879 1,790,194 storage and compresses...... 2,793,457 2,441,948 United S tates: Cotton consumed ................... 829,730 882,390 Cotton on hand A p ril 30 in consum ing establishments.. 2,185,881 2,504,402 storage and com presses..... 2,860,277 2,117,197 Spindles active, U . S ................. 21,694,000 21,808,000 Source: Departm ent o f Commerce COTTON C O N SU M PTIO N — FIF T H A ug. 1 to A p ril 30 1948 1947 3,617,225 3,797,862 6,286,773 6,841,436 7,131,046 7,810,484 D IS T R IC T (In Bales) M ONTHS N. Carolina S. Carolina V irgin ia A pril 1948.......................... 226,307 175,225 18,897 March 1948........................ 239,732 181,265 20,149 A pril 1947.......................... 228,298 182,066 19,819 4 Months 1948.................. 692,591 907,428 75,237 4 Months 1947.................. 921,337 714,936 77,427 S ource: Departm ent o f Commerce. % Change from 3 Mos. ’ 47 D istrict 420,429 441,146 430,183 1,675,256 1,713,700 PR ICE S OF U N FIN IS H E D COTTON T E X T IL E S A p ril 1948 22 41 8 90 2 69 21 M arch 1948 A p ril 1947 83.42 102.71 72.08 79.86 70.42 97.61 63.27 Average, COM M ERCIAL F A IL U R E S Number o f Failures Total Liabilities District U.S. District U.S. A pril 1948.......... .............. M arch 1948........ .............. A p ril 1947 .............. 4 Months 1948 .............. 4 Months 1947................. S ource: Dun & Bradstreet + + — — + + + A pril 1948 87.11 110.00 77.86 79.86 70.83 97.61 63.25 86.15 110.41 79.81 79.86 65.03 97.61 62.54 N o te : The above figures are those fo r the approxim ate quantities o f cloth obtainable from a pound o f cotton with adjustm ents fo r salable waste. $15,296,000 17,481,000 16,080,000 71,361,000 59,500,000 D E P O S ITS IN M UTUAL S A V IN G S BANKS 8 B altim ore Banks A p ril 30, 1948 Total Deposits r8 1 ............$393,221,652 M arch 31, 1948 A p ril 30, 1947 $392,783,344 $386,575,159 MONTHLY REVIEW MAY 1948 B U ILD IN G PE R M IT W H O L E S A L E T R A D E , 191 FIRM S FIGU RES Maryland Baltim ore ...................................................................... $11,848,925 Cumberland ................................................................... 68,775 Frederick ......................................................................... 299,850 H agerstown .................................................................. 201,880 Salisbury ....................................................................... 338,347 V irginia Danville ........................................................................... 1,218,062 Lynchburg .................................................................... 399,382 N orfolk ........................................................................... 1,202,330 Petersburg .................................................................... 110,600 Portsm outh .................................................................. 160,460 R ichm ond ....................................................................... 1,313,932 Roanoke ......................................................................... 1,271,040 W est V irginia Charleston .................................................................... 518,631 Clarksburg .................................................................... 141,910 H untington .................................................................. 446,141 N orth Carolina A sheville ......................................................................... 256,594 Charlotte ......................................................................... 791,219 Durham ......................................................................... 1,330,102 Greensboro ..................................- ................................ 537,090 H igh Point .................................................................... 200,030 Raleigh ............................................................................. 347,907 R ocky M ount ................................................................ 101,650 Salisbury ......................................................................... 156,765 W inston-Salem ............................................................ 580,427 South Carolina Charleston ..................................................................... 281,378 Columbia ...................................................................... 387,935 Greenville ....................................................................... 635,350 Spartanburg .................................................................. 104,229 District o f Columbia W ashington .................................................................. 5,012,119 $ 3,331,275 59,075 53,915 91,025 129,247 522,330 409,225 597,295 598,070 65,702 795,187 389,521 1,091,882 177,255 523,710 166,271 557,424 401,650 1,591,603 193,381 236,525 177,100 54,285 297,804 101,066 348,090 158,560 165,207 4,563,590 D istrict Totals ............................................................ $30,263,060 4 Months .........................................................................$91,043,849 $17,847,269 $59,295,203 S O FT C O A L PR O D U C TIO N IN T H O U SAN D S OF TON S A p ril 1948 REG ION S W est V irgin ia V irgin ia ................... M aryland ................. F ifth D istrict , U nited States , , % in D istrict A p ril 1947 % Chg. 4 Mos. 1948 4 Mos. 1947 % Chg. 9,217 1,170 151 10,538 34,631 30.4 11,878 1,226 135 13,239 41,225 32.1 — 22 — 5 + 12 — 20 — 16 46,811 5,398 534 52,743 174,138 30.3 56,442 6,179 751 63,372 207,182 30.6 — — — — — TOBACCO 17 13 29 17 16 % Change from A p ril 1947 Sm oking & Chewing tobacco (Thousands o f lb s .).......... 17,950 Cigarettes (Thousands) .... 30,036,168 Cigars (Thousands) ............ 449,504 Snuff (Thousands o f lbs.) 3,871 + 10 + 9 + 8 + 12 LIN ES A uto supplies (4 )* .............. E lectrical goods ( 8) * ........ H ardware (9 )* .................. Industrial supplies (4)*.... Drugs & sundries (11) *__ D ry goods (1 4 )* .................. Groceries (59) * .................. Paper & products (7 )* . , T obacco products (7 )* ..... Miscellaneous ( 68)* .......... D istrict A verage (191)* + + + + + — + — + + + + + — + — — + 18 2 1 2 4 12 2 — 1 + 3 — 13 — 5 8 21 15 3 4 4 3 7 2 1 3 + + + + + + 50 45 12 6 20 6 "o + 39 + 27 + — — + + — 58 82 107 111 69 166 103 152 79 94 io 2 7 2 2 2 — 5 — 1 0 S ou rce: Departm ent o f Commerce. ♦Number o f rep orting firms. R E T A IL F U R N IT U R E S A L E S Percentage com parison o f sales in periods named with sales in same periods in 1947 A p ril 1948 4 Mos. 1948 STATE S M aryland (5 )* ........................ Dist. o f Columbia ( 6) * .......... V irginia (18)* ........................ W est V irgin ia ( 10) * .............. North Carolina (1 5)* ............ South Carolina (9 )* ................ D istrict (6 3)* ...................... + 19 + 22 + 12 + 18 + 14 + 3 —1 + 1 — 4 + 8 + 4 + 19 + 12 — 5 + 14 — 9 — 1 + 4 + 7 + 4 Individual Cities Baltimore, Md., ( 5 )* .............. W ashington, D. C., ( 6) * ........ Richm ond, V a., ( 6) * .............. Charleston, W . V a. ( 3 ) * ..... Charlotte, N. C., (4 )* ............ Columbia, S. C., ( 3 )* ............ + 22 —6 + 3 —1 2 + 56 ♦Number o f reporting firms. D E P A R T M E N T STORE T R A D E Richm ond Baltim ore W ashington Other Cities D istrict Percentage chg. in A p ril 1948 sales, com pared with sales in A p ril 1947: + 2 + 5 — 1 + 3 0 Percentage chg. in 4 m onths’ sales 1948, com pared with 4 m onths in ’ 47: + 3 + 5 + 7 + 6 + 6 M A N U FA C TU R IN G A p ril 1948 Stocks R atio A p ril A p ril 30, 1948 collections to a cc’ts com pared with A p r. 30 Mar. 31 outstand’ g A p ril 1 1948 1947 N et Sales A p ril 1948 com pared with A p ril M arch 1947 1948 Total V aluation A p ril 1948 A p ril 1947 4 Mos. 1948 65,017 109,818,015 1,841,142 14,684 % Change from 4 Mos. ’ 47 + 3 + 1 + 2 + 14 Percentage chg. in stocks on A p ril 30, ’ 48, com pared with A p ril 30, ’ 47: — 5 + 15 + 7 +19 + 9 Percentage chg. in outstanding orders A p ril 30, ’ 48 from A p ril 30, ’ 47: — 20 — 16 + 1 — 18 — 24 Percentage chg. in receivables A p ril 30, ’ 48 from those on A p ril 30, '4 7 : + 41 + 20 +20 +23 +24 Percentage o f current receivables as o f A p ril 1, 1948 collected in A p r il: 30 48 48 49 44 Percentage o f instalm ent receivables as o f A p r. 1, ’ 48 collected in A p r i l : 17 23 22 27 23 R A Y O N Y A R N SH IPM EN TS A N D STOCKS A p ril 1948 R ayon Staple R ayon Staple yarn fiber yarn fiber shipments...................... 67,200,000 shipments...................... 22,300,000 stocks, lbs................... 9,100,000 stocks, lbs................... 3,600,000 S ou rce: R ayon Organon M arch 1948 67,800,000 22,600,000 9,400,000 4,800,000 A p ril 1947 58.700.000 17.900.000 7.400.000 2.900.000 Maryland Dist. o f Col. V irgin ia W .V irg in ia Percentage chg. in A p ril ’ 48 sales from + 1 + 5 + 2 + 4 N o. Carolina So. Carolina A p ril *47 sales, by states: + 4 0 P ercentage change in 4 m onths’ 1948 sales from 4 m onths’ 1947 sales: + 3 + 5 + 7 +13 + 5 + 7 FEDERAL RESERVE BANK OF RICHMOND NATIONAL SUMMARY OF BUSINESS CONDITIONS (Com piled b y the Board o f Governors o f the Federal R eserve System Industrial production decreased in April and in creased in May owing chiefly to changes in coal pro duction and supplies. Department store sales were at exceptionally high levels following the Easter shopping period. Wholesale and retail price levels were higher, reflecting chiefly increases in meat prices. Industrial Production The Board’s seasonally adjusted index of industrial production declined 5 points in April to 187 per cent of the 1935-39 average, reflecting chiefly lower output of iron and steel resulting from the labor dispute at coal mines, which began in the middle of March. Following settlement of the dispute around the middle of April, output of coal and steel increased and the total index in May is expected to be around 190. Steel production reached a low point of 71 per cent of capacity in the third week of April, as compared with a March average of 95 per cent, then advanced rapidly to a rate of 97 per cent in the fourth week of May. Auto mobile output was substantially curtailed in the first 3 weeks of May, as pig iron and steel supplies continued short and a work stoppage began at the plants of a major automobile company. Lumber output, adjusted for sea sonal variation, declined 9 per cent in April, owing in large part to work stoppages on the West Coast. Output of nondurable goods showed a further slight decline in April. According to preliminary indications textile production was below the March level. Coke pro duction was sharply curtailed because of reduced coal supplies. Activity in the rubber products industry and in some chemical industries declined. On the other hand, production of gasoline increased, and newsprint con sumption showed somewhat more than the usual sea sonal rise. Coal production for the month of April was in about the same small volume as in March. Output of crude petroleum was maintained at a record level, and there was an exceptionally large increase in output of iron ore. Construction Value of construction contracts awarded expanded sharply in April, according to the F. W . Dodge Corpora tion, reflecting chiefly large increases in awards for pri vate residential construction and for religious and other institutional buildings. Awards for manufacturing plants and public works and utilities showed little change from the levels prevailing in recent months. Distribution Department store sales, which usually decline after the Easter shopping season, were maintained this year and the Board’s seasonally adjusted index rose from 284 in March to 299 in April, with some further rise indi cated for May. Railroad shipments of coal and coke showed a sharp increase in the latter part of April following the end of the coal strike. Shipments of perishable goods were curtailed temporarily in the middle of May in anticipa tion of a rail strike which was subsequently called off. Carloadings of most classes of manufactured goods con tinued to show little change in April and the first half of May. Commodity Prices Wholesale prices of meats, livestock, and vegetable oils advanced from the middle of April to the third week of May, while most other farm products and foods showed little change or declined somewhat. Price changes were also mixed for industrial ma terials. W ool tops, coal, coke, and building materials were higher in this period, reflecting in part freight rate increases, while prices of steel, cotton grey goods, and certain other materials were reduced somewhat. Price reductions were announced for various electrical pro ducts. Consumer prices in mid-April were 1.4 per cent higher than in March and exceeded slightly the previous peak reached in January. The advance in April reflected higher retail prices for foods, owing chiefly to reduced supplies of meats and fresh vegetables, and further rises in prices for various consumer services. Bank Credit Little change occurred in member bank reserve posi tions in the last half of April and the first two weeks of May. Treasury operations were largely neutral in their effect on total bank reserves. A further moderate gold inflow permitted a small reduction in Reserve Bank credit. In the third week of May member bank reserve balances were reduced considerably, in part as a result of a transfer by the Treasury of funds from war loan accounts to its balances at Reserve Banks. In addition, member banks used reserve funds to purchase in the market Treasury bills held by the Reserve Banks, with the result that the reserves of many large city banks fell temporarily below requirements. Real estate and consumer loans continued to expand at banks in leading cities during April and the first half of May. Commercial and industrial loans increased somewhat during May following a decline in earlier months of the year. Security Markets Prices of common stocks showed a marked further rise in the middle of May to a level 14 per cent below the high of May 1946, according to Standard and Poor’s index of 90 stocks. Volume of trading was unusually large. Following the Treasury announcement on May 13 that June and July certificate maturities would be re funded at 1-1/8 per cent, prices of Treasury bonds ad vanced sharply.
