View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Interest Rates and the Demand
for Credit

Atlanta, Georgia
April

•

1966

Vol. LI, No. 4

Also in this issuer
BANKING RESPONDS
TO THE GROWING NEEDS
OF TENNESSEE BUSINESS

SIXTH DISTRICT
STATISTICS

Higher interest rates affect borrowers and savers differently. The busi­
nessman who needs funds for working capital finds expenses higher.
Corporations seeking funds in capital markets to finance expansion
must consider the prospect of higher rates. And the home-buyer may
find mortgage credit more expensive and difficult to obtain.
To those who save, higher rates create the opposite effect. Savers
profit when thrift institutions bid higher for their savings dollars. Even
investors who seldom stray from common stocks may notice the at­
tractiveness of bond yields when interest rates are high.
Less evident is that these influences often become blurred by simul­
taneous saving and borrowing. For instance, a family buying a home
on credit may continue to set aside money for a “rainy day.” And even
some persons that fail to save do receive interest indirectly from pen­
sions or insurance benefits. Higher rates, then, do have different effects
and these become particularly important when adjustments are sharp,
as in recent months.
Interest Rate Developments

DISTRICT BUSINESS
CONDITIONS




Will

Although the explanation for the interest rate developments is not
clear to everyone, the extent and timing of the upswing are. Short-term
rates have been advancing since 1961, but the rate rise for long-term
U. S. Government and corporate bonds did not begin until mid-1965.
This marked an abrupt change from the relatively stable trend of the
early 1960’s. The direction of state and local bond yields was similar,
except for drifting noticeably lower in 1962-1963 and then doing an
about-face as early as spring 1965. Mortgage rates also declined in the
earlier years of the current economic upswing and were slower to rise
than state and local yields. However, they, too, moved upward before
the Federal Reserve Banks this past December increased the rate at
which member banks can borrow, i.e., the discount rate. Thereafter, the
run-up in long-term rates accelerated until early March, when yields
fell back.
By early March, investors found outstanding Aaa corporate bonds
yielding about 4% percent— up nearly Vi percent from early 1965.
Over the same period long-term U. S. Government bonds also advanced
more than Vi percent, to about 43 percent, and municipal bonds rose
A
nearly 34 percent, to 3% percent. Newly issued Aaa corporate bonds,
which usually offer a better return than outstanding obligations, paid
in the neighborhood of 5% percent— an increase of nearly 1 percent.
Bond yields gained so swiftly in January and February that many
observers believed the increase in yields had been overdone. This factor,
along with rising expectations of a tax increase and the cancellations of
several bond issues, helped produce a reversal in most bond yields be­
tween early March and early April. Although bond yields are currently
higher than last fall and winter, they remain below yields on most Euro­
pean securities, many of which also increased this past year.

A lt h o u g h
c r e a s e

t h e

in

F e d e r a l

r e s e r v e s

R e s e r v e

a n d

t h e

p e r m

m o n e y

it t e d

a

s u p p ly

s u b s t a n t ia l
in

^

___ T o t a l R e s e r v e s
O f M em ber B an ks
_______ ____________________

S

2 1.5 -

-

/

S e a s o n a lly A d ju s te d

~

2 1 .0 -

-

-

-

2 0 .5

2 0 .0 ...................................I

...................................

............................. I

....................................

—

M o n e y S u p p ly a n d T im e D e p o s it s
330 —

A t C o m m e r c ia l B a n k s

310 -

-

**

290
—

250

S e a s o n a lly A d ju s te d

-----------

—

—

-

I

............................. I ....................................
1965

1964

m o s t

in t e r e s t

c lic a l

p e a k s

r a t e s
.

.

c lim

b e d

1966

a b o v e

U .

S .

t h e ir

1

.

1959-60 High

1966 H ig h 1

G o v e r n m e n t

3 - m o n th

b ills

4 .5 9

6 - m o n th

b ills

5 .0 7

9 - 1 2 -m o n th
3 -5 -y e a r

P r im

e

55 . .10 51

S ta te

4 .4 2
4 .5 0

C o r p o r a t e

lo c a l

5 .5 0

4 .0 0

F u n d s

a n d

5 .0 4

5 .0 0

ra te

F e d e r a l

4 .6 6

is s u e s

is s u e s

L o n g - t e r m

4 .7 5

3 .6 5

A a a

4 .6 1

A a a

2 5 -y e a r

m o rtg a g e s

6 .2 4

C o n v e n t io n a l

m o rtg a g e s

6 .3 0

F H

A

6 .0 0

xBased on statistical series available at time of publication.
a s

Shadows of 1959

The rise in rates in this country in the last half of 1965 and
early 1966 has brought back memories of 1959. In fact,
in early 1966 most basic interest rates were above their
1959 cyclical highs— in some cases, by a sizable margin.
For instance, the increase in the prime or minimum com­
mercial bank lending rate to 5 Vi percent this March
brought this rate one full percentage point above its 1959
level.
Rate relationships among different maturities resemble
those of 1959, however. For example, 3-5 year Treasury
bonds, that are sold to yield less than long maturities as
a rule, have moved above long-term yields as they did
in 1959.

2 2 .5

2 2 .0

in ­

1 9 6 5 ,

s h o r t- te r m

a n d

in t e r m e d ia t e

r a t e s

c o

u p s w in g
P e rce n t

a n d

P e rce n t

lo n g - t e r m

P e rce n t

. 6 •



r a t e s

b r o k e

o u t

o f

P e rce n t

t h e ir

Monetary Policy
More intriguing than the rate rise is its cause. During 1965
the Federal Reserve System bought securities in the open
market. Other things being equal, this would tend to raise
the price of securities and lower yields— in other words,
push interest rates lower. The amount of securities pur­
9 5 9 - 1 9 6 0
c y ­
chased by the System on a net basis was $3.7 billion.
This purchase, greater than in 1964, was made partly to
meet larger reserve losses from an increased outflow of
gold. Even after this, however, the System created a sub­
stantial amount of reserves last year, permitting rapid
expansion in bank credit.
4 .9 0
The rise in interest rates, in spite of this expansion in
reserves, suggests that the System could have checked the
increase in rates only by supplying reserves in much
4 .7 1
greater volume. Would this have been advisable in view
of rising inflationary pressures? On the contrary, some
observers would have favored considerable credit re­
3 .6 3
straint because of the developing ebullience of the econ­
4 .9 7
omy and the more rapid rise in prices last year.
5 .8 6
The highly publicized December discount rate increase
came many weeks after other interest rates had risen. This
further indicates that the System reacted to earlier rate
developments in credit markets. Moreover, in the weeks
n t in u e d
t h e ir
after the discount rate increase, the System took pains to
slow down the sharp interest rate adjustments then taking
place. Purchases of Government securities in the open
market were stepped up, even though this added to banks’
ability to expand credit during a period of increased loan
demands.
Looking at a longer period, however, monetary policy
has tried to moderate the growth in bank credit and total
spending. Since the turn of the year (through March),
money and bank credit have, in fact, expanded more
slowly than in 1965.
s t a b le

t r e n d .

Contraction in Market Supply of Funds?

Interest rates sometimes increase because of a reduction
in the supply of lendable funds. Was this the cause for
last year’s interest rate rise? The answer is No. Funds
supplied to credit and equity markets (net of repay­
ment) amounted to $72 billion in 1965, nearly $5 billion
more than the very large supply in 1964. Almost threefourths of the funds supplied in 1965 originated with con­
sumers, nonfinancial businesses, and state and local gov­
ernments, i.e., the private domestic nonfinancial sector
of the economy. Within this sector, most of the funds were
M ONTHLY

R E V IE W

provided by consumers and transferred to borrowers
through banks, savings and loan associations, and other
so-called financial intermediaries. Only a small portion
reached borrowers through state and local governments’
buying corporate and U.S. Government securities and
other forms of “direct investment.” The increase in funds
provided by the private sector, particularly consumers and
state and municipal governments, more than accounted for
the gain in total supply. Other sectors supplied less than
in 1964.
Increased Demand Is Accountable
If the upward pressures on interest rates did not originate
on the supply side, where then? The main causal factor
was a sharp expansion in demand. This demand left a
sizable gap between the amount of money desired by
borrowers and that which lenders were willing to supply
at prevailing interest rates. Accordingly, would-be bor­
rowers, competing for the relatively scarce funds, forced
interest rates upward. The higher interest rates enticed a
greater supply of funds into the market and probably
reduced demand by causing some would-be borrowers to
abandon or postpone marginal projects. Through this
rationing process, the potential demand and supply of
funds were brought closer together, and the effective de­
mand for funds (actual funds raised equals actual funds
supplied) increased by almost $5 billion to $72 billion.

As usual, consumers, nonfinancial businesses, and state
and local governments accounted for practically all the
demand for funds. However, demand for funds from these
borrowers leaped upward in 1965 by more than $10
billion— over twice the increase in total effective demand.
At the same time, demand from the Federal Government
and from foreign borrowers was smaller than in the pre­
ceding year. Considerably more funds were required by
nonfinancial businesses to support both larger inven­
tories and the expansion of plant and equipment. State and
local government demand increased to finance the con­
struction and expansion of schools, water and sanitation
systems, and highways. Financing needs of consumers ex­
panded to support accelerated durable goods buying and
continued acquisition of housing. The general rise in
interest rates reflected all of these expanded financing
requirements.
Most of the demand for funds was met in the securities
and mortgage markets. Altogether, private market demand
through securities and mortgages amounted to about $39
billion— nearly $2 billion more than in 1964— largely
accounted for by consumers and businesses and by state
and municipal governments on a smaller scale.
In the securities markets, both corporate and state and
municipal demands were greater in 1965 than in the
preceding year. State and municipal demand for money
continued on page 30

Supply of Credit from Original Sources

Effective Demand for Credit

United States, 1961-65
Q u a rte r ly
S e a s . A d j. at A n n u a l R a te s

H

United States, 1961-65

A n n u a l T o ta ls
B illio n s of D o lla

| _ J j | Q u a r te r ly
S e a s . A d j. at A n nu al R a te s

M

A n n u a l T o t a ls

B illio n s o f D o lla rs
T o ta l D em an d

U . S . G o v e rn m e n t

11

B illio n s o f D o lla rs

B illio n s o f D o lla r s
) - p r jv a t e D o m e s t ic N o n fin a n c ia l S e c t o r

|

i

B illio n s o f D o lla r s

1964

1965

1964

T h ro u g h
In t e r m e d ia r ie s

1965

1964

D ir e c t

The increase in the supply of funds in 1965 stemmed from the
private domestic nonfinancial sector, where considerably more
funds were made available through intermediaries. Direct pri­
vate lending also advanced, but to a lesser degree.

A P R IL

1 9 66




|

i

r u

[C o n s u m e r

I

I B u s in e s s
I S ta te and L o c a l

I S ta te and L o c a l

T o ta l

t f l n

B illio n s o f D o H a rs

P r iv a t e D o m e s t ic N o n fin a n c ia l S e c t o r

[C o n su m e r
|B u s in e s s

1965

n

1965

1964

1965

1964

1965

1964

S e c u r it ie s
an d M o rtg a g e s

Net funds raised in credit and equity markets increased further
in 1965, largely due to greater borrowing by consumers, busi­
nesses, and state and local governments. The outstanding
development in 1965 was a sharp rise in loans, specifically
business loans. Securities and mortgage borrowing showed a
sm aller gain.

• 27 •

p

g

J

Banking Responds to the Growing Needs
of Tennessee Business
Tennessee’s economy was “still running ahead” of the
nation, according to the last M o n t h l y R e v i e w report
(June 1965). Statistics for the complete year confirm its
faster pace. Different sectors of economic activity reveal
that Tennessee’s nonfarm employment gained 5 percent
versus 4 percent for the nation; the state incorporated 8
percent more new businesses, while the United States
showed 3 percent more incorporations. The state’s con­
tract construction soared 15 percent in contrast to the
7-percent national gain. These increases in turn were
reflected in an 8-percent advance of personal income for
the state and a 7-percent gain for the nation.
Tennesseans proved no less hesitant to spend money
than their national counterparts. Consumer spending gains
compared favorably with the 8.5-percent rise in national
retail sales, as suggested by the 10.6-percent jump in
state sales tax collections.
This increased economic activity placed more demands
upon the financial institutions of the Volunteer state.
Member banks of the Federal Reserve System located in
the Sixth District or eastern two-thirds of Tennessee pro­
vided much of the lubrication needed to facilitate the flow
of goods and services. These banks extended 14 percent
more loans and attracted 10 percent more deposits in
surpassing the corresponding national percentage gains.
Despite a greater increase in business activity, Tennessee
banks’ time deposits grew at a slower-than-national rate.
A Tennessee law limiting the maximum rate payable on
bank deposits to 4 percent may have retarded growth.
The 10-percent gain in the flow of payments through
checking accounts also gauges the increased use of bank
services.
Consumer loans showed strong gains, according to
figures based upon the latest detailed loan breakdown
(June 1965). Loans for retail purchases jumped 21

percent from the year-earlier level. Since most automobile
purchases utilize credit, many of the new consumer loans
came as direct consequences of the fast growth in auto
sales. New state automobile registrations soared 18 per­
cent in 1965 from the 1964 level. In addition to direct
consumer loans, Tennessee member banks supported the
expansion of consumer spending with sizable increases
in their loans to other financial institutions, such as con­
sumer credit companies.
Loans to fabricated metal products and food proces­
sing in the manufacturing sector and construction in the
nonmanufacturing sector showed large annual increases.
These gains were reported by leading banks in Chatta­
nooga, Knoxville, and Nashville at the end of 1965.
The large loan volume extended to the fabricated
metal products industry reflects the rapidly rising demand
for its products. This demand led to an 8-percent increase
in jobs. Food manufacturing did not register a very large
employment gain, but the rapid rise in food prices prob­
ably created a need for larger working capital for carrying
inventories. The gain in construction loans mirrors the
jump in the state’s construction contracts and employment.
The patterns of economic change in each of the areas
of the state are not simply smaller scale reflections of
state totals. Therefore, recent developments in Tennessee’s
economy can be understood by reviewing trends in trade
and banking areas. Each of these areas consists of neigh­
boring counties with similar economic characteristics.
Chattanooga employs a higher percentage of workers
in manufacturing than any other major city in the state.
Since manufacturing employment grew faster than non­
manufacturing employment during 1965, Chattanooga’s
greater orientation toward manufacturing helped assure
faster job growth in this area than in other state areas.
The high level of activity in metals industries and the

A WIDE RANGE OF ACTIVITIES CHARACTERIZES THE STATE’S GROWING ECONOMY:




In Chattanooga the laboratories
of a drug manufacturing firm test drugs,
cosm etics, and fine chemicals.

Outside of Knoxville in Alcoa, a long hot rolling line carries
aluminum through another stage of processing.

resurgence of textiles revived the area’s activity after its
lackluster performance in the earlier stages of the present
economic expansion that began in 1961. Although Chat­
tanooga construction contracts dropped last year after an
unusually good year in 1964, the large backlog of con­
struction activity carried over from 1964 gave the area
a 29-percent boost in construction jobs. Chattanooga
banking business reflected this industrial and construction
activity with better-than-state increases in loans and
deposits at member banks and in bank debits.
Knoxville posted employment gains below the state
average, despite excellent gains by the apparel industry.
The city staged a spectacular 65-percent growth in total
building contracts. Spending connected with the construc­
tion boom was likely a major factor in giving the area a
faster annual growth in bank debits than the state. How­
ever, the slower growth of business activity, indicated by
employment figures, held loans and deposits expansion be­
low the state average. A great deal of the new construc­
tion includes public buildings and apartments for which
local bank financing is less frequently used. The 1965
construction contracts getting underway this year prob­
ably will stimulate the area’s economy.
Nashville’s gains in economic activity and banking
surpassed those of the state. She scored her best per­
centage job gains in machinery, apparel, and chemical
industries. This strong increase caused member banks
to decrease their investments in order to meet the strong
loan demand. The 12-percent growth of deposits, the
largest gain for any of the four trade and banking areas,
did not prove adequate to meet the 17-percent gain in
loans without reducing investments.
The economy of the Tri-Cities area of Bristol, Johnson
City, and Kingsport was somewhat less buoyant than the
standard metropolitan areas of the state. Yet the area’s
income gains probably lagged less than job gains, since
the high-wage chemical industry had a good year. Fasterthan-the-state growth in deposits is symptomatic of good
income gains in the area. If large chemical firms had relied
on local sources of finance, loan expansion would have
been larger. Employment figures indicate that construc­
tion activity moved ahead strongly in 1965.

At the Arnold Engineering Development Center in the Nashville
Trade and Banking Area, a rocket test cell is being constructed for
testing the third stage of the Saturn 5 space vehicle.




Percent Changes in Selected Tennessee Indicators
1964-1965

M em ber Bank
Statistics by Trade
a n d Bankm g A rea
Loans D eposits
C
K
N
T
S

h a
n o
a s
r ita t

t t a n o o g a
x v ille
h v ille
C it ie s
e T o t a l

1 3 .6
8 .9
1 1 .9

Standard M etropolitan
Statistical A rea Figures
Value of
NnnConstruction
fnrm
Contracts
Bank E 7 ploy_ — ^ f _
m
^ T “
D ebits
m ent
dential residential

1 0 .2 1 2 .5
6 .0
3 .0
8 .8 1 1 .6
4 .8
6 6 08. 4
7 .
11 16 . .77
5 .4
1 2 .7
1 9 .3
5 1 .0
1 0 .4 7 . 8 1 4 . 2 t
N . A .
1 3 .7 *
9 . 1 0* . 2 *
9
5 .1 1 7 .7
1 1 .4

tTri-Cities is a non-SMSA area.
•Sixth District portion only.

tBased on average of bimonthly figures.
N.A. Not available.

The Memphis area, lying outside the Sixth District,
apparently took a breather in 1965 after a good year in
1964. The 2.9-percent increase in jobs lagged behind the
growth in the other four major areas of the state. Con­
struction activity suffered a sizable letdown following its
success in 1964. Memphis banks echoed the moderation
of the city’s business in a slowdown in the growth of bank
debits, loans, and deposits.
Will the fast pace of Tennessee business continue this
year? A definite plus factor for the state is the present
exuberance of the national economy, because of the
interdependence of the state’s economy with that of the
nation. Yet business conditions could change unexpectedly.
Capacity limitations are becoming of greater importance
to the state’s economy as it begins the sixth year of expan­
sion. However, Tennessee has already provided for more
capacity by the large number of new businesses established
and the higher level of construction activity last year. The
possibilities of further expansion challenge Tennessee
business and labor to make 1966 an even better year.
C. R i c h a r L o n g
d
This is one of a series in which economic developments in
each of the Sixth District states are discussed. Develop­
ments in Georgia’s economy were analyzed in the March
1966 R e v i e w and a discussion of Florida’s economy
,
is scheduled for a forthcoming issue.

One of the state’s largest industrial plants
in Kingsport produces
chem icals, fibers, and plastic products.

- 1

N . A

D e b its

I n te r e s t K a te s

was strongest in the first half and the final quarter of the
year, while corporate demand was heaviest in the second
and third quarters. Corporate and consumer mortgage
demands were about the same in 1965 as in 1964.
True, total securities and mortgage demand increased
somewhat in 1965, but the outstanding development was
the nearly $9-billion jump in loans to more than $27
billion. Most of this gain reflected increased demand for
funds by the private sector. Accounting for the lion's share
of the rise in loans, business demand practically doubled
in 1965, with particular concentrations in the first half
and the final quarter of the year. Consumer needs, which
also increased, were heavy throughout the year. With
swollen business and consumer loan demands coming on
top of the large security and mortgage financing, no won­
der interest rates gained.
Feeling the brunt of the loan demand, commercial banks
resorted to the sale of U.S. Government securities, putting
upward pressure on yields of these issues. Their total
securities portfolio— although larger—did not expand on
the scale of other recent years, when heavy purchases of
municipal bonds helped hold down interest rates. Total
loans expanded by almost 15 percent in 1965, before
slowing down in early 1966.
In summary, then, the rise in interest rates has been
triggered largely by a sharply increased demand for funds
in credit and equity markets.
Where Will It End?
The outlook for interest rates will depend heavily on future
credit demands and savings flows, as well as monetary
policy actions.
In the event interest rates increase further, the higher
cost of credit will, however beneficial to savers and in­
vestors, discourage some would-be borrowers and thereby
cut down on some types of spending. Already, high
interest rates have prompted postponement of some new
financing by state and local governments.
If interest rates should again spurt upward and at the
same time credit were to become less readily available,
this development could have a more restraining influence
on the use of credit and total spending than the additional
cost of borrowing. However unwelcome this increased
cost may be to borrowers, its impact is often less painful
than higher taxes, which along with monetary policy make
up the traditional methods for heading off inflation. Higher
interest rates also perform the important function of
serving as an impersonal tool for rationing credit when
funds are limited and demands are large.
a

r

r

D e m a n d

D e p o s it

A cco u n ts

(In Thousands of Dollars)

continued, from page 27

H

to

In su re d C o m m ercial B a n k s in th e S ix th D istrict

yB r

a

n

d at n

d

R

o

b

e

r

t
R

.

Wy

a

n

dI

I

B a n k A n n o u n c e m e n ts
T h e B a n k o f M o r r i s t o w n , M o r r is to w n , T en n essee, a
n e w ly o r g a n iz e d n o n m e m b e r b a n k , o p e n e d fo r b u sin ess on
M a r c h 21 a n d b eg a n to r e m it a t p a r f o r c h e c k s d ra w n on
it w h e n r e c e iv e d fr o m th e F e d e r a l R e s e r v e B a n k . J. R .
S n o d g ra ss is P re sid e n t, a n d C la u d e J. L e d f o r d , V ic e P re si­
d e n t. C a p ita l to ta ls $ 3 2 0 ,0 0 0 , a n d su rp lu s a n d o th e r c a p i­
ta l fu n d s, $ 4 8 0 ,0 0 0 .

Digitized • 3 0 *
for FRASER


Feb.
1966
STANDARD METROPOLITAN
STATISTICAL AREASf
Birmingham . . .
1,216,544
55,109
Gadsden . . . .
154,449
Huntsville
. . .
402,817
Mobile
. . . .
286,171
Montgomery . . .
78,750
Tuscaloosa . . .

Jan.
1966

Feb.
1965

Percent Change
Year-to-Date
2 months
Feb. 1966 from
1966
from
Jan.
Feb.
1965
1966
1965

1,368,755
67,306
169,901
478,517
262,340
98,527r

1,084,861
52,214
146,653
377,479
234,023
73,920

— 11
— 18
—9
— 16
+9
— 20

+ 12
+6
+5
+7
+ 22
+7

+ 15
+ 10
+4
+7
+ 17
+ 17

542,039
1,399,307
1,924,348
451,894
172,331

652,867
l,5 0 0 ,3 0 2 r
2,112,552r
489,940r
191,126

472,683
1,157,416
1,714,178
413,196
164,955

— 17
—7
—9
—8
— 10

+15
+21
+12
+9
+4

+17
+18
+13
+9
+4

1,059,699
440,304

1,321,384
496,918r

973,184
3 % ,3 6 2

— 20
— 11

+9
+ 11

+12
+ 17

82,188
3,660,445
214,922
175,177
193,852
222,679

86,397
3,927,718
240,266
196,848r
220,122
264,109

75,895
3,231,930
143,036
169,021
201,199
190,587

—5
—7
— 11
— 11
— 12
— 16

+8
+ 13
+50
+4
—4
+ 17

+ 6
+12
+44
+3
+4
+18

.
.
.
.

445,492
109,944
109,084
2,050,779

517,541
126,006
132,223
2,320,242

386,658
86,395
96,576
1,775,632

— 14
— 13
— 18
— 12

+
+
+
+

15
27
13
15

+17
+ 26
+14
+16

449,198

— 12

+12

Chattanooga
. .
Knoxville . . . .
Nashville . . . .

475,859
372,138
1,196,173

582,493
413,158
1,227,328

411,389
336,923
1,040,825

— 18
— 10
—3

+ 16
+ 10
+15

+16
+13
+11
+ 14

OTHER CENTERS
Anniston . . . .
Dothan
. . . .
S e lm a ......................

51,933
47,545
36,595

60,870
53,221
39,294

48,096
44,247
31,183

— 15
— 11
—7

+8
+7
+ 17

+10
+8
+ 16

34,172
49,857
180,111
73,705

42,534
68,489
248,315r
86,737r

31,938
47,281
166,371
67,916

— 20
— 27
— 27
— 15

+7
+5
+8
+9

+4
+16
+16
+ 10

St. Augustine . .
St. Petersburg . .
Sarasota . . . .
Tallahassee . . .
T a m p a.....................
Winter Haven . .

69,070
70,630
33,661
111,670
52 224
16,446
258,559
92,133
107,439
589,114
59,599

84,317
78,348
34,756
123,061
56,339
19,936
368,625
116,841r
109,780
681,747
72,337

Athens
. . . .
Brunswick
. . .
Dalton
. . . .
Elberton . . . .
Gainesville . . .
Griffin
. . . .
LaG range . . . .
Newnan . . . .
R o m e .....................
Valdosta . . . .

59,793
34,530
73,952
12,516
61,124
29,356
21,400
20,445
59,819
41,888

68,190
39,195
83,129
12,058
70,498
30,444
21,647
23,690
69,197
49,548

60,934
66,471
28,191
101,250
47,289
14,228
243,938
88,462
94,116
537,521
57,599
51,757
34,346
79,976
10,618
56,475
24,171
17,640
17,493
56,370
40,250

— 18
— 10
—3
—9
—7
— 18
— 30
— 21
—2
— 14
— 18
— 12
— 12
— 11
+4
— 13

. . .
. . .
. . .
. . .
. . .
. . .
. . .

9,866
101,628
4,939
26,942
32,055
8,210
18,687

11,385
118,594
5,793
30,079
39,927
10,594
29,335

— 13
— 14
— 15
— 10
— 20
— 23
— 36

+ 14
+9
+ 19
+10
+ 12
+ 19
+17
+ 12
+20
+9
+7
+16
—2
—8
+4
+7
+15
+15
—1
+11
+8
+3
+7
—5
+ 1
+10
+15
+12

Biloxi-Gulfport . .
Hattiesburg . . .
L a u re l.....................
Meridian . . . .
Natchez . . . .
Pascagoula—
Moss Point . .
Vicksburg . . . .
Yazoo City . . .

85,870
48,330
30,370
56,546
29,914

88,786
52,924
34,578
63,080
34,706

9,993
96,994
4,563
26,894
28,811
7 ,3 %
15,420
72,987
40,240
27,497
55,074
28,146

+13
+ 6
+ 19
+ 10
+ 10
+16
+6
+4
+14
+ 10
+3
+ 16
+1
—8
+18
+8
+21
+21
+ 17
+6
+4
—1
+5
+8
+0
+11
+11
+21

—3
—9
— 12
— 10
— 14

+ 18
+20
+ 10
+3
+6

+22
+14
+10
+8
+7

47,604
35,237
20,748

45,482
37,643
29,124r

38,863
29,914
19,207

+5
—6
— 29

+22
+ 18
+8

Bristol
. . . .
Johnson City . . .
Kingsport . . . .

56,347
59,326
116,122

50,053
52,924
100,761

— 20
— 15
—9

+13
+12
+ 15

+17
+ 16
+8
+15
+ 12
+14

2 7,751,430r 21,999,043
3,511,064r 2,845,259
9 ,0 7 9 ,334r 7,091,774
6,519 ,9 6 8 r 5,342,187
3,884,342
2,969,509
987,232
l,2 4 3 ,0 5 5 r
3,513,667
2,763,082

— 12
— 10
— 16
—8
— 12
— 10
— 11

+11
+11
+7
+12
+15
+13
+13

+ 12
+12
+12
+11
+15
+16
+13

Ft. Lauderdale—
Hollywood
. .
Jacksonville . . .
M ia m i.....................
Orlando . . . .
Pensacola
. . .
Tampa—
St. Petersburg
W. Palm Beach . .
Albany
Atlanta
Augusta
Columbus
Macon
Savannah

. . . .
. . . .
. . . .
. . .
. . . .
. . . .

Baton Rouge
Lafayette
.
Lake Charles
New Orleans .
Jackson

.
.
.
.

. . . .

Bartow
. . . .
Bradenton
. .
Brevard County .
Daytona Beach .
Ft. Myers—
N. Ft. Myers
Gainesville . .
Monroe County .
Lakeland . . . .

Abbeville .
Alexandria
Bunkie
.
Hammond
New Iberia
Plaquemine
Thibodaux

502,525

.
.
.
.
.

SIXTH DISTRICT, Total
Alabama}
. . .
Florida! . . . .
Georgia:): . . . .
Louisiana*t . . .
M ississippi^ . .
Tennessee*f . . .

24,393,437
3,165 215
7,595,200
5,992,542
3,405,567
1,114,730
3 ,120,183

574,020r

70,574
70,175
128,125

—1
— 14
— 14
— 15

♦Includes only banks in the Sixth District portion of the state.
tPartially estimated. JEstimated. r-Revised

M ONTHLY

R E V IE W

S

i x

t h

D

i s

t r i c

t

S

t a

t i s t i c

s

Seasonally Adjusted
( A ll

d a t a

Latest Month
(1966)

a r e

One
Month
Ago

in d e x e s ,

Two
Months
Ago

1 9 5 7 - 5 9

=

1 0 0 ,

u n le s s

in d ic a t e d

One
Year
Ago

SIXTH DISTRICT

Latest Month
(1966)

o t h e r w is e .)

One
Month
Ago

Two
Months
Ago

One
Year
Ago

GEORGIA

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Jan. 50,995
Manufacturing P a y ro lls * * * ...........................Feb.
181
Farm Cash R e c e i p t s ..................................... Jan.
144
C r o p s ...........................................................Jan.
143
L iv e s to c k ..................................................... Jan.
140
Instalment Credit at Banks, *(Mil. $)
New L o a n s..................................................... Feb.
219
R e p a y m e n ts ................................................ Feb.
192
PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M a n u fa c tu rin g * * * ....................................Feb.
A p p a r e l * * * ...........................................Feb.
C hem icals***...........................................Feb.
Fabricated M e ta ls * * * ...........................Feb.
F o o d * * * ................................................Feb.
Lbr., Wood Prod., Furn. & Fix.***
. Feb.
P a p e r * * * ................................................ Feb.
Primary M e ta ls * * * ................................ Feb.
T e x t i l e s * * * ...........................................Feb.
Transportation Equipment***
. . . Feb.
N onm anufacturing***................................ Feb.
C on stru ctio n * * *..................................... Feb.
Farm E m p lo y m e n t...........................................Feb.
Insured Unemployment, (Percent of Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mrg., (Hrs.)*** . . . Feb.
Construction C o n tr a c ts * ................................ Feb.
Residential
................................................Feb.
All O t h e r ..................................................... Feb.
Electric Power Production**
..................... Feb.
Cotton Consumption**..................................... Feb.
Petrol. Prod, in Coastal La. and Miss.**
. Feb.
FINANCE AND BANKING
Member Bank Loans*
All B a n k s ..................................................... Feb.
Leading C i t i e s ...........................................Mar.
Member Bank Deposits*
All B a n k s ..................................................... Feb.
Leading C i t i e s ...........................................Mar.
Bank D e b i t s * / * * ...........................................Feb.

50,477r
178
116
108
143

49,722r
175
126
124
138

46,552
n.a.
139
165
115

209
198

219
195

215
183

129
130
154
123
142
113
105
112
112
107
166
129
132
71
2.2
42.1
132
145
137
134
115
192

129
129
153
123
140
114
106
111
113
107
165
129
135
71
2.1
41.9
173
174
172
136
120
190

127
127
154
120
136
111
102
112
110
102
151
127
132
74r
2.0
41.8
178
194
165
135
114
199

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
78r
2.6
41.5
137
139
136
127
113
176

226

211

222
207

218
203

193
180

171
155
173

173
155
173

168
157
173

152
143
156

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)
Manufacturing Payrolls*** . . . .
Farm Cash R e c e i p t s ...........................

Jan.
Feb.
Jan.

9,883
183
153

9,710r
182

9,445r
182

PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M an u factu rin g * * * ..................................... Feb.
N onm anufacturing***................................ Feb.
C o nstruction***..................................... Feb.
Farm E m p lo y m e n t...........................................Feb.
Insured Unemployment, (Percent of Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Feb.

129
127
130
142
62
1.5
41.4

130
127
131
146
70
1.4
41.5

128
125
129
146
75r
1.5
41.7

n.a.
n.a.
n.a.
n.a.
64r
2.0
40.9

FINANCE AND BANKING
Member Bank L o a n s ..................................... Feb.
Member Bank D e p o s i t s ................................Feb.
Bank D e b i t s * * ................................................Feb.

243
187
190

234
184
180

226
178
179

200
162
169

111

122

3,910
n.a.
127

LOUISIANA
INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Jan.
Manufacturing P a y r o lls * * * ...........................Feb.
Farm Cash Receipts
..................................... Jan.

7,863
162
144

7,563r
160
115

7,494r
155
142

PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M a n u fa c tu rin g * * * ....................................Feb.
N onm anufacturing***................................Feb.
C o nstruction***..................................... Feb.
Farm E m p lo y m e n t.......................................... Feb.
Insured Unemployment, (Percent of Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Feb.

119
112
121
145
65
2.7
43.5

119
112
121
149
65
2.5
43.5

117
109
119
139
71 r
2.1
42.2

n.a.
n.a.
n.a.
n.a.
75r
3.2
42.6

FINANCE AND BANKING
Member Bank L o a n s * ..................................... Feb.
Member Bank D e p o s its * ................................Feb.
Bank D e b i t s * / * * ...........................................Feb.

204
149
154

204
154
157

205
148
160

178
134
134

7,082
n.a.
137

MISSISSIPPI
ALABAMA
INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate)

6,319
n.a.
125

6,954r
167
128

6,697r
161
129

120
120
120
126
71
2.6
42.4

120
119
121
128
68
2.9
42.3

119
118
119
124
72r
2.7
41.3

n.a.
n.a.
n.a.
n.a.
76r
2.7
41.6

217
174
168

208
172
167

208
167
167

187
154
151

Jan.
Feb.
Jan.

6,833
170
154

Feb.
Feb.
Feb.
Feb.
Feb.
Feb
Feb.
Feb.
Feb.
Feb.

PRODUCTION AND EMPLOYMENT

Avg. Weekly Hrs. in Mfg., (Hrs.)
FINANCE AND BANKING

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Jan.
Manufacturing P a y ro lls * * * ...........................Feb.
Farm Cash R e c e i p t s ..................................... Jan.

3,791
198
170

3,618r
197
107

3,533r
198
120

PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M a n u factu rin g * * * ..................................... Feb.
N onm anufacturing***................................ Feb.
C o n stru ctio n * * * ..................................... Feb.
Farm E m p lo y m e n t...........................................Feb.
Insured Unemployment, (Percentof Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Feb.

130
142
125
137
64
2.6
41.7

131
142
126
146
62
2.6
4 1 .7

129
140
125
161
64 r
2.1
4 2 .2

n.a.
n.a.
n.a.
n.a.
71r
3 .2
41.0

FINANCE AND BANKING
Member Bank L o a n s * ..................................... Feb.
Member Bank D e p o s its * ................................ Feb.
Bank D e b i t s * / * * ...........................................Feb.

263
207
184

261
207
183

234
178
177

213
167
163

3,492
n.a.
183

TENNESSEE

FLORIDA
INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Jan. 14,415
Manufacturing P a y r o lls * * * ...........................Feb.
208
Farm Cash R e c e i p t s ..................................... Jan.
119
PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M an u factu rin g * * * ..................................... Feb.
N onm anufacturing***................................ Feb.
C o n stru ction*** ..................................... Feb.
Farm E m p lo y m e n t...........................................Feb.
Insured Unemployment. (Percent of Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Feb.

140
142
140
117
95
1.5
42.5

14,818r
205
117

139
140
139
116
98
1.6
42.4

14,724r
198
128

13,244
n.a.
141

138
140
138
115
lOOr
1.8
42.6

n.a.
n.a.
n.a.
n.a.
104r
2.0
42.4

221
174
173

197
152
156

FINANCE AND BANKING
Feb.
Feb.
Feb.

223
171
167

224
176
175r

INCOME AND SPENDING
Personal Income, (Mil. $, Annual Rate) . . Jan.
Manufacturing P a y r o lls * * * ...........................Feb.
Farm Cash R e c e i p t s ..................................... Jan.

3,210
179
129

7,814r
172

121

7,829r
170
121

PRODUCTION AND EMPLOYMENT
Nonfarm Employment***
...........................Feb.
M a n u factu rin g * * * ..................................... Feb.
N onm anufacturing***................................Feb.
C onstruction***..................................... Feb.
Farm E m p lo y m e n t...........................................Feb.
Insured Unemployment, (Percent of Cov. Emp.) Feb.
Avg. Weekly Hrs. in Mfg., (Hrs.) . . . .
Feb.

130
137
127
154
79
2.8
41.8

130
136
127
164
75
2.6
41.0

127
132
125
153
76r
2.4
41.4

n.a.
n.a.
n.a.
n.a.
87 r
3.3
41.2

226
166
183

220
167
179

215
164
184

192
155
162

FINANCE AND BANKING
Member Bank Loans* . . . .
Member Bank Deposits* . . .
Bank D e b i t s * / * * .....................

,
.

.

.

.

Feb.

7,505
n.a.
116

*For Sixth District area only. Other totals for entire six states. **D aily average basis. ***Figures for manufacturing payrolls, employment, and average weekly hours in
manufacturing have been revised in accordance with the 1965 state employment benchmarks.
r Revised, n.a. Not available.

Note: Department store sales figures will no longer be included in this table and the District Business Conditions chart. Available statistics may be obtained from the Business S ta­
tistics Section, Bureau of the Census, Suitland, Maryland 20023.
Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U. S. Dept, of Labor and cooperating state agencies; cotton
consumption, U. S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U. S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash
receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank.
APRI
1 66
DigitizedLfor 9FRASER


• 31 •

DISTRICT BUSINESS CO N D ITIO N S
As old man Winter loosened his grip, the District began to feel a less
predictable chill. Rechanneling of savings flows, accom panied by sharply
rising interest rates, becam e more obvious. Bankers were harder pressed
to m eet credit dem ands, even at higher rates, as deposit growth slowed
somewhat. Other financial institutions noted growing competition for
new savings dollars, reflected in higher savings rates. Growth in new jobs
decelerated, although the District experienced a small net gain in total
nonfarm employment. Payrolls and total personal income showed contin­
ued gains. Construction employment and contract volume were down
from previous months, but plant announcem ents were up sharply. Prices
on many farm products rose further.

.B illio n s o f D o lla r s
A n n u a l R a t*
"S « a s . A d j.

P e r s o n a l In c o m e

N o n fa rm
E m p lo y m e n t

M fg. E m p lo y m e n t

A v e ra g e W e e k ly H o u r s ’

Demand for available credit supplies at District banks was higher than
usual during March because of heavy business borrowing during the midMarch tax and dividend payment dates. Some banks felt central money
market pressures in the calls against credit lines previously established for
national firms in the region. Total loan increases were about in line with those
of last year, but filling this demand appeared more difficult. Major District banks
joined those of the larger money centers in raising the prime rate at mid-month
and instituted firmer conditions for business and other loans. A number of
banks increased their rates on time deposits, effective April 1.

M fg. P a y r o lls ’1

C o n s tru c tio n C o n tr a c ts
5-m o. m o vin g a v e r a g e

Job gains took a breather in February. There is some indication that a
shortage of workers led to this slowdown, since production indicators were
buoyant. Moreover, payrolls continued to expand and average hours worked
in manufacturing remained at recent high levels. Large gains in nonfarm jobs
in Florida more than offset declines in the District.

I n d u s tr ia l U s e of E le c tr ic P o w e r

C o tto n C o n s u m p tio n

vs

[S

Construction firms have already felt the bite of competition for funds.
February construction contracts for residential building were down sharply
from a temporary upswing in December and January. Other construction
contracts were also severely depressed in February.

B a n k D e b its

F a rm C a s h R e c e ip t s
6-m o . m o vin g o v o ro g *

The District consumer, like his national counterpart, rem ains a strong
bidder for available credit supplies, as well as the mainstay of financial
savings flows. Preliminary estimates reveal continuing strong increases in
personal income through February and early March. Judged by debits to
demand deposits, consumer spending also continued upward. Savings flows
to depositary institutions in the District, however, remained weak, relative to
previous years. Consumer demand at banks for financing automobiles and other
durables purchases was less vigorous in February than in previous months.
Competitive pressures for savings have led to higher compensation for them,
but the total flow does not yet appear to have increased.

M em ber B ank L oans

M em ber B ank
D e p o s its ^

B o r r o w in g s fro m F. R. B a n k s
E x c e ss R e s e rv e s

1963

1964

1965

1966

♦Seas. adj. figure; not an index.
**Jan. and Feb. 1966 data revised in accordance
with 1965 state employment agency benchmarks.




The District’s farm economy is still benefiting from higher prices.
Cattle, broiler, and egg prices have advanced even more, although hog prices
have declined. Substantial shifts in acreage are likely, as final production plans
for the new crop year are effected. Early estimates indicate that the 1966
cotton acreage will be reduced by about one-fourth. Lesser reductions in corn
and peanuts are expected, while production of rice, soybeans, and tobacco is
slated for some increase.
N o t e : D a t a o n w hich statem ents are b ased have been adjusted whenever possib le to elim in ate se ason al
influences.