Full text of Economic Quarterly (Federal Reserve Bank of Richmond) : September 1960

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FEDERAL RESERVE BA NK OF R I C H M O N D

SEPTEMBER

1960

TRAILERS ON TRAINS
How does a railroad move 1,000 of its em
ployees 500 miles to set up a new headquarters ?
By piggyback, of course. Piggyback, the popular
name for the system of carrying truck trailers on
railroad flatcars, is being used right now by the
Atlantic Coast Line to move its employees from
Wilmington, North Carolina, to the line’s new
headquarters in Jacksonville, Florida. Moving
vans packed with household goods are driven onto
the railroad’s flatcars at Wilmington and carried
by the railroad to Jacksonville. There the vans
are driven off the flatcars and to the doors of
the employees’ new homes.
This is an unusual use of piggybacking. There
are many other ways in which it is used; in fact,
the w'hole piggybacking field has been growing by
leaps and bounds in the past few years. Frequent
ly referred to as “a new concept” in railroading,
piggybacking has been heralded by many railroad
men as a way of regaining some of the freight
traffic that railroads have lost to other means of
transportation.
TRAFFIC AND INCOME DOWN
T h e country’s
railroads have been experiencing declines in in
come and traffic in the midst of general prosperity.
After a recent peak in 1955, net railway operating
income has declined in each of the past four years
and in 1959 was one-third below the 1955 level.
The railroads’ share of intercity freight traffic
has been in a long decline as railroads have lost
out to trucks and barges.
In response to these problems railroads have
considered solutions in many different areas. In
several cases mergers wyith other lines have been
proposed. Since mergers involve a long series of
negotiations before they can become effective, other
more immediate solutions have been undertaken.
Under this category come various improvements
made in equipment and facilities with the expecta

tion of reducing operating expenses. Piggyback
ing is another solution of this type.
EVEN IN 1880 The history of piggybacking goes
back as far as the 1880’s when “Farm ers’ Trains”
of produce wagons and teams of horses were
carried on flatcars by the Long Island Railroad.
More recently, in the 1920’s and 1930’s, various
railroads hauled trailers piggyback though not to
any great extent.
The current surge in piggybacking began in
1953. Expansion was fairly moderate at first,
but loadings kept increasing and more and more
railroads became piggybackers. In mid-1954 dur
ing the first wreek for which statistics on piggy
back carloadings were reported, there were 1,646
cars loaded piggyback by six Class I railroads.
(A Class I railroad has annual operating revenues
of at least $3 million.) In a recent week there
were 10,877 loadings by 55 railroads. In 1959
piggyback loadings were up 50% over 1958, and
currently they are running about 35% ahead of
the 1959 pace. All major Class I railroads now
offer some form of piggyback service.
Piggyback trailers ride on flatcars specially
equipped for this service. There were 6,835 of
these flatcars in use at the end of June 1959—a
63% increase over the previous year—and recent
estimates place the present number of piggyback
flatcars at over 10,000. Piggyback loadings still
account for only a small part of total freight car
loadings, about 2% at the present time. They
show a substantial increase over last year, how
ever, at a time when total carloadings are lagging
behind their year-ago level.
FROM FARM PRODUCE TO MAIL
Just what is
this new service which railroads are offering? In
its most common form truck trailers simply ride
on their own wheels on railroad flatcars. In most
cases the flatcars are loaded by backing the trailer
and tractor up a ramp onto the flatcar and then

So fa r, only a few railro ad s schedule complete piggyback trains.

driving the tractor off. The trailer is fastened in
place and rides to its destination where it is driven
off the flatcar. Most flatcars being made today
are 85 feet long and can carry two 40-foot trailers.
Some of the earlier flatcars were not as large and
could carry only one trailer at a time.
These piggyback cars are usually run as part of
regular freight trains. In a few cases they are
made part of a passenger train and run at passen
ger train speeds. W here volume has become large
enough, railroads have scheduled trains made up
completely of piggyback cars.
All types of commodities—from farm produce
to mail—are carried piggyback. One of the newest
developments is automobile piggybacking, carry
ing automobiles on truck trailers piggyback on
railroad cars. This is growing rapidly in many
parts of the country.
NEED FOR STANDARDIZATION As with any new
and rapidly expanding service, piggybacking has
been suffering from growing pains. This has
been particularly evident in two areas, the kind
of equipment used and the type of service offered.
When piggybacking began its recent growth, many
railroads acted independently in setting up their
particular system and developing equipment on
their own. This has resulted in several different
modifications of the basic piggyback flatcar and
has created problems where cars are interchanged
between two railroads. Attempts are being made
to standardize flatcars and other equipment.
Another modification of equipment which is
developing is the shipment of freight in containers.
A container may be thought of as a trailer without
wheels which is carried on a railroad flatcar in
much the same way as a trailer. At the end of
the railroad haul the container is placed on wheels
Flatcars are loaded by backing trailer and tractor up a ramp.

so that it can be carried on the highway. A con
tainer has wider use than in railroading and may
be carried by truck, ship, or plane as well as by
rail. At the present time container shipment of
freight is a relatively unexplored but growing field.
WHICH PLAN TO USE? In addition to owning sev
eral types of piggyback equipment, the railroads
also offer five different plans for carrying piggy
back trailers. Although some railroads operate
under only one plan, most offer at least two, and a
few offer all five.
When railroads first began carrying piggyback
cars, as a rule they carried trailers belonging to
motor common carriers, that is, trucking com
panies. These trailers are loaded and unloaded
by the railroads and are carried on flatcars which
belong to the railroads. The trucker performs all
of his regular functions; the railroad only substi
tutes for the trucker on part of the haul. This has
become known as Plan I. About a year ago the
Agricultural Marketing Service of the Department
of Agriculture surveyed the 50 railroads offering
piggyback service at that time. Eighteen out of
the 50 offered Plan I.
In contrast, Plan II is an “all-railroad” plan.
The railroad owns both trailers and flatcars,
solicits business directly from shippers, performs
pickup and delivery services, and charges rates
competitive with trucks. The survey of piggy
backed reported that 41 out of 50 railroads were
offering Plan II service.
NEW PLANS INTRODUCED
Plans III and IV
were specially designed to appeal to shippers and
freight forwarders. A shipper is any private in
dividual or company who moves large volumes of
merchandise. A freight forwarder assembles sev
eral shipments to make up a full trailer load.
Under Plan III the shipper or freight forwarder
owns the trailers and the railroad owns the flat
cars. The railroad takes care of loading and un
loading the flatcar and charges the shipper a flat
rate per mile. Under Plan IV the shipper owns
both trailers and flatcars and loads and unloads
the cars. The railroad hauls the shipper’s trail
ers and flatcars and charges a flat rate per car.
Of the 50 railroads in the survey of piggvbackers,
20 offered Plan III; 12 offered Plan IV.
Plans III and IV have just begun to gain im
portance in the past two years. At the present time
the rates published by the railroads for these plans
have been challenged by the trucking industry be
fore the Interstate Commerce Commission. As
yet the ICC has made no final decision, but reports

have been issued by two Commission examiners,
one favoring and one opposing these rates.
Plan V is of even more recent origin and at the
present time is offered by only a few railroads; the
previously cited survey reported that three out of
50 railroads offered Plan V. This may be called
a joint operation between the railroads and truck
ing companies since it operates under joint railtruck rates. For example, suppose that a railroad
runs between points A and B and a trucking com
pany between B and C. Under Plan V they can
operate under a joint rate and carry shipments
between A and C. This in effect extends the ter
ritory of each carrier into that of the other.
DISTRICT PIGGYBACKERS All major railroads
which operate in Fifth District states offer piggy
back service. These nine railroads have been piggy
backed for widely varying lengths of time.
About half began the service between 1954 and
1956, making them among the first in the nation
to begin piggybacking. The rest joined the ranks
of piggvbackers in 1959 and 1960.
All except two District railroads, the Southern
and the Western Maryland, are members of Trail
er Train, a nationwide organization which provides
a pool of piggyback flatcars for use by its member
railroads. All District railroads run their piggy
back cars as part of their regularly scheduled
freight trains. The Chesapeake and Ohio also
connects piggyback cars to the end of a passenger
train. All five plans for piggybacking are offered
by District railroads. Plans I, II, and III are the
most common, probably because IV and V are
comparatively recent developments.
WHAT'S AHEAD? Many authorities see the com
bining of advantages of both trucks and railroads
as the principal reason for the growth of piggy
backing. A p ig g y b a c k load may be picked up by
a truck at almost any point, thus utilizing the
flexibility of trucking. Since the trailer itself is
carried by the railroad, no loading or unloading
of the shipment from trailer to boxcar is required.
This may result in substantial savings in time and
money and reduce the loss of goods through
damage or pilferage. In many cases shipments
by rail may be faster and cheaper than shipments
by truck for long distances on crowTded highways.
Piggyback is a term that will continue to be
heard in the news. Future developments depend
upon such uncertainties as ICC decisions, the
growth of containers as a means of shipping, and
the extent to which piggybacking can be expanded
and adapted to meet changing needs.

FEDERAL RESERVE HIKES ALLOWABLE VAULT CASH AND
CUTS RESERVE REQUIREMENTS
“Federal Reserve Acts to Loosen Strings on
Banks’ Lending Power” read a caption in a lead
ing New York newspaper on August 9. It made
good reading for most Federal Reserve member
bankers. The good news came in two parts. First,
member banks were authorized to begin counting
more of their vault cash as legal reserves. Effec
tive September 1, central reserve city banks—
larger New York City and Chicago banks—
and reserve city banks—larger banks in 51 other
important banking centers—were able to begin in
cluding as legal reserves all vault cash in excess of
1% of net demand deposits. Other member banks
—the “country banks”—were permitted, beginning
August 25, to count all vault cash in excess of
2 ^ % of their net demand deposits. Second, re
serve requirements for central reserve city banks
were cut on September 1 from 18% to 17^4% of
net demand deposits, bringing their requirements
closer to the 16}4% for reserve city banks and the
11% for country banks.
This was the second time the Federal Reserve
Board had authorized banks to count a portion of
vault cash as required reserves. The first action
permitted country banks, as of December 1, 1959,
to count all cash in excess of 4% of net demand
deposits and central reserve and reserve city banks,
as of December 3, 1959, to start including all above
2%. of net demand deposits. Prior to these dates
banks could meet their legal reserve requirements
only with balances on deposit with the Federal
Reserve Bank of their District.
WHY THE ADDITIONAL VAULT CASH? An Act
of July 28, 1959 amended the Federal Reserve Act
by (1) empowering the Board to allow member
banks to count all or any part of their cash hold
ings as legal reserves and (2) as of July 28, 1962,
terminating the central reserve city classification
and reclassifying Chicago and New York as re
serve cities. The cut in reserve requirements was a
first step towards eliminating the reserve differen
tial requirements between central reserve and re
serve city banks by the cut-off date.
The Board freed additional vault cash in order
to reduce further vault cash inequities among mem
ber banks. Vault cash is directly “competitive” with
member bank balances at the Federal Reserve in
the sense that member banks generally draw down
their reserve balances to obtain vault cash and

deposit any excess cash in their reserve accounts.
Banks that must hold large stores of cash either
because of their locations or the nature of their
business are treated unfairly relative to other
banks to the extent that vault cash is not allowable
as legal reserves. The recent actions and those of
last December go a long way towards remedying
these long-recognized inequities.
HOW BIG A STEP? The cut in reserve require
ments freed about $125 million in reserves, and
the cash release hiked the amount of allowable cash
by an estimated $480 million. Prior to August 25
banks had been counting as reserves around $285
million in vault cash—about an eighth of their
holdings. The new regulations should raise the
dollar amount of allowable cash to approximately
$765 million and the proportion to about one-third.
Around four-fifths of all member banks are ex
pected to have some allowable cash.
Fifth District banks typically hold more cash in
relation to deposits than do other United States
banks and consequently benefitted relatively more
from the release of cash in both 1959 and 1960. It
is estimated that District banks will be able to
count as reserves around one-half of their cash
holdings. It is expected that about 95% of the
banks will receive some benefit. Ony 70% had
allowable cash under the old formula.
EFFECTS AND TIMING The new vault cash regu
lations resemble a reduction in reserve require
ments. Technically, requirements remained un
changed, but the counting of additional vault cash
increased by a like amount the volume of excess
member bank balances at the Federal Reserve.
These excess reserves— except to the extent tem
porarily offset by policy actions—enabled banks to
expand loans and investments by several times the
volume of cash freed. The new cash regulations
will increase the expansion potential of any future
additions to reserves because part of the additions
to vault cash that banks typically make as deposits
rise can also be counted as reserves. The action
was deliberately timed to take place at the begin
ning of the fall season when the Federal Reserve
ordinarily supplies additional reserves to meet
peak seasonal credit needs. This year, the reduc
tion in reserve requirements and the freeing of
additional vault cash will supply around $600 mil
lion of those funds.
5

TOTAL DEBT AND
GROSS NATIONAL PRODUCT
(Billions of Dollars)
GN P
Gross Debt

During the expanding Fifties the nation's
debt alm ost doubled, but G N P
about the sam e rate.
w as

about twice

grew

In 1959 total debt
larg e

G N P —the

sam e ratio as during 1949.

301.8

266.1

THE COMPONENTS OF DEBT
(Billions of Dollars)

State and Local
Federal
Corporate
Individual and Noncorporate Enterprises

93.7

Increased borrowing by corporations and

heavier dem and for credit by indi

v id u a ls— particularly for new housing and durable goods—have pushed private
43.2
debt to a dom inant position in the debt picture.

1949

A DECADE OF DEBT
CHANGES IN THE
UNITED STATES

CONSUMER CREDIT OUTSTANDING AND
DISPOSABLE PERSONAL INCOME
335.9

(Billions of Dollars)

322.0

Consum er Credit Outstanding
D isposable Personal Incomo

265.8

A m arked

upw ard trend

in Disposable

vidual's w illingness to incur debt.

Personal

Income

has

increased

Between 1949 and 1959 Consum er Credit O u t

standing rose from 9.2% to 15.4% of Disposable Personal Income.

1959

the indi

The United States has about $19.1 billion in
gold stacked up at Fort Knox and in several other
vaults scattered over the country. Although this
is nearly half of the free world’s gold supply, it
is the lowest gold stock the United States has held
in twenty-one years, and in recent months the
press has given considerable attention to the possi
bility that it may be reduced further.
When the United States has a balance of pay
ments deficit, as it does now, it is supplying for
eign countries with an excess of dollar receipts
from the United States, which may be used to
build up dollar holdings in the form of bank de
posits or short-term assets or which, if they are
held by official institutions, may be used to pur
chase gold from the United States. Until 1958
the United States payments deficit averaged about
$1.5 billion a year and foreigners secured additions
to their gold reserves mostly from sources other
than the United States. In the 1950-57 period
our gold stock decreased by only $1.7 billion, and
foreigners increased their short-term dollar hold
ings by about $7.7 billion.
RECENT EXPERIENCE In 1958 and 1959, how
ever, the United States lost a total of $3.4 billion
in gold, in large part because the countries wTith
the largest reserve gains were those that tradi
tionally take additions to reserves in the form of
gold. During these two years foreign dollar hold
ings rose by $2.5 billion. During the first six
months of 1960 foreign purchases of gold from
the United States ran at the extremely low level
of $125 million. Then in July and the first half
of August United States gold losses amounted to
about $285 million.
During the first half of 1960, when net foreign
gold purchases from the United States wTere ex
ceptionally small, Switzerland lost reserves (and
sold gold) and three other countries that tradi
tionally take additions to their reserves in the form
Digitized for 8
FRASER

of gold (Belgium, the Netherlands, and the United
Kingdom) had only small reserve gains. For this
six-month period, these four countries combined
had an aggregate net reserve gain of $240 million.
In contrast, the combined rise in Swiss and
British reserves for the month of July alone was
close to $250 million. Given such a sharp addi
tion to the world demand for monetary gold, it is
hardly surprising that total foreign purchases from
the United States have increased since the middle
of the year. The exceptionally large reserve gains
of Switzerland and the United Kingdom appear
to reflect movements of capital, at least partly in
response to interest rate differentials.
Early this year interest rates began a rapid
decline in the United States as the Federal Gov
ernment reduced its marketable debt and business
activity expanded more slowly than had been ex
pected. In the industrial countries of Western
Europe interest rates continued the rise which
had begun during the Fall of 1959 as industrial
output increased. Since then nearly every coun
try in W estern Europe has taken steps to imple
ment policies of monetary restraint.
In contrast, the discount rate in the United
States this year has been reduced twice, follow
ing declines in other short-term rates. The first
decrease, from 4 to 3 ^ % , was made in early June,
shortly before the Bank of England raised its bank
rate to 6%. The second reduction, to 3%, oc
curred in mid-August. Even before these diver
gent changes in central bank rates wrere made, the
rate on United States Treasury bills wras con
siderably below comparable rates in England.
Since mid-1959 United Kingdom bill rates have
been over 1% above United States bill rates,
after allowing for cost of foreign exchange cover.
HOLDERS OF DOLLAR BALANCES The volume of
foreign-held funds which may be shifted out of
the United States in response to current interest

rate differentials depends in part upon who holds
the dollar balances. At the end of May when the
United States gold stock amounted to about $19.4
billion, there was $20 billion in dollar balances
in the hands of foreigners. Over $3 billion was
held by international organizations, primarily the
International Monetary Fund and the Interna
tional Bank for Reconstruction and Development.
These organizations hold dollar balances to per
mit them to carry out their functions and do not
shift funds in response to interest rate differen
tials. Of the remaining $16.8 billion in dollar
holdings, foreign central banks and governments
held $9.3 billion. These official balances are re
serves. They are held in United States dollars
to the extent they are because the dollar is a re
serve currency, not because particular interest rate
levels prevail in the United States. Consequently,
official balances are not shifted in response to in
terest rate differentials.
Commercial banks, corporations, and individuals
held the remaining $7.5 billion. These private
holdings probably consist largely of working bal
ances needed by their holders to finance trade and
banking transactions. Since early 1958 private
holdings of dollar balances have increased by over
$1 billion. This increase, which was largely in
European holdings, came about in response to the
elimination or relaxation of exchange restrictions
by major European nations and the accompany
ing increase in working balances as well as in
response to increased United States yields over
much of the 1958-59 period. Lower interest rates
in the United States, relative to other markets,
could cause an outward movement of that part
of private holdings in excess of working balances.
Private balances, then, are the only form of dollar
holdings which can be expected to shift in response
to interest rate differentials.
When private balances are withdrawn from the
United States for investment elsewhere, the holder
generally sells them to a foreign central bank in
return for the currency of the country to which
the funds are being transferred. If the central
bank decides to hold the dollar assets, a foreign
official holder will take the place of a foreign pri
vate holder of dollar balances, and the United
States will lose no gold. Most countries take part
of the additions to their reserves in the form of
dollar balances and some maintain very large offi
cial dollar holdings. A few other central banks,
e.g., those in England, Switzerland, Belgium, and
the Netherlands, normally take their reserve gains
in the form of gold. These banks might use the

dollar balances purchased from the private holders
to buy gold, and when the world demand for gold
is swelled by heavy total foreign purchases, a large
part of the total demand may take the form of
purchases from the United States Treasury.
FORM OF DOLLAR HOLDINGS Of the $16.8 bil
lion in foreign dollar holdings, exclusive of inter
national organization holdings, only about $200
million was held on deposit with Federal Reserve
Banks. About $8.3 billion was held on deposit
with other banks, part of it in the form of time
deposits bearing interest. Another $8.2 billion
was held in the form of short-term Government
securities and other money market paper.
Part of these security and money market paper
holdings are sensitive to interest rate changes on
various forms of dollar assets. However, funds
held in the form of earning assets are not, by rea
son of this, necessarily to be excluded from the
total of working balances. At the end of the sec
ond quarter of 1958 when short-term interest rates
were at a cyclical low, foreign holdings of United
States Government securities fell to $3.7 billion.
As the yield on short-term funds in the United
States rose during 1959, foreign holdings of Unit
ed States Governments increased, reaching $6.5
billion at the end of 1959. This sensitivity to in
terest rates on the part of holders of United States
Governments does does not portend any sharp in
crease in gold outflow as rates here fall. On the
basis of past experience it appears that when Unit
ed States interest rates decline, so that yields on
money market instruments offer little competitive
advantage over returns on time deposits, foreign
holders of dollar balances tend to shift a large part
of their holdings to time deposits and to reduce
the proportion in the form of short-term Govern
ments and other money market instruments.
SUMMARY
When the United States has a per
sistent deficit in its balance of payments, the result
is an excess of United States dollar receipts by
foreigners. These may be held in the form of
dollar deposits here, invested in Treasury bills and
other money market instruments, or, if held by
official institutions, used to purchase gold. The
extent to which the dollars are used for their
various purposes depends upon the size of the pay
ments deficit, the countries which have the cor
responding payments surpluses, the percentage of
dollar holdings in working balances, and the at
tractiveness of the United States money market
for short-term investment.
9

the!; D ;.fl 9 district
Fifth District business is winding up a generally
successful summer. Retail trade so far this year,
however, has not quite kept pace with last year’s
consumer buying and has shown considerable
divergence from normal seasonal patterns. The
seasonally adjusted index of department store sales
for July and August was about on a par with last
year. District automobile dealers in July ex
perienced little if any more than a seasonal in
crease in demand for new cars. Used car demand
was rated below normal. Sales of appliances this
summer, according to trade sources, have general
ly failed to keep pace with 1959. Sales of refriger
ation and laundry equipment have been particularly
slow. Cooking equipment is reportedly about even
with a year ago. The volume of air conditioner
sales is described as satisfactory in view of the kind
of weather which has prevailed this summer.
EMPLOYMENT HIGH
Indications of s tre n g th
in District business can be seen in the record of
employment. The number of nonagricultural
workers employed in the District, seasonally ad
justed, edged up again in July and established a
new high nearly 1.5% above the level of a year
ago. Mining employment showed the only signifi
cant year-to-year decline—more than 6%. All
of the June-to-July changes were relatively small.
Mining employment between the two months de
creased nearly 2.5%. The other employment re
ductions occurred in trade and services, each of
which decreased by considerably less than 1%.
Current industry and area reports, including the
weekly summaries of state unemployment insur
ance experience, help to round out the incomplete
picture afforded by these statistics. Such sources
do not indicate any decline from the recent high
levels of employment.
More tangible evidence is provided by the scat
tered reports of new and enlarged manufacturing
and commercial facilities going into operation.
North Carolina, for instance, has recently an
nounced that industrial growth during the first
half of this year has created in that state over

M any scenes like this w ill have to be enacted this fa ll if
recent moves to reduce textile output are soon to be reversed.

16,500 new jobs which will mean increased annual
payrolls of over $50 million. In view of the many
such projects which are still under construction,
these piecemeal additions to District employment
are scheduled to continue for some time and will
add up in the coming months to a significant total.
Tending to reduce the level of employment in
government agencies of the District, economy
measures instituted by the Federal government are
expected in the next several months to eliminate
a few thousand jobs in the Washington, D. C. area.
DECLINES IN MAN-HOURS CONTINUE
Season
ally adjusted man-hours in District manufacturing
industries declined nearly 1% between June and
July. This decrease resulted from man-hour re
ductions in many durable goods industries and
nearly all nondurable goods industries. In the
durable goods group the biggest reductions oc
curred in lumber and wood products (down 3% )
and furniture and fixtures (down 1.6%). The
most significant decreases among nondurable goods
industries (all between 2% and 3% ) occurred in
tobacco manufacturing, the broad woven and knit

ting components of the textile industry, and chemi
cals and allied products.
Against the general downward movement, sig
nificant increases occurred among the durable
goods industries in fabricated metals, transporta
tion equipment and the stone, clay and glass group.
The only increases registered among the nondura
ble goods industries occurred in paper and allied
products and the printing and publishing indus
tries, each of which established a new record.
Despite the decline from June to July, total manu
facturing man-hours in July were a small fraction
of 1% higher than in July 1959. This resulted
from a variety of changes in individual industries
The primary metals and machinery industries
(hampered a year ago by the steel strike) regis
tered considerable increases as compared with last
year. Paper and printing each showed gains of
nearly 5% as compared with July a year ago. By
the same comparison, decreases of about 3% or
4% occurred in fabricated metals, transportation
equipment, the stone, clay and glass category, and
textile mill products.
TEXTILES IN PERSPECTIVE
As in the case of
over-all economic activity, the cotton textile busi
ness of District mills is currently marked by un
certainty and divergent conditions. Although the
volume of new orders continues to be quite small,
the backlog of unfilled orders is still sizable. Stem
ming from the uncertainties of current and pro
spective trends, an air of caution is prevalent from
soft goods and retailers clear back to the spinning,
weaving, and knitting mills. While many pro
ducers of cotton textile mill products continue to
express optimistic opinions of prospective business,
a number of firms have reduced production to
avoid undue inventory accumulation. The work
week has been reduced at a number of mills, typi
cally to five days, and permission has been re
quested from some customers to defer delivery
dates in order to stretch out production schedules
based on the current volume of unfilled orders.
In view of the confusion and uncertainty in the
current textile picture, a brief review of what has
happened so far this year might provide perspec
tive for a better evaluation of present and prospec
tive developments.
At the opening of 1960 the volume of unfilled
orders for broad woven cotton goods, to take a

typical example, was very high, amounting to 21.5
weeks of production at the then current rate. Ac
cordingly, no concern was shown by mills over
the mere trickle of new orders received during the
early weeks of 1960. However, trade reports con
tinued to indicate the receipt by District mills of
only a negligible volume of new business. Dur
ing the entire first half of the year only a couple
of flurries of increases in new orders were re
ported. By July there were questions in some
quarters about the optimism with which cloth pro
ducers continued to view prospects.
The most recent report of the American Cotton
Manufacturers Institute shows that the backlog of
orders for broad woven cotton goods declined
sharply from a total equal to 21.5 weeks of pro
duction in January to an amount equal to 13.3
weeks of output at the end of June. This, to
gether with uninterrupted operations during the
26-week period—save for a couple of days during
the March storms—indicates that new orders rep
resenting about 17 weeks’ production must have
been received during the first half of the year. This
is in sharp contrast to the “little or no new busi
ness” consistently reported. It did, of course,
represent a marked decline from 1959. It is esti
mated that the flow of new orders in the first six
months was roughly equivalent to 70% of produc
tion as contrasted with a volume equal to about
115% of production in the comparable period of
1959 and to about 160% in the final quarter of
that year.
Despite the sharp decrease noted, unfilled orders
for cotton broad woven gray cloth are still fairly
substantial—probably larger than they were at the
beginning of any September in the past 10 years
except 1959, 1955, and 1950.
During this long period of steady production,
comparatively slow orders, and declining backlogs,
broad woven cotton goods inventories moved up
ward little by little. From a level equivalent to
3.4 weeks’ production in January, according to the
American Cotton Manufacturers Institute, these
inventories reached a level equal to 4.0 weeks’ pro
duction in June. This was the highest point
reached in a year and a half.
The most recent bits of information show a con
tinuation of the tendencies revealed in the statistics
of the first half of the year. One new and possibly
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