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MONTHLY REVIEW IN THIS ISSUE: •O ur Greatest Economic Problem • Bank Deposit Growth and Income Changes in the Southeast •D istrict Business Conditions FEDERAL RESERVE BANK OF ATLANTA http://fraser.stlouisfed.org/ I i i i of i i J St. ! Federal Reserve Bank Louis APRIL 1969 Our Greatest Economic Problem By Monroe Kimbrel President, Federal Reserve Bank of Atlanta* At this time of the year, a lot of us like to look back and measure what we have accomplished. I could spend my allotted time, therefore, in pointing out to you what you already know. This nation achieved a great deal during 1968, and in some respects the future looks very bright. The nation’s banks shared in this growth, with de posits and earnings up sharply. You recognize these gains. Instead of enlarging on our gains, I am going to spend my time telling you what we have lost. I am going to point out some of the losses we have suffered because the American people failed to halt the acceleration of inflation during 1968. What have we lost because of inflation? I shall point out three types of losses although, of course, they do not cover everything. 1. We ended 1968 with our dollars—as meas ured by consumer prices—worth almost 5 percent less than they were a year earlier. 2. Partly because of inflationary develop ments, the United States has lost the major part of its favorable position in world trade. 3. Our greatest loss, I believe, is a change in emphasis in making judgments on spending and investing. Some of us have substituted planning for inflation for planning for pro duction. The general public loses out in the process. Let me touch briefly on each of these in turn. Monthly Review, Vol. LIV, No. 4. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. 46 Rising Prices Not all of you may agree we have lost because of rising prices. I am sure that some businessmen are rather happy about their ability to charge their customers higher prices. This makes their financial statements look better, and corporations point to increased earnings per share. They may be especially happy if the prices of the goods they sell rise more than the prices of the goods and services they buy. The point is, however, such persons will con tinue to be happy only if the prices of the things they sell or the prices of their services continue to go up more than the prices of the things they buy. Not all have been in that fortunate position; and as costs catch up, it is likely that fewer and fewer can retain this particular type of lead. It is more and more likely that the fruits of infla tion will be concentrated into fewer and fewer hands. We do not have to look very far to find many persons who lost through inflation in 1968. Con sumers as a group found that during 1968 the major part of the growth in income was a phan tom gain. In 1967, per capita disposable income —that is, the average income per person after Federal taxes—was $2,744. During 1968, the av erage increased by $184 to reach a total of $2,928 per capita. The increase, measured in current dollars—that is, without any allowance for de terioration in purchasing power—was thus about *An address before the 39th annual convention of the Independent Bankers’ Association of America, March 17-19, 1969. M O NTHLY R E V IE W 7 percent. But as the year went on, consumers found that these dollars were buying less and less. They may not have been acquainted with the statistics, but they knew by hard experience that this was so. Now the statisticians tell us that, when this $184 gain is deflated for the in crease in prices, the per capita gain in personal disposable income in 1968 was only 3 percent. I suggest that those who believe everyone gains from inflation ought to read an article that ap peared in the Wall Street Journal on February 17 reviewing various case studies gathered from throughout the nation. The article concludes that “inflation is shattering many Americans’ compla cent belief that every year they are living a little better than before.” Instead, many will find ex periences such as: less bowling, more overtime; no cookies for the kids; eating less than three meals a day; and cutting out pork and veal and substituting salads. The uneven impact of inflation extends beyond those with relatively low incomes. For example, I talked with a businessman the other day who was on the board of trustees of a preparatory school. He was complaining that the funds that had been painfully accumulated over the years to build a badly needed building this year fell far short of the present cost because of rising prices. A city official who was attending the same meet ing did not listen very carefully since he was so upset about the rising costs of government and capital improvements because of inflationary con ditions. As bankers, you have heard many such complaints. Under inflation, the economy gets out of joint. Bankers well know that the price of money, like the prices of goods and services, has gone up sharply. Yields on long-term Government securi ties are the highest since the Civil War. You are getting higher rates on your loans and invest ments, and these higher rates are showing up in higher earnings on your statements. Inflated ex penses cut net profits, however. Moreover, the dollars banks have earned from higher interest rates have bought less. What is more, every fixed income asset on the bankers’ books has decreased in market value as interest rates have risen— something that always happens during inflation. It isn’t too long before members of the general public who find their money buying less and less begin to wonder if it is worthwhile to save. When too many people do this, we shall find ourselves losing one of the chief forces responsible for this nation’s economic growth and high productivity. This is so because the savings of the American people, the savings of consumers as well as busi A P R IL 1969 nessmen, provide the capital investment funds required for economic growth. U.S. Foreign Trade Our second loss during 1968 because of infla tion was a deterioration of our competitive posi tion in world trade. Our total balance of payments for 1968 looks very good on the surface. During 1968, this na tion achieved a balance of payments surplus for the first time since 1957. Our balance of pay ments, of course, includes financial transactions and other nontrade factors. I shall not go into the details of how this surplus was achieved, except to suggest that many of the forces that created last year’s surplus may not be as strong this year. It was achieved by a substantial increase of finan cial flows into this country—partly as the result of the stock market boom, partly because of re patriation of corporate funds, and partly because of the success in curtailing lending abroad by U.S. banks. The total conceals the serious deterioration in the trade surplus of the United States. In prior years, we were able to count on selling substan tially more goods and services abroad than we imported. This favorable balance of trade helped carry the load of government expenditures abroad and drains through financial transactions. The United States was competitive in world markets during the early sixties largely because it was able to keep the prices of the things it sold rela tively stable, whereas many of our foreign friends suffered internal inflation. We have lost this advantage. The export surplus on a balance of payments basis in 1968—that is, the excess of the value of our goods and services exported over those im ported—was more than $3 billion less than in either 1966 or 1967. Rising prices here have made our exports less attractive to foreigners and have attracted more imports. Most experts see little hope for improving this situation very much until we bring our rising prices under control. Emphasis on Inflation The shifting of emphasis toward inflationary considerations when making decisions to spend or invest, it seems to me, may turn out to be the greatest loss we have experienced because of in flation during 1968. Traditionally, the American businessman ana lyzed economic opportunities on the basis of how well the enterprise would provide the services or produce the goods that would meet the demands of the public. Success or failure have typically 47 depended upon the astuteness of the business man in discovering these opportunities and his efficiency in producing the goods or providing the services the public wants. His profits reflect how efficiently he has produced and how well he has met the demands of the public. In contrast, in many countries of the world we have witnessed the process whereby decisions to invest or to launch enterprises have been based almost entirely upon inflationary considerations. Under those conditions, you don’t choose your investments because they are most productive in meeting the demands of the public. You decide on the basis of what will benefit most or suffer least from inflation. Your profits, instead of meas uring your efficiency, may reflect only inflation. In the short run, rising prices may cover up your mistakes. In the long run, the result is misdi rected resources. Giving rewards to the inflationminded destroys the very basis for the operations of a free enterprise system. In reviewing some economic history recently, one of the things suggested was that economists in 1834 said that the man on the street—the con sumer, the investor—was motivated by a feeling of fear when things were going down or at the bottom. But when they were going up—as prices are now—people were motivated by a feeling of greed. This feeling of greed can become a substi tute for rational judgment. I am afraid that you and I simply have to say that a part of the American public today is being motivated by exactly that feeling. For example, in the stock market it is not looking at the current price-earnings ratio; it is not looking at the intrinsic value of some of the investments it has been making. Moreover, I must say some of our friends in the banking business have also been motivated by the same feeling. Some of us in the Federal Reserve would like to see some bankers begin to say “No” to some of their loan applicants. We should like to see a little more of the consuming public have less of this psychological fear of in flation and make fewer decisions on what they think prices are going to be tomorrow or next month or in two months. I think the banking community is very much guilty today of contin uing to act as though the feeling of greed of others, if not their own, is going to bail them out. We are calling what is developing now “infla tionary psychology.” Maybe we ought to call it “inflationary greed,” because it can destroy us. Who Is to Blame? It is generally popular to blame rising prices on someone else. Four good targets are: labor, 48 which is accused of pushing up wages faster than productivity; business, which is often charged with being over-eager to raise prices in order to maintain profits; Government spending, which we all think should be reduced—except for the things we are interested in; and the Federal Re serve, whose monetary policies—some claim— have not been tight enough. A case has been made to support each one of these charges. Labor costs have risen. Employers complain of low productivity. Average hourly earnings of manufacturing workers rose over 6 percent between the end of 1967 and the end of 1968. Some workers experienced greater gains, and some less. We shall have to admit, however, that inflation itself was a major spur to the push toward high wages, and we can hardly blame the average worker for trying to maintain his in come in the face of rising prices. On the other hand, the workers can point to higher corporate profits in 1968 than in 1967. Even after substantially higher taxes, corporate profits rose from $48.1 billion in 1967 to $51 bil lion in 1968. But would not some businessmen respond that this was only the normal growth required to maintain incentives? It is, of course, true that Government spending has been high. The Federal deficit for fiscal 1968 reached $25.2 billion and in the last half of cal endar 1968 was $10.3 billion. To finance this, the U. S. Treasury had to borrow $21.4 billion from the public in fiscal 1968 and $10.4 billion in the last half of 1968. This borrowing, on top of heavy demands for funds by the private sector, had a great deal to do with the high interest rates. Since a large part of the deficit was financed by additional bank credit, inflationary pressures were increased. In early 1967, economic and financial experts pointed out that the nation was going to get into trouble if it did not increase taxes or reduce expenditures. We can’t complain of a lack of warning. Congress was slow in enacting legisla tion. Finally, with pressures having been built up for so long, the surtax program that was finally put into effect in mid-1968 has been slow to take effect. Ultimately, it may help. Before we condemn our senators and repre sentatives in Congress for dilatory actions, let’s ask ourselves if it might not be true that they were reflecting pretty well the sentiments of their constituents. Was it not possible that we, the people, hoped that by some magic we could get the Federal Government to cut expenditures for everything but those things we were inter ested in so that we would not have to pay more M ONTHLY R E V IE W taxes? How many of us wrote letters to our congressmen approving the closing down of a Federal facility or establishment in our area? On the other hand, many of us applauded our congressmen during 1967 and early 1968 if they announced that they would have nothing to do with a tax increase. Another popular whipping boy is the Federal Reserve System. Critics can point out that in the first half of 1968 bank credit rose at what they considered an excessively high seasonally adjusted annual rate of 6.5 percent. After mid year, the annual rate of growth was even higher —about 19 percent in July and August and 14 percent in September. By the end of the year, the rate had slowed down a bit. With prices ris ing so rapidly, critics ask, “Why did the Federal Reserve supply the reserves to the banking sys tem that made this growth in bank credit pos sible?” You will find that I am on record as having suggested during 1968 that I believed the bank credit growth was excessive. At the same time, I must point out that the Federal Reserve was caught in a trap that prevented it from exerting the pressures required to completely offset the effects of deficit Treasury financing. By itself, the Federal Reserve could not have held back the inflationary pressures completely without creating serious side effects. You will recall that, because of the failure to take timely action in respect to fiscal policy, the Treasury was forced to borrow heavily during 1968, especially during the second half. Corpora tions and state and local governments were strongly competing for funds. Interest rates were high. How much higher they would have gone had not the Federal Reserve supplied some ad ditional credit to the banking system, I do not know. An even greater and sudden increase in rates, however, might have been well-nigh disas trous, possibly including a failure in Treasury financing. Perhaps the Federal Reserve can be criticized for its policy judgments, but those who do so should remember the problem that was faced, who and what created the problem, and what might have been the consequences of a more restrictive policy posture. In a democracy such as ours, responsibility for keeping our economic and financial affairs in order cannot be shifted to the shoulders of any one group. Neither can a democracy expect any agency it may set up, including a central bank A P R IL 1969 such as the Federal Reserve System, to success fully do the job unless there is widespread public support. Can We Control Inflation? Professor Jacques Rueff, the French financial expert, has stated, according to Sidney Homer, that no democratic society can be expected to run its financial affairs successfully. “Is he right?” Homer asks. I should think that Amer ican economic and financial history has shown that a society such as ours can manage its fi nancial affairs when it wants to. We have made mistakes; sometimes we have refused to face reality, we have refused to accept discipline, and some special interests have at times forgotten the public interest. But the record of our Amer ican society is far better than that of most of the nations of the world. When we have lapsed, we have eventually realized the disastrous con sequences that could result unless we changed direction. We have then accepted collective re sponsibility and stopped trying to shift responsi bility to others. Our political leaders, business men, and labor have responded by taking or supporting the needed steps to restore financial order. Who was responsible? Was it labor? Was it business? Was it the Government? Was it the Federal Reserve? A little of each perhaps. But I am inclined to think we can place the blame on our own collective complacency—the failure of you and me and other Americans to accept the responsibility and to act. Therefore, I am confident we can bring infla tion under control. For one thing, more and more persons realize that, if the same inflationary conditions prevail in 1969 as in 1968, our losses from inflation can be compounded. They realize that they do not need to be, however. This reali zation, tardily perhaps, is getting our fiscal af fairs in a more manageable state. With our fiscal affairs under better control, monetary policy may have more room to maneuver. There are signs here and there that the frantic pace of the economy is abating. If we have patience and determination, you and I can win the battle. We cannot win it, though, if we are tempted by inflationary greed. We cannot win it unless we recognize the need for discipline. We can win the battle if you and I and other Americans sup port those whose job it is to administer the dis cipline. 49 Bank Deposit Growth and Income Changes in the Southeast It is a well-known fact that bank deposits in some areas of the South have increased more than in others. But why? Many of us have be lieved that the growth in deposits is generally associated with income changes. Therefore, we have assumed that areas with more rapid eco nomic growth, measured by personal income, tended to have relatively higher deposit growth than areas where incomes grew more slowly. Now, a statistical study recently completed by this Bank has provided some evidence to sup port our earlier impression: That over a long time span, higher rates of change in deposit levels in some areas are associated with higher changes in income. Year-to-year changes in com mercial bank deposits and personal income in the Sixth District states1 during the last 20 years were studied. We found that roughly half of the year-to-year changes in total deposits of each state could be explained by personal income changes in the same year. Thus, at the state level, growth in deposits was correlated with ex pansion in income. It follows that since income ’Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee. 50 growth has been more rapid in some states than in others, deposit growth has also been more rapid. While we verified statistically, with respect to the Sixth District, that personal income changes have an impact on the growth in total bank de posits, it would be unwise to make too much of this relationship. We would not expect de posits and income in the nation to move uniformly up and down from year to year, since the level of deposits for the nation varies with the avail ability of bank reserves, the lending and invest ing activities of commercial banks, and the deposit mix between time and demand deposits— factors not always associated with income changes. Thus, an examination of the relation ship between deposit and income changes for the nation shows that there have been several years when deposit changes varied considerably from what would be expected on the basis of the re lationship between deposit and income changes for the entire 20-year period. That the years of marked divergence were, in many instances, the same in individual District states suggests that the same forces other than income influenced deposit changes there. M ONTHLY R E V IE W Among District states, Florida has led in rate of growth of total personal income since 1946; next and nip and tuck have been Georgia and Louisi ana; while, again in tandem, Tennessee, Missis sippi, and Alabama follow. Florida has also led in total bank deposit growth; Louisiana and Georgia were next in order, and were followed by Mississippi, Alabama, and Ten nessee. i i i i i i i i i i i i i i i i i i i i i i i ........................... i i i ................. ... i i i i Our evidence further suggests that, on the state level, there are factors relevant to deposit changes other than changes in personal income and the forces at work throughout the nation as a whole. Unfortunately, our statistical analysis does not tell us what these other influences are. Nonetheless, the structure and stability of each state’s income base, its per capita income level, its degree of industrialization, and other eco nomic forces determining its ability to retain and attract funds from other areas may well be of considerable importance. Under these circum stances, it is not surprising that for some states we observed that income changes have a rela tively greater impact on deposits than they have in other states. Furthermore, we found that a dollar change in income, again at the state level, has had a relatively greater influence on time deposits than on demand deposits. rapid growth. Her sunny beaches and warm weather, when much of the country is fighting blizzards and snowdrifts, have attracted everincreasing numbers of money-spending vaca tioners and retirees. And, with the retired and funseekers flocking in, the opportunities for profitable investment by both local and national trade- and service-oriented businesses have abounded. The installation of Government missile sites has given a different kind of boost to the state’s economy. As well as creating new jobs, it has provided fertile grounds for the establishment of other defense-oriented industries, which in turn have led to the creation of more high-paying jobs. As the state’s economy has expanded and income has grown, funds have flown in from outside the state, and bank deposits and other loanable funds to meet the growing credit de mands have, of course, increased. 46 '50 ’55 '60 '65 ’68 Relationships Between States Florida Not only has Florida ranked first in rate of personal income growth compared to other District states, but a dollar increase in in come has had a greater dollar impact on total de posits than in any other District state.2 More over, we found that a dollar change in income in Florida has had a relatively greater influence on time deposits than in the other states. For years, Florida has had a reputation for ^his is shown in the Notes on Regression at the end of this article. A P R IL 1969 Georgia Atlanta, frequently called the financial center or hub of the South, has contributed a lot to the expansion of Georgia’s economy—at tracting people not only from other parts of the South but from all over the country. Substantial industrialization has taken place in Georgia. Next to Florida, Georgia has moved forward more rapidly since World War II than any other District state, with the possible exception of Louisiana. And we have observed that a dollar increase in income has had a greater impact on deposits in Georgia than in any other state— except, of course, Florida. 51 Both states have been more successful than most in capitalizing on their available resources and in providing good economic opportunities which attract both financial and human re sources. In addition, they have enjoyed a rela tively more consistent pace of growth through out the period. And expansion has not been cen tered in one sector, but has spread throughout their economies, creating a stabilizing effect on income. Louisiana Louisiana has roughly matched Geor gia in the percentage of total income gains since the end of World War II. However, the statistical relationship between income and deposit gains in Louisiana is different in at least one im portant respect: While movements in time de posits seemed related to personal income changes, the movements in demand deposits were not. Louisiana’s economy has a reputation for pur suing its own independent course and being somewhat prone to fluctuation. The crude oil industry generates a widespread impact on Louisiana’s economy. Billions have been in vested in offshore petroleum gathering and re fining activities which are highly mechanized and require large amounts of capital. In addi tion, oil and gas have stimulated the develop ment of a large petrochemical industry. In comparison with Florida and Georgia, the expansion of Louisiana’s economy has been less consistent and less stable, reflecting its depend ence on the developments in relatively few key sectors. That changes in deposits and income in Louisiana should be less closely associated than in either Georgia or Florida seems consistent with the characteristics of Louisiana’s past eco nomic expansion. Alabama, Mississippi, and Tennessee By no stretch of the imagination, can one characterize the economic expansion of Alabama, Mississippi, and Tennessee as having been slow. Yet com pared to Florida, Georgia, and Louisiana, longerrun income gains in these three states have been somewhat less rapid. As shown in the charts, there is some similarity in the ranking of states in terms of total deposit growth and personal 52 income growth. Deposit gains in Tennessee and Alabama have been relatively less rapid than in Florida and Georgia. Further probing suggests that deposit growth in Alabama, Tennessee, and Mississippi has been less responsive to income changes than in Florida and Georgia (thus rank ing more or less the same as income growth). Moreover, the influence of income changes on time deposits and demand deposits for banks in the former states is, for the most part, either weaker than in the latter or is nonexistent, at least statistically speaking. Conclusions Bankers are interested in economic growth for what it will do to their community, and also be cause funds are attracted to a boom area from outside the state or community. And banks ex pect to share in the fruits of this expansion. De posit growth, for the most part, can result from conditions over which banks have little control. For example, the Federal Reserve is an im portant determinant of the growth in deposits of commercial banks in the United States. But to what extent individual banks can share in this aggregate deposit expansion is another matter. Based on measurable statistical relationships, the rapidity by which a particular Southeastern state grows enhances its chances that its deposit growth will also be fast. In a sense, this con clusion no more than verifies what many people have long believed. Despite this relationship between income and deposits, however, income is not the only in fluence on deposits. There are other determinants of a state’s deposit growth than merely income. Nor in all cases, as we have found, do income changes satisfactorily answer why either demand deposits or time deposits have expanded relative ly more in some states than others. Therefore, while rapid income growth is still the easiest path to rapid growth in many states, it is not the whole story. DOROTHY F. Arp was responsible for the statistical work and much of the analysis on which the conclu sions of this article are based. M ONTHLY R E V IE W NOTES ON REGRESSION The simple regression analysis used in this study measures the statistical relationship between two variables, Y and X. The economic relationship between the two variables—the influence of X on Y—is provided by the researcher; re gression analysis provides a way of testing the researcher’s hypothesis of influence and of quantifying that economic relationship. For our purposes, this relationship was as sumed to be linear—represented by the straight line. Y = a + b(X). The regression problem consists of getting reliable estimates of (a) and (b) from data on Y and X. The resulting esti mate of (b), which can be positive or negative, tells us that if X increases by one unit, we might expect Y to change by (b) units because of the increase in X. The estimate of (a) is simply a constant, which serves to adjust the straight line up or down according to the initial values of X and Y. We employed this sort of regression analysis to compute the relationship between year-to-year deposit changes (Y) and year-to-year personal income changes (X) in each Sixth Dis trict state for the period 1946-67. The underlying economic hy pothesis is that changes in personal income produce changes in deposits. We used three different definitions of deposits at all commercial banks: (1) changes in demand deposits, (2) changes in time deposits, and (3) changes in demand plus time deposits. Our estimates of (b) suggest, in each case, that if per sonal income increases by one dollar, deposits will tend to change by (b) dollars. Since we used changes in deposits and income, rather than levels, our estimate of the constant (a) has a special interpretation. Each time we move from year to year, the time in years increases by one. Thus our estimate of (a) suggests that deposits will change by (a) dollars when we move from one year to the next, regard less of what happens to personal income. If income changes by one dollar between, say, 1964 and 1965, then we would expect deposits to change by (a) + (b). Economically speaking, (a) can be interpreted as representing the shift in the relationship between X and Y each year. In the first case, these were our state-by-state regression results: Case (1): Y = Annual change in demand deposits; X = Annual change in personal income Coefficient Level at of Deter which (b) is mination Statistically a R-’ Significant b(X) Alabama: -30.6 + 0.31 (X) .54 .05 Florida: -27.0 + 0.32(X) .50 .05 Georgia: -34.4 + 0.30(X) .64 .05 Louisiana: 16.8 .50 + 0.22(X) .21 Mississippi: - 0.1 + 0.26(X) .56 .05 Tennessee: - 8.7 + 0.28(X) .42 .50 U. S.: 0.3 + 0.19(X) .24 .05 The coefficient of determination (R2), which measures the percentage of variation in Y explained by the cor responding variation in X, indicates, for example, that about half the variation in Florida demand deposit changes was explained by the contemporary variation in Florida personal income. In the Louisiana regression, less than a quarter of Y’s variation was explained by X’s variation. The level at which (b) is statistically significant—the right-hand column—gives us some idea how much confi dence we can place in our estimate of (b). Significance of .05 in the table above, for instance, tells us that there is only a 5-percent chance that the (b) is actually zero or, in other words, that the nonzero (b) we estimated merely re sulted from random fluctuations in X and Y. This is a case of the lower the better; we should place a lot more confidence in the Georgia estimate of (b), which is signifi cant at the 5-percent level, than in the Louisiana one, which is only significant at 50 percent in the above table. We ran comparable regressions using the two other definitions of deposits mentioned earlier. Here are the re sults for these two cases: Case (2): Y = Annual change in time deposits; X = Annual change in personal income Alabama: Florida: Georgia: Louisiana: Mississippi: Tennessee: U. S.: a 0.33 -76.7 -25.1 -19.7 13.6 17.4 - 1.3 Coefficient Level at of Deter which (b) is mination Statistically Significant b(X) R2 + 0.25(X) .32 .05 .50 + 0.41 (X) .66 + 0.31 (X) .60 .50 + 0.33(X) .57 .05 .05 + 0.16(X) .29 .50 + 0.27(X) .38 .05 + 0.39(X) .46 Case (3): Y = Annual change in time plus demand deposits; X = Annual change in personal income Alabama: Florida: Georgia: Louisiana: Mississippi: Tennessee: U. S.: a - 30.3 -103.6 - 59.5 - 3.3 13.5 8.8 - 1.0 Coefficient Level at of Deter- which (b) is mination Statistically Significant b(X) R2 + 0.56(X) .61 .05 .05 + 0.73(X) .75 + 0.61 (X) .75 .05 + 0.55(X) .60 .05 + 0.41(X) .58 .05 + 0.56(X) .55 .05 + 0.58(X) .48 .05 B a n k A n n o u n c e m e n ts On March 1, Darby Banking Company, Vidalia, Georgia, a nonmember bank, began to remit at par for checks drawn on it when received from the Federal Reserve Bank. Another nonmember bank, Bank of Lucedaie, Lucedale, Mississippi, began to remit at par on March 10. Mercantile City Bank, Atlanta, Georgia, was admitted to membership in the Federal Reserve System on March 12. A. E. Garber is president; Carl M. Harris, executive vice president; and Mrs. Lala H. Oberdorfer, A P R IL 1969 vice president. Capital is $237,500; surplus and other capital funds, $266,500. Citizens and Southern International Bank, Miami, Florida, an Edge Act Corporation, opened on March 24. On March 25, The Commercial Bank at Apopka, Apopka, Florida, opened for business as a newly organized nonmember par-remitting bank. Officers are T. L. Mattox, president; Foley A. Hooper, vice president; and Jon F. Hiland, cashier. Capital is $350,000; surplus and other capital funds, $175,000. 53 Sixth District Statistics Seasonally Adjusted (All data are indexes, 1 9 57-59 = IOO, unless indicated otherwise.) Latest Month 1969 One Two Monthi Months; Ago Ago One Year Ago S IX T H D IS T R IC T IN C O M E A N D S P E N D IN G Personal Incom e (Mil. $, Annual Rate) . Jan. 67,476 . Feb. 241 . Jan. 164 167 169 66,211r 65,541r 60,857 238 230 220 158 139 145 134 167 126 171 164 156 Instalm ent Credit at B a n k s* (Mil. $) . Feb. . Feb. 295.4 277.8 282.6r 248.3 320.2 273.4 307.9 255.2 One Two Latest M onth M onth M onths Ago 1969 Ago M an u factu rin g ...................... N o n m a n u fa c t u r in g .................. C o n s t r u c t i o n ..................... Farm E m p lo y m e n t ...................... Unem ploym ent Rate (Percent of Work Force)t . . • Avg. Weekly Hrs. in M fg. (Hrs.) . F IN A N C E A N D B A N K IN G Mem ber B ank L o a n s .................. Mem ber B ank D e p o s it s .............. B ank D e b i t s * * ............................. One Year Ago . . Feb. . . Feb. . . Feb. 169 163 124 95 168 163 122 94 168 162 117 95 166 156 103 96 . . Feb. . . Feb. 2.6 41.7 2.6 40.8 2.6 42.1 2.9 41.1 . . Feb. . . Feb. 338 251 257 324 250 251 325 257 247 279 215 205 P R O D U C T IO N A N D E M P L O Y M E N T M an ufacturing F o o d .................................... Lbr., Wood Prod., Furn. Fix. & . . . . . . . Feb. Feb. Feb. Feb. Feb. Feb. Feb. . Feb. 147 147 175 139 168 117 109 128 133 112 201 147 143 63 146 146 174 139 167 116 108 126 134 112 199 146 140 63 144 144 176 139 167 114 107 126 137 112 198 144 136 62 142 141 172 132 158 115 106 122 133 111 185 142 138 67 . Jan. 3.2 3.5 3.9 3.7 . Feb. . Feb. 1.9 40.9 249 278 225 154 102 207 1.9 40.9 290 268 309 153 101 206 2.0 41.5 209 270 157 153 100 213 2.1 41.2 173 186 . Feb. Transportation Equipm ent Unem ploym ent Rate (Percent of Work Foi Insured U nem ploym ent Avg. Weekly Hrs. in M fg. (Hrs.) Construction Contracts* . . . Electric Power Production* . Feb. . Jan. “ Feb. 299 263 267 238 224 191 255 224 189 243 r 227 193 243 204 181 210 . Jan. 8,431 200 150 8,245r 197 123 . Feb. . Feb. 130 132 129 124 64 129 131 128 120 61 129 131 128 124 67 128 129 128 119 68 . Feb. . Feb. 3.8 41.4 3.6 41.2 4.1 42.0 4.3 41.3 . Feb. 276 213 233 272 211 223 270 213 227 251 195 199 IN C O M E Personal Incom e . Jan. Farm C ash R e c e i p t s .............. 8,228r 192 125 7,819 185 156 P R O D U C T IO N A N D E M P L O Y M E N T U nem ploym ent Rate (Percent of Work Force)t . . Avg. Weekly Hrs. in M fg. (Hrs.) F IN A N C E A N D B A N K IN G . . Feb. 147 140 150 158 54 146 140 149 154 64 145 140 148 147 59 142 134 145 155 58 . . Feb. . . Feb. 2.6 41.1 2.5 41.1 2.8 41.3 3.2 40.9 . . Feb. 328 249 287 324 250 264r 321 248 268 279 225 236 . . Jan. . . Feb. 9,937 185 175 9,487r 181 156 N onfarm E m p lo y m e n t * .............. . . Feb. M an u factu rin g ...................... • • Feb. N o n m a r iu fa c tu r in g .................. . . Feb. C o n s t r u c t i o n ...................... . . Feb. Farm E m p lo y m e n t ...................... U nem ploym ent Rate (Percent of Work Force)t . . . . . Feb. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Feb. 134 125 136 152 58 134 123 136 150 51 132 122 134 147 51 132 121 135 156 61 4.8 41.5 4.7 41.3 5.1 40.9 4.4 43.8 . . Feb. . . Feb. 253 177 188 247 178 190 249 181 189 229 169 176 . . Jan. . . Feb. . . Jan. 4,929 263 186 . . Feb. . . Feb. F IN A N C E A N D B A N K IN G M em ber B ank L o a n s .................. M em ber B ank D e p o s it s .............. B ank D e b i t s * * ............................. Personal Incom e (Mil. $, Annual Rate) . . . . M an u factu rin g P a y r o l l s .............. Farm C ash R e c e i p t s .................. 9,405r 187 170 9,237 173 183 P R O D U C T IO N A N D E M P L O Y M E N T F IN A N C E A N D B A N K IN G M em ber B an k L o a n s * .............. M em ber B an k De po sits* . . . . B ank D e b i t s * / * * ......................... M IS S IS S IP P I IN C O M E Personal Incom e (Mil. $, Annual Rate) . . . . M anufacturing P a y r o ll s .............. Farm Cash R e c e i p t s .................. 5,059r 260 133 4,788r 254 126 148 159 143 160 58 147 159 142 159 57 146 158 141 150 51 144 153 140 160 59 . . Feb. . . Feb. 3.7 41.2 3.6 40.8 3.7 41.9 4.5 41.0 . . Feb. 375 254 254 359 254 242 359 256 231 340 242 226 4,472 239 182 P R O D U C T IO N A N D E M P L O Y M E N T . Feb. F L O R ID A IN C O M E Personal Incom e (Mil. $, Annual 12,915r 12,904r 11,784 242 239 216 147 159 123 . . Feb. . . Feb. . . Feb. Nonfarm E m p lo y m e n t * .............. M an u factu rin g ...................... N o n m a n u fa c t u r in g .................. C o n s t r u c t i o n ...................... Farm E m p lo y m e n t ...................... Unem ploym ent Rate (Percent of Work Force)* . . . Avg. Weekly Hrs. in M fg. (Hrs.) . IN C O M E 301 265 . . Jan. 13,119 . . Feb. 248 171 P R O D U C T IO N A N D E M P L O Y M E N T 222 309 267 . Feb. Personal Incom e (Mil. $, Annual Rate) . . . . M anufacturing P a y r o l l s .............. Farm C ash R e c e i p t s .................. L O U IS IA N A Loans* Deposits* All M em ber E Large B an k s IN C O M E 162 152 109 F IN A N C E A N D B A N K IN G . Feb. G E O R G IA . Jan. 20,436 . Feb. 330 . Jan. 173 20,275r 20,038r 330 304 151 188 17,909 272 164 P R O D U C T IO N A N D E M P L O Y M E N T Feb. 54 164 163 163 157 N onfarm E m p l o y m e n t * .............. M an u factu rin g ...................... N o n m a n u fa c t u r in g .................. C o n s t r u c t i o n ...................... Farm E m p lo y m e n t ...................... U nem ploym ent Rate (Percent of Work Force)t . . . A/g. Weekly Hrs. in Mfg. (Hrs.) . F IN A N C E A N D B A N K IN G M em ber B ank L o a n s * .............. M em ber B ank D e po sits* . . . . B ank D e b i t s * / * * ......................... M ONTHLY R E V IE W Latest Month 1969 Two M onths Ago One M onth Ago One Year Ago TEN N ESSEE IN C O M E Personal Incom e (Mil. $, Annual Rate) . . . . M anufacturing P a y r o ll s .............. Farm C a sh R e c e i p t s .................. . . Jan. 10,624 . . Feb. 240 . . Jan. 121 10,230r 10,178r 235 225 111 137 9,636 212 107 PR O D U C T IO N A N D E M P L O Y M E N T Nonfarm E m p lo y m e n t t .............. ..................... M an u factu rin g . . Feb. . . Feb. 149 157 147 156 146 156 ‘ For Sixth District area only. Other totals for entire six states. 145 154 ‘ Daily average basis. Latest M onth 1969 One M onth Ago Two M onths Ago On* Year Ago Feb. Feb. Feb. 144 182 63 143 178 63 141 171 64 140 184 70 Jan. Feb. 3.0 39.7 3.7 40.6 4.1 40.9 3.9 40.6 . Feb. . Feb. . Feb. 293 190 295 293 189 275 281 199 274 257 188 223 N o n m a n u fa c t u r in g ..................... . C o n s t r u c t i o n ......................... . Farm E m p lo y m e n t ............................ . U nem ploym ent Rate (Percent of Work ForceJt . . . . . Average Weekly Hours in M fg. (Hrs.) . F IN A N C E A N D B A N K IN G M em ber B ank L o a n s * .................. M em ber B an k D e p o s i t s * .............. B ank D e b i t s * / * * ......................... tPrelim inary data. r-Revised. Sources: Personal incom e estim ated by this Bank; nonfarm , mfg. and nonm fg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consum ption, U.S. Bureau of Census; construction contracts, F. W. Dodge Corp.; petrol, prod., U.S. Bureau of M ines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes base d on data collected by this Bank. All indexes calculated by th is Bank. Debits to Demand Deposit Accounts Insured Commercial Banks in the Sixth District (In Thousands of Dollars) 1969 1969 Percent Change Percent Change year-to-date 2 mos. Feb. ’69 from 1969 Jan. Feb. from 1968 1969 1968 1968 year-to-date 2 mos. Feb. ’69 from 1969 S T A N D A R D M E T R O P O L IT A N S T A T IS T IC A L A R E A S t 1,706,222 57,541 168,182 540,854 361,645 112,129 1,915,657 69,095 210,806 600,148 367,563 130,152 1,544,069 57,953 173,989 491,036 300,810 98,966 -1 1 -1 7 -2 0 -1 0 - 2 -1 4 + 11 - 0 - 3 + 10 +20 + 13 + 9 + 2 + 3 + 7 + 17 + 12 1,017,248 1,644,496 3,097,063 663,003 206,330 179,875 1,158,492 1,997,372 3,593,128 743,190 240,740 169,043 737,822 1,447,095 2,490,100 571,439 202,015 147,886 -1 2 -1 8 -1 4 -1 1 -1 4 + 6 + 38 + 14 +24 + 16 + 2 +22 +30 + 16 +22 + 7 + 6 +17 1,695,669 595,887 2,165,087 668,973 1,506,426 487,148 -2 2 -1 1 + 13 +22 + 18 + 18 Albany .............. Atlanta .............. A u g u s t a .............. Co lu m b u s . . . . M acon .............. Sav an n a h . . . . 99,787 5,968,418 270,440 257,613 292,878 291,733 113,770 6,456,435 309,357 272,884 312,516 341,512 88,281 4,847,883 282,774 218,235 247,939 268,713 -1 2 - 8 -1 3 - 6 - 6 -1 5 + 13 +23 - 4 + 18 + 18 + 9 + + + + + 8 19 1 15 15 10 Baton R ouge . . Lafayette . . . . Lake C ha rles . . . New O rleans . . . 645,205 140,995 152,976 2,357,991 665,322 189,446 193,125 2,820,470r 558,917 127,728 147,024 2,396,285 - 3 -2 6 -2 1 -1 6 + + + - + + + + 9 20 6 3 Biloxi-Gulfport . . Jackson .............. 117,892 692,561 132,737 759,490 107,493 673,221 -1 1 - 9 + 10 + 3 + 14 + 6 Chattanooga . . . Knoxville . . . . Nashville . . . . 662,186 496,835 2,296,192 766,233 600,216 2,443,931 578,437 433,595 1,593,531 -1 4 -1 7 - 6 + 14 + 15 +44 + 15 + 15 +40 71,355 71,291 50,332 77,813 79,751 51,467 65,930 59,725 45,956 - 8 -1 1 - 2 + 8 + 19 + 10 + 12 + 15 + 11 37,465 95,284 218,094 88,082 50,921 121,804 286,893 106,974 30,634 77,400 215,415 87,400 -2 6 -2 2 -2 4 -1 8 +22 + 23 + 1 + 1 + 9 + 21 + 4 + 1 128,788 145,207 106,650 -1 1 + 21 + 24 B irm in gh a m . . . . Gadsden . . . . Huntsville . . . M obile .............. M ontgom ery . . . Tu scalo osa . . . Ft. L a u d e rd a le Hollywood . . . Jacksonville . . . M iam i .............. O r l a n d o .............. Pensacola . . . . Talla h asse e . . . T am p a— St. Petersburg W. P alm B each . . 15 10 4 2 OTHER C E N T E R S Anniston Dothan Se lm a . . . . .............. .............. Bartow .............. Bradenton . . . . Brevard County Daytona B each . . Ft. M y e r s N. Ft. M yers . . •Includes only banks in the Sixth District portion of the state. A P R IL 1969 tPartially estimated 1969 1969 1968 Jan. Feb. from 1969 1968 1968 Gainesville Lakeland . . Monroe County Ocala . . . . St. A ugustine . St. Petersburg Sarasota . . Tam pa . . . W inter Haven . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,161 134,481 38,875 73,776 23,632 393,962 148,272 890,050 82,573 102,692 149,525 47,497 81,615 29,977 492,041 176,762 1,089,859 86,031 88,398 125,377 35,181 63,590 18,597 341,539 120,732 803,939 67,367 - 4 -1 0 -1 8 -1 0 -2 1 -2 0 -1 6 -1 8 - 4 + 11 + 7 +10 +16 +27 + 15 +23 +11 +23 + 7 + 2 +14 +19 +25 +16 +16 +16 +13 Athens . B runsw ick Dalton . Elberton G ainesville Griffin . LaGrange New nan . Rom e . . Valdosta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,872 45,107 104,311 14,318 66,686 34,868 22,153 22,636 75,550 58,974 104,144 55,133 125,948 17,155 78,393 39,181 24,876 25,597 88,054 61,332 77,751 40,863 87,379 12,486 62,228 33,886 19,833 24,974 70,844 51,369 -1 9 -1 8 -1 7 -1 7 -1 5 -1 1 -1 1 -1 2 -1 4 - 4 + 9 +10 +19 +15 + 7 + 3 +12 - 9 + 7 +15 +11 +10 +25 +16 + 6 + 4 +12 - 9 +11 + 5 Abbeville Alexandria Bunkie . . Ham m ond New Iberia . Plaquem ine Thibodaux . . . . . . . . . . . . . . . . . . . . . 11,570 158,502 6,792 39,003 38,671 13,674 21,741 17,817 185,062 8,825 43,277 46,193 15,983 36,398 12,094 123,665 6,145 35,602 31,801 11,995 21,181 -3 5 -1 4 -2 3 -1 0 -1 6 -1 4 -4 0 - 4 +28 + 11 +10 +22 +14 + 3 +12 +24 + 6 +11 +20 +10 +10 Hattiesburg Laurel . . M eridian Natchez P a sc a g o la — M o ss Point V ick sburg Yazoo City . . . . . . . . . . . . 65,256 42,658 69,615 42,646 71,718 40,305 81,213 47,927 54,545 37,016 63,355 37,895 - 9 + 6 -1 4 -1 1 +20 + 15 +10 + 13 +17 +11 +11 +15 . . . . . . . . . 68,150 38,901 31,787 83,931 48,694 34,670 58,209 43,764 27,232 -1 9 -2 0 - 8 + 17 -1 1 +17 + 18 - 0 +13 Bristol . . Johnson City K ingsport . . . . . . . . . 77,870 79,192 173,592 91,008 94,619 186,410 78,407 70,907 145,247 -1 4 -1 6 - 7 - 1 +12 +20 + 3 +11 +17 40,802,215r 30,952,264r - 1 2 +16 + 15 +11 +19 +16 + 4 + 7 +26 +10 +18 +14 + 7 + 9 +25 . . . . . SIX T H D IS T R IC T Total Alabam a^ Florida^ Georgia^ Lo u isian at* M is sissip p i!* Te nnesse e!* t Estimated. . . . . . . . . . . . . 35,864,276 . 4,376,244 . 11,683,239 . 9,068,961 . 4,174,360 . 1,538,287 . 5,023,185 4,899,474 13,628,151 10,017,696r 4,913,879r 1,720,909 5,622,106 3,931,013 9,778,768 7,819,002 4,002,170r 1,439,634 3,981,677 -1 1 -1 4 - 9 -1 5 -1 1 -1 1 r-Revised. 55 District Business Conditions remained at a low level. Through mid-March, businessman showed no sign of curbing their heavy bor rowing from banks; consumer lending, however, has; slowed considerably recently.. Construction activity remains a strong expansionary element, even while mortgage.fnterest rates are under upward pressure. District farmers are planning to add to their crop acreages this spring? •;'' Nonfarm employment continued to expand at a rapid rate in February, with both the manu facturing and nonmanufacturing sectors making substantial gains. At the same time, average weekly hours in the manufacturing sector ad vanced. Substantial lending by both large and small banks showed no sign of letting up in February and the first half of March. At the large banks, borrowing by business firms remained especially heavy. In response to these loan demands and further attrition in certificates of deposit, the larger banks further reduced security holdings and stepped up borrowings from other commer cial banks and the Federal Reserve. The smaller banks continued to enjoy considerable deposit gains, with growth in loans being accompanied by increases in their security holdings. Consumer borrowing from banks advanced only moderately in February. Recently, consumers have concentrated more on repaying their exist ing instalment loans than taking on new debt. As a result, the advance in outstanding consumer credit at banks has slowed considerably from the trend of late 1968. Less demand for automobile loans has been largely responsible for this slower 56 pace. Bank credit card and check-credit activity still is expanding rapidly. Construction volume in February was only slightly below January’s swollen volume. Savings flows to District financial institutions during early 1969 continue much stronger than a year ago; increases in mortgage lending and commit ments are also higher. Mortgage interest rates remain under pressure, although some relief is beginning to appear in a few market areas. One prominent Florida savings and loan association has announced a reduction in its interest rates on prime mortgage loans as a result of heavy inflows of savings in the first few months of this year. District farmers will increase acreages in most major crops this year, according to a recent report of planting intentions. Tobacco acreages will be higher in Florida, Georgia, and Tennessee, and plantings of cotton and soybeans will be greater than last year in all states. Total acreages of peanuts will be up fractionally, while corn and rice plantings will decline. N O TE: Data on which statem ents are based have been ad justed w henever possible to elim inate seasonal influences. MO NTHLY R E V IE W
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