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HIIVTIILV
FEDERAL RESERVE BANK OF RICHMOND
R IC H M O N D 13, V IR G IN IA

□ C T Q B E R 31, 19 4 B

Business Conditions
H E business situation of the Fifth Federal Reserve
District in September was little different from that
in August. Total production declined further but trade
levels improved somewhat. Commodity prices have been
falling in the District in contrast to the general price
trend in the nation as a whole, partly because of the rela­
tive concentration of the District on lines where demand
has weakened. This has found its reflection thus far in
a relatively slower pace in the trade level of the District
than of the Nation but not in a loss of funds to other
Districts. The slackening in production activity in im­
portant industries in the District, however, may result
in a loss of funds from the District in the months ahead.
On a seasonally adjusted basis, declines in production
in September as compared with August were shown in
coal production, cigarette production, cotton consump­
tion and cotton spindle hours. There was a very slight
improvement in building permits and while these are
notably below their peak for the year they are still at
a high level.
Department store sales rose seven per cent, after ad­
justment for seasonal, from August to September, a
considerable part of which was caused by a rise in sales
of women’s and misses’ apparel. There was just a no­
ticeable pick up in shipments of furniture from the fac­
tories of the District in August compared with July, the
last figures we have available, but these are well below
the peak levels established earlier in the year. Furniture
sales at retail, however, established a new peak in Sep­
tember. This no doubt was influenced considerably by
promotional activity prior to the reestablishment of
Regulation W .
Savings as reflected in sales of life insurance were
at essentially the same level in September as in most
months of the year. Sales of wholesalers in September
on a seasonally adjusted basis improved moderately in
most lines. Dry goods, however, declined six per cent
below August, and was also six per cent below the same
month a year ago. Grocery and hardware sales held
even with August levels.

T

Employment
Employment levels in Maryland in September were
at the highest point of the year, largely as a result of
seasonal activity in the food processing industries. Em­
ployment levels in Virginia have remained steady at
levels which have prevailed thus far this year. North
Carolina employment declined sharply in July, but re­



covered a considerable part of the loss in August. There
are indications that some deterioration has taken place
in September and October.
Employment levels in the iron and steel industries in
Maryland moved upward in both July and August into
new high ground. There was, however, no overall gain
in Maryland’s durable goods industries due to offsets to
iron and steel increases in machinery, transportation
equipment and non-ferrous metal industries. August
employment in Maryland’s construction industries de­
clined slightly from the July level, contrary to the usual
seasonal tendency.
August witnessed a resumption of the upward trend
in employment in the cigarette industry in North Caro­
lina, and a seasonal rise occurred in the same industry in
Virginia. North Carolina furniture factories employed
a larger number of workers in August than in July, while
the employment in that industry in Virginia remained
steady in this period.
Production
Cotton goods output failed to be sustained in Septem­
ber at August levels after seasonal adjustment. The level
of output since September has deteriorated further, and
every now and then further cut backs in production ac­
tivity are announced. Thus far the market demand for
products of the textile mills has not been forthcoming
in a volume that would appear to justify the current
levels of operation. There is still the possibility, how­
ever, that a sizeable amount of fill-in purchases may be
forthcoming and prevent any further decline in opera­
tions in the next two months. The trade expects this
and, based on the relationship of inventories of cotton
goods to sales in department stores, it may be that the
necessary volume of business may be forthcoming in the
remainder of the year to sustain current production
levels. The degree to which the prices of cotton goods
and yarns have fallen would seem to indicate that a
larger volume of purchase by both wholesalers and re­
tailers would be a logical expectation in view of their
current inventory position. It is doubtful, however, that
the reduction in prices has gone far enough to stimulate
a domestic consumer demand sufficient to utilize the fa­
cilities of the industry at the level that prevailed over the
first five months of the year, thus offsetting the substan­
tial loss in exports and the lack of stimulation resulting
from the fact that domestic pipelines are filled.
Bituminous coal output in September in the District
declined 13 per cent on a seasonally adjusted basis from

FEDERAL RESERVE BANK OF RICHMOND

August, and was eight per cent smaller than in Septem­
ber 1947. In some sections of the District there are still
impediments to production in the nature o f labor short­
ages, car shortages and mine disabilities, but the main
factor in a reduced output of coal in September was the
slackening of demand. This factor in several mining
districts has affected a considerable portion of the ca­
pacity of the industry. There has not been much ten­
dency thus far, however, of prices of good quality of
coal to decline appreciably.
Mechanization of the deep mines is still being effected
as rapidly as possible, and alternative fuels are making
their inroads on the coal market. It seems only a ques­
tion of time, therefore, until competition on a price basis
will be necessary to hold on to the present market outlets.
Furniture
Generally speaking, furniture manufacturers’ inven­
tories in this District are not excessive. Most executives
who have been in the industry a long time have been
cautious about accumulating inventory. There are a few
exceptions, however, and there is some feeling in the

industry that these firms may adopt a price cutting policy
to dispose of their surplus, thus weakening the market.
Most concerns in the District are operating their plants
on a three day week, and few of them have any consider­
able backlogs of orders. Lumber costs have declined
about 10 per cent on gum woods and most of the soft
woods used.
Hosiery
The demand for hosiery has been on the weak side
through the summer months, and September was no ex­
ception. This applies particularly in the seamless end
of the business. Demand for women’s full fashioneds
appears to be holding up better than in other segments of
the industry, but even so it is down considerably from
what it was earlier in the year and prices at the manu­
facturer’s level have weakened further. The seamless
demand has been extremely dull, and has found reflec­
tion in a substantial cut in th rate of operations. In ad­
dition to this, some of the mills have built gray stocks to
a level well beyond safety requirements. Even if retail­
ers and wholesalers enter the market for seamless hosi­
ery in a substantial way during November, it is not likely
Continued on page 10

BUSINESS IND EXES— FIFTH FEDERAL RESERVE DISTRICT
AVERAGE D A ILY 1935-39=100— SEASONALLY ADJUSTED

Automobile Registration*..........................................
Bank Debits..................................................................
Bituminous Coal Production....................................
Building Contracts Awarded................................... .......
Apartments and Hotels..........................................
Commercial Construction Contracts..................
Manufacturing Construction Contracts.............
One and Two Family Houses.............................
Public Works Utilities.................................. .......
Residential Construction Contracts...................
Building Permits Issued............................................
Business Failures—No...............................................
Cigarette Production.................................................. ....
Cotton Consumption....................................................
Department Store Sales.............................................
Department Store Stocks...........................................
Electric Power Production.......................................
Employment—Mfg. Industries*...............................
Furniture Orders.........................................................
Furniture Shipments...................................................
Furniture Unfilled Orders.........................................
Furniture Sales—Retail..............................................
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**................................
Cotton Spindle Hours................................................. .......

Sept.
1948

308
257

Aug.
1948
146
365
168r
337
385
292
722
297
243
346r
284
38
264
142
315
289
274
136
264
225
651
256r
255

July
1948
132
329
164
347
159r
414
453
431
259
404
323
35
223
131
328
308
260
133
309
211
584
265
197
263

Sept.
1947
110
321
162
285
494
504
408
304
185
368
300
37
240
141
304
252
241
133
182
194
684
295
175
250

397
284
231
91
277
219
398
168
93
143

377
264
246
88
277
218
285
167
87
146

364
270
189
93
276
159
342
146
98
125

315
286
247
73
289
153
357
181
104
143

368
149
340

412
292
55
233
141
337
297

*Not seasonally adjusted.
**1938-41=100.




[2]

<0 change
j

Sept. 1948 from
+ 1
—11
+ 1

+15
—8
+19

4-19
4- 3
+45
—12
1
+ 7
+ 3

+12
—3
+49
—3
0
+11
+18

+20
+ 1

+ 4
+ 3

+ 5
+ 8
—6
+ 3
0
0
+40
+ 1
+ 7
—2

+26
1
—6
+25
—4
+43
+11
—7
—11
0

—

—

OCTOBER 1948

MONTHLY REVIEW

A New Source of Investment
for Life Insurance Companies Provides a New Form
of Corporate Financing
The initial enabling legislation opening up a new and,
to date, fast-growing method of corporate financing was
written into the Virginia statutes in 1942 whereby life
insurance companies were authorized to acquire and
hold real estate for investment purposes. Prior to this
time, life insurance companies could own real estate only
for their own occupancy use and in such cases where it
was acquired through fore-closure. In the latter in­
stances it had to be sold generally within 5 years. Other
states were slow to follow the lead o f Virginia in this
field during the war years, and it was not until 1945 that
7 other states enacted the necessary legislation to afford
their life insurance companies access to investment in­
come producing real estate. Further adoptions of such
enabling legislation were widespread during 1947, and
at the present time only 8 states either still prohibit the
acquisition of real estate for investment purposes or
have legislation sufficiently doubtful in meaning as to
inhibit such holdings.
South Carolina and West Virginia are the only two
states of the Fifth Federal Reserve District that do not
have specific provision in their laws authorizing the ac­
quisition of real estate for investment purposes. In the
absence, however, of statute and charter limitations
there is little reason for doubting the right of life insur­
ance companies in those states to make such investments.
The pertinent laws of Virginia, Maryland, and the Dis­
trict of Columbia restrict total holdings of real estate for
investment purposes to 5% of the admitted assets of the
particular companies, and in North Carolina such hold­
ings must not exceed 4% of the admitted assets nor
more than 50% of capital and surplus, whichever is less.
Considering the fact that it was not until 1946 that
the largest life insurance companies were permitted, un­
der the New York laws, to acquire real estate for long­
term lease to other companies, the dollar volume of such
investments has risen to an impressive level. As of
December 31, 1946 total holdings of non-housing real
estate of life companies amounted to only $70 million.
Acquisitions during 1947 raised the amount to $122
million at year end, and an increased rate of purchases
during the current year boosted the total to $321 million
by July 30. This investment is distributed mainly be­
tween manufacturing concerns and commercial enter­
prises but covers a wide variety of activity within these
fields such as manufacturing plants o f numerous kinds,
office buildings, department stores and retail outlets,
service and repair stations, research laboratories, super
markets, and warehouses.
Unfortunately, no data are available on the geo­
graphical distribution of business property leased from
institutional investors, and it has not been possible to
estimate the total amount of property so held in the Fifth




District. The only state of the District for which any
data are available is North Carolina. From the inception
of its enabling legislation in 1945 through August 1948,
real estate purchased for lease by North Carolina in­
surance companies amounted to $8.7 million, $3.7 mil­
lion of which was leased to manufacturing companies
and $5 million to (commercial enterprises. It is likely
that because Virginia first permitted life insurance com­
panies to acquire real estate for investment purposes
that its insurance companies hold a larger amount of
such property than do such companies in the other states
of the District. For example, at the end of 1947 two
Virginia life companies held a total of over $10 million
of income-producing real estate.
Nature of the Transaction
When the “ purchase and lease,, transaction was first
started, it was confined mainly to commercial properties,
particularly retail locations, with only top names being
considered. Such owner-user properties were sold to
tax-exempt institutions and a lease signed under which
the properties were rented to the former owner on a
long-term basis. This is still the general nature of such
transactions, but in a number of cases, the insurance
companies have acquired land and constructed buildings
to the specifications of the pre-determined tenants. An
example of the latter arrangement was the announce­
ment in January 1947 that the New York Life Insur­
ance Company had contracted to finance the post-war
plant expansion program of the Continental Can Com­
pany. Under this agreement New York Life may spend
as much as $10 million in constructing factories design­
ed by Continental Can and to be rented by the latter com­
pany under a long-term lease.
The period of lease is generally related to the useful
life of the building or, in the case of newly constructed
properties, for a shorter period. The actual number of
years for which leases are drawn ranges from 15 to 40
years, averaging probably about 25. Usually, the agree­
ment provides the lessee with an option for renewing
the lease after its initial expiration and at a sharply re­
duced rental. The initial rental is set at an amount gen­
erally sufficient to amortize all of the cost of the prop­
erty before or by the end of the lease and includes also
a “ reasonable” return to the owner on the cost of his
investment. The Virginia statute, for example, requires
!the lessee to pay an annual rental that will enable the
owner to write off his investment at or before the normal
termination of the lease or at or before the end of 50
years should the lease extend for a longer period. (Sec.
5258a, Virginia Code 1942 as amended.) Similarly, it
is required in North Carolina that 75% of the invest­
ment be written off by the termination of the lease or

r3i

FEDERAL RESERVE BANK OF RICHMOND

at the end of 30 years, whichever is the longer. (Sec.
58-79 G.S. 1943 as amended by Chapter 386, Laws of
1945.) In some states a limit is placed on the return to
the insurance company; for example, in New York the
law states that the amount of rental which shall be con­
sidered income shall not be more than 4% on the invest­
ment.
Other typical provisions in the lease require the lessee
to assume all costs of operating the property, including
taxes and insurance, and to make any capital outlays
necessary to maintain the property— this is the so-called
“ carefree” lease. In such cases in which the lease is to
a subsidiary concern, the guaranty of the parent com­
pany is usually required in order to obviate a loss occa­
sioned by the unwillingness of the parent company to
support the subsidiary in times of financial stress.
It has been stated by one authority that the sale of
property preceding the lease arrangement is usually
made on the basis of the cost of the property, resulting
in neither gain nor loss to the seller. However, it is
likely that in view of the high level of real estate prices
that has prevailed during the post-war period, many of
the deals must have resulted in a profit to the selling
company. Such a profit, where meeting the require­
ments of a capital gain, would be subject to a levy of
only 25%. It may be assumed, however, that sales made
in conjunction with a lease agreement are examined
closely by the taxing authorities.
In view of the attention given currently to the conten­
tion that there is a shortage of equity capital and to the
suggestions that have been made for making more pri­
vate savings available for investment in business equi­
ties, it should be noted that the investment of life insur­
ance funds in business properties for income purposes
is a form of equity financing , though perhaps not from
the point of view of the lessee. By selling his properties
to an institutional investor, the owner converts fixed
assets into cash and thus acquires an amount of working
capital which he might otherwise have sought in the
securities market or in obtaining a loan from a bank.
To the extent that such financing has been engaged in
in order to expand plant and equipment (see example
given above with respect to the Continental Can Com­
pany), it has contributed to the current inflationary
boom by swelling expenditures for goods and services
that have been particularly scarce.
Resultant Position of Seller-Lessee
In general, the purchase and lease transaction as a
form of investment for institutional investors and as a
means of financing for commercial and industrial enter­
prises evolved as a result of several conditions. Among
the conditioning factors are an increasing amount of
institutional funds seeking permanent investment and
the pinch felt by business concerns caught between high
costs of capital expansion programs and concomitant
needs for additional working capital. However, it might
be helpful to consider separately the reasons why busi­
ness firms have been willing to sell their properties and
lease them back and why insurance companies have be­
come the other party to such transactions.




4

A number of authorities have concurred in holding
that tax considerations have been a primary factor in
inducing owners to sell and become least-holders. A n­
nual rental payments made under the lease constitute
deductible operating expenses for tax purposes, and it
may be that this annual deduction, including the portion
paid for amortization purposes, will exceed over the
long run the deductions that would otherwise have been
taken in the form of depreciation and, if money had
been borrowed to acquire the building, interest on debt.
In this connection it might be pointed out that while the
seller-lessee is, in effect, exchanging one form of taxable
deduction for another, the latter, the rental payments,
will not be available in the way that depreciation allow­
ances may be— for example, for interest payments dur­
ing times of financial stringency. Funds represented by
the latter are an important source of equity capital to
corporations, and during periods of depressed business
conditions asset replacement may be negligible, enabling
the company to shunt funds ordinarily used for re-in­
vestment in fixed assets into working capital purposes.1
It was stated above that the rental payment, including
that amount for amortization, may be considered as a
deductible expense for tax purposes. This has been the
usual statement made in the relatively few articles writ­
ten about this new method of corporate financing. How­
ever, it is interesting to note that a question has been
raised whether the entire amount o f the rental paid by
the lessee will be permitted as a deductible expense.
Writing in the August 15, 1948 issue of The N ew York
Times, Mr. G. N. Nelson argued that “ The sale must be
outright and bona fide, and the rental provided for must
be exclusively rent. Obviously if a leasehold calls for a
rate of rental which yields to the lessor a margin over
and above taxes, interest and other necessary expenses,
plus a return on the lessor’s investment, it would be con­
tended that such excess represents a partial retirement
of the lessor’s investment and thus, to the disadvantage
of the lessee, place in jeopardy the deductibility of rental
payments.”
This reasoning would appear to be pertinent to those
cases in which the lessee is given a dual option at the
expiration of the initial term of renewing the lease at a
nominal rental or of purchasing the property. This is
reported to be a provision, for example, in the contracts
drawn up for the sale of properties by Safeway Stores,
Inc. That is, it is stated that Safeways require an option
to repurchase any property it sells “ at the original sales
price, less the amount of amortization paid to the date of
cancellation.” (See Business W eek, April 17, 1948,
p. 100.) Here there is the possibility that the tax author­
ities might regard such a transaction as a loan secured
by the title to the property which has passed to the lessor
for the duration of the lease. Such an interpretation
might preclude the tax advantages ordinarily cited in
favor of the lessee when he does not have the option of
repurchase. A recent decision of the U. S. Tax Court
might be cited in connection with the question of rental
payments. In an agreement whereby a concern rented
1See Koch, The F in an cin g o f L arge C orporations, 1920-1939, N ational
Bureau o f E conom ic Research, 1943, pp. 27-32, 85-86.

MONTHLY REVIEW

machinery from a manufacturer it was stipulated that
the lessee would pay a yearly rental of $10,000 and have
an option to purchase the machinery at the end of the
lease period by paying an undisclosed sum to obtain title.
It was held that the rental did not constitute a deductible
expense for tax purposes and that the rental agreement
was in effect a purchase of the machinery. Therefore,
only the interest included in the consideration could be
treated as a deduction item. (In re Judson Mills, 11 Tax
Ct. No. 3.)
It would appear that the question of deductibility of
rental payments is based primarily on something else
again from a bona fide sale and a simple lease contract.
It may be felt that some question may come to be at­
tached to such amounts of rental payments held to repre­
sent equity in the property, but to date no substantial
support is available for generalizing along such lines.
A second reason that has been advanced by some as
the dominating one for many of the transactions to date
is the fact that the sale of real estate releases funds in the
form of badly needed cash for expansion programs or
for improving working capital positions that have been
pinched by steadily rising costs and expanding opera­
tions. Many sellers have explained their conversion of
fixed assets into working capital by stating that funds so
used are more profitable than if kept immobilized in the
form of real estate.
Another major reason given for the willingness of
many companies to sell their properties is closely related
to the foregoing point in that it is claimed that it affords
a more desirable method of raising funds for expansion
and working capital than by resorting to bank loans or
by issuing additional securities. Although this has un­
doubtedly been true for a number of individual con­
cerns, it is difficult to generalize in this respect for all
companies. Many found it difficult in the past two
years to sell new stock issues on satisfactory terms and
were forced to obtain external funds by borrowing. But
despite the large increase in corporate debt that has oc­
curred during the post-war period, business corpora­
tions as a whole show a slightly better equity-to-debt
ratio now than they could in 1939. However, numerous
individual companies have found in the sale-lease ar­
rangement a solution of unfavorable alternatives of
borrowing long-term funds which, for their particular
companies, would produce an unsatisfactory capital
structure, increasing considerably their short-term debt
by bank borrowing, or issuing stock on unsatisfactory
terms. As compared with the sale of stock, it is pointed
out also that the sale-lease transaction does not dilute the
stockholders’ equity or introduce new voices into the
management of the business.
A fourth reason or advantage ascribed to such trans­
actions is claimed in such cases where the property sold
had been subject to a mortgage. Here it is pointed out
that the sale of the property wipes out that funded debt
with a consequent improvement in the position of the
company for future financing. O f course the equity-todebt ratio is improved, and the company is free of the
future problem of paying or refunding the debt. But in
some respects the claimed improvement in the credit po­




OCTOBER 1948

sition of the company might be more apparent than real.
For example, although the lessee is not required to show
in his financial exhibits a liability for the contractual
rent payment, (although such leasehold obligations
must be shown in registration statement filed with the
Securities Exchange Commission and a statement made
of rent payments), the investor or other interested par­
ties examining that statement should treat the rental
obligation, at least in part, as the equivalent of interest
as a fixed charge.
Along with the considerations of the third and fourth
reasons cited for the willingness of companies to sell
their properties and sign long-term leases for their con­
tinued use might be injected an unfavorable note drawn
from past experience. During 1931 and 1932 many
companies, particularly retail enterprises, were hard
pressed or failed to meet rental obligations set at opti­
mistic amounts during the preceding period of pros­
perity.2 It is felt that this is a point that should be care­
fully checked at the present time, particularly in view
of the fact that the rental payment contracted for during
the initial term o f the lease is, in most cases, very high
in relation to the value of the property.
Other reasons that have been given for the participa­
tion of some sellers in such transactions are the possi­
bility of realizing a gain on the sale which will be subject
to only the capital-gains tax and the ability to write off
as a leasehold improvement during the term of the lease
dny improvements made by the former owner to the
properties and financed out of the proceeds of the sale.
From the Point of View of the Insurance Company
The active interest that has been exhibited by life in­
surance companies in purchasing business properties for
long-term lease to the former owners is primarily a two­
fold one. In the first place there has been a growing
need for a new source o f long-term investment. The rise
in life insurance ownership in the past three years repre­
sents the greatest dollar increase in a comparable period
of time in the history of life insurance. As of June 30,
1948, for example, total life insurance owned had in­
creased $17 billion over the amount owned at mid-year
1947. As a consequence, insurance assets are increasing
well over $3 billion annually, and investment managers
have encountered a growing problem in finding satisfac­
tory investment outlets for new funds.
The purchase-lease transaction, however, not only af­
fords a new source of investment, and one that is likely
more permanent than a mortgage, but it provides a rate
of return that exceeds that which can be obtained from
the holding of high-grade securities. According to one
insurance executive, life companies are obliged to earn
about 2.8% net to maintain reserves for payments on
life insurance and annuity contracts.3 The average yield
on triple A corporate bonds (M oody’s index) has been
2Graham and Dodd, Security A nalysis, p. 228, cite the case o f the U nited
C igar Stores which in 1928 reported no funded debt and earnings equal
to about 7 tim es the preferred debt. “ Y et so crushing were the liabilities
under its long-term leases (and to carry properties acquired by subsidi­
a ries), that in 1932 bankruptcy was resorted to . . . ”
8Glenn McHugh, V ice President, T he Equitable L ife Assurance Society
o f the U nited States, in an address to the annual convention o f N ational
A ssociation o f B uilding Owners and M anagers, June 16, 1948, at St. Louis.

FEDERAL RESERVE BANK OF RICHMOND

declining steadily since the early thirties, going below
3% in 1940 and to 2.5% in 1946; for the first six months
of this year the average was 2.8%. As a consequence of
the declining trend in bond yields, the net rate of in­
terest earned by the life insurance companies in this
country on their invested funds dropped under 3% in
1946 for the first time in the history of the business. The
1946 earning rate was 2.92%, as compared with 3.7% in
1939, and despite an upturn in bond yields during 1947
the net rate of interest earned by the life insurance com­
panies fell to a new low last year of 2.88%. Hence the
interest of life insurance companies in a medium of in­
vestment that will satisfy safety requirements and yield
over 3% (limited to 4% in New York by the law which
states that the amount of rental which shall be consid­
ered income shall not be more than 4% on the invest­
ment.
There exist, naturally, differences of opinion on the
suitability of purchase-lease transactions as a means of
investment for life insurance companies. One insurance
executive has expressed the opinion that the selection in
such situations is against his company and that the dan­
ger in such investments in time of adverse business con­
ditions is too great to merit such holdings to any extent.
However, it would appear that at the present time the
consensus favors the opinion that such transactions can
be made safe enough to warrant investment status. One
of the executives of The Equitable Life has pointed out
that most of the large retail properties which have been
sold were never on the market before; in other words,
these properties are not similar to other forms of wealth
which may be subject to frequent market valuations, and
they are not up for sale to the average buyer.4
It has been contended in some quarters that these sales
have enabled owners to unload old, inefficient stores at
prices pushed to a peak by inflationary forces. It may be
that numerous owners have attempted to dispose of
properties that they felt might become financal burdens,
but it is just as likely that insurance companies have
turned thumbs down on the great majority of such o f­
fers. Certainly, counter-contentions stress the careful
analysis and severe selectivity that is exercised by buy­
ers in their attempt to obtain tailor-made deals to their
satisfaction. For example, one of the more numerous
types of real estate that has been bought by insurance
companies is well located retail properties owned for­
merly by and leased back to tenants with prime national
credit. It is felt that the possibility of failure on the part
of such tenants is relatively remote, but that even in that
event the insurance-company owner would have basic
protection in the location and land value.
Another type of property that has been the subject of
purchase-lease arrangements and which is referred to in
defense of the suitability of such investments for life
companies, is industrial and warehouse property. With
good tenants and with sufficient alternative uses, it is
contended that such properties offer a minimum of
speculative elements. Should the tenants fail, and they
would have paid a fairly high rent in the interim, the in­
40 p cit.




surance companies feel that they would have a reason­
able assurance of leasing the properties to new tenants.
Special use properties are something else again. The
success of the transaction to the insurance company is
dependent solely on the credit of the seller-lessee. Should
the latter fail to meet the terms of the lease, the owner is
confronted with the problem of finding a new tenant,
with the likelihood of a considerable time lag involved as
well as the possibility of having to revamp the functional
design of the property. Properties of this nature, how­
ever, have been the subject of a number of purchaselease transactions.
Similarly, although some office buildings have been
bought by insurance companies for investment purposes,
they suffer certain disadvantages in the feature of mul­
tiple tenancy and expense of efficient management. More
pronounced speculative elements are found in deals in­
volving unimproved or poorly improved properties.
Here the prospects are purely speculative, and although
no information is available on the extent to which such
real estate has been purchased by life companies, it is as­
sumed that there has been a minimum of activity in this
direction.
Thus, insurance companies have acquired real estate
for investment purposes because it affords a new and
permanent outlet for an increasing volume of funds that
might be so placed as to earn their keep and because it
offers an attractive rate of return. Closely allied to these
purposes and advantages is the feature of a fairly rapid
return of the amount invested in each transaction. As
was pointed out earlier, the lease provides for the amor­
tization of the cost of the property by or before the ter­
mination of the initial period of the lease; in the process
the insurance company comes into funds available for
reinvestment in the light of existing market conditions
and reappraisal of business prospects. At the end of the
first lease-term the insurance company has recovered
the cost of its investment and is, therefore, in a position
at the outset to offer the lessee the advantage of an op­
tion to renew the lease at a greatly reduced rental. The
receipt of subsequent rentals is, therefore, a return on
an investment which has already been recovered and re­
invested to produce a new flow of income.
Another advantage that has been attributed to the
purchase of real estate for investment purposes by life
insurance companies is that it affords much more direct
control over the investment than is usually enjoyed. As
indicated above, however, this characteristic might not
be so desirable as it appears if the investment is of such
a nature as to require specialized skills, and consequent
extra costs, of management in maintaining or securing
continuous or full tenancy. With respect to the option
of renewal open to the current tenant it is obvious that
a risk is incurred in the possibility that the initial lease
will expire during a period of depressed business con­
ditions and may not be renewed, leaving the owner with
a non-earning asset for an indeterminable period. In
the case of a long-term mortgage, in the absence of de­
fault, there is no problem of reacquiring property; in
the case of the subject investment the property is owned
and must be kept leased to produce a return and to avoid

rfil

MONTHLY REVIEW

OCTOBER 1948

costs of holding. Even though the owner is in a position
to offer a lease on very low rental terms, assuming that
the original tenant has not exercised his option to renew,
it may be more difficult and costly to “ reinvest” the
property, that is, to secure new tenants, than it would be
to invest liquid funds at that particular time.

Prospects
The pattern of purchase-lease transactions has not
shown material variation so far, but it is probably too
early to say that it has jelled so that future deals will
follow the form assumed in the initial stage of the de­
velopment. Some authorities feel that in some cases the
rate of return, slightly above 3% , has not been com­
mensurate with the risk involved and that the competi­
tion engendered by the rapid entrance of insurance com­
panies into a new field has also forced rather loose terms
in other respects. It may be that future transactions will
contain provisions designed to secure an adequate “ cov­
erage” o f the rental payment on the part of the lessee
and to safeguard working capital by certain dividend
restrictions. Similarly, it is likely that what constitutes
a satisfactory differential between the return on real
estate held for investment and on high-grade bonds will
become more clearly established.
Some concern has been expressed that if the present
rate of acquisitions by life insurance companies con­
tinues, the latter will secure a dominating position in
the non-housing real estate field. This fear should be
allayed by the fact that the statutes in most states set a
definite ceiling to the amount of such investments that
can be made by insurance companies by limiting the pro­

AVERAGE DAILY TOTAL DEPOSITS* OF
MEMBER BANKS
Last Half of Aug. Last Half of
% of
$ thousands U.S. $ thousands
.94 1,011,593
1,001,939
Maryland
.59
644,307
634,066
Reserve city banks
.35
367,286
367,873
Country banks
.82
887,875
877,505
District of Columbia
865,291
855,232
.80
Reserve city banks
.02
22,584
22,273
Country banks
1,288,023 1.21 1,313.080
Virginia
309,392
303,054
.29
Reserve city banks
.92 1,003,688
984,969
Country banks
612,900
.56
603,043
West Virginia
.77
834,299
825,090
North Carolina
.35
373,041
379,705
Reserve city banks
.42
461,258
445,385
Country banks
440,692
.40
422,309
South Carolina
5,017,909 4.70 5,100,439
Fifth District
107,901
106,748 100.0
U. S. (millions)
♦Excluding interbank demand deposits.




portion of their assets that can be so held. Assuming the
average of state limitations to be 4% , life insurance com­
panies could hold about $2 billion of their total assets
of $50 billion in the form under discussion. Holdings as
of July 30, 1948 amounted to about 16% of this theore­
tical maximum. (It should be pointed out that the as­
sumed $2 billion of possible investment is a generous
estimate in view of the 3% limitation in New York.)
Taken in conjunction with the preponderant share of
insurance companies in the $1.8 billion of private place­
ments of new corporate securities in 1947, it is obvious
that purchases of real estate for investment purpose
adds considerably to the importance of life companies
in the field of corporate financing.
Finally, it might be pointed out that although life in­
surance companies have become the heaviest buyers of
real estate for investment purposes since their entry into
the field in 1946, other tax-favored and tax-exempt in­
vestors were earlier parties to such investments. The
largest deal of this type, in fact, was that which involved
the sale in 1945 of nearly all of the real estate and build­
ing holdings of Allied Stores Corporation, the largest
department store chain in the country, to Union College
for around $16 million. An earlier transaction was nego­
tiated in 1943 with the sale by Gimbel Brothers of its
properties in Philadelphia and Pittsburgh to a trustee
for four schools for a total consideration of $10 mil­
lion. For the most part, when colleges are the buyers,
the municipalities in which the properties are located
suffer a loss in tax revenues as a consequence of the in­
stitutions’ tax-exempt status.

Sept.
% of
U.S.
.94
.60
.34
.82
.80
.02
1.22
.29
.93
.57
.77
.34
.43
.41
4.73
100.0

[71

PRINCIPAL ASSETS AND LIABILITIES
FIFTH DISTRICT MEMBER BANKS
BILLIONS OF DOLLARS

FEDERAL RESERVE BANK OF RICHMOND

The Cotton Textile Situation
The cotton textile industry turned out 11,108 million
linear yards of broad woven goods 12 inches and wider
in the calendar year 1942. This was an all time high
record and 34 per cent above the 1939 output. It was
accomplished before a serious drain on manpower was
felt as a result of inductions into the armed services and
migrations to better paying jobs. Production of cotton
goods declined in each succeeding year until 1945 to
8,721 million linear yards or 22 per cent below the peak
year. This was not due to any slackening of demand
but came about because of the mentioned loss of man­
power.
Factors Making Post War Demand
Reduction in output during the war years made the
war requirements for cotton goods an increasing pro­
portion of the output and as a consequence the civilian
market was starved of new production while inventories
o f these goods in all channels of distribution were badly
depleted. A t the end o f the war there was an inordi­
nately large domestic demand for cotton goods which can
be attributed to three factors.
First, there were many more people gainfully em­
ployed at the end of the war than had ever before been
employed in peacetime. The urge to save and the re­
straint on consumer purchasing was removed with the
ending o f the war.
Second, the stocks of these goods held by wholesalers
and retailers were hardly in the nature of stocks at all, but
were more like goods in transit from manufacturer to
consumer, into the back door o f the establishment and
out through the front door. This meant that if these
stocks were to be built up to where a selection was pos­
sible by the merchant in the case of wholesale distribu­
tion or the consumer in case of retail distribution, pro­
duction in units would have to exceed sales at retail to
accomplish this accumulation. In order to build an in­
ventory equivalent to 60 days requirements, therefore,
it would take about 14 months production at the going
rate of demand, to fill 12 months requirements and at
the same time build a 2 months supply, or stated another
way, it would take a rate of production 162 per cent
A
above demand to accomplish the inventory accumulation
of two months supply in one year’s time. Then, too,
there were industrial users of cotton goods which in
many instances had not been producing the products
requiring cottons during the war but had been producing
munitions. These concerns had no cotton goods inven­
tories at the end of the war, and they had to be accumu­
lated in their entirety. When it seemed that the cotton
textile industry was likely to fill the added requirements
of inventory accumulation by the spring of 1947, there
appeared an astounding demand for export. This added
requirement in the year 1947 amounted to 14 per cent
of the year’s production.
Third, there has been an increase in the civilian popu­
lation from mid-1945 to mid-1948 of 14 million, but in




this period there was a substantial decline in military
personnel. Even so, the largest number on record is
now employed, and their earnings and savings have been
such as to permit a large demand for cotton goods.
Post War Production
As pointed out earlier the dearth of manpower was
the cause of a reduction in cotton goods production in
1943, 1944, and 1945 and it was similarly a retarding
factor in post war production. Although there was no
reconversion problem involved in the shift from war
production to peacetime production of the cotton textile
industry other than a readjustment of looms and some
shift to the production of higher count yarns, output in
1946 increased only 5 per cent over 1945, compared with
a gain of 12 per cent in the production of all non-durable
goods industries in the period. Production in 1947 rose
more than 7 per cent over 1946 to a level within 12 per
cent of the 1942 peak; it was 18Y per cent higher than
in 1939.

Employment and Wage Rates
Employment in the cotton goods industries was slow
to recover in the early post war period. This was partly
due to the liberal unemployment provision afforded re­
turned veterans; partly due to the still wide differential
in wage rates relative to the average of all manufacturing
industries at the end of the w ar; and partly due to the
continued loss of women and overage men who had en­
tered the labor force on a temporary wartime basis. The
hourly wage scale in the cotton textile industry, which
was maintained through 1944 at about 60 per cent of
that in all manufacturing industries, began late in 1945
to reduce the spread. By the end of that year the ratio
was 72 per cent, by the end of 1946 it was 78 per cent,
and by the end of 1947 it was 83 per cent. Workers were
again attracted to the mills in the last half of 1946 and,
except for a moderate cutback in the summer of 1947,
employment in the industry continued upward to a post
war peak in March of this year to a level within 4 per
cent of the all time high level established in 1942.

181

OCTOBER 1948

MONTHLY REVIEW

summer when translated into lower prices of finished
products may aid in a small way to sustain demand for
apparel and household uses. Productive activity of
those industries using cotton goods as a raw material
such as automobiles, tires, other rubber goods, and what
not, are in the main showing production trends no better
than flat. Industrial consumers are exercising a cautious
purchasing policy, for the most part a 60-day coverage.
With no gain in operations of these industries and with
no likelihood of a further accumulation of inventories
by them, the best demand outlook from this quarter over
the next several months would be no better than steady.

COTTON GOODS
(EXCLUSIVE OF SM ALL WARES)

Thus the loss of considerable part of a trained labor
force and the necessity of retraining a new one in a tight
labor market retarded the production of cotton goods in
both 1946 and 1947. As an indication of the strength of
demand in relation to the output in those years, whole­
sale prices of cotton goods rose 83 per cent from August
1945 to April 1947. This rise was exceeded by only 10
out of 45 of the sub groups reported by the Bureau of
Labor Statistics from August 1945 to their respective
peaks, land compares with a gain of 53 per cent in the
average prices of all commodities.

Current Demand Factors
The inordinate rise in prices has had its effect in ton­
ing down the domestic demand to some extent, and ex­
port demand has halved what it was last year for want
of purchasing media. Together these have been instru­
mental in changing wholesale and retail inventory policy
from one of accumulation to one of reduction. Thus at
the present time production has overtaken shipments and
finished stocks at the manufacturers levels are rising in
some cases.
The best indications available in the retail trade sta­
tistics would seem to indicate that sales in dollar terms
have leveled off. This probably means that there has
been some reduction in unit sales. Such reductions as
have occurred in prices of cotton goods this spring and




Effect on Production
Under the assumption that industrial usage of cotton
goods would be sustained in the next several months at
essentially the same rate shown thus far this year, and
that apparel and household textile sales at retail would
be sustained at rates that have been prevailing recently,
the outlook for production of cotton goods in the last
half of 1948 and perhaps the first quarter of 1949 is in­
dicated to be 5 to 10 per cent lower than in the first half
of 1948 and from about even to 5 per cent below the last
half of 1947. If the last half year production should run
5 per cent below the first half the 1948 year’s total out­
put would be about 2 per cent ahead of the 1947 output.
If the last half year output should fall 10 per cent below
that of the first half the 1948 production would be 2 per
cent below that of 1947.
Inventories of cotton goods in the hands of converters
and cutters are always of questionable consideration in
the appraisal of their probable takings from the cotton
mills, and the same can be said of the inventories of
wholesalers and retailers with respect to their demands
placed on the converters and cutters.
Market information reflecting the opinion of goods
manufacturers or their selling agents has it that all of
the above mill outlets for goods have been reducing
their inventories in the last several months, and that in
order to meet the current demand these sources will
soon have to place orders in volume with the mills.
Thus far in October there has been no evidence of a
wave of buying at the mill level, but there has been what
may be called a fair volume of fill-in business or pur­

roi

FEDERAL RESERVE BANK OF RICHMOND

chase for near-by delivery. Furthermore with a large
cotton crop now coming to market and the prospect that
cotton prices will be held at support levels, plus the fact
that mill capacity is not likely to be approached over the
remainder of the year or in the first quarter of 1949, it
would seem probable that a much larger amount of spot
purchases of cotton goods would be seen in this period
than at any time since the war began.
All factors taken together indicate that ultimate do­

mestic consumption of cotton goods is likely to be well
sustained at levels that have been current for several
months. The continued diminution of exports and a
readjustment of inventories in converter and cutter
hands, as well as at wholesale and retail level in adjust­
ment to the above factors, is good evidence that either
cotton goods production will be cut back or that mills
will accumulate a burdensome stock of goods. There is
evidence that some of both has already occurred.

Business Conditions
Continued from page 2

that there will be much improvement in production since
this demand can be met from gray stock.
Trade
Department store sales in the Fifth District in Sep­
tember rose seven per cent on a seasonally adjusted basis
over August, and stood 11 per cent higher than in the
same month last year. Department store stocks rose
three per cent from August to September after seasonal
adjustment, and in the latter month were 18 per cent
higher than a year ago. Gains in sales were made over
August in all states of the District except West Virginia.
The chief cause of the September rise was a substantial
increase in sales of women’s and misses’ ready-to-wear
apparel. This may be a reflection of the acceptance of
the long skirt this year whereas last year there was con­
siderable resistance to it.




Despite the promotional activity of stores in antici­
pating Regulation W , there does not appear to have been
much response to the easier credit terms on major house­
hold appliances. Department store sales in September
returned to the advanced level of June in all states of
the Fifth Federal Reserve District. Sales in most lines
of wholesale trade rose in September, but in most cases
the trend of sales gives more evidence of flattening off
than of rising, automotive supplies and hardware to the
contrary notwithstanding. Sales of gasoline have been
on an upward trend in the Fifth District thus far this
year. The rise has been more pronounced in South Car­
olina and West Virginia than in the other states of the
District. North Carolina even shows some evidence of
flattening out the trend. It is presumed that sales of
gasoline would also indicate a rising trend of sales in
general of filling stations.

f IQ 1

OCTOBER 1948

MONTHLY REVIEW

DE B ITS TO IN D IV ID U A L ACCOU N TS

F E D E R A L R E S E R V E B A N K OF RICH M ON D
(A ll Figures in Thousands)
O ctober 13,Chg. in A m t. F rom
1948
9-15-48
10-15-47

ITEM S

T otal Gold Reserves .............................$1,089,557
Other Reserves .....................................
16,239
Total Reserves ................................... 1,105,796
Bills Discounted .....................................
30,272
Industrial Advances .............................
50
Govt. Securities, T otal.......................... 1,513,385
Bonds ....................................................
632,592
N otes ......................................................
59,235
Certificates .........................................
403,333
Bills ........................................................
418,525
T otal Bills & Securities .................... 1,543,707
U ncollected Items .................................
254,589
31,763
Other Assets ...........................................
Total Assets ....................................... 2,935,855

— 15,803
+
295
— 15,508
+ 15,150
+
5
+ 13 6 ,2 4 4
+ 83,217
— 56,846
+ 89,839
+ 20,034
+ 151,400
— <55,740
+
6,361
+ 86,513

— 150,655
+
2,310
— 148,345
+ 24,421
+
30
+ 208,395
+ 585,503
+ 26,356
— 66,010
— 337,454
+232,846
— 43,678
+ 14,560
+ 55,383

Federal Reserve Notes in C ir........... $1,694,776
Deposits, T otal .......................................
943,030
Members* Reserves ..........................
839,797
U. S. Treas. Gen. A cct...................
80,385
F oreign ..................................................
17,513
Other Deposits ...................................
5,335
Def. A vailability Items ......................
256,497
Other Liabilities ...................................
902
Capital A ccoun ts ...................................
40,650
T otal Liabilities ................................. 2,935,855

+
+
+
+
—
+
—
+
+
+

—
+
+
+
+
+
—
—
+
+

15,619
87,374
48,561
38,200
1,097
1,710
18,066
274
1,312
86,513

38,028
97,508
78,742
11,921
4,562
2,283
8,541
40
4,484
55,383

51 R EPO RTIN G M EM BER B AN K S— 5th DISTRIC T
(A ll Figures in Thousands)
October 13,
1948

ITEMS

Real Estate Loans
U. S. Treasury Bills ..............
U . S. Treasury Certificates
U . S. Treasury Notes ..........

Cash Items in Process o f Col.
Due from Banks ........................
Currency & Coin ......................
Reserve w ith F . R . Banks ..... .
Other Assets .................................

$ 873,071^
414,741
200,434
263,622
1,670,765
60,892
206,788
66,130
1,206,288
130,667
281,493
189,847+
71,642
543,967
46,705
3,677,490

$2,824,795
2,111,299
59,721
Deposits o f U. S. Govt.................
183,864
Deposits o f State & Local Govt.
434,568#
D eposits o f Banks ........................
35,343
Certified & Officer's Checks .....
601,632
. 580,669
20,963
Other Tim e Deposits ..................
16,350
L iabilities fo r Borrow ed Money
17166
A ll Other Liabilities .....................
217,547
3,677,490

Chg. in A m t. From
10--15-47
9-15-48
+
+
—
—

+
+
—
—

+
+
+
+
—

+
+
+
+
—

+
+
+
+
—

+
+

2,352
8,857
197
6,281
24,031
16,766
4,015
25,786
16,740
2,286
14,289
2,257
5,681
18,199
833
17,914

+
+
+
+
—
+
+
—
+
+
—

+
+
—

—

5,615
24,207
1,006
9,763
15,493
11,856
649
93
556
12,650
2,923
1,923
17,914

____

+
+
+
—
—
—

+
+
+
+
—

113,655
56,565
39,929
22,887
193,666
20,046
373
36,376
184,470
6,761
18,564
16,286
7,270
36,663
4,942
38,742
44,205
2,120
18
6,635
39,464
13,514
17,539
18,580
1,041
14,150
109
8,743
38,742

♦Net Figures, reciprocal balances being eliminated.
♦♦Less losses fo r bad debts.

STA TE S

CON STR U C TIO N CO N TRA C TS A W A R D E D
% Change
% Change
from
from
A ugust
A ug. 1947
8 Mos. ’ 48* 8 M os.’ 47
1948

$32,555,000
M aryland ......................
4,902,000
Dist. o f Columbia .....
19,251,000
V irgin a ........................
4,742,000
W est V irgin ia ..............
14,454,000
N orth Carolina ..........
South Carolina .......... ....... 4,953,000
$80,857,000
F ifth D istrict ..........
S ou rce: F. W . Dodge Corp.

M O N TH S

6
19
14
54
30
11
10

$224,611,000
55,224,000
144,401,000
67,226,000
133,419,000
61,831,000
$686,712,000

+
+
+
+
+
+
+

22
17
15
144
86

398
439
292
3,800
2,510

$ 511,000
283,000
305,000
$3,518,000
3,991,000

Septem ber
1948
D ist. o f Columbia
W ashington
............$
M aryland
B altim ore ........................
Cumberland
.............
F rederick ........... .............
H agerstown
............
North Carolina
A sheville ............. .............
Charlotte ............ ............
Durham ............... .............
Greensboro ......... ............
K inston ................ ............
R aleigh ............................
W ilm ington ...... ..............
W ilson .................. ............
W inston-Salem
............
South Carolina
Charleston ......... .............
Columbia ............. .... ........
Greenville .........................
Spartanburg
.................
V irginia
Charlottesville
.................
Danville ...........................
L ynchburg ......... ............
N ew port News
............
N o rfo lk ................ ............
Portsm outh .......................
R ichm ond ..|...... ..............
Roanoke ............. ............
W est V irgin ia
Bluefield ............ ............
Charleston ......... .............
Clarksburg ....... ............
H untington
.............
P arkersburg
............
D istrict Totals

% Chg.
from
Sept. 1947

716,813
965,795
22,402
20,812
27,061
52,636
251,934
186,755
75,098
40,982
137,014
36,607
57,327
143,553

% Chg.
from
9 Mos. ’ 47

9 Mos.
1948

7

$ 6,473,648

+ 12

+
+
+
+

9
1
7
8

8,584,167
191,637
169,122
237,921

+ 10
+ 3
+ 8
+ 9

+
+
+
+
+
+
+
+
+

10
20
27
23
37
33
7
46
18

450,578
2,105,222
1,000,968
659,209
145,427
1,014,656
315,241
175,793
1,106,996

+
+
+
+
+
+
+
+
+

14
19
10
19
15
18
5
14
10

+ 18
+ 15
+ 9
+ 10

508,657
815,425
701,562
416,031

+
+
+
+

14
12
15
17
5
10
11
7
13
9
17
15

+

61,581
94,963
78,763
48,499
22,278
49,647
37,284
30,819
178,853
21,529
534,286
85,220

—
+
+
+
+
+
+
+

2
61
4
2
5
19
14
7

194,058
247,73>5
335,773
282,732
1,604,489
177,502
4,201,060
752,188

+
+
+
+
+
+
+
+

50,665
137,200
32,733
61,662
28,251

+
+
+
+
+

34
11
11
23
12

385,699
1,180,877
285,923
516,007
239,595

+ 25
+ 12
+ 18
+22
+ 9

+ 13

$35,475,898

+ 13

............$ 4,289,022

C OTTON C O N SU M PT IO N A N D ON H A N D — B A LE S
Sept.
Sept.
1948
1947
F ifth D istrict S ta tes:
Cotton consumed ....................
373,640
375,069
Cotton G row ing S tates:
Cotton consumed ....................
656,056
639,781
Cotton on hand Sept. 30 in
consum ing establishments 1,040,114
932,003
storage & com presses........ 4,072,470 2,537,390
U nited S tates:
Cotton consum ed ..................
739,139
728,606
Cotton on hand Sept. 30 in
consum ing establishments 1,282,404 1,139,357
storage & com presses........ 4,140,319 _________
2,588,052
Spindles a ctive, U . S................. 21,302,000 21,459,000
S ou rce: Departm ent o f Comm erce.

A u g. 1 to Sept. 30
1947
1948
-----744,376

734,195

1,301,270

1,270,170

1,467,871

1,441,470

COTTON C O N SU M PT IO N — F IF T H D IST R IC T
(In Bales)
N. Carolina S. C arolina
September 1948 ...............
199,705
August 1948.......................
197,359
September 1947 ...............
199,202
9 Months 1948...................
1,911,610
9 M onths 1947...................
1,872,990
S o u rce : Departm ent o f Comm erce

158,607
156,591
158,706
1,474,496
1,507,265

V irginia

D istrict

15,328
16,786
17,161
155,955
163,327

373,640
370,736
375,069
3,542,061
3,543,582

P R IC E S OF U N FIN ISH ED COTTON T E X T IL E S
Sept. 1948 A ug. 1948 Sept. 1947

27
8
9
28
28
45
23

A verage,

17

constructions..

Sateen (1) ....................................................
Duck, average (2) ..... .................................

72.48
80.66
61.00
85.70
64.75
100.23
60.11

77.06
85.40
62.99
91.51
67.77
121.96
62.04

91.27
118.96
74.83
97.67
66.53'
124.41
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 ent fo r sal­
able waste.
S ou rce: Departm ent o f A griculture.

C OM M ERCIAL F A IL U R E S
Total Liabilities
N um ber o f Failures
D istrict U.S.
D istrict
U.S.

Septem ber 1948 ..................
A ugu st 1948 .... ...................
Septem ber 1947 ..................
9 M onths 1948 ....................
9 M onths 1947 ....................
S ou rce: Dun & Bradstreet




+
—
+
+
+
—
+

(000 om itted)

$ 20,703,000
21,442,000
10,034,000
$153,359,000
157,882,000

DE PO SITS IN M U T U A L SA V IN G S B A N K S
8 B altim ore Banks
Sept. 30, 1948
T otal Deposits

n il

........................ $392,826,257

A ug. 31, 1948

Sept. 30, 1947

$392,133,804

$389,479,711

FEDERAL RESERVE BANK OF RICHMOND

B U ILD IN G PE R M IT

FIG U R ES

R A Y O N Y A R N SH IPM EN TS A N D STOCKS

Total V aluation
Sept. 1948
Sept. 1947
M aryland
B altim ore .................................................................. $4,371,240
$
Cumberland ..............................................................
136,800
108,540
F rederick ..................................................................
H agerstow n ..............................................................
281,375
Salisbury ...................................................................
196,296
V irgin ia
Danville .....................................................................
124,114
Lynchburg ................................................................
482,256
N orfolk .......................................................................
641,590
P etersburg ................................................................
124,323
Portsm outh ..............................................................
145,720
Richm ond ..................................................................
4,170,542
Roanoke .....................................................................
303,253
W est V irginia
Charleston ................................................................
902,945
C larksburg
..............................................................
81,175
H untington ................................................................
507,505
N orth Carolina
A sheville .....................................................................
382,396
Charlotte ..................................................................
1,457,707
Durham .......................................................................
579,330
Greensboro ................................................................
559,484
H igh P oint ................................................................
266,320
Raleigh ......................................................................
461,030
R ocky M ount ............................................................
78,500
Salisbury ....................................................................
69,095
W inston-Salem ........................................................
505,480
South Carolina
Charleston ................................................................
607,125
Columbia ..................................................................
310,520
Greenville ................................................................
299,400
Spartanburg ............................................................
147,144
Dist. o f Columbia
W ashington ..............................................................
3,586,137
District Totals ........................................................ $21,887,342
9 Months .................................................................. $215,919,913

Rayon
Staple
R ayon
Staple

6,088,340
298,650
53,625
115,210
161,198

yarn
fiber
yarn
fiber

shipments, lbs............. 68,300,000
shipments, lbs............. 21,300,000
stocks, lbs................... 10,600,000
stocks, lbs................... 4,800,000

13,794
1,457
101
15,352
50,540
30.4

REGIONS
W est

14,620
1,800
155
16,575
52,381
31.6

—
—
—
—
—

6
19
35
7
4

121,565
14,629
1,217
137,411
434,591
31.6

840,310
91,738
433,725

LIN ES
A uto supplies (6 )* .............................
E lectrical goods (6 )* .........................
H ardware (1 1)* .................................
Industrial supplies (4 )* ..................
Drugs & sundries ( 9 ) * ....................
Dry goods (13)*...................................
Groceries (57)* ...................................
Paper & products (6 )* ....................
T obacco & products ( 6 )* ................
Miscellaneous (7 0 )* ........................
D istrict A verage (1 8 8 )* ..............

195,132
856,460
456,740
981,522
328,958
263,355
144,100
87,850
781,359

REPORT

4,228,768

ON

—
+
+
+
+
+
+

4
30
26
24
9
5
2
0
+ 6
+ 3
+ 7

R E T A IL

6,400,000

+
+
+
+
+
+
+
—
+
+
+

4
7
12
30
20
2
3
2
8
2
5

Stocks
Sept. 30, 1948
com pared with
Sept. 30
A ug. 3
1947
1948
—
+
+
—

3
32
48
3
0
+ 24
0

—
+
+
+
—
—
+

1
2
5
1
2
11
5

+ 16
+ 18
+ 21

+ 12
— 8
— 3

+
+
—
—

SALES

+
+
+
—
—

+16

18
5
9
17

18
5
5
19
25

+ 5
—1
+ 2
—2
+ 8
+ 6

+ 5
+ 9
+ 4

Individual Cities
Baltimore, Md., ( 5 ) * ...............
W ashington, D. C., ( 6 ) +.......
Richm ond, V a., ( 6 ) #...............
Lynchburg, Va., (§ )♦ .............
Charleston, W . V a., (3 )* .......
Charlotte, N. C., (4 )^ ...........
Columbia, S. C., (3 )* ...........

5
4
21
5
4

F U R N IT U R E

P ercentage com parison o f sales in
periods named with sales in same
periods in 1947
Sept. 1948
9 Mos. 1948

M aryland ( 5 ) # .........................
Dist. o f Columbia ( 6 ) #...........
V irgin ia (18) ♦ .........................
W est V irgin ia (10) ♦...............
N orth Carolina (1 3 )* ...............
South Carolina (1 0 )* .............
D istrict (6 2)* .......................

9 Mos. %
1947 Chg.
—
+
—
—
—

,

8 000,000

S ou rce: Departm ent o f Comm erce.
♦Number o f reporting firms.

120,925
218,010
166,b80
110,330

128,339
14,119
1,535
143,993
454,203
31.7

60,100,000
20,400,000

22 100.000
10 200,000

N et Sales
Sept. 1948
com pared with
Sept.
A ug.
1947
1948

$ 22,441,808
$163,528,841

9 Mos.
1948

%
Chg.

71.900.000
.
,
4,700,000

W H O L E S A L E T R A D E , 188 FIR M S

SOFT C O A L PR O D U C TIO N IN TH O U SA N D S OF TON S
Sept.
1947

Sept.
1947

S ou rce: R ayon Organon.

178,430
224,480
1,378,060
416,800
113,315
1,083,586
2,023,852

S TATE S

Sept.
1948

A ug.
1948

Sept.
1948

+ 16

+ 5
—1
+ 3

— 3
— 3

+ 3
+ 3

+ 8

♦Number o f reporting firms.
TOBACCO M A N U F A C T U R IN G
Sept.
1948
Sm oking & Chewing tobacco
19,439
(Thousands o f lb s .)............
Cigarettes (Thousands) ..... 29,856,504
Cigars (Thousands) ..............
544,856
Snuff (Thousands o f lbs.)....
3,718

% Chg.
from
Sept. 1947

+ 2
+ 13
— 7

9 Mos.
1948
149,992
263,460,202
4,244,876
31,251

+ 1
5
+ 4
+ 6

+11




30,705,544
296,825,012
36,536,634
364,067,190
588,142,451

71,677,459
316,221,911
11,213,044
399,112,414
506,580,319

P rice per cw t.
1948
1947
$44.43
49.55
54.54
$49.62
50.45

+ 3

+ 5

+10

+

7

P ercentage
3
Percentage
— 21
P ercentage
+ 35
Percentage

A U C T IO N TOBACCO M A R K E TIN G

South Carolina ........
N orth Carolina ........
V irgin ia ....................
D istrict ..................
Season through

Richm ond
Baltim ore
W ashington
Other Cities
D istrict
Percentage chg. in Sept. 1948 sales com pared w ith sales in Sept. ’ 47
+ 26
+ 9
+ 5
+11
+ 3.0
Percentage chg. in 9 months sales 1948 com pared with 9 months in ’ 47

+

S ou rce: Treasury Departm ent.

Producers’ tobacco sales, lbs.
Sept.
Sept.
1948
1947

D E P A R T M E N T STORE T R A D E

% Chg.
from
9 Mos. ’ 47

$39.87
41.48
44.11
$41.26
42.17

chg. in stocks on Sept. 30, ’ 48 com pared with Sept. 30, *47
+11
+20
+25
+14
chg. in outstand’ g orders Sept. 30, ’ 48 from Sept. 30, *47
— 20
— 26
— 33
— 24
chg. in receivables Sept. 30, ’ 48 fro m those on Sept. 30, ’ 47
+25
+23
+23
+26
o f current receivables as o f Sept. 1, '48 collected in Sept.
50
48
50
45
Percentage o f instalm ent receivables as o f Sept. 1, '48 collected in Sept
24
23
23
23
M aryland

D ist.of Col.

V irgin ia

W . V irginia

N . Carolina

S. Carolina

Percentage change in Sept. 1948 sales from Sept. 1947, b y states:
+ 8
+ 5
+19
+12
+12
+13
Percentage change in 9 m onths 1948 sales from 9 months 1947 sales:
+ 3
+ 5
+11
+15
+ 8
+ 7

[12]