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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 43A percent, and municipal bonds rose 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 th e cre a se re se rv e s a n d th e in F e d e ra l R e se rv e p e r m it t e d a s u b s t a n t ia l in m o n e y s u p p ly in 1965, 2 2 .5 ^ ___ T o t a l R e s e r v e s O f M em ber B an ks 2 2 .0 _______ ____________________ 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 - ** — S e a s o n a lly A d ju s te d ----------- — — - I ............................. I .................................... 1965 1964 m ost in t e r e s t ra te s c lim b e d above t h e ir 1966 1 9 5 9 -1 9 6 0 cy c lic a l p e a k s . . . 1959-60 High 1966 H ig h 1 3 - m o n t h b ills 4 .5 9 4 .6 6 6 - m o n t h b ills 5 .0 7 4 .9 0 9 - 1 2 - m o n t h is s u e s 5 .1 5 5 .0 1 3 - 5 - y e a r is s u e s 5 .0 0 5 .0 4 L o n g -te rm U . S. G o vern m e n t 4 .4 2 4 .7 1 P r im e ra te 4 .5 0 5 .5 0 F e d e ra l F u n d s 4 .0 0 4 .7 5 S ta te a n d lo c a l A a a 3 .6 5 3 .6 3 C o rp o ra te A a a 4 .6 1 4 .9 7 2 5 -y e a r m o rtg a g e s 6 .2 4 5 .8 6 C o n v e n t io n a l m o rtg a g e s 6 .3 0 6 .0 0 F H A xBased on statistical series available at time of publication. as 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. - 290 250 Shadows of 1959 sh o rt-te rm and in t e r m e d ia t e ra te s c o n t in u e d t h e ir u p s w in g P e rce n t and lo n g - t e r m P e rce n t ra te s P e rce n t . 2FRASER 6 • Digitized for b ro k e out of t h e ir s t a b le P e rce n t tre n d . 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 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. 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 greater volume. Would this have been advisable in view of rising inflationary pressures? On the contrary, some observers would have favored considerable credit re straint because of the developing ebullience of the econ omy and the more rapid rise in prices last year. 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 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. 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 n B illio n s o f D o lla r s 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 1964 T o ta l 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 | [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 1965 t f ln i r u p g J T , 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 • 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 h a tta n o o g a K n o x v ille N a s h v ille T r i- C it ie s S ta te T o ta l 1 3 .6 8 .9 1 6 .7 1 1 .9 1 3 .7 * 1 0 .2 8 .8 1 1 .7 1 0 .4 1 0 .2 * tTri-Cities is a non-SMSA area. •Sixth District portion only. Standard M etropolitan Statistical A rea Figures Value of NnnConstruction fnrm Contracts Bank E 7m ploy_ — ^ f _ ^ T “ D ebits m ent dential residential 1 2 .5 1 1 .6 1 2 .7 7 .8 1 9 .9 * 6 .0 4 .8 5 .4 4 .2 t 5 .1 3 .0 6 7 .8 1 9 .3 N .A . 1 7 .7 - 1 7 .1 6 0 .4 5 1 .0 N .A . 1 1 .4 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 d L o n g 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. 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 y B r a n d t a n d R o b e r t R . W y a n d II 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 •for3 0FRASER 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 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 ix t h D i s t r i c t S t a t is t ic s Seasonally Adjusted ( A ll d a t a a re Latest Month (1966) in d e x e s , One Month Ago 1 9 5 7 -5 9 Two Months Ago = 1 0 0 , u n le s s in d ic a t e d o t h e r w is e .) One Year Ago SIXTH DISTRICT Latest Month (1966) 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. A P R I L 1 9 66 • 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.
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