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RESERVE BANK/ RICHMOND October 1955 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 Deportment of Labor, Bureau of Labor Statistics 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 1955 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 wrould 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 wrage (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 October 1955 /{ o n f f l it //f a n c u jL Trade—A Sensitive Economic Barometer 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 showred a gain of 11% . 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, wras 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 wrere 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 1955 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 $5,621,312 356,508 307,099 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 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 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 + 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 _________ — — — 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 ______________ $4,671,118 * Net figures, reciprocal balances being eliminated. ** Less losses for bad debts. * Interbank and U. S. Government accounts excluded. ** Not included in District totals. S t a tistic s A io V /farizuA October 1955 F if t h St a t is t ic a l D a t a d is t r ic t F U R N IT U R E SAL ES* (Based on Dollar Value) Percentage change with corresponding period a year ago STATES August 1955 8 Mos. 1955 Maryland ______ ______ _________ + 4 Dist. of Columbia ___ + 12 + H Virginia ________ ___________ ___ + 14 + 7 +24 West Virginia ____________________ +36 + 16 North Carolina __ _______________ + 11 South Carolina ___ ____________ _._ + 11 + U District _____ __ ___ ___________ +13 + 11 IN D IVID UAL CITIES Baltimore, Md. ______ ____________ + 12 Washington, D. C. ________________ + 16 Richmond, Va. ____________________ Charleston, W . Va. ____ ________ + 71 + 10 Greenville, S. C. - __ *Data from furniture departments of department stores furniture stores. B U IL D IN G P E R M IT F IGUR ES Aug. 1955 Maryland Baltimore ___..$ 5,041,005 Cumberland 124,850 Frederick ____ 182,800 Hagerstown .... 75,535 Salisbury ____ 69,116 Stocks on Aug. 31, 1955 compared with Aug. 31, July 31, 1954 1955 — 1 + 18 Sales in Aug. 1955 compared with July Aug. 1955 1954 +45 + 2 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 — 15 + 16 + 1 + 4 + 15 NA + 2 NA + 2 NA + 3 + 5 NA + 12 + 45 + 3 NA NA 0 + 3 + 4 NA NA + 3 + 1 + $ 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 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 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 3,986,302 1 N A Not Available. Source: Bureau of the Census, Department of Commerce. $ 4,938,500 38,450 100,260 530,465 82,450 305,055 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 0 + 11 8 Months 1954 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 — 11 + 13 8 Months 1955 Virginia Danville _____ Hampton ____ Hopewell ____ Lynchburg ___ Newport News Norfolk ______ Petersburg ___ Portsmouth ___ Richmond _____ Roanoke ___ _ Staunton ____ Warwick _____ + 4 + 11 + 9 + 25 + 6 as well as W H O LE SA LE TRADE Aug. 1954 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 _ Sales, Aug. ’55 vs Aug. ’54 ___________________ + 15 + 7 + 10 + 8 + 5 + 5 + 1 + 3 +20 + 3 + 15 + 11 50.5 46.6 Aug. 1955 + 13 4 10.9 14.5 14.5 16.1 D.C. Va. W .V a. N.C. + + 14 + 11 + 19 + 16 July 1955 Aug. 1954 % C hgLatest Mo. Prev. Yr. Mo. Ago New passenger car registraBank debits __________________ _ Bituminous coal production* _ Business failures-—nu Cigarette production 14.1 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 Md. 8 Dist. Total + Outstanding Orders + 18 + 14 Seasonally Adjusted: 1947-1949 = 100 ii y