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RESERVE BANK/

RICHMOND

October 1
955

THE ROLE OF COMMERCIAL BANKS
IN CONSUMER INSTALMENT LENDING
Consumer Instalment
Credit Outstanding
(Billions of Dollars)

Per Cent held by
Commercial Banks
50

40

-

1940

1942

1944

1946

onsumer instalment credit extended by com­
mercial banks has been rising steadily since
W orld W ar II, but their share of this credit has
recently declined slightly. The article on page 3
discusses the growth of instalment credit in com­
mercial banks as well as over-all growth and some
of the factors causing the unprecedented rise.

C




1948

1950

1952

Also In This Issue - - Coming: Minimum W age Adjustment ....Page

5

Trade— A Sensitive
Economic B arom eter_________________ Page

7

Business Conditions and P r o sp ec ts_____ Page

8

Fifth District Statistical Data __________ Page 10

Federal Reserve Bank of Richmond

F if t h

D is t r ic t

T rends

TO TAL CONSTRUCTION CONTRACT AWARDS

COTTON CONSUMPTION
300

140

140

250

.hi
V

120

200
100

A y

150

J

»v

Si

80

1

60

0
1948

1949

1950

1951

1952

1953

1954

120
100

(Seo sonally Adju sled)
(19 47-1949=

1947

J "

V

80
100
50

■
vAA'"

a

60

00 )

0
1947

1955

1948

1949

1950

1951

1952

1953

1954

1955

Average daily (seasonally adjusted) consumption of cotton in
Fifth District mills rose 2 % from July to August which brought
the August level above that of June. Relative to a year ago, August
consumption was up 9 % , and over the first eight months of the
year, the gain was 8% .

Construction contract awards for all types of construction during
August 1955 were down 22% from July after seasonal correction.
The level, however, was 14% higher than in August 1954, and dur­
ing the first six months of 1955, the gain amounted to 43% .

S E R IE S E AND H SAVINGS BONDS

WHOLESALE PRICE-COTTON BROAD WOVEN GOODS

Millions of Dollors

Millions of Dollors

Source U S Deportm of Labor, Bureau of Labor Statistics
ent

Sales of United States Savings Bonds, Series E and H, amounted
to $26 million in this District during August, a gain of 6% from
July and 13% over a year ago. For the first eight months the
increase was 13% . In the same period redemptions declined 4 % .

Prices of cotton broad woven goods in August stood at 89.4% of
the 1947-49 average. They have been rising slowly since May 1954,
with an over-all increase of 4 % since that date. August prices
were 0.7% higher than in July, 3.0% higher than in August 1954,
and 24.9% lower than at the peak, February 1951.

D E P A R T M EN T

DEPARTMENT STORE INVENTORIES

ST O R E S A L E S
150

150

A

125

100

/n/

V

j

»

v w

V

125

100

75
(19

sted)

If

(Sea

-i §
>

75
DO)

.....

0 L
1947

1948

1949

1950

1951

1952

1953

1954

1955

Department store inventories (seasonally adjusted) in August
were unchanged from July. They were 6% higher than in August
last year. The level of inventories on a seasonally adjusted basis
rose somewhat from 1954’s recession levels toward the end of that
year. Thus far in 1955, they have remained steady.

Strength continued in District department store sales during Au­
gust. Although the average daily (seasonally adjusted) level de­
clined 1% during the month, sales were 10% higher than in August
1954, and in the first eight months of the year, they were up 8% .




-I 2

y

October 1
955

Consumer Instalment Credit In Commercial Banks
growth of consumer instalment credit in recent
months, sparked by the sharp rise in automobile
credit, has been the subject of widespread attention—
and of some concern. Although the current increase
has been substantial, there have been times since the
end of W orld W ar II when instalment credit has grown
at as rapid a pace or even more rapidly— notably, in
early 1950, just before the outbreak of the Korean W ar,
and in late 1952 and early 1953.
The continued rise in instalment credit this year
points up a trend in evidence since 1945. Its growth
causes concern because of the very nature of instalment
credit (the borrowings of individuals on their future
incomes) and because of the
effect the net repayment of
the instalment debt might
have in any period of de­
clining economic activity.
a p id

A s of July 30, 1955, in­
stalment credit outstanding
reached a record $25.5 bil­
lion, almost $4 billion or
16.6% above a year ago. In
the first seven month of the
year, it advanced $3 billion,
an average rate of almost
$450 million a month, with
the preponderant share in
automobile paper. Instal­
ment credit on July 30 ac­
counted f o r m o r e than
three-fourths of the $32.9
billion of short- and inter­
mediate-term c o n s u m e r
credit outstanding.
Shortand intermediate-term consumer credit not only includes
instalment credit but it also includes charge accounts,
single payment loans, and service credit.
A t the beginning of 1929 (earliest date for which
data are available) total instalment credit amounted to
$2.6 billion. After declining to $1.4 billion in early
1933, this type of credit grew at a moderate rate until
W orld W ar II, when the Government took direct
measures to limit its expansion (Regulation W ) and
also to curtail the production of durable consumer
goods. Instalment credit fell from $6.5 billion in mid1941 to less than $2 billion in early 1944. After the
W orld W ar II period, there was rapid growth until
the Korean W ar when the rate of increase slowed ap­
preciably. Upon removal of Regulation W in May
1952, consumer instalment credit advanced from a total
of $15.3 billion to $22.2 billion by the close of 1953, an
increase of almost $7 billion in the year and a half
period. In the early months of 1954 there was a slump
in instalment borrowing, but by m id-1954 the upward



^ 3 f

movement was resumed and brought the total to its
present unprecedented level.
Commercial Banks’ Share in Instalment Lending
Consumer instalment credit on a significant scale is
relatively new in the field of commercial banking, dat­
ing from the mid-1930’s. A t the close of 1939 (earliest
date for which commercial bank data are available)
commercial banks held 24% of total instalment credit;
by August 1955 they accounted for 38% . During this
period, the amount of consumer instalment credit car­
ried on the books of commercial banks multiplied al­
most ninefold— from $1,079 million to $9,656 million.
The cover chart shows
clearly the varying impor­
tance of commercial bank
holdings of consumer in­
stalment paper since 1939.
Commercial bank instalment
credit accounted for less
than a quarter of the total
outstanding in 1939; by
m id-1942 it had risen to
29% of the total. The
percentage dropped in the
war years, 1942 to 1944.
From 25% of the total at
the beginning of 1944 it
rose to 30% by late 1945.
In the first six months of
1946, the commercial banks’
share rose sharply— from
30% to 36% of the total in
the six months’ period. By
m id-1947 commercial banks’
percentage reached 40% of total instalment credit, and
from this date through 1952 they held their own in an
increasingly competitive field, their share fluctuating
between 39% and 40% of the total. They reached
their highest point in m id-1953, holding 42% of all
instalment credit in the country. Since then they have
not kept pace, and by July 31, 1955, when instalment
credit in the country was at its peak, commercial banks
had slipped back to about 38% of the total.
The commercial banks which are members of the
Federal Reserve System now account for about 95%
of the consumer instalment credit held by all commer­
cial banks in the United States. Back in 1942 member
banks held $774 million in instalment credit and had
increased it almost eleven and a half times, to $8.5
billion, by April 1955— from less than 5% of their total
loans to 13^4%.
In this District, holdings of consumer instalment cred­
it by member banks have grown at a more rapid rate
than for the country as a whole. In 1942 member

Federal Reserve Bank of Richmond

banks in the District held $34.5 million in consumer
instalment loans, which was 5.1% of total loans. By
June 30 of this year, consumer instalment credit held
by member banks had increased fourteen and a half
times— to $506 million. This was 17.6% of the total
loans held by Fifth District member banks, and the rate
of growth in this period exceeded that of any other
type of member bank lending.
Importance of Automobile Credit
Automobile instalment paper has been an important
part of total instalment credit since the early years of
instalment borrowing. In 1929, when automobile in­
stalment paper amounted to only $1.1 billion, it ac­
counted for 42% of total instalment credit. During
the depression years and again in W orld W ar II auto­
mobile instalment paper went as low as $321 million
and $343 million, respectively, and accounted for 23%
and 17% of the total. By the close of 1946, automobile
paper again took the spotlight, and advanced steadily
(except for the period of the Korean W a r) until early
1954 when extensions of new credit fell below the level
of repayments so that outstanding automobile instal­
ment credit declined moderately over the first three
months of the year. Since then the volume of new
automobile loans has shot upward until it now con­
stitutes more than 51% of all consumer instalment
credit. In recent years, three-fifths of all purchases of
both new and used automobiles have required credit.
In 1955 the availability and the terms of consumer
instalment credit have been very important factors in
the high level of automobile sales.
Recent rapid increase in consumer instalment credit
has stemmed chiefly from instalment automobile paper,
although other types of instalment buying have added
their bit to the total. Included in instalment credit
buying are T V sets, refrigerators, washing machines,
furniture, and the like. A lso included are repair and
modernization loans and personal loans. A s of July
30, 1955, credit extended by all classes of lenders in
the country for the purpose of purchasing automobiles
accounted for $13 billion or 51% of the total; other
consumer goods paper accounted for 22% ; repair and
modernization loans accounted for 6% ; and personal
loans accounted for the balance, 21% .

Some Aspects of Consumer Instalment Lending
The rising tide of consumer instalment credit has
resulted in part from the rising level of personal income.
( Disposable personal income is estimated to have grown
from $253.9 billion in the second quarter of 1954 to a
record total of $267.1 billion in the second quarter of
1955.) It also represents changing attitudes on the
part of both lenders and borrowers. In recent years
more people with steady incomes prefer to purchase
w’hat they want and enjoy their purchases while paying
for them. The rise may also be attributed to the highly
competitive market, with promotional campaigns fre­
quently featuring price concessions, to national growth,
and to a vast array of new products.
According to a recent survey on consumer finances,
conducted by the Federal Reserve System in coopera­
tion with the Survey Research Center of the University
of Michigan, the people who owe money are the ones
who can afford to owe it. Drawing on this same study,
the Federal R eserve Bulletin recently noted that com­
mitments for instalment debt were most frequent in the
middle and moderately high income groups.
There are no over-all data on the terms of instalment
credit. It is generally conceded that a loosening of
terms on instalment credit, particularly automobile pa­
per, occurred in late 1954 and early 1955 because of the
favorable outlook for business activity and competition
among lending agencies. However, according to the
survey on consumer finances referred to above, about
one-fourth of instalment debts outstanding at the date
of the survey were to be paid off in six m onths; an
additional two-fifths were payable in six months to a
yea r; and less than one-tenth of the debt had more than
two years to run. In recent weeks, a growing aware­
ness of the dangers of too-easy credit by all types of
lenders has appeared, and steps are being taken to
tighten up on credit-granting terms.

A s of July 30, 1955, commercial banks of the coun­
try held 36% of the total of all automobile credit (see
chart, page 3 ), the lowest percentage held by commer­
cial banks since m id-1942. The decline in the propor­
tion of automobile instalment credit held by commercial
banks accounts principally for the decline in their share
of total consumer instalment credit. O f the total of
instalment credit held by commercial banks on July
30, 1955, 48% was in automobile instalment credit;
20% in other consumer goods paper; 13% in repair
and modernization loans; and 19% in personal loans.



On June 30, 1955, Fifth District member banks held
47% of their total consumer instalment credit in auto­
mobile instalment paper. Retail purchases of house­
hold appliances, furniture, and the like accounted for
16% of the total, and loans for repair and moderniza­
tion of homes accounted for one-tenth of the total.
The remainder, more than a quarter of total instalment
credit held by District member banks, was in “ cash
instalment loans,” covering primarily such payments
as medical and hospital fees, services or nondurable
commodities, and personal debts. According to latest
published national figures (A pril 1955) all member
banks followed the same general pattern.

Thus far there is little evidence of any marked rise
in defaults of instalment debt. Data collected by the
American Bankers Association from commercial banks
showed national delinquency rates (delinquent loans as
(Continued on page 10)

i 4y

October 1955

Coming: Minimun Wage Adjustments
small and wr
ould invite small price adjustments, especial­
ly if costs of raw foodstuffs continued to move lower.

e a r l y 300,000 workers, or 23%
of the total, in
Fifth District manufacturing industries are esti­
mated by the Federal Reserve Bank of Richmond to be
earning less than $1 an hour. Those earning less than
this amount are not confined to the nondurable goods
group of industries, but durables and nondurables were
relatively the same. O f the estimated 299,000 receiv­
ing less than $1 hourly, the durable goods industries
account for 107,000 and the nondurable goods indus­
tries, 192,000. This is 23% of all those employed in
durable goods, while the remaining 192,000 constitute
23% of employment in nondurable goods industries.

Stone, clay and glass industries of the District em­
ployed 51,800 in June 1955 ; of these it is estimated that
22,600, or 4 4% , were earning less than $1 an hour.
Most of those below this level are found in stone and
clay work and very few are in the glass industry. Since
most stone and clay products are used locally and do
not compete substantially with other areas, cost in­
creases will likely be passed on in higher prices.
The leather and products industries are unimportant
in this District, employing in June only 8,700 workers;
but 37% were earning less than $1 an hour. Leather
prices are quite volatile and since other leather-produc­
ing areas of the country are similarly situated, a price
rise can probably be effected to cover increased costs.

The scheduled change (M arch 1956) in the minimum
wr
age (under the Fair Labor Standards A ct of 1938)
from 75<j; an hour to $1 an hour will have rather sub­
stantial effects on important industries in the District,
such as apparel, lumber, food, stone, clay and glass,
leather, and furniture industries.
Apparel industries of the Fifth District, employing
89.000 workers in June 1955, are estimated to have
54.000 workers earning less than $1 an hour, or 61%
of the number employed. Approximately half of those
earning less than $1 were in the 75^ to 80^ wage
bracket, with the remainder fairly evenly distributed
between 80^ and $1. Increasing the wages of 61%
of these employees will raise many problems. Since
Southern apparel firms set the competitive price, it is
almost a foregone conclusion that prices will rise. In
the work-clothing field, moderate price advances have
already taken place, and thus far have not dampened
the demand. The problem is not quite as intense in
other industries of the District, although six of them
have substantial segments receiving less than $1 an
hour. The lumber industry, including wood products,
is estimated to have 50% of its work force earning less
than $1 an hour. In June 1955 there were 103,200
persons employed in these industries with 51,600 esti­
mated to be under the new minimum. Lumber prices
in 1955 have been rising moderately, due to the strength
of demand rather than the wage situation, but there is
a question whether the lumber industry will be able
to pass on the increased wage costs in still higher prices
since Southern softwood markets already feel the com­
petition of Western fir. If lumber demand remains as
intense as it has been, higher prices on Southern soft­
woods might stand up. If the demand slackens, South­
ern softwood employment will probably be more ad­
versely affected than W est Coast lumber employment.

The furniture and fixtures industries of the District,
were employing 56,400 workers in June 1955, with an
estimated 18,300, or 3 2% , of these earning less than $1
an hour. Furniture prices are fairly strong at the
present time, and there is little doubt prices will be in­
creased to cover added costs. There is not much likeli­
hood that District furniture factories will lose competi­
tive positions at the relatively higher wage level.
The tobacco and products industries were employing
35,100 workers in the Fifth District in June 1955, with
an estimated 7,500 or 21% , earning less than $1 an
hour. The forthcoming wage increase may be the tipoff for another cigarette price increase. It is also likely
to motivate further mechanization in tobacco processing.
Other Fifth District industries with below-minimum
wages range from 5% (percentage of total employees)
in machinery (excluding electrical) to 18% in un­
classified industries. The textile mill products indus­
try is estimated to have 14% of its workers earning
less than $1. This is a low percentage compared with
industries already noted, but more people are involved
than in the apparel industry (56,300). These unclassi­
fied industries employed 82,700 in June and are esti­
mated to have 14,900 earning less than $1. Similarly,
chemicals and allied products industries employing
99,600 in June are thought to have some 11,800 under
$1, while all other major groups of industries in the
District show an outside figure of 3,300.
Adjustment of these industries to the $1 minimum
wage next March 1 is of greater significance than that
necessary when the 75<ft minimum came in January
1950. W hile this statement cannot be conclusively
demonstrated, it is felt evidence points in this direction.
The cotton textile industry in the Charlotte, North
Carolina area had 1% of the workers employed prior
to the establishment of the 75^ minimum wage earning
less than that amount. Currently, 23% of the cotton
textile workers in this area are earning less than $1 an
hour. In the Spartanburg, South Carolina district, less

The food and kindred products industries of the Fifth
District employed 103,300 in June 1955, and of this
number 45,700, or 4 4% , are estimated to be earning
less than $1 an hour. Here, increasing prices to offset
wage costs may be easier since food industries in many
other parts of the country are similarly situated. Fur­
thermore, wage costs in food products are relatively



i 5 y

Federal Reserve Bank of Richmond

than 1% of the cotton textile workers prior to January
1950 were earning less than 75^ an hour. Currently,
61% are earning under $1 an hour.

scale showed approximately the same percentage in­
crease. The average of the highest four skills, however,
showed larger increases than the lowest four. Some­
what larger increases are recorded in wage scales in
this period in seventh, eighth, and ninth ranking skills.
The men’s seamless hosiery industry in the W instonSalem-High Point area between October 1949 and
November 1952 showed a moderately larger increase
in the highest wage scale than in the lowest. The sec­
ond highest wage scale showed an increase of 15% in the
period under review; the ninth showed an increase of
16%. The fourth highest increased 13% ; the sixth high­
est 12%. There was little tendency for low-wage earners
to show a larger increase than high-wage earners.
The full-fashioned hosiery industry located around
Charlotte, North Carolina, between October 1949 and
November 1952, showed an increase in the highest wage
scale of 10%. In the lowest, the increase was 5% . The
largest percentage increases came in the fourth highest
skill (2 0 % ) and the fifth highest (1 8 % ) . Again no
clear-cut indication that higher-wage earners received
smaller increases than lower-wage earners, or that rate
differentials had been narrowed.
It is true that the evidence presented here is from a
small sample of the whole, but the earlier short-run
effects cited by the Department of Labor seem not to
have prevailed over a longer period. This implies that
the long-run consequences of raising the minimum wage
rate would be a general increase of approximately simi­
lar proportions in the total wage structure. This state­
ment, of course, must be qualified by the fact that
through the period in which these changes have been
measured, business conditions have been in a strong up­
ward trend, either making higher wages tolerable or
permitting price increases to offset increased wage costs.
In a period of less business exuberance, the wage struc­
ture might well be compressed.

In the men’s and boys’ dress shirts and nightwear in
the state of South Carolina, 54% of those employed
prior to January 1950 earned less than 75^ an hour.
Currently, 69% are earning less than $1 an hour.
In the full-fashioned hosiery industry of the Charlotte,
North Carolina area, 0.6% of the number employed
prior to January 1950 were receiving less than 75<j; an
hour. Currently, 25% are receiving less than $1 an
hour. In the Hickory-Statesville area of North Caro­
lina, 8 % of employees in full-fashioned hosiery were
earning less than 75^ an hour prior to January 1950.
Currently, 18% are earning less than $1 an hour.
The wood furniture industries about Martinsville,
Virginia, prior to January 1950, had 7% of their em­
ployees earning less than 75^ an hour. Currently
28% of the employees in this area are earning less
than $1 an hour. In the W inston-Salem-High Point
area, wood furniture industries prior to January 1950
had 13% of their workers earning less than 75^ an
hour. Currently, 26% of the workers in this industry
in this area are earning less than $1 an hour.
Although these figures are fragmentary, they quite
clearly indicate a more substantial wage adjustment to
the $1 minimum than on the earlier date.
The United States Department of Labor, in its pub­
lication, Results of the M inimum-W age Increase of
1950, says, “ The short-run wage impact of the 1950
minimum rate increase was greater on lower than on
middle or higher pay rates and in lower-wage than in
higher-wage industries, regions, occupations and plants.
It, therefore, tended to narrow percent earnings differ­
entials within industry.”
In such comparisons as can be made of occupational
wage scales in the Fifth District, this tendency indicated
by the Department of Labor was washed out over a
longer period. Between August 1949 and May 1954
the men’s and boys’ dress shirts and nightwear wage
scales in South Carolina showed no evidence of a larger
percentage increase in the low-wage skills as compared
with the high-wage skills. The lowest-paid workers in
this industry in 1949 were watchmen and their scales
by May 1954 had been brought to the level of handpressers to show the largest percentage increase in this
period of any occupational skill; but ninth and tenth
ranking skills showed smaller percentage increases than
second and fifth skills, and on the whole there was little
tendency to show a greater change one way or another.

Economic Consequences
The Department of Labor, in its study of the 1950
minimum wage increase, found that regional differen­
tials in the short run were narrowed. Chances are that
the long-run effects would show the same result. This
narrowing of wage differential (other things being
equal) woud tend to stabilize the growth of industry in
areas in which it was already located; that is if the
minimum wage were high enough to remove area differ­
entials, the wage rate alone would have that tendency.
But other things are not equal and other costs are
not affected by the minimum wage. Regional industrial
development would still take place in newer regions if
unit cost of production, because of other factors, could
be lowered in regions where industry had not existed.
If, for example, it is customary or mandatory in an
area for a textile mill operator to tend four looms, while
in another area it is customary to operate sixteen or
more, unit production cost would be quite different in
the two areas even with the same hourly wage scale.

Again in the Charlotte territory cotton textile indus­
try, between April 1949 and November 1954, out of 13
skills listed, a 7th ranker showed the largest percentage
increase, with increases in the high-wage scales approxi­
mately the same as increases in the low-wage scales.
In the wood furniture industries in the W instonSalem, North Carolina area, the highest and lowest



i 6y

{/ o

n

October 1
955

f f l i t f a n c u jL
/

Trade— Sensitive Economic Barometer
A
new products for the home, they likewise benefit from
increased sales stemming from fashion conciousness in
clothing. The male population may be succumbing to
“ planned obsolescence” in his fashion field— the “ good
blue suit” is sharing wardrobe space with newer styles
and hues in men’s clothing. July sales (seasonally ad­
justed) in the men’s and boys’ wear departments were
the highest thus far this year, and in departments fea­
turing men’s furnishings and hats, sales reached an
all-time high. Sales in sportswear experienced the
sharpest uptrend in the women’s clothing field, a reflec­
tion of the tendency toward the casual and comfortable
in women’s wrear.

JT\ i s t r i c t trade sat atop an all-time pinnacle in the
■LS Summer months. The cash register’s jingle played
a pleasant tune for most merchants. The housewife’s
new refrigerator and air-conditioned living room were
and are the envy of neighbors; and the man of the house,
along with the rest of the family, beamed when the new
automobile was delivered.
Rising levels of employment, hours and income in the
District clearly induced an attitude of willingness to
exchange disposable personal income for commodities
and services.
Department and specialty store sales . . .
Department store sales added impetus to the upward
progress of the trade level. August sales (average
daily, seasonally adjusted) were 6% higher than for
the same month last year. The 4% decline from July’s
high point for the first eight months of 1955 hardly in­
dicates a reversal of the trend. July’s sales topped the
December 1954 peak by nearly 6 % , and the 1953 high
by almost 5 % . All District states and Washington,
D. C., reported July department store sales above those
of July 1954 and June 1955. In four areas, July proved
to be the peak sales month for the first seven months
of 1955, with Maryland and North Carolina the excep­
tions. Metropolitan areas such as Baltimore, M ary­
land and Washington, D. C., have responded to the
suburban trend by providing convenient local shopping
centers to supplement downtown stores. Personal
shopping services, home and mail delivery, and “ chargaplates” have helped to answer the consumer’s demand
for better and speedier service.

Prime “ fashion first” for ’ 55 has been the new auto­
mobile. Comparisons with July 1954 showed regis­
tration increases of 30.3% for the District, 30.1% for
the District of Columbia, 30.2% for Virginia, 37.1%
for North Carolina, 40.6% for Maryland, 43.0% for
W est Virginia, and a drop of 5.5% in South Carolina.
Although new passenger car registrations (unad­
justed) in five District states and Washington, D. C.,
were 6.4% lower in July than in the previous month,
the ratio of July to June registrations was 1.1% higher
than the average ratio for the same months over a period
of the last five years, an indication that automobile
dealers continue to move new cars from the showroom
to the road at a gratifying rate. Maryland registrations
dropped 0.9% in July from June; North Carolina,
1.0% ; the District of Columbia, 6.9% ; Virginia, 8.2% ;
W est Virginia, 12.9% ; and South Carolina, 15.3%.
. . . reflect fair economic climate.

. . . for the home . . .

Levels of employment and income are important fac­
tors in the economic climate— and shifts can portend
fair or stormy trade weather. A vid consumer demand
is reflected in a 0.7% increase in average retail trade
employment for the first seven months of 1955, com­
pared with a like period in 1954. District total non­
agricultural employment for the same period increased
1.1%. Insured unemployment for the week ending
August 20 was the lowest for the District since Novem ­
ber 7, 1953. The August 20 unemployment level drop­
ped 20% from the previous month, and 50% from a
year ago.

July sales levels in home-furnishings and related de­
partments within department stores, in retail furniture
stores, and in household appliance stores— reflecting a
growing interest in home atmosphere— exerted a strong
influence on the over-all trend. Sales in home furnish­
ings, powered by increases in housewares and major
household appliances, reached an all-time high. Retail
furniture store net sales (seasonally adjusted) for July
were 21% above a year ago and 14% over June.
The increased demand for furniture and appliances
naturally parallels the high rate of residential construc­
tion and new household formation. For the first seven
months the total value of residential construction con­
tracts awarded in the Fifth District surpassed the figure
for the same period in 1953 by 84% and that for 1954
by 45.3% , providing current markets for building ma­
terials and future markets for home furnishings. Com­
pletion of homes now under construction should main­
tain a high market for household articles, even if
residential construction levels off or declines.

Rising employment contributes security and confi­
dence which help to forge the link between the desire
to buy, activated by new and improved consumer prod­
ucts and effective advertising, and the ability to buy—
as measured by income. Income figures for the Dis­
trict will be unavailable for some months, but Business
W eek estimated that Fifth District income was 7.2%
higher in June 1955 than in June 1954, compared with
a 4.7% increase for the nation; and estimated District
manufacturing payrolls were up 11%.

. . . and for the individual . . .
While department stores reflect rising purchases of



{

7

)
-

Federal Reserve Bank of Richmond

Business Conditions and Prospects
industries in the Fifth District
went into new high ground during August, and
output of the District’s mines continued to move up­
ward. Retail trade, however, failed to maintain the
hectic pace of July and settled down a bit. W hile con­
tract awards for new construction eased, it was a case
of coming out of the stratosphere but still remaining
above the clouds.
A N U F A C T U R iN G

Aside from the loss of many trees and small build­
ings along the coast, hurricane damage was not ex­
ceedingly heavy. Moderate losses occurred in the to­
bacco crop, and heavy damage to the tri-state tomato
crop took place. Oyster packers in the Rappahannock
River oyster farming area estimated their losses from
$3-5 million.
Heavy credit demand is indicated by the weekly
reporting banks.
It has centered mainly in consumer
credit and business loans, which hesitated slightly dur­
ing August but have since resumed an upward trend.
Employment has increased in the District, although
only one major labor market area in the District has
an unemployment figure under 3% of the labor force.
However, insured unemployment in the week ended
September 3 totaled 70,600, a 17% decline from a
month earlier, and a striking 50% less than a year ago.

ahead of August 1954. In the first eight months of
this year industrial awards were 88% larger than in
the same months of 1954, the largest increase in any
category. The steady increase in orders of manufac­
turers in the District during the year has resulted in
a large backlog of unfilled orders, and suggests that
there will be further expansion in industrial construc­
tion.
Trade
July established all-time highs in retail sales of de­
partment and furniture stores in the Fifth District. In
August, average daily seasonally adjusted department
store sales dipped 1% , but the level was 10% higher
than in August 1954, and the first eight months of the
year were up 8 % . August figures were again, as in
July, sparked by substantial gains in major household
appliances. In stores reporting departmentally, these
sales were up 50% from a year ago. W om en’s coats
and suits did quite well in August, showing a gain of
11%, and men’s clothing also showr a gain of 11% .
ed
Retail furniture store sales in August failed to main­
tain July’s withering pace and dropped 11% on a sea­
sonally adjusted basis. The August level, however,
wr
as still moderately higher than in June, was 15%
ahead of August 1954, and up 14% for the first eight
months. Despite a 14% decline in adjusted credit sales
from July to August, receivables increased 4 % , while
collections were off 5% .

C onstruction
In the first eight months of 1955, the value of con­
struction contracts awarded in the Fifth District was
43% greater than in the corresponding months a year
earlier. Since October 1954, however, contract awards
(seasonally adjusted) have been declining and in A u ­
gust of this year were only 14% greater than in August
1954. If awards in September continue at the same
rate as in August, allowing for seasonal influences, the
total will be smaller than in September 1954.

The inventory position of department and furniture
stores in the District remains conservative relative to
the trade level. Department store inventories (ad­
justed) in August showed no change from July and
wr
ere 6% higher than a year ago, whereas sales were
up 10%. Furniture stores inventories (adjusted) in
August were down 9 % from July and 1% from a year
ago.
Sales relative to a year ago were up 15%. This
is indeed restraint, considering that many soft-goods
items appear headed for price rises sparked in part by
an increase in the minimum wage next year.

A drop of 22% in contract awards from July to A u ­
gust, seasonally adjusted, was due chiefly to declines of
47% in awards for public works and utilities, and of
24% in commercial construction awards. Value of
residential awards changed little, reflecting continued
strength in most major categories.

New passenger automobile registrations in three
Fifth District states and the District of Columbia
showed an increase of 11% in August over July, a gain
of 57% over August 1954, and were up 30% for the
eight months. New commercial car registrations in
three states of the District showed an increase of 10%
from July to A ugust; an increase of 45% in August
over a year ago; and an increase of 14% for eight
months. These figures indicate a new-car demand well
beyond the hopes of any but the super-optimists.

Advertisements in metropolitan papers of the District
show that down payments are required for most houses
offered, though a few advertise no down payment for
G I’s and 30 years to pay. Most of the no-down-payment loans undoubtedly were based on prior commit­
ments and are less likely to be offered in the near future.
Contracts awarded for factory construction in the
District continue to increase fairly steadily. In August
such awards were 8 % higher than in July and 11%



i 8y

October 1
955

Coal
Expanding killowatt-hour output, with coal again in
a pleasant competitive position, the high rate of steel
operations, and continued expansion in coal exports all
continue to give impetus to bituminous coal production
in the Fifth District. During August average daily
output was 3% higher than in July, 25% higher than
in August 1954, and up 27% for the first eight months
of the year. From the end of August through Septem­
ber 22, bituminous coal moving through Eastern Tide­
water ports to overseas destinations was slightly over
4 million tons or at an annual rate almost equal to the
1947 record. Over 90% of foreign cargo shipments thus
far in 1955 have moved through Hampton Roads ports.

June and 4% under July a year ago. The accumulated
seven months total, however, was 2% ahead of a year
ago.
Banking
Demand for bank credit remained very active during
August and early September. W eekly reporting banks
on September 21 showed commercial, industrial, and
agricultural loans up $3.9 million over a month earlier,
and $112.4 million over a year ago. Their real estate
loans gained $4.2 million during the month and $48
million over the year. “ Other” loans, which are large­
ly consumer, showed an increase of $2.6 million during
the month and were up $94 million over the year.
Loans and investments of all member banks in the
Fifth District rose $42 million during August, with
loans up $46 million and investments down $4 million.
Relative to a year ago, loans and investments were up
$415 million, with loans up $466 million and invest­
ments down $51 million.

Manufacturing
A new recovery high was established in manufactur­
ing industries of four states of the District during A u ­
gust and man-hours in North and South Carolina man­
ufactories established new all-time records.

Total deposits of all member banks at the end of
August were $49 million higher than a month earlier,
and a sharp $418 million over a year earlier. During
August, demand deposits rose $47 million and time
deposits a modest $2 million. Inter-bank deposits ac­
counted for $38 million of the rise in demand deposits.
The increase of $418 million in total deposits over a
year ago was accounted for by an increase of $106 mil­
lion in time deposits, $9 million in inter-bank deposits,
and $303 million in other demand deposits.

Man-hours in all manufacturing industries of V ir­
ginia, W est Virginia, North Carolina and South Caro­
lina rose 3.7% from July to August, to a level 7.4%
ahead of a year ago. Largest increases during the
month came in W est Virginia and North Carolina.
The durable goods industries of these states showed
an aggregate man-hour rise of 2.6% from July to A u ­
gust and 7.9% in August from a year ago. The rise
during the month was due mainly to a 10% increase in
W est Virginia and a 1.8% increase in South Carolina.
Virginia showed a fractional rise, while North Carolina
showed a fractional loss.

Member bank borrowings at the end of August
amounted to $83 million, an increase of $24 million
during the month and an increase of $54 million during
the past twelve months.

Man-hours in the nondurable goods industries of
these four states rose 4 % from July to August, with
August 7% ahead of a year ago. The rise occurred
principally in North Carolina, 7.1% ; and South Caro­
lina, 3.4% . W est Virginia showed a fractional rise
while Virginia showed a fractional loss.

Agriculture
Prices received by farmers in Fifth District states,
which had shown a tendency to rise in some states at
mid-year, again turned down in August. Farm prices
in Maryland during August were 3.2% under July;
Virginia, down 1 .9 % ; W est Virginia, down 2 .5 % ;
North Carolina, no change; South Carolina, up 1.1%.

Furniture, glass, primary metals, yarn and thread
mills, knitting mills and apparel industries showed better-than-average increases during the month.
The textile and apparel industries of the Fifth Dis­
trict are operating full-time schedules and the backlog
of business is the best in many years. The outlook for
production and employment in these industries is good,
despite the impending adjustment in wage rates under
the new minimum wage law, and in spite of increased
imports of Japanese textiles.
The shipbuilding business appears to be reaching a
stabilization point. Some yards find working sched­
ules moving downward while others are increasing
theirs moderately.

Cash receipts from farm marketings in the first half
of 1955 were 2.7% smaller than a year earlier, com ­
pared with a 3.9% decline nationally. In the District,
livestock and products income was down 2.8% in the
first half compared with 6.8% for the country as a
whole. Crop income in Fifth District states in the first
half was off 2.3% , compared with a national increase of
1.9%. Virginia was the only Fifth District state to
show an increase in total cash receipts, first half of
1955 vs. 1954. Other states showed decreases ranging
from 3.4% in South Carolina to 6.2% in Maryland.

Cigarette production in July failed to maintain the
modest gains indicated earlier in the year. District
output in July (seasonally adjusted) was 9% below

Early marketed tobacco in the Fifth District brought
improved prices over a year ago, but later marketings
have shown price decreases.




i 9y

Federal Reserve Bank of Richmond

Consumer Instalment Credit In Commercial Banks
(Continued from page 4)

1955, held the next largest share of consumer instal­
ment credit— 32% of the total. The third largest share
was held by retail outlets— department, furniture, and
household appliance stores, automobile dealers, and
others. A ll other financial institutions (such as mutual
savings banks, savings and loan associations, finance
companies operating principally under small loan laws,
and industrial loan companies) and credit unions made
up the rest of the total.

a percentage of total loans) as of July 30 below those
of a year ago. In the South Atlantic States, of which
this District is a part, the delinquency rates were below
those for the nation as a whole— on automobiles, for
instance, they were 1.425% for the nation and .829%
for the South Atlantic States.
C onclusions
Although the share of commercial bank holdings in
the field of consumer instalment credit has declined in
the past two years, the amount of instalment credit
outstanding at commercial banks has been steadily ris­
ing. In the current year their holdings have increased
$1 billion to July 30, and, in addition, their loans to
finance companies rose sharply. Commercial banks
continue to own the largest single share of consumer
instalment credit. Sales finance companies, on July 30,

F ifth
D E B IT S TO D E M A N D
(000
Aug.
1955
Dist. of Columbia
Washington ______ $1,393,892
Maryland
B altim ore_________ 1,647,370
27,861
Cumberland _ _ ____.
F red erick _________
26,875
Hagerstown ______
41,520
Salisbury** ______
36,209
Total 4 Cities ___ 1,743,626
North Carolina
Asheville _ ________
69,377
Charlotte _________
422,779
Durham ___________
90,446
Greensboro ______
154,082
High P o in t* * ____
51,905
K in sto n ___________
33,891
Raleigh ___________
228,341
Wilmington ______
52,717
32,071
Wilson ................... ..
Winston-Salem ___
178,164
Total 9 Cities___ 1,261,868
South Carolina
Ch arleston_______ _
87,344
Columbia _________
186,103
Greenville _________
127,581
Spartanburg _____
63,012
Total 4 Cities ___
464,040
Virginia
Charlottesville____
36,547
D a n v ille __________
39,750
Lynchburg ________
56,713
Newport N e w s ___
61,805
Norfolk ___________
309,034
35,994
Portsmouth ______
R ichm ond___ _____ _
710,081
Roanoke ___________
139,958
Total 8 Cities ___ 1,389,882
West Virginia
Bluefield _ _ _______
48,079
Charleston ________
172,141
Clarksburg ________
34,931
Huntington ______
70,845
Parkersburg______ _
32,213
Total 5 Cities ___
358,209
District T o t a ls _____ $6,611,517

D ist r ic t

While commercial banks in earlier years were reluc­
tant to enter the field of consumer instalment credit
financing, they are now in the business to stay. They
have found this area a lucrative part of their total earn­
ings. The commercial banks have added a steady
impetus to the total of consumer instalment lending and
have become an important factor in maintaining con­
sumer expenditures at the extraordinary levels of recent
years.

B a n k in g

D E P O SIT A C C O U N T S*
omitted)
Aug.
8 Months
8 Months
1954
1955
1954
$1,156,152

W E E K L Y R E P O R T IN G M E M B E R B A N K S
(000 omitted)

$10,706,095 $ 9,236,217
Items

1,379,929
25,296
21,694
34,274
35,198
1,461,193

12,578,954
204,636
189,289
347,378
270,883
13,320,257

11,448,718
188,239
178,670
286,231
263,901
12,101,858

62,673
355,663
104,192
119,365
44,155
27,024
177,092
47,044
28,651
148,745
1,070,449

531,166
3,229,846
662,267
1,182,232
399,054
190,886
1,701,678
419,578
171,853
1,355,240
9,444,746

487,782
2,773,331
730,915
943,501
336,403
167,260
1,500,129
371,779
154,796
1,180,295
8,309,788

73,343
148,077
108,737
62,676
392,833

668,302
1,444,476
1,015,851
513,603
3,642,232

589,929
1,312,908
861,821
495,834
3,260,492

293,689
308,033
432,214
446,534
2,319,631
287,659
5,242,268
1,045,391
10,375,419

249,115
273,498
390,387
376,081
2,030,928
256,333
4,735,287
927,252
9,238,881

30,428
35,174
49,149
48,722
250,813
32,735
659,645
119,395
1,226,061
37,053
155,058
29,914
62,699
29,900
314,624
$5,621,312

Sept. 14,
1955

Change in Amount from
Aug. 10,
Sept. 15,
1955
1954

Total Loans ____________________ $1,702,193**
Bus. & A g r ic ._________________
754,438
Real Estate L o a n s ___________ . 332,962
All Other Loans _____________
636,826

31,733
5,367
3,289
22,867

+260,643
+118,030
+ 46,609
+ 99,885

+
1,006
+ 23,504
— 7,158
— 26,184
+
5,472
+
5,372
+ 97,335
+
9,016
+
4,667
+
778

— 141,711
— 40,452
— 94,817
+ 36,019
— 56,022
+ 13,561
+ 26,205
— 18,626
+
3,739
+ 13,230

Other Assets ___________________
70,341
Total Assets __________________ $4,671,118

+
674
+145,209

+
7,392
+150,872

Total Demand D ep osits_______ $3,545,469
Deposits of Individuals _____ 2,669,530
Deposits of U. S. Government
94,120
Deposits of State & Local Gov.
176,355
Deposits of Banks ___________
546,724*
Certified & Officers’ Checks _
58,740

+155,818
+107,042
— 2,140
— 17,587
+ 66,119
+
2,384

+128,890
+143,214
— 9,498
— 3,664
+
893
— 2,055

Total Time D eposits______ ____
Deposits of Individuals______
Other Time Deposits _________

356,508
307,099
1,350,813
1,343,533
286,084
248,567
579,927
545,102
258,349
240,131
2,831,681
2,684,432
$50,320,430 $44,831,668

+
+
+
+

Total Security Holdings ________ 1,730,084
U. S. Treasury Bills __________
80,556
20,221
U . S. Treasury Certificates __
U . S. Treasury N o te s ________
326,622
U. S. Treasury Bonds ______ 1,026,976
Other Bonds, Stocks & Secur.
275,709
Cash Items in Process of Col. _
394,431
Due from Banks ________________
184,093*
Currency and Coin ___________._
83,097
Reserve with F. R. B a n k s____
506,879

—
—
—

3,580
3,395
185

+
5,424
+ 19,601
— 14,177

— 14,250
+
4,023
+
3,198
+145,209

+
6,850
— 7,240
+ 16,948
+150,872

751,541
679,349
72,192

Liabilities for Borrowed Money
13,550
All Other Liabilities ___________
46,437
Capital A ccou n ts_______________
314,121
Total Liabilities ______________ $4,671,118

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

* Interbank and U. S. Government accounts excluded.
** Not included in District totals.




S t a tistic s

A

io

V

/farizuA

October 1955

F if t h

S t a t is t ic a l

d is t r ic t

F U R N IT U R E SAL ES*
(Based on Dollar Value)
Percentage change with corresponding period a year ago
STATES
August 1955
8 Mos. 1955
Maryland ______ ______ _________
+ 4
Dist. of Columbia ___
+ 12
+ H
Virginia ________ ___________ ___
+ 14
+ 7
+24
West Virginia ____________________
+36
+ 16
North Carolina __ _______________
+ 11
South Carolina ___ ____________ _._
+ 11
+ U
District _____ __ ___ ___________
+13
+ 11
IN D IVID UAL CITIES
Baltimore, Md. ______ ____________
+ 12
Washington, D. C. ________________
+ 16
Richmond, Va. ____________________
Charleston, W . Va. ____ ________
+ 71
+ 10
Greenville, S. C.
- __
*Data from furniture departments of department stores
furniture stores.

B U IL D IN G P E R M IT F IGUR ES
Aug.
1955
Maryland
Baltimore ___..$ 5,041,005
Cumberland
124,850
Frederick ____
182,800
Hagerstown ....
75,535
Salisbury ____
69,116

LINES
Auto supplies -------------------Electrical, electronic, and
appliance goods _ ------- _ + 7
Hardware, plumbing and
heating goods ____________
+ 17
Machinery equipment sup­
+ 34
plies _____________________
Drugs, chemicals, allied
products ---------- -------------- + 12
NA
Dry goods ---------------------------Grocery, confectionery,
meats ...................................
+ 2
+25
Paper and its products ....
NA
Tobacco products ------ —
Miscellaneous ........................... + 8
District Total
------------- . + 2 2

+

1

+

4

+ 15
NA

+ 2
NA

+ 3
+ 5
NA
+ 12
+ 45

+ 3
NA
NA
0
+ 3

$ 67,985,427
1,109,191
2,157,775
1,628,320
1,381,172

$ 41,553,810
481,925
814,406
2,077,846
1,192,336
2,041,568
7,341,472
1,712,391
3,437,999
2,285,394
10,232,872
1,539,086
4,781,093
23,012,993
8,084,364
1,145,850
5,182,035

West Virginia
Ch arleston___
Clarksburg ___
Huntington __

761,133
117,375
474,493

2,214,783
81,434
459,964

4,763,408
1,371,663
4,617,272

7,215,240
1,637,382
5,166,029

North Carolina
Asheville _____
Charlotte ____
Durham ______
Greensboro ___
High Point __
R a le ig h ______
Rocky Mount _
Salisbury ____
Wilson ________
Winston-Salem

431,482
2,169,033
275,532
1,436,430
979,885
1,548,395
305,981
114,800
676,371
1,017,901

226,165
3,583,963
676,752
718,982
275,637
1,522,900
290,665
168,749
253,600
1,071,269

2,305,559
20,273,626
8,270,468
8,218,173
5,687,236
14,985,896
2,552,652
958,575
3,050,946
9,230,902

2,531,679
15,110,434
4,212,592
7,473,591
3,413,210
9,397,606
2,162,118
1,453,099
2,022,800
8,548,258

South Carolina
Charleston ___
C o lu m b ia ____
Greenville ____
Spartanburg _.

165,946
1,360,128
834,600
191,257

409,744
681,747
711,150
356,655

2,065,240
6,417,209
5,601,200
1,771,186

2,311,206
6,739,489
5,268,210
2,081,329

Dist. of Columbia
Washington

+ 2
NA
+ 4
NA
NA
+ 3
+ 1

+

$ 4,938,500
38,450
100,260
530,465
82,450

4,628,919
11,393,391
2,699,305
7,219,178
1,671,752
9,292,688
2,807,800
3,343,483
15,424,326
8,553,088
2,054,870
8,369,795

3,986,302

0

+ 11
+ 13

8 Months
1954

305,055
1,407,074
679,044
354,130
113,371
908,062
202,850
291,979
6,702,276
1,057,619
284,600
695,145

— 11

+ 16

8 Months
1955

345,812
1,245,143
458,530
396,970
271,431
1,064,843
113,400
272,698
1,654,207
976,527
131,775
882,069

+ 4
+ 11
+ 9
+ 25
+ 6
as well as

Stocks on
Aug. 31, 1955
compared with
Aug. 31, July 31,
1954
1955
— 1
+ 18

— 15

Aug.
1954

Virginia
Danville _____
Hampton ____
Hopewell ____
Lynchburg ___
Newport News
Norfolk ______
Petersburg ___
Portsmouth ___
Richmond _____
Roanoke ___ _
Staunton ____
Warwick _____

W H O LE SA LE TRADE
Sales in
Aug. 1955
compared with
July
Aug.
1955
1954
+45
+ 2

D ata

1

N A Not Available.
Source: Bureau of the Census, Department of Commerce.

District Totals ..$30,153,755

3,006,868
$35,402,357

53,561,029

38,726,482

$307,422,720

$242,388,194

F IF T H D IS T R IC T IN D E X E S
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.
Sales, Aug. ’ 55 vs Aug. ’54 _ + 11
Sales, 8 Mos. ending Aug. 31,
’55 vs 8 Mos. ending Aug.
31, ,54 ___________________
+ 9
0
Stocks, Aug. 31, ’55 vs ’54

+

8

Open account receivables Aug.
1, collected in Aug 1955 -

32.2

Instalment receivables Aug.
1, collected in Aug. 1955 _

+ 15




Aug.
1955

+ 13

4

+

7

+ 10

+

+

5

+

5

+

1

+

3

+20

+

3

+ 15

+ 11
50.5

46.6

Business failures-—nu
Cigarette production

14.5

14.5

16.1

D.C.

Va.

W .V a.

N.C.

+

+ 14

+ 11

+ 19

14.1

+ 16

8

Aug.
1954

% C hgLatest Mo.
Prev.
Yr.
Mo.
Ago

S.C.

i

172
101
191
196

189
172
98r
246
226
92
125
135
194
108
132
187

135
153
81r
167
228
96
109
122r
166
107
102r
166

— 6
0
+ 4
—22
— 13
— 9
— 3
— 1
+ 3
0
— 11
+ 10

+ 30
+ 12
+25
+ 14
— 14
— 4
+ 11
+ 10
+ 17
+ 4
+ 15
+24

121
134
Electric power production __
Manufacturing employment*
Furniture stores sales ______
117
Life insurance sales __________
206
* Not seasonally adjusted.
** Seasonal factors have been revised for the period 1952 to date
r Revised.
Back figures available on request.

38.7

10.9

July
1955

New passenger car registraBank debits __________________ _
Bituminous coal production* _

8

Md.
Sales, Aug. ’55 vs Aug.
’54 ___________________

Dist.
Total

+

Outstanding Orders
+ 18

+ 14

Seasonally Adjusted: 1947-1949 = 100

ii

y




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