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'AI//RESERVE BANK /t»F RICHMOND

'W

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/ \ O M £ U fi
May 1954

PRINCIPAL INSTITUTIONAL LENDERS
CREDIT OUTSTANDING-END OF 1945 AND 1953
^Billions of Pollars~
50

1001

COMMERCIAL
BANKS

L IF E INSURANCE
COMPANIES

^ Z Z Z Z Z Z Z Z T "

MUTUAL SAVINGS
BANKS

SAVINGS & LOAN
ASSOCIATIONS

SA LES FINANCE
COMPANIES

O THERS*
p r

GOVERNMENT
CREDIT AGENCIES

X

* Including Consumer Finance Companies, Credit Unions, and Industrial Loan Companies.

Also In This Is s u e
he lenders of money provide a very important
share of the purchasing power that promotes
high level business activity. Their activities en­
courage saving by making it profitable and pre­
vent idle savings from acting as a drag on eco­
nomic activity. A review of the more important
lenders in our economy begins on page 3.

T




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

Fifth District Trend C h arts____________ Page
A New and Fast-Growing Industry
in North Carolina ____________________Page
Bank Lending—
Stability at a High L e v e l____________ Page
Fifth District News B r ie fs ______________Page
Business Conditions and P rosp ects_____ Page
Fifth District Statistical D a ta ___________ Page

11

Federal Reserve Bank of Richmond

F ifth

D ist r ic t

W H O L E SA L E S A L E S

T r e n d s
DEPARTMENT

Dry goods wholesalers in the District experienced a drop in sales
after seasonal adjustment of 3% between February and March, and
their sales were 14% under March 1953. These figures are in line
with the purchasing policies evidenced by District department stores
and reflect an easier retail sales level in small independent stores as
well as the ability of retailers to obtain quicker delivery.

STORE OUTSTANDING ORDERS

Although District department store inventories have been worked
down considerably since last Summer, inventory policy is still on
the conservative side as evidenced by a drop of 5 % in seasonally
adjusted outstanding orders between February and March to a level
17% under a year ago. This policy is no doubt a reflection of the
ability to secure quick delivery.

RETAIL FURNITURE STORE INVENTORIES

CONSTRUCTION CONTRACT AWARDS
iooo |

(Seasonally Adjusted)
(1947-1949= 100)

i

i

i

r

ONE AND TWO FAMILY HOUSES

500-

(Seasonally Adjusted)
(1935- 1939 * 100)

1946

1947

1948

1949

1950

1951

1952

1953

1954

Furniture stores of this District are maintaining inventories at a
level commensurate with declining sales. During March furniture
store sales were down 12% from a year ago and inventories were
down 10% . Inventories declined 2 % after seasonal correction from
February.

CONSTRUCTION CONTRACT AWARDS

Contract awards for commercial buildings which reached a postKorean high in January this year have since fallen sharply in both
February and March. March awards after seasonal correction were
47% under those of February and 13% smaller than March 1953.
The large January awards, however, were instrumental in raising
the first quarter total 4 % above that quarter of 1953.




Contract awards for one- and two-family houses in this District
in March were at the highest level since February 1950 and highest
of any month of record except three. March awards were 15%
higher than in February after seasonal correction and 52% higher
than in March 1953. In the first quarter of 1954 these awards were
29% higher than in the first quarter of 1953.

NEW PASSENGER CAR REGISTRATIONS

Four Fifth District states and the District of Columbia showed
registrations of new passenger cars in March 29% higher than in
February, but 8% under March 1953. The accumulated registra­
tions for the first three months of the year were also 8% smaller
than in similar months last year. Virginia was the only state to
show higher registrations in March than a year ago.

May 1954

The Money Lenders
They Are the Catalysts in a Complex Economy
tract is the instrument not only for transporting idle
has been truly said that the economic health of the
funds from savers to those who can put them to current
nation rests essentially on faith since virtually every
use but also for bringing into existence entirely new
transaction that takes place involves trust and confi­
funds which are put to work and exert their influences,
dence. This is true because the prerequisite of every
at times profound influences, on the economy.
transaction— the means of making payment— is itself a
form of credit. Furthermore, every delayed payment
In the present intricate economic structure, painfully
is in essence credit and a very substantial portion of all
evolved through centuries of trial and error, the saver
payments is delayed. The employee who receives pay­
of funds rarely comes in contact with the borrower. He
ment for his services at the
deposits his funds in a sav­
end of a period of service,
ings account, pays an in­
the electric company that
surance premium, purchases
MORTGAGE LO A N S
bills for power supplied in
shares in a savings and loan
HELD BY PRINCIPAL FINANCIAL INSTITUTIONS
a past period, the supplier
association, or contributes
(Billions of Dollars)
who bills the manufacturer
to a pension fund— in these
$ 77 .9
for raw material after de­
and other ways he puts his
livery— each has surrender­
funds in the hands of a fi­
ed services or commodities
nancial middleman. The fi­
on trust, with the faith, al­
nancial m id d le m a n then
though buttressed by the
seeks to employ them in
such a manner that he is
force of law, that payment
will be satisfied in the nor­
always ready to meet de­
mal course of economic
mands made upon him by
events.
the savers who entrusted
their funds to him, to pay
Few pause to consider
them the agreed rate of re­
the magnitude of merely the
turn for the use of the mon­
more e a s i l y recognized
ey, and also to acquire a
forms of credit. A n indi­
profit to the in s t it u t io n
vidual borrows money from
above the costs of its opera­
his bank in order to pur­
tion.
chase a home, an automo­

/

t

bile, a refrigerator, a power
mower. A retail merchant
makes a loan to purchase
inventory. A manufacturer
procures money from the
public by s e l l i n g bonds.
Uncle Sam borrows by is­
suing and selling bonds,
notes, certificates of indebtedness or bills. In each case
borrower and lender are easily recognized. The total
amount owed by all borrowers at the end of 1952 is
estimated by the Department of Commerce at $553 bil­
lion. This is 60% greater than the nation’s gross na­
tional product— the market value of all goods and serv­
ices produced— in the United States in that year.

This generally smoothworking process of putting
saved funds to work has im­
portant economic implica­
tions. It means that the
1953
saving of present income for
future use need not cause a
reduction in the over-all lev­
el of spending currently taking place. It means also
that saving becomes profitable, that saved funds can be
put to work to earn a return for their owners, thus pro­
viding an additional incentive to save.
The Institutional Lenders
In the complex American economy are a great num­
ber of institutions whose primary function revolves
around the borrowing and lending of money. Some of
these act almost solely as intermediaries— they work to
bring lender and borrower together. The securities ex­
changes are good illustrations of this sort of institution,
where the borrowers of money offer their bonds, notes,
and other evidences of indebtedness for sale and the
lenders of money make their bids and their purchases.

For every borrower there must be a lender. This
raises the q uery: W h o are the lenders of money and
what is the source of the money they lend? Initially
we might say simply that loanable funds come either
from money already in use but not being spent by its
owners, that is, savings, past or present, or from money
newly created by the lending process. The loan con­



-I 3

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Federal Reserve Bank of Richmond

the banking system must have for each dollar of bank
Also included among the intermediaries are brokerage
credit extended. Thus, with a given amount of cash
firms, investment bankers, factors, and similar firms.
Other institutions act as true middlemen— they re­
resources, the banking system can extend approximately
ceive funds from savers, the ultimate lenders, and on
five times the amount of credit to its customers that
other types of lenders could extend with the same
their own initiative and judgment lend these funds to
amount of cash available. (F o r an explanation of the
a vast array of borrowers constantly seeking present
use of their future income. This group of financial
deposit expansion process see the November 1952 issue
institutions we would like to explore in greater detail.
of the M onthly R eview of the Federal Reserve Bank of
Richmond.)
Am ong them are specialists in the financial services they
offer as, for example, sales finance companies, consumer
The principal source of banks’ loanable funds then is
finance companies, and credit unions which lend almost
in the ability to create new money, but this ability as
entirely to individuals for
well as the margin of funds
purposes of personal con­
other t h a n b a n k credit
sumption, or savings and
which supports this complex
U S. GOVERNMENT SECURITIES
.
loan associations and mutual
superstructure rests on the
HELD BY PRINCIPAL FINANCIAL INSTITUTIONS
savings banks which invest
savings of individuals and
(Billions of Dollars)
most of their available funds
business firms. These sav­
$ 124.3
ings may be very short term,
in mortgage loans.
as when funds are deposited
Other financial middle­
with provision for with­
men offer a much broader
drawal on d e m a n d , or
service and cater to almost
longer term, in the form of
all classes of loan demand.
time or savings deposits.
Included in this group are
In a d d i t i o n , a smaller
the commercial banks whose
amount of funds is provided
borrowers range from farm­
by the owners of banks in
ers to home owners, from
the form of capital funds.
individual c o n s u m e r s to
Bank lending is both
broader in scope and greater
in total amount than that of
any other type of financial
institution. Half of all the
loans and investments held
by the principal lenders are
owned by commercial banks.
Their lending ranges in ma­
turity from one or two days
(for example, Federal funds
loaned to another bank to
meet a temporary need), on
up to from twenty to twenty-five years, as in the case
of V A guaranteed mortgage loans or certain long-term
bonds. Their borrowing customers may be consumers,
farmers, home buyers, retail or wholesale merchants,
construction firms, manufacturing and mining concerns,
and many others including other financial institutions
borrowing in order to be able to meet demands of their
own borrowing customers. Commercial banks are
truly the department stores of the financial field.

business firms— the pygmysized as well as the corpo­
rate giants. Their invest­
ment p o r t f o l i o s in c lu d e
bonds of a varied assort­
ment of corporate enter­
prises as well as obligations
of the United States G ov­
ernment and of states and
political subdivisions.
A n understanding of the
operations of these varied
institutions is essential if an
appraisal of the effects of their activities is to be at­
tempted.
Commercial Banks. These financial institutions differ
from all others by an extremely important attribute:
Their demand deposit credit is in effect money and need
not be converted into some other form to be used in
buying and selling. Commercial banks can, therefore,
lend their own credit whereas other lenders must make
payment to their borrowers in the form of currency or
of bank demand deposit money. Other lenders are re­
stricted in their lending to the actual money they have at
their command, while commercial banks may, within
certain limits, create the funds— their own demand de­
posit credit— they lend.

Life Insurance Companies. The second largest cate­
gory of institutional lenders, life insurance companies,
also offer an extremely variegated credit service. Their
lending practices differ from those of the commercial
banks in that more of their loan and investment assets
are acquired in the financial markets although there
are many direct lender-borrower transactions. Their

The limits to deposit expansion are set by legally re­
quired reserves which, in effect, set the amount of cash



i

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May 1
954

loans to business and industry include vast quantities of
corporate bonds and stocks purchased in the market,
as well as many direct purchases and a large number
of individual loan transactions. Even home mortgages
are purchased in large blocks in the secondary mar­
ket, but in this type of lending there is also a good
deal of direct home buyer-lender transactions. Today,
almost half of the credit extended by life insurance com­
panies is in the form of securities of business and in­
dustry and one-third is in the form of mortgages. The
remainder is almost entirely in the form of securities
of the Federal Government
or of the states and their
political subdivisions.
The source of life insur­
ance companies’ investment
funds is predominantly from
policyholders. F o r many
years premium income has
p r o v i d e d approximately
three-fourths of the total,
the remainder coming from
earnings on investments, in­
come from rental properties,
and other sources. In the
case of stock companies,
paid-in capital has provided
a small margin of funds, but
additions to capital in recent
years have been insignifi­
cant as compared to pre­
mium and other income.

the savings of their individual shareowners. Individuals
who place their funds with these associations participate
mutually in their ownership and in the distribution of
net profits. Unlike the conventional owners of most
corporations, howrever, these shareowners can normally
redeem their shares on demand and the associations, in
practice, anticipate a normal turnover of their share
accounts. A n additional source of investment funds
is provided by earnings retained for reserves and other
purposes.
The savings and loan associations extend credit al­
most exclusively to home
buyers in the immediate and
surrounding communities.
LOANS AND IN V EST M EN T S*
Today, over 90% of their
HELD BY PRINCIPAL FINANCIAL INSTITUTIONS
earning assets are in the
(Billions of Dollars)
form of mortgage l o a n s .
$ 132.5
Over 28% of m o r t g a g e
loans held by financial in­
stitutions are in the port­
folios of the savings and
loan associations. They are
surpassed only by the life
insurance companies in the
amount of mortgage credit
they have extended. The
remainder of their earning
assets are almost entirely in
the form of U. S. Govern­
ment securities.

Sales Finance Companies.
These are the only impor­
tant institutional lenders in
Mutual Savings Banks.
our economy that do not
A s the word mutual implies,
rely upon the savings of a
these institutions are owned
large number of individuals
by and operated for the
as their principal source of
benefit of their depositor
funds. A n important mar­
members. Loanable funds
gin of their loanable funds
are derived almost entirely
# O ther than mortgages and U .S . Goverment secu rities.
is derived from their own­
from the savings of mem­
* * Including Sales Finance Com panies, Consumer Finance Com panies,
C re d it Unions, ond In d u s tria l Loon Com panies.
ers’ equity. The net worth
bers and e a r n i n g s are
of sales finance companies
shared on a mutual basis.
Earnings, which are re­
averages a p p r o x im a t e ly
tained to provide appropriate reserves and for other pur­
16% of total resources. In addition to owners’ equity,
poses, provide a second source of funds to the savings
which represents paid-in capital plus retained earnings,
banks.
these companies provide themselves with a substantial
Credit policies of the mutual savings banks are tra­
amount of working funds by borrowing from banks, in­
ditionally conservative and every effort is made to re­
surance companies, and other institutional investors. In
duce the risk element in their investments to a mini­
addition, the larger companies frequently sell their own
mum. Mortgage loans provide their principal lending
commercial paper in the open market.
outlet, and these include mortgages on commercial prop­
The sales finance companies have grown up with the
erties as well as those on homes. Their other assets are
automobile. Loans for financing the purchase of auto­
almost entirely in the form of Government securities and
mobiles account for the major portion of the business
the higher grade public utility and industrial bonds.
handled by them. Although these companies handle
Savings and Loan Associations. The predominant
source of funds to savings and loan associations is from




consumer-type loans almost exclusively, they are to be
(Continued on page 12)

* 5 V
1

Federal Reserve Bank of Richmond

A New and Fast-Growing Industry in North Carolina
Carolina has a healthy, lusty infant industry
whose rapid growth is attracting to the state some
of the most respected names in industry. The electrical
and electronics equipment industry is the latest feather
in North Carolina’s industrial cap.
o rth

Prior to W orld W ar II this industry was practically
nonexistent in North Carolina. According to the 1939
Census of Manufactures, there were only three estab­
lishments in the industry in the state, and they employed
a mere 66 persons. The next Census of Manufactures
in 1947 showed the infant industry had grown to eleven
plants, and employment had risen to the respectable
figure of 5,023. Its contribution to the flow of income
in North Carolina had swelled from $77,000 of wage
and salary payments to about $14 million.
The booming years of the postwar period stimulated
further growth, and in 1953 alone eleven new electrical
and electronics plants were constructed or planned for
early construction in the Tarheel State. Since 1947
$42 million has been invested in new construction and
expansion of plants in this industry in the state. A c ­
cording to a recent release of the North Carolina De­
partment of Conservation and Development, there are
now 40 plants with around 22,000 employees engaged
in the production of electrical and electronics supplies
and equipment.
These plants produce a wide variety of items, rang­
ing from such familiar items as radio tubes, electric
blankets, and air-conditioning units to lesser-known
parts like capacitors and electrodes. As might be ex­
pected, some of the plants are working on defense con­
tracts and their production is classified.
From the point of view of investment in plant and
equipment, employment, and production, the industry in
North Carolina is made up principally of plants of large,
nationally-known companies. Seven companies account
for 93% of the total employment in the state’s electrical
and electronics plants. They are W estern Electric,
Westinghouse, General Electric, Union Carbide & Car­
bon, Cornell-Dubilier, International Resistance, and
Sprague Electric. One of the results of the prevalence
of plants established by such companies in North Caro­
lina is a very high average employment figure per plant.
Somewhere between 500 and 600, it far exceeds the av­
erage for all manufacturing plants in the state (prob­
ably well under 100) and is perhaps higher than the
average for any other manufacturing industry in North
Carolina, including tobacco which hitherto has had the
highest average.
Diversification— An Income-Raiser
In 1952 North Carolina ranked 45th among the states
of the nation in per capita income. One of the prin­



cipal reasons for this low position is found in the nature
of North Carolina’s manufacturing structure. In the
aggregate, manufacturing accounts for a larger per­
centage of total employment in North Carolina than it
does in the country as a whole. Based on the latest
data available, the comparative figures are 28.4% and
26.3% . However, manufacturing employment in North
Carolina is heavily concentrated in just a few industries.
Plants producing textile mill products alone account for
over half of the state’s total manufacturing employment.
North Carolina’s “ Big Four” — textile mill products,
lumber and products, furniture and fixtures, and tobacco
manufactures— account for about three-fourths of the
total.
It is true that these industries are not high wage
payers, but this is characteristic of the industries them­
selves and is not unique in North Carolina. According to
the Bureau of Labor Statistics, average weekly earn­
ings for production workers in all manufacturing indus­
tries in the United States in 1953 were $71.57. Com­
parable earnings in plants producing textile mill prod­
ucts were $53.44; in lumber and wood products (e x ­
cept furniture) $65.45; in furniture and fixtures plants
$62.91; in all tobacco manufactures $47.30; and in ciga­
rette plants $58.70.
The “ soft-goods economy” of North Carolina needs
to be supplemented along lines other than those pres­
ently supplied by the manufacture of lumber and wood
products and furniture and fixtures. The recent growth
of plants making electrical supplies and equipment is
an encouraging step in that direction. Average weekly
earnings of production workers last year in the nation’s
electrical machinery industry were $71.55. Comparable
earnings in component industries were $77.12 in electri­
cal appliances, $62.47 in radio tubes, and $77.92 in the
manufacture of carbon and graphite electrical products.
T o a considerable extent, industrial areas of the coun­
try are characterized by specialization. There are, for
example, automobile areas, iron and steel areas, meat­
packing areas, and chemical areas. North Carolina’s
economy is heavily influenced by its textile, furniture,
and tobacco manufacturing areas. So far, the growth
of electrical and electronics equipment plants in North
Carolina has not progressed far enough to have affected
materially the flow of income payments in the state. It
is highly likely that nationally this industry will con­
tinue to be a relatively fast-growing industry. Should
this infant industry continue to grow at a faster-thanaverage rate in North Carolina, it will assist in bring­
ing about a basic redistribution of manufacturing em­
ployment and this in turn would have a favorable effect
on the state’ s per capita income position.

4 6 }
►

May 1954

Bank Lending—Stability at a High Level
o a n s extended by member banks in the Fifth Dis­
trict stood at $2,408.8 million at the end of the first
quarter of 1954— just under the all-time peak reached
at the end of last year. Total loans outstanding drop­
ped seasonally in January, experienced very little change
for the month of February, then rose moderately
through March.
The loan experience of member banks in this District
shows very little evidence of economic weaknesses which
have been apparent in some other economic indicators.
True, loans have not shown the growth this year that
they experienced last year. But the banks have main­
tained a record loan level
over the past year with con­
siderable stability. The ac­
companying chart shows the
loan experience of fifty of
the District’s member banks
which report weekly on
their activities, thus provid­
ing a valuable current indi­
cator of lending develop­
ments which, in turn, offers
another useful measure of
business trend in a sensitive
period.

L

A look at the components
of the total loan figures
plotted in the chart will be
helpful in interpreting the
importance of the trends.
Commercial, industrial and agricultural loans make up
nearly half of all the loans extended by the weekly re­
porting banks. W hat happens in this group of bor­
rowers will have a profound effect on the over-all total.
Commercial, industrial and agricultural loans outstand­
ing declined fairly sharply through January, but not as
sharply as in January 1953. They showed very little net
change for February and then jumped above their level
at the beginning of the year during the first two weeks in
March. This early March rise also characterized the
same period in 1953 and is generally recognized as bor­
rowing by business firms to meet the March 15 install­
ment of their current year’s Federal income tax bill.
This year, 45°/c of the total bill had to be paid by the
March date in keeping with the acceleration of corporate
tax payments under the Mills Plan. Since mid-March,
commercial, industrial and agricultural loans have de­
clined moderately but persistently.
Manufacturing and mining firms, one of the com po­
nents of the commercial and industrial group of bor­
rowers, have made more active use of bank credit in
this District through mid-April of this year than in the
comparable period of 1953, but they failed to match




their borrowing record for the 1952 period. Within
this group of users of bank credit, textile, apparel and
leather manufacturers increased their bank indebtedness
substantially this year over last. Processors of metals
and metal products and petroleum, coal, chemicals and
rubber borrowed new money in both periods, but to a
lesser extent this year than last. Food, liquor and to­
bacco firms repaid bank indebtedness on balance in both
periods, but net repayments were somewhat smaller this
year than last.
Wholesale and retail traders have, on balance, bor­
rowed considerably less money from their banks over
the first three and a half
months of this year than in
the comparable period in
both 1953 and 1952. Over
the first two months of the
year loan repayments by
such firms were much larger
than new loans made and
the total outstanding de­
clined sharply. Since the
first of March trade firms
have made net new borrow­
ings, but the amount of such
loans has not yet reached
the level at the beginning of
the year.
Sales finance companies
reduced their bank loans
substantially in January and
have maintained them at about this level since then. This
experience is very similar to that in 1952 but represents
a greater reduction in loans on the banks’ books than
in the same period in 1953.
Construction firms made less use of bank credit
through mid-April this year than in either 1953 or 1952.
The loan decline here might be interpreted as a sign of
weakness in this economic sector. Actually, such indi­
cators as mortgage recordings, contracts awarded, and
housing starts point to a high level of activity, and there
is evidence that considerable optimism exists in this
field. Here is a reminder that our complex economy
is extremely variegated in its composition and that each
major sector, though closely interrelated with other
sectors, may at times show surprising independence.
Loans to consumers make up another important seg­
ment of the loan portfolios of District member banks.
According to the weekly reporting banks, the indica­
tions are that borrowing by consumers is at a very slow
pace this year relative to immediate past years, includ­
ing 1951 and 1952 when the consumer credit restraint
measure, Regulation W , was in effect.
Nevertheless,
consumer loans are still being held at a record level.

{ 7}

Federal Reserve Bank of Richmond

Fifth District News Briefs
The Celanese Corporation of America has
started production of a new heavy denier voluminized acetate yarn at its Cumberland, Mary­
land, plant. The yarn is used in the manufac­
ture of drapery, upholstery, and other fabrics,
and gives a novelty handloomed appearance.

plants in Greenville, South Carolina, in
March showed gains in employment over the previ­
ous month. Manufacturers of apparel and finished
products hired 200 persons, and textile producers added
100 during the month. Despite this increase, manu­
facturing employment in Greenville was still 2,000 be­
low a year ago.

T

e x t ile

Sidney Blumenthal and Company of New Y ork has
purchased 100 acres of land near Scotland Neck, North
Carolina, where it plans to build a plant for weaving pile
fabrics. The first unit, a 30,000-square-foot building,
is expected to be ready for occupancy about July 1.
Eventually, the plant will contain 150,000 square feet
and employ more than 300 people.

A construction and modernization program at
the Baltimore refinery of the Standard Oil Com­
pany (New Jersey) will involve an expenditure
of $15 million. The program will include three
of the most modern refining processes in the
industry: fluid coking, hydrofining, and hydro­
forming.

Textile Machine W orks’ Statistical Survey
for 1953 presents this interesting textile infor­
mation: (1) 87 mills liquidated during 1953 and
45 new ones began operating. North Carolina
had 10 liquidations and 7 new formations; (2)
full-fashioned knitting machines in the United
States decreased by 452 to 9,017 during the year,
with North Carolina at the end of 1953 account­
ing for approximately 28% of the national total
(compared with 20% a year earlier) and all
other southern states for around 27% (com­
pared with 19% a year earlier); (3) 66-gauge
machines introduced during 1953 replaced 60gauge machines in popularity and for the first
time in many years Pennsylvania replaced
North Carolina as leading purchaser.

Herman Cone, president of Cone Mills, stated at the
annual meeting of the company early in April that
business was unsatisfactory and no signs of a pickup
were then discernible. Cone Mills is one of the coun­
try’s largest makers of denim and also manufactures
other cotton cloths. It is the largest supplier to the
work clothing trade where, according to Mr. Cone, there
are no signs of improved demand.
A spokesman for J. P. Stevens & Company
announced on April 7 that the company would
close down virtually all its production facilities
for rayon, acetate, and synthetic woven fabrics
for one week beginning April 19. Since this
announcement, several other weavers of syn­
thetic fabrics have also announced intentions to
shut down for one week.
The Union Carbide and Carbon Corporation an­
nounced on April 8 the start of commercial production
of fluorothene resins at its continuous process plant in
South Charleston, W est Virginia. The material is a
specialty-type plastic, able to withstand corrosive chemi­
cals and to resist high temperatures. A large part of
current production is absorbed by the military, the rest
being used in the electrical and chemical industries.
The Southern Furniture Exhibition building
in High Point, North Carolina, is adding 60,000
square feet of space in a ten-story building
which will adjoin the present structure...__The
new space, designed for bigger and better furni­
ture displays, is expected to be completed in
January 1955.
The Pittsburgh Coke and Chemical Company’s office,
warehouse, and laboratory now under construction at
Spartanburg, South Carolina, and estimated to cost
$100,000, is due to be completed in August. The com­
pany will make Spartanburg its national sales head­
quarters for the fine chemicals division, supplying dyestuffs and chemicals to textile manufacturers through­
out the South.



< 8 f
1

Lansburgh’s department store in Washington, D. C.,
is launching a multimillion dollar expansion program
beginning with excavation of a new $600,000 service
building adjacent to the main store. Plans are to com ­
plete this building by October.
Pickens Manufacturing Company will build
a textile plant in Pickens, South Carolina, to
cost in excess of $1 million. The plant will be
a 50,000-square-foot one-story building employ­
ing around 200 workers. It has been reported
that the new plant will manufacture woolen
fabrics and that the principals will transfer
operations from Philadelphia, but this has not
been confirmed officially.
Jefferson, South Carolina, an agricultural trading cen­
ter, has secured two new industries, making three for a
community which had none a year ago. Jefferson Mills
will construct a 25,000-square-foot factory which will
cost $400,000 when equipment is installed. Initial em­
ployment is expected to total 75 workers but will prob­
ably rise later to between 150 and 200. Monticello
Knitting Mills will install equipment in an existing
building at a cost of $100,000 and will employ around
125 persons initially, perhaps 300 to 400 later on, in the
knitting of athletic shirts.

May 1954

/ 'fm fflA / / (h / ie cci

Business Conditions and Prospects
ber of hours worked during March on an average daily
seasonally adjusted basis declined 1.0% from February
and 7.0% from a year ago.

moderate improvement witnessed during Feb­
ruary over January failed to carry through in
March. Bright spots included department store sales,
which were somewhat better than seasonally expected,
a decline in insured unemployment in three Fifth Dis­
trict States— though there were increases in the other
two— a sharp increase in construction contracts for oneand two-family houses which rose 15%, seasonally ad­
justed, from February, and an unexpectedly good March
for hard goods though a relatively poor one, strange to
say, for soft goods. Construction, coal mining, cotton
textiles, hosiery, lumber, and tobacco industries did not
rise to their expected seasonal levels during March.
Department store sales were somewhat better but furni­
ture stores and most lines of wholesale trade turned in
a poorer than seasonally expected performance.

T

he

Construction
The substantial volume of construction contract
awards in March was still not of seasonal proportions,
and consequently the adjusted index dropped 2% from
February. Total contract awards, however, in March
were 19% ahead of a year ago.
M ajor elements of strength in the March construc­
tion contracts were one- and two-family houses which
rose superseasonally 15% from February and nonresidential structures (other than commercial and factory)
which were up 29% from February after seasonal cor­
rection. Increased weakness was displayed in adjusted
commercial construction awards which dropped 47%
in March from February to a level 13% below a year
ago; first quarter commercial awards, however, were
4% over last year.
Weakness also continued in the
awarding of contracts for factory buildings. These
dropped 36% on an adjusted basis from February to
March, were 61% under a year ago, and first quarter
figures were down 46% from a year ago. Public works
and utilities awards were likewise on the negative side,
adjusted awards in March having dropped 16% from
February and 16% from a year ago. First quarter
figures were down 20% from last year. Despite the
rather marked crosscurrents in the construction picture,
the total awards for the first quarter are 1% higher than
a year ago, and within 15% of the all-time high first
quarter established in 1951.
Unclassified contracts awarded under the WalshHealey Public Contract A ct to prime contractors in the
Fifth District rose 578% from the fourth quarter to the
first quarter of 1954,-and the first quarter was 371%
higher than in the first quarter 1953. These Federal
contracts in the United States as a whole during the
first quarter of 1954 rose 142% from the fourth quarter
of 1953 but were 32% smaller than in the first quarter
1953. First quarter gains occurred primarily in V ir­
ginia and to a lesser extent in the District of Columbia
and Maryland. Other States in the District show
smaller contract awards in this period.

In wholesale trade grocery and tobacco concerns
showed superseasonal increases. Compared with a year
ago, automotive sales were up 1% , paper up 16% , and
tobacco up 4 % . All other lines were down.
Farm income in the District continued to reflect the
long price decline, and for the first two months of the
year was 7% under a year ago, though it is noteworthy
that conditions appear favorable for optimum produc­
tion.
Low er levels of economic activity are hardly reflected
in the financial figures. Loans and discounts of mem­
ber banks were higher on March 31 than a month
earlier, and well above their high level of a year ago.
Total deposits at the end of the first quarter were down
slightly during the month and less than 1% under a
year ago. Business loans— of the weekly reporting
banks— on April 21 were $26 million higher than the
year’s low and near last year’s level.
Manufacturing Industries
March man-hours in the important manufacturing in­
dustries of the Carolinas show textiles down 9.9% from
a year ago, broad woven goods down 9.0% , knitting
mills down 8.1% , lumber and timber industries down
10.5%, tobacco manufacturing down 18.3%, and all
manufacturing industries in these states down 8.1% .
These declines were not far out of line with those shown
in the first three months of the year. In some cases
they were slightly smaller and in others, slightly larger.
March man-hours in W est Virginia’s important indus­
tries show primary metals down 16.6% from a year ago,
chemicals down 4.0% , and stone, clay and glass indus­
tries down 12.0%. Man-hours in the bituminous coal
mining industry in this state during March were 19.7%
lower than a year ago. Average daily seasonally adjusted
consumption of cotton in the mills of the District de­
clined 1.0% from February and 9.0% from a year ago.
The number of cotton spindles in place times the num­



Bituminous Coal
Bituminous coal output in the Fifth District con­
tinued its downward trend in March by dropping 10%
after seasonal correction from February to a level 17%
below a year ago. The recession in the steel industry
has been a particularly heavy blow for the coal industry
to take. Latest figures on coal consumption show only
the electric utilities with increased use over a year ago.
Competition from residual fuel oil imports is at about
the same level as a year ago, but industrial uses of

i

9

Y

Federal Reserve Bank of Richmond

natural gas continue to increase. Employment in the
bituminous coal mines of W est Virginia during March
was 2.3% smaller than in February and 17% smaller
than a year ago. Hours worked in March were down
7.7% from February and down 3.3% from a year ago.
Insured unemployment in W est Virginia has been
contributed to substantially by the bituminous coal in­
dustry. In the week of April 3, W est Virginia, with
a total nonagricultural employment of 479,000, had in­
sured unemployment of 47,300. Bituminous coal prices
(B L S ) in March dropped more than 3% from February
and were nearly 7% under a year ago. The combina­
tion of price weakness and reduction in demand is tak­
ing a continuous toll of marginal operators.
Trade
Department store sales in the Fifth District, on an
average daily seasonally adjusted basis, rose 2% from
February to March but continued 7% under a year ago.
Actual dollar sales in the District in March were down
11 % from a year ago, but the combination of difference
in business days and the effect of the shift in Easter to
late April brought the adjusted reduction to 7 % . In
the first quarter of 1954 dollar sales were down 8%
from a year ago, but correcting for the shift of Easter
in March, the first quarter shows a drop of 5% .
The Washington, D. C. Metropolitan Area shows a
gain in average daily seasonally adjusted sales corrected
for shifting Easter of 0.8% in March 1954, compared
with March 1953. All other major political subdivi­
sions of the District show decreases in sales similarly
adjusted, ranging from 4.9% in Maryland to 13.9% in
South Carolina. In the first quarter of 1954 sales (with
all corrections) show Maryland down 2.7% , W ashing­
ton Metropolitan Area down 0.8% , Virginia down
7.0% , W est Virginia down 8.4% , North Carolina down
10.0%, and South Carolina down 6.7% .
March was a poor month for soft goods but a rela­
tively good one in hard goods in department stores of
this District. Dollar sales without correction show
women’s and misses’ accessories down 14% , coats and
suits down 22% , dresses off 2 % , men’s clothing off
12% , furniture up 11%, floor coverings up 13% , major
appliances up 24% , radio, television, etc., up 36% .
Department stores as a whole in this District no
longer have a problem of excess inventories despite the
fact that adjusted inventories of stores rose 4 % between
February and M arch; they were 2% smaller than a
year ago. W ith the intense competition for consumers’
dollars in the current market, current inventories are
probably needed to give the proper selection and style
necessary to induce the consumer to purchase.
Outstanding adjusted orders of department stores in
March, however, dropped 5% from February to a level
17% below a year ago, an indication of conservative in­
ventory policy.
Sales of District furniture stores (adjusted) fell 2%



-f 10

from February to March and were down 12% from a
year ago. Year-to-year changes in cash sales show a
drop of 22% , whereas credit sales were down only 11%.
Furniture store inventories, seasonally adjusted, fell 2%
from February to a level 10% under a year ago.
Am ong the wholesale trades, sales of grocery and
tobacco concerns showed increases after seasonal ad­
justment from February to March. All other lines
were either even with March or down. Relative to a
year ago, wholesalers’ sales of automotive supplies were
up 1% , paper up 16% , tobacco up 4 % ; all other lines
were down from 5% to 37% .
March registrations of passenger automobiles are
available for Virginia, North Carolina, W est Virginia
and the District of Columbia. These registrations were
29% higher than in February, but 8 % smaller than in
March a year ago, and down 8% for the first quarter.
Agriculture
Cash farm income in Fifth District states during Feb­
ruary was 6% smaller than a year ago, and in the first
two months of the year was down 7 % . In the first two
months, cash income in Maryland was down 13% , V ir­
ginia down 13% , W est Virginia down 1% , North Car­
olina down 1% , and South Carolina up 2 % .
In the first two months of 1954, prices received by
farmers in Virginia averaged 8% below those months
of 1953, those in W est Virginia were down 9 % , North
Carolina down 4 % , and South Carolina down 2 % . The
growing season thus far has been favorable.
Banking
Total loans and investments of all member banks in
the Fifth District of $5,311 million on March 31 were
down $97 million or 1.8% from February 24, but were
up $27 million or 0.5% from March 25, 1953. Loans and
discounts of $2,409 million were $34 million higher on
March 31 than a month earlier, and $85 million higher
than a year ago. Total security holdings of $2,902 mil­
lion were down $131 million during the month and down
$58 million from a year ago.
Total deposits on March 31, 1954 of $6,420 million
were down $114 million during the month and down
$55 million from a year ago. Time deposits of $1,605
million were up $19 million during the month and up
$103 million from a year ago. Demand deposits of
$4,815 million were down $133 million during the
month and down $158 million during the year. B or­
rowings of $21 million were down $12 million during
the month and down $49 million from a year ago.
Commercial, industrial and agricultural loans of the
weekly reporting banks reached a low point for 1954
on January 27 and again on February 17. Between
February 17 and March 17 these loans had risen $26
million ; by April 21 they had dropped $9 million but
were still $26 million higher than the year’s low point
and $3 million lower than in the same week last year.

Y

May 1
954

F if t h
SE L E C T E D

D is t r ic t

IN D E X E S

S t a t is t ic a l . D a t a
B U IL D IN G P E R M IT F IG U R E S
March
1954

Avg. Daily 1935-39 = 100— Seasonally Adjusted
% Chg.—Latest Mo.
Mar.
Feb.
Mar.
Prev.
Yr.
1954
1954
1953
Mo.
Ago
New Passenger Cars1 .......................—
156
215
+
2
+ 1
481
490
+
1
0
Bank Debits ___________________ 488
Bituminous Coal Production2,3
65
72
78
— 10
— 17
Construction Contracts ________ 480
489
405
— 2
+ 19
Business Failures— No................ 144
124
40
+ 16
+260
Cotton Spindle Hours _________ 151
152
163
— 1
— 7
Department Store Sales2 _____
119p
117
128r
+ 2
— 7
Electric Power Production ___ ___
416
404
0
+ 3
Manufacturing Employment1,2 ___
106
lllr
— 1
— 4
Retail Furniture: Net Sales2 __ 100
102
114
— 2
— 12
Life Insurance Sales __________ 417
358
394
+ 16
+ 6
1 Not adjusted.
2 1947-1949 = 100.
3 Not seasonally adjusted.
Back figures available on request.

Maryland
Baltimore ___ $ 3,424,820
Cumberland __
41,550
Frederick ____
152,642
Hagerstown __
471,914
Salisbury ____
149,728

March
1953

3 Months
1954

3 Months
1953

$ 4,605,700
49,225
55,750
54,528
81,912

$14,754,160
72,900
309,792
680,449
402,078

$15,929,325
130,825
795,457
916,263
212,124

Sales in
March 1954
compared with
Mar.
Feb.
1954
1953
+ 18
+ 8
— 11
—
1
—21
+ 11
— 4
— 9
+ 10
+ 4
— 16
+ 6
+ 18
+ 3
+ 15
+ 7
+20
+ 4
— 4
+ 6
— 4
+ 10

LINES
Auto supplies (8 ) -------------Electrical goods (5) -----------Hardware (9) ________ ;------Industrial supplies (9) ------Drugs and sundries (11) __
Dry goods (15) ------------------Groceries (39) _____________
Paper and its products (5)
Tobacco products (11) ___
Miscellaneous (93) _________
District totals (205) ______

Stocks on
March 31, 1954
compared with
Mar. 31, Feb. 28,
1954
1953
0
+ 4
— 4
+ 3
— 5
— 2
0
+ 3
—
1
0
— 2
+ 3
0
+ 5
—24
— 5
— 3

—29
— 5
— 3

parentheses.
Bureau of the Census, Department of Commerce.

363,058
197,209
813,525
186,711
868,814
158,700
302,614
2,901,886
967,973
125,675

518,119
332,529
360,840
334,739
4,415,289
188,200
269,980
1,868,256
1,196,489
205,425

587,314
407,966
1,518,166
355,517
2,820,261
436,500
3,113,504
6,265,109
2,577,097
325,640

1,522,576
787,712
853,901
567,634
5,982,506
352,400
770,210
4,121,573
2,621,500
378,325

W est Virginia
Charleston
Clarksburg
Huntington __
W H O L E S A L E TRADE

Virginia
Danville ______
Hopewell ____
Lynchburg
Newport News
Norfolk ______
Petersburg
Portsmouth __
Richmond ____
Roanoke _____
Staunton _____

762,920
633,050
453,515

766,514
79,136
590,609

1,714,799
820,921
941,169

1,982,444
1,038,586
1,208,074

North Carolina
Asheville _____
Charlotte _____
Durham _____
Greensboro
High Point
Raleigh ______
Rocky Mount ..
Salisbury _____
Wilson _______
W inston-Salem

279,666
1,642,897
367,379
1,570,650
348,637
409,319
326,446
138,900
295,800
1,524,799

300,730
3,157,921
407,153
1,121,469
231,503
1,010,860
152,666
129,080
60,100
736,588

771,053
4,478,684
1,162,995
2,884,200
789,667
3,278,921
821,628
567,402
699,400
4,152,022

545,214
9,189,553
2,079,770
3,360,330
1,293,808
3,018,045
1,808,775
450,081
482,790
1,828,972

South Carolina
Charleston
Columbia _____
Greenville ____
Spartanburg _

69,620
856,264
582,440
280,130

102,464
569,492
457,450
100,592

387,176
2,324,585
2,116,695
1,143,681

834,112
1,466,427
1,465,950
243,688

Dist. of Columbia
Washington __ 10,364,199

6,233,838

16,152,170

15,350,152

District Totals __$32,033,450

Source:

$30,745,146

$79,833,621

$83,589,102

------ ♦
D E P A R T M E N T ST O R E O P E R A T IO N S
(Figures show percentage changes)
Other
Wash. Cities
Rich. Balt.
— 4
— 14
— 10
-12
4
vs 3 Mos. ending Mar. 31,
— 11
- 8
— 6
— 3
’53 ________________________

Dist.
Totals

—1
1

1

+■ 8

— 4

— 1

— 1

—

-26

Stocks, Mar. 31, ’54 vs ’53 ..
Outstanding Orders

— 17

— 15

— 12

— 17

Open account receivables Mar. 1
31.9
collected in Mar. 1954 —

51.2

43.0

37.0

41.7

Instalment receivables Mar.
collected in Mar. 1954

15.3

12.6

16.3

13.7

10.6

Md.
Sales, Mar. ’54 vs Mar.
’53 __________________




—

10

D.C.

Va.

W .V a.

N.C.

S.C.

—4

— 13

— 15

— 14

— 14

STATES
Maryland _________
Dist. of Columbia
Virginia __________
West Virginia
North Carolina
South Carolina
District _________

---

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
March 1954
3 Mos. 1954
+ 11
1
— 8
8
— 6
— 10
— 12
— 16
— 13
— 14
— 5
+ 2
0
— 8

+

+

IND IVIDU AL CITIES
Baltimore, Md.
+ 11
1
— 8
Washington, D. C.
8
— 11
— 13
Richmond, Va.
Charleston, W . Va.
— 3
— 7
* Data from furniture departments of department stores as well

+

+

Federal Reserve Bank of Richmond

F ifth

D ist r ic t B a n k in g

D E B IT S TO D E M A N D D E P O SIT A C C O U N T S*
(000
omitted)
March
March3 Months
3 Months
1954
1953
1954
1953
Dist. of Columbia
Washington ______ $1,292,166
$1,123,291$ 3,387,948 $ 3,094,557
Maryland
1,484,472
4,189,250
4,134,952
Baltimore _________ 1,525,959
Cumberland _____
23,187
23,892
65,431
75,900
Frederick _________
23,653
24,344
64,660
69,141
Hagerstown ______
38,094
37,849
108,458
108,198
North Carolina
Asheville ...________
61,583
62,975
179,899
183,522
Charlotte _________
391,798
382,515
1,064,199
1,094,107
Durham ___________
89,037
87,489
251,132
257,185
Greensboro ________
124,723
119,346
350,498
346,516
High Point ______
44,779**
NA
126,117**
NA
Kinston ___________
20,116
19,634
62,007
61,703
Raleigh ___________
222,297
238,958
569,926
618,015
Wilmington ______
49,284
45,850
135,995
134,012
Wilson ____________
18,272
17,309
55,475
52,317
Winston-Salem ___
167,543
158,722
449,563
440,119
South Carolina
Charleston ________
76,792
75,374
215,008
243,674
Columbia __________
179,846
152,933
495,463
466,236
Greenville ________
114,118
115,136
322,267
338,672
Spartanburg _____
62,024
67,602
190,000
198,342
Virginia
Charlottesville ____
33,000
27,418
90,772
72,971
Danville __________
35,304
36,985
106,785
114,438
Lynchburg _______
49,408
49,610
142,322
143,966
Newport News ___
50,171
51,427
138,105
146,910
Norfolk ___________
283,118
269,211
771,002
757,821
Portsmouth ______
34,766
33,097
93,870
90,069
Richmond _________
651,976
648,702
1,750,783
1,807,062
Roanoke __________
123,453
124,652
339,562
357,282
West Virginia
40,966
45,248
121,091
133,304
Bluefield _____ ____
Charleston ________
167,262
166,714
524,171
493,783
Clarksburg ________
30,995
32,481
98,377
105,733
Huntington ______
70,514
69,500
209,420
215,845
Parkersburg _____
30,613
30,282
89,035
86,588
District Totals _____ $6,082,038
$5,823,018$16,632,474 $16,442,940
*
Interbank and U. S. Government accounts excluded.
**
Not included in District totals.
N A Not Available.

s t a t is t ic s

SO R E P O R T IN G M E M B E R B A N K S
(000 omitted)
Change in amount from
April 14,
March 17,
April 15,
Items
1954
1954
1953
Total Loans ____________________ :$1,401,058** — 12,313
7,075
+
—
Bus. & Agric. ___ ____________
644,615
954
8,181
+
Real Estate Loans _ _________
266,359
2,489
7,399
+
+
All Other Loans _____________
507,555
6,578
73
_

Total Security Holdings ______ 1,724,671
U. S. Treasury Bills _________
116,447
U. S. Treasury Certificates _
151,713
U. S. Treasury Notes _______
228,142
U. S. Treasury Bonds ______
991,599
Other Bonds, Stocks & Secur.
236,770
Cash Items in Process of Col. ..
297,202
Due From Banks ___ _ _ _____
199,469*
Currency and Coin __
80,451
Reserve with F. R. Banks _____
535,759
Other Assets _ ________________ _
62,988
_ 4,301,598
Total Assets _____ _ _ _ . _

+
+
+
+
+
+

Total Demand Deposits _______ 3,250,917
Deposits of Individuals ______ 2,419,472
Deposits of U. S. Government
108,435
Deposits of State & Local Gov.
209,735
Deposits of Banks
. . .
454,659*
Certified & Officers’ Checks „
58,616
Total Time Deposits ___________
706,649
Deposits of Individuals _____
629,627
Other Time Deposits ________
77,022
Liabilities for Borrowed Money
7,375
All Other Liabilities ____________
47,828
Capital Accounts ____________ _ 288,829

— 82,223
— 42,623
— 9,955
—
666
— 22,275
6,704
8,214
5,470
+
2,744
+
—
8,975
3,789
+
+ 1,626

76,260
— 23,779
—
35,994
8,839
+
— 6,849
— 18,477
+ 34,245
+ 36,336
—
2,091
—
15,825
+ 4,730
+ 20,346

— 77,569

—

Total Liabilities

_ __________ $4,301,598

.....

—

+
-

74,473
39,599
62,756
5,801
13,241
8,840
2,831
14,571
3,535
12,924
1,204
77,569

17,324
52,912
+ 28,498
—
54,053
+ 53,556
7,587
+
—
32,344
+ 17,722
3,027
+
— 17,807
6,887
+
- 32,764
—

32,764

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

The Money Lenders— They Are the Catalysts in a Complex Economy
(Continued from page 5)

distinguished from other consumer credit institutions in
that they deal primarily with automobile and other con­
sumer durable goods dealers rather than with the con­
sumer. They, in effect, purchase instalment notes or
credit instruments in other forms from the dealers who
have themselves arranged the credit purchase with the
customer. A t the present time, sales finance companies
hold over one-fourth of all the consumer instalment
credit outstanding in the country.
Other Institutional Lenders. The picture of this
segment of our financial structure would be incomplete
without mention of the relatively smaller organizations
engaged in supplying the credit needs of a varied group
of borrowers. Though of less importance by compari­
son with the billions of dollars of credit extended an­
nually by the larger institutions, they nevertheless per­
form a vital role within their limited spheres of in­
fluence.



i

This wide and varied group of lenders includes credit
unions, consumer loan companies (sometimes called
personal finance companies or small loan companies),
mortgage companies, stock savings banks, industrial
banks, trust companies, and cash depositories. In addi­
tion to the multitude of private lenders, a number of
Government agencies are active in the lending field.
Am ong their borrowers are farmers, financial institu­
tions, exporters and importers, and foreign govern­
ments.
The complexity of the American economy, which pro­
vides the highest living standard yet achieved, is well
illustrated by the above brief survey of the institutions
which promote both saving and spending by their fi­
nancial activities. It is not too much to say that with­
out our highly organized saving-lending process our
present level of living would be impossible.

12 j
>


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